09 November 2007
Ways to cope with the economic and social implications of an ageing society are at last on the government's to-do list. Public Finance and Deloitte convened a round table of politicians and policy experts to discuss long-term care and pension strategies. Judy Hirst reports
Maybe it's all those aspirational, assertive baby-boomers hurtling towards pensionable age, and demanding better care services. Maybe it's the fact that older people are four times more likely than younger ones to vote at elections. Or maybe someone in the Treasury has finally worked out that there are already more pensioners than children in the UK, raising the – admittedly alarmist – prospect of a 'silver tsunami' engulfing the social security system.
Whatever the causes, there is suddenly an awful lot of interest in the economic and social implications of ageing. Weighty reports – from Sir Derek Wanless for the King's Fund, from the Joseph Rowntree Foundation and others – have been making the case for new ways of funding long-term care. And not before time. The Healthcare Commission has recently drawn attention, in its Dignity in care report, to the scandalously low quality of care received by many vulnerable elderly people. And, against a background of ever-tighter eligibility criteria, a Caring Choices Coalition of major charities has pronounced the long-term care system unsustainable, and called for urgent reform.
For once, it seems that ministers might be listening. Tucked away among the small print of the recent Pre-Budget Report and Comprehensive Spending Review was an important commitment to a 'radical rethink' on long-term care. A social care green paper is planned within the next 12 months, based on 'progressive universalist' principles (for which, read: some form of minimum care entitlement, topped up by co-payments).
These proposals dovetail with government pension reforms, fleshed out in this week's Queen's Speech. More than 7 million people have little pension beyond the statutory minimum, and moves are afoot – principally through new matched funding Personal Accounts – to encourage more saving for older age. For the better-off, there is also talk of equity release and other schemes to help self-fund continuing care.
So will these efforts to shake up the pensions and social care systems be enough to provide for present and future generations of pensioners? And is the government's focus on encouraging financial self-reliance the right way to go? Public Finance, in association with Deloitte, decided to take a longer view. By bringing together leading politicians and policy experts, from across the long-term care and pensions fields, we hoped to stake out a direction of travel – and encourage joined-up thinking in these two public policy areas.
The Longer View round table – the latest in a high-profile PF series – took place on October 29 in central London – nearly ten years after the government set up its Royal Commission on Long-Term Care for the Elderly to consider funding of care.
That commission's March 1999 recommendations, particularly on free personal care, proved highly controversial, and set the scene for much subsequent debate. So it was entirely fitting that its chair, Lord Stewart Sutherland, and fellow commissioner, Lord David Lipsey, led off the round-table discussion.
Also in attendance was the pensions minister, Mike O'Brien, who opened up the session on pensions reform. He used the occasion to make a significant announcement on the rights of divorcees, and to flag up key elements of the forthcoming Pensions Bill. Acting Liberal Democrat leader Vince Cable, and the Conservatives' shadow minister for pensions and older people, Nigel Waterson, also made important contributions.
Other speakers and contributors included Alexandra Norrish, head of social care strategy at the Department of Health; David Walden, director of strategy at the Commission for Social Care Inspection; Sir Christopher Kelly, chair of the Joseph Rowntree advisory group on the cost of long-term care; Stephen Burke, chief executive of the charity Counsel and Care; and Chris Curry, research director of the Pensions Policy Institute. The event was chaired by local government expert Tony Travers.
Lord Sutherland kicked off the long-term care debate by describing the UK as a 'living laboratory' when it came to the widely different care systems across England, Scotland, Wales and Northern Ireland. A form of 'postcode mortality' also operates, he noted, depending on where you happen to live.
Sutherland, who is leading a government review of the free personal care system in Scotland, did not mince words about the way care services are provided in England. 'I'm not convinced that there's something worthy of the name “system” operating in England. There's a lot of money being spent, but the [critical] noise in the system is very great indeed,' he observed.
In particular, he attacked the wide variations in service coverage and quality across local authority boundaries, and between health and social services. It was deeply iniquitous, he said, that someone with alcohol-related liver damage, for example, automatically receives free care, while the growing numbers of dementia and Alzheimer's sufferers do not.
