Monday, 28 November 2016

Wrong, stupid and unsustainable - old people and the funding of care

Much of the discussion following the Autumn Statement concerned Brexit and the forecasts. Plus of course the prediction from the Institute for Fiscal Studies that we're not going to see "real incomes" rise until after 2021 (or something along those lines). I don't plan on making any comments about these forecasts except to say, as Chris Snowden at the IEA points out, even the much-heralded and 'independent' IFS isn't infallible when making predictions.

Instead let's talk about old people. The Local Government Association made great play of there being no mention - or extra money - for social care. It seems to me that, as Jeremy Warner observes, nearly all of the financial challenges facing government can be traced back to the inconvenient fact that us Baby Boomers (who have all the assets, or so we're told) are going to live a long time yet.

There are two reasons why people living a lot longer is a problem for government. The first of these is the impact on revenue budgets of looking after older people. Not just the very expensive end-of-life care but also the everyday costs of catering for people with declining mobility, poorer eyesight, incipient deafness and a collection of chronic but manageable health conditions.

The second is that, while we are busy not dying, the wealth we've accumulated stays safely tucked up in housing and other assets. And because we're living longer the circulation of that wealth within society is slowed down. It might be true that the explosion of home ownership post-WWII (culminating in Margaret Thatcher's brilliant right-to-buy legislation) represented the biggest transfer of wealth away from the elite in our history but right now us Boomers are sitting pretty atop all that wealth.

The proportion of the population that is over-65 is set to grow further. The ONS predicts (I know forecasts, pah) something like this:

This increase (and the corresponding stagnation in the numbers of young people) completely alters the balance of our demography. From a position where 'youth culture' dominates we are moving gradually to a sort of gerontocracy where the needs, expectations and preferences of the old vastly outweigh those of the young. It's notable that, after a time when political leaders seemed to get younger (Major, Blair, Cameron, Clinton), we now have a slew of older leaders. The two main UK political parities are led by a 60 year old and a 67 year old. Over in the USA the presidential election was fought out between a 69 year old and a 70 year old - with the 70 year old winning. If the current indications are right, France will get a 63 year old as President and Germany will keep its over-60 Chancellor.

It's also interesting to note that the question of age (as opposed to the matter of health) is never raised. When Ronald Reagan was elected his age was seen as a problem, yet no-one (so far as I can see) is challenging Trump on the basis that he ought to be getting comfy in the armchair with slippers and a pipe. This change just reflects the fact that there are millions of fit, healthy, active and involved folk in this age category. When your Dad is walking Munroes at 75 or your Mum riding at 81 then no-one's fussed about a Prime Minister who is 60 or a President of 70.

The difficulty is that our public finances (and to a considerable degree our economy) start with the assumption that people retire in their 60s and die in their 70s. When the NHS was founded its planners believed that the costs would diminish (OK they were batty) rather than increase as universal access improved overall population health. What we've seen instead is that, as health has improved, people have lived longer with the result that more and more of NHS resource gets directed to the health of old people. Today around 75% of NHS spending goes on the over-65s.

We can add the pressures on social care to these numbers - adult social care used to be an important but relative minor element in local government spending. Today it represents perhaps a third of spending with this proportion set to rise (under the current model at least) as the numbers of frail elderly increase in line with the numbers of people over 80. The current arrangement where local government contracting dominates the market for care provision results in downward pressures on costs that are simply unsustainable given rises in minimum wages and expectations in terms of service quality.

The third major element creating pressures in the simple fact of the old age pension (made more problematic by the so-called 'triple lock'). Of the current welfare budget over 40% goes on paying old age pensions and once we add in other payments such as mobility allowances, carer allowances, free TV licences and fuel discounts, nearly half of the money we spend on welfare goes to those receiving an old age pension. By way of comparison, just 1% of that welfare budget is spent on unemployment benefit.

In a world where there are fewer people working to pay the taxes to provide these benefits, it's pretty hard to see how such public largess - in health, care and benefits - can be sustained. Something has to give especially when it is clear that wealth is increasingly retained by the older generation, primarily in the form of those housing assets obtained during the great home ownership boom from the 1960s to the 1990s.

