David Willetts is a Member of the House of Lords
Social Care is one of the most vivid examples of the failure of British politics to tackle an obvious problem. It is not some mysterious complex puzzle, but tackling it involves difficult trade-offs between personal payment and tax-payer funding. No political party finds them easy. It is also an illuminating example of the range of approaches that Conservatives have been willing to go for over the past 20 years.
Whilst Health Secretary in Gordon Brown’s Government, Andy Burnham proposed a step-by-step process for reforming social care – ending with an NHS-style, tax-funded free public service. But even the intermediate step of capping the social care costs which families had to pay would increases public spending. To pay for this, he envisaged freezing inheritance thresholds.
The front runner for funding the full-blown, free public service was a charge on people’s estates after death – possibly an extra 10 per cent on Inheritance Tax or roughly £20k on average. Conservatives denounced that as a Death Tax. Frank Luntz the American political consultant found that polling showed that “death tax” was a far more emotive and effective expression than estate duty or inheritance tax. His advice reached Conservative HQ. So a charge on the estate – a reasonable means of meeting costs without extracting cash from pensioners – has been demonised ever since.
The Conservative-led Coalition then commissioned Sir Andrew Dilnot to review social care. His report is an excellent guide to the issues. He proposed a cap on the total care costs that would have to be paid by a family, and he proposed a higher floor below which your assets were protected.
Any scheme which avoids a full-blown NHS model and instead improves on the current system is probably going to have a cap and a floor. However these two features come with a cost. The Coalition legislated for Andrew Dilnot’s model, but was never able to resolve the problem of how to fund it. The Cabinet Committee discussion of the issue included options for some kind of charge on the estate, but the fear was that Labour would do to us what the Conservatives had done to them.
So we were stuck until Theresa May unexpectedly put a proposal in her 2017 manifesto. I believe she and her team were trying to find a way to fund social care without putting up taxes. There would be no cap on care costs – that broke with the Dilnot model and saved public money. There was, however, a much higher floor of £100,000 – below which assets would be fully protected. This did put up public spending, and the manifesto envisaged paying for it by ending the exemption of the family home from the means test for domiciliary care.
So more affluent recipients of domiciliary care would have to make a bigger contribution, though with deferred payment as a charge on the estate after death. This is what became known as the Dementia Tax. With no political preparation – it was not even clear that Cabinet colleagues had an opportunity to consider it. It was a major reason for the 2017 election campaign unravelling.
That set the scene for Boris, who claimed to have a plan.
He reverted to the Dilnot model, with a cap on costs and a floor below which assets were protected. This was to be funded with a social care levy. It recognised that there is genuine social insurance here – not everyone has to face these costs, but nobody can predict whether they will or not, and if they do it can be financially disastrous.
The levy was Chancellor Rishi Sunak’s requirement for endorsing Boris’s plan. It broke the deadlock of how to pay for a Dilnot model. The legislation to set up the levy was controversial but it passed. It was to collect roughly £12bn a year to fund the new model of social care. A forerunner to the levy – a national insurance surcharge – was collected from April 2022. Conservatives hoped that with a cap on costs there was now a prospect of private insurance for care costs emerging, and nobody would have to sell their home to pay for care.
However, when Liz Truss took over she and Kwasi Kwarteng committed to abolish the levy. The Bill to repeal the Levy had just reached the Lords but had not yet completed its Parliamentary process when Liz Truss resigned as PM. It would have been in order for the Lords to delay it by a month, but we did not. Rishi became PM the very day that the legislation abolishing the levy received royal assent. With the funding for social care reform gone, the new Government’s Autumn Statement delayed implementing the cap and floor to 2025.
The whole plan was finally abandoned by Rachel Reeves in her first budget.
So, since 2010, the Conservatives have denounced a charge on the estate as a death tax and then proposed it. The Conservatives have endorsed a cap and floor model, implemented a levy to pay for it but then abandoned it. And now Andy Burnham is back where he started. His 2010 white paper was entitled “Building the National Care Service” and it seems as if that is still his preference.
There is a very significant political consequence of the years of failure to deliver a social care policy: Local authorities face enormous funding pressures and so the costs of private providers are not properly met. They cannot afford decent pay and there is no worthwhile ladder of increasing pay to justify getting much training. So they import cheap foreign labour.
Since 2022, when visas specifically for social care were introduced, half a million migrants including family dependents have come to Britain. Faced with actually paying for social care properly through a charge on our estates or a levy or instead saving money and going for cheap labour we have chosen the latter.
Now that route is being closed the dilemma of how we pay for social care is more acute than ever.