Sutherland called for a 'new settlement' to come out of the social care green paper, based on several criteria: needs, as defined by professional judgement; equal treatment of frailties causing care needs; and consistent application of services and guidance across local authority boundaries. But these criteria must be financially and legally sustainable, he stressed; what matters is the net, not headline, cost of any new system.
Lord Lipsey, who described himself as residing in 'the finest long-term care home in Britain, the House of Lords', went even further in his condemnation of the care system. Current budgets, he said, meant that only those with 'deep care needs' received state support, while hundreds of thousands of people who need day-to-day care got no help whatsoever. 'The resources available for long-term care… are grotesquely, grossly and disgustingly inadequate,' Lipsey told participants.
He also warned that governments must produce more accurate cost estimates for the provision of services, after it emerged that initial projections for providing free personal care in Scotland until 2022 were likely to fall short by billions of pounds annually.
Lipsey, who co-authored a Royal Commission minority report opposing free personal care, said he understood that there was a trade-off between care provision and the resources available to fund it. But the partnership model outlined by Sir Derek Wanless did not impress him hugely: 'It's extremely expensive, and most of it is money that would already have been spent anyway.' It was just another way of 'redistributing money from the poor to the rich'.
Instead, he suggested a mixed approach: wider use of people's greatly inflated personal assets, such as housing, combined with state support for all needs once an individual had received long-term care for five years. He also proposed doubling the personal allowances for old people in care homes, 'to give them some dignity and purchasing power'.
Many participants picked up on the theme of 'trade-offs': between the state, the individual and other stakeholders; and between what Tony Travers, from the chair, described as a 'humane public policy' approach versus a rather more hard-nosed, cost-conscious one.
Michelle Mitchell, of Age Concern England, felt that a shortcoming of the Wanless report was that it did not communicate adequately the trade-offs that would have to be made. But Mervyn Kohler, of Help the Aged, argued that this question must come later. The green paper consultation should ask what sort of care people want – to stop them becoming dependent – rather than starting out with an assumption about a limited pot of money.
This was also the tack taken by Sir Christopher Kelly. He said that talking about costs was 'almost the wrong place to start'. The system is underfunded and unsustainable; the question, he argued, is whether you carry on with it and try to 'patch' it, as indicated by Lipsey, or go for more fundamental change.
The debate over long-term care, several participants suggested, was an 'uncomfortable' and 'politically awkward' one. Uncomfortable, said Sarah Pickup, of the Association of Directors of Adult Social Services, because of the huge difference between the 4% awarded to the NHS in the CSR and the 1% to local government, making the prevention agenda a real struggle to afford. Politically awkward, suggested some, because, to put it crudely, old people are not as attractive to politicians as young ones, who have been explicitly favoured in the past.
This, though, is all about to change, according to Conservative spokesman Nigel Waterson. The 11 million baby-boomers heading for retirement have widely different expectations to the present generation of older people, and don't like to be told what to do. The next election will be the first time most voters are aged over 50, he added. Politicians will have to take note.
Alexandra Norrish, who is heading the social care green paper team at the Department of Health, was called upon to give some idea of the direction it will go in. She set out three basic principles that earlier consultations showed it must support – independence, wellbeing and choice – before returning to the theme of tensions between different competing objectives.
The trick, she said, was going to be 'how to engage those who have very little awareness about social care issues in an intelligent debate about these trade-offs.' They were planning a debate on this 'at a fairly profound level of sophistication', engaging younger as well as older people – and were looking to 'a long-term care settlement for the next 20, 30 or 40 years'.
Douglas Anderson, a pensions actuary with Hymans Robertson, put this time-frame into a demographic context when he talked about the 'huge systemic change' in life expectancy that has taken place in just
a decade. In local government pensions schemes, for example, ten more 65-year-olds out of every 100 are going to survive to 85, compared with a decade ago. 'I'm flabbergasted at the success of the NHS,' he said. 'But it's bitter-sweet. How are we going to support them all?'
With nearly a quarter of the population projected to be over 65 by 2051 this is an urgent question, particularly for the 1.5 million people (most over 80) who are expected to be living with dementia – double the number now. As Clive Bowman, medical director of Bupa, put it: 'We are in the eye of a demographic storm.'