I don't believe that the answer to all this is the sort of anti-Boomer rhetoric of the Resolution Foundation where the fact of those assets (and the fortune of the increases in those assets' value) is seen as some sort of selfishness on the part of people aged over-55. Nor do I think that the answer lies in inventing a new tax so as to carry on with the market-fixing methods that result too often in expensive and poor quality social care. What is needed is an apology, some honesty and a better market.

First the apology. Aneurin Bevin lied to you and every subsequent government regardless of its political stripe has repeated and compounded that lie. National Insurance, for all the trappings of an insurance scheme, is just an income tax. So when people say, "I'm entitled, I paid my stamp all those years" they are merely repeating Bevin's lie. The government should stand up and apologise for this lie.

Next some honesty. People aren't stupid and can deal with facts so perhaps we should give them some. Starting with the one where we say that we can't go on with above inflation increases to the NHS, to social care and in old age pensions. That means we've either less money for other things that matter like policing, defence, firemen, roads and schools, or else your sons and daughters (the one's you're helping out because they struggle to buy the school uniform) will have to pay higher taxes. So old people with lots of money tied up with high value property assets need to start thinking about how they use those assets to provide the care and health support they'll need as they get older and more frail. This means no more "family house" nonsense and no more assumption that the Council will pay so you can leave those housing assets to your children.

And the market. Markets are very good at providing the things that people want. This isn't about ownership it's about how prices are set. Right now the UK's health and care system is (see above) unsustainable. Getting wealthy people to realise they are responsible for their own life is a start but, if we do this, we've got to have a market where they can purchase the care and health support they need.

None of this is about Boomers being selfish. After all part of the problem is that the Boomers' kids are anticipating the glorious day when that South London semi turns into £750,000 cash and some don't want any rapacious care homes, stair lift companies or walk-in shower fitters spoiling the prospect of this lovely lolly. A few weeks ago I was told by a housing officer how equity release schemes to improve home warmth were often blocked by families who saw this as eating into the inheritable asset. It's shocking but true that people will leave granny cold with no handrail on the front steps so as to keep ten or twenty grand on the inheritable value of granny's house.

At the core of all this is changing our presumption that care is some sort of absolute entitlement rather than something that's a matter of personal responsibility. When I sit in Bradford's Health & Wellbeing Board meetings is hear about the idea of 'self-care' - essentially people taking responsibility for their own health. Often this is little different from good old nannying fussbucketry -don't smoke, change your diet, cut out the booze, do more exercise - but it has within it the idea that we are, as individuals with agency, responsible for our own lives. And this means paying for stuff. The long term implication of self-care for an informed public taking decisions that reduce health harms and, recognising that some support in inevitable at some point, being prepared to pay others to help deliver that self-care.

In a nation obsessed with the idea of a "free" National Health Service, it's going to prove difficult to deliver the changes to our attitude to health necessary if longevity isn't going to turn almost all of government into a health care provider. And the core of all this is to recognise (or rather rediscover some we once knew but has lost sight of) that the assets we accumulate during our lives - houses, pension funds, cash savings and so forth - are there to be run down during our old age not something to which our descendants have any sort of entitlement. Getting the government to tax relatively poor people so you don't have to use your assets has always been wrong. Now it's wrong, stupid and unsustainable.



Mark In Mayenne said...

So if an insurance salesman sells me insurance fraudulently and I make a claim on it I'm repeating his lie?

Anonymous said...

If poverty is directly proportional to an early death then we can assume that the majority of old people who require years of social care are the more affluent. Social care isn't free to those who own even modest sums in savings or a house. They will be required to pay for the care which is very expensive. Someone who lives in a house worth £100k with £20k savings would see that gone in a matter of a few years.

Contrast that with George Osborne's plan which begins to take effect next year to enable those who have an inheritance tax liability to utilise the value of their property to reduce the liability which he sold on the grounds that people should be able to pass their home on to their children.


Anonymous said...

It is often conveniently forgotten that one key plank of Bevin's principles was also the curse of 'idleness' - if the full range of the Welfare State's objectives were enacted, particularly that oft-omitted plank, then a different result, and culture, may ensue.