Lord Sutherland had a few ideas, some a little futuristic, about what could be done. 'The Alzheimer's pill will come,' he assured the gathering, although only if research is redirected away from more fashionable causes. He also had a lot of confidence in the potential for technology, properly used, to reduce the costs of care, and for integrated housing and care schemes to provide a real alternative to residential care.
But in the here and now, one of the most important recommendations to come out of the Royal Commission had been for single health and social care budgets. In the rare cases where it happens, he said, there are significant reductions in 'bed-blocking' and at least the real possibility of trade-offs between sectors.
Stephen Burke, chief executive of Counsel and Care, led off the next section of the discussion by outlining the key things that those on the receiving end of all the policies – older people themselves – want from the green paper.
These included an explicit universal entitlement to services, based on real national eligibility criteria and, importantly, much more support for carers. 'We need a kind of “Sure Start” for older people,' he argued, with a single gateway to guide them through the confusing and unfair array of benefits, charges and fees. Local strategic partnerships and LAAs could also play a vital role, by shaping places 'that are good to grow old in'.
Other contributors commented on the 'bewildering market' that faces many older people and their carers, and the lack of effective choice and demand that is increasingly driving services in other sectors. This is to some extent being addressed by the new star ratings being introduced by the Commission for Social Care Inspection for care homes and other care services. But its director of strategy, David Walden, agreed that there is 'a failure of normal market mechanisms', particularly in the self-funding care field. There is a huge thirst for knowledge, he said, which is being largely neglected by independent financial advisers.
Philip Spiers, managing director of NHFA Care Fees Advice, concurred, but thought the fact that only 5% of people ever seek advice on funding care showed that most of us were 'in denial about ever needing care, until the event happens'. Long-term care insurance had generally been a failure, he noted, here and increasingly in the US. The alternative was some form of compulsion, most likely through taxation.
Vince Cable, acting leader of the Liberal Democrats, picked up some of these complex issues in his contribution. His party is currently doing some rethinking on its expensive manifesto commitment to free personal care, and on wider long-term care issues, he said. Other options – such as Lipsey's post-five-year free care plan, or the Conservatives' more limited version – were clever, but a bit of a 'cynical smoke-and-mirrors approach', given that most care home residents had a life expectancy of two years.
Such ideas as equity release schemes had their attractions but had been discredited in the past, and were subject to very high marginal rates of tax, because of means testing. Cable broadly favoured some combination of the Wanless model, with its limited personal contribution to topping up care levels, and the Northern Ireland approach, which appears to cater better for people in their own homes. 'We're moving away from free personal care towards a much wider care agenda, taking in respite services and other issues,' he said.
Nigel Waterson rebutted the suggestion that the Conservatives' proposal of a three-year 'cap' on care costs set out in their last manifesto was cynical. In fact, he argued, it was a way of making long-term care insurance viable for the companies selling it. He also endorsed the idea of joint budgets, to break down the health and social care Berlin Wall.
Meanwhile, Imelda Redmond, chief executive of Carers' UK, pointed out how the inadequacies of the care system have an adverse impact on whole families. One in five carers – 80% of whom are of working age – falls out of work because of the way social care is delivered, she said. This in turn has an impact on pensioner poverty. She also pointed out that, for a complex range of reasons, significant numbers of older people refuse social care services, relying instead on informal carers. Any new settlement had to take this into account.
Responding to the discussion around joint budgets, Paul Carey-Kent, financial controller at the DoH, explained why things were not as straightforward as they might appear. There is a 'compounding' effect on costs he explained; when, for example, a hospital bed is unblocked, the patient goes into a home, and the bed is refilled. 'Getting the balance right between acute and non-acute services is difficult,' said Carey-Kent, who emphasised the substantial government investment that had gone into this area.
If participants thought this slightly arcane issue of costs and incentives ('logical for some, perverse for others' as one respondent put it) was complex, the subsequent debate on pensions and retirement planning raised even more challenging issues.
Opening the discussion, pensions minister Mike O'Brien set out, in broad terms, the government's post-Turner reforms to the pensions system, stressing the level of political consensus that had been achieved.
In an era when one in five people born this year should live to 100 years old, the funding challenges were numerous. 'What must we do to respond? There's a responsibility to ensure dignity in old age, promote greater independence and wellbeing, encourage longer working lives and ensure that pensioners share in our prosperity,' O'Brien said.
Key reforms were already under way, including a commitment to re-link the basic state pension to earnings and to improve retirement payments for women and carers. In this context, the minister also announced that the government would scrap rules that prevent divorcing couples from sharing retirement pots covered by the state's Pension Protection Fund.
The decision could help thousands of people, mostly women, facing poverty in retirement.
But O'Brien warned that people must also help themselves. 'Aspirations are critical,' he said. 'Millions can enjoy a similar lifestyle in retirement to during their working lives, but ultimately it's their responsibility to make it happen.'
To this end, the government was introducing the Personal Accounts system of low-cost pensions. These state-managed occupational schemes would combine contributions from employers, employees and the government to build-up retirement pots for low- to middle-income earners. O'Brien said he would also introduce 'hurdles' to stop employers 'levelling down' their current provision to staff.
So far, so encouraging, was the response from most of those present. It was noted that, in comparison with long-term care, the consensus arrived at on pensions – albeit fragile – was ahead by several years. However, things got more tricky once Chris Curry, from the Pensions Policy Institute, explained that there were still difficult issues to resolve around auto-enrolment, and opting in or out of the new pension system; the suitability of Personal Accounts for different savers; employers' responses to the new scheme – and its impact on total savings and the wider pensions market. Some of these issues have subsequently resurfaced, with Opposition threats to vote down the new savings scheme.
Douglas Anderson thought he detected a general complacency about the pensions debate. 'The real problem is the middle ground, not the lower echelons that Personal Accounts are aimed at,' he said. 'We are sleepwalking into a mis-selling fiasco over the closure of defined benefit schemes in favour of inadequate contribution ones.' Maggie Craig, of the Association of British Insurers, was also concerned about the protection of good workplace pension schemes, Personal Accounts were a start, she said, but could not really offer a comfortable retirement.
Several participants raised the issue of poor take-up of pension credits and other benefits; O'Brien acknowledged that the Department for Work and Pensions is struggling with this. And, bringing the discussion back to long-term care, Sir Christopher Kelly emphasised the scope for partnerships and self-help on both fronts. More should be done, through better regulation, to encourage the use of housing assets to fund retirement, he said.
On this, and other personal finance questions, such as annuities and private insurance, O'Brien confessed that he had got lots of questions, but as yet no clear answers. Yes, there needed to be better validation for equity release schemes. And, yes, pensions and long-term care needed to be discussed as a whole.
But as for where the green paper will lead, he seemed to agree with Waterson that 'there is no over-arching product' that can address all the problems, and the consultation must take its course. 'Long-term care is by its nature a long-term business,' O'Brien said. But, hopefully, not too long, some will have sighed. And, please, not another ten years.
Additional reporting by Mark Conrad
Participants
Douglas Anderson
Senior partner, Hymans Robertson
Clive Bowman
Medical director, Bupa
Stephen Burke
Chief executive, Counsel and Care
Vince Cable MP
Acting leader, Liberal Democrats
Paul Carey-Kent
Financial controller, Department of Health
Maggie Craig
Director of life and savings, Association of British Insurers
Chris Curry
Research director, Pensions Policy Institute
Richard Harbord
Chair, CIPFA Social Care Panel
Lisa Harker
Co-director, Institute for Public Policy Research
Sir Christopher Kelly
Chair, Joseph Rowntree advisory group on the cost of long-term care
Mervyn Kohler
Special adviser, Help the Aged
Lord David Lipsey
Chair, Social Market Foundation
Michelle Mitchell
Director of communications and policy, Age Concern England
Anne McDonald
Programme director for community wellbeing, Local Government Association
Alexandra Norrish
Head of social care strategy, Department of Health
Mike O'Brien MP
Minister of state, Department for Work and Pensions
Sarah Pickup
Co-chair, resources network, Association of Directors of Adult Social Services
Imelda Redmond
Chief executive, Carers UK
Philip Spiers
Managing director, NHFA Care Fees Advice
Lord Stewart Sutherland of Houndwood
Former chair, Royal Commission on Long-Term Care for the Elderly
Tony Travers (chair)
Director, Greater London Group, London School of Economics
David Walden
Director of strategy, Commission for Social Care Inspection
Nigel Waterson MP
Shadow minister for pensions and older people, Conservative Party
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