The coalition fails to rise to the challenge on social care

The £75,000 cap on costs planned by the government will help just 10 per cent of those needing care.

More than 18 months after Andrew Dilnot's landmark report into social care was published, the coalition will finally unveil its planned reforms today. In a statement to the Commons, Jeremy Hunt will announce that the government will introduce a cap of £75,000 on care costs and increase the threshold for means-tested support from £23,250 to £123,000, so that no one with assets worth less than this amount is forced to pay. The £1bn-a-year cost of the plan will be met through higher national insurance contributions on employers and a six-year freeze in the inheritance tax threshold at £325,000 (George Osborne's famous 2007 pledge to increase it to £1m now being a distant memory of a pre-austerity age). 

The first point to note about the £75,000 cap is that under the coalition's timetable it won't actually be introduced until April 2017. Thus, as shadow care minister Liz Kendall has noted, it "won't do anything for the hundreds of thousands of elderly and disabled people who are facing a desperate daily struggle to get the care and support they need right now".

In addition, the cap, which excludes food and accommodation costs (typically around £7,000-£10,000 a year), is set a significantly higher level than that recommended by Dilnot. His report called for a cap of between £25,000 and £50,000 (settling on a figure of £35,000) and warned that anything outside of this range "would not meet our criteria of fairness or sustainability". A cap above £50,000 "could mean people with lower incomes and lower wealth would not receive adequate protection." Even if we adjust the £75,000 cap for inflation (it is based on 2017 price levels), that still leaves it at £61,000 - £11,000 higher than Dilnot's recommended maximum.

Interviewed on the Today programme this morning, Dilnot said that he regretted the coalition's decision to opt for a £75,000 cap but recognised that "the public finances are in a pretty tricky state". By capping costs for the first time, the plan would still "radically reduce anxiety", he argued. But others have been less generous. 

Labour has pointed out that since it will take the average person around four years before they reach the cap, it will not benefit the majority of patients, most of whom don't make it this far. Dot Gibson, the general secretary of the National Pensioners Convention, estimates that the proposals will help "just 10 per cent of those needing care". Labour is currently developing its own social care plan as part of its policy review but is likely to recommend a cap no greater than £50,000. 

The government's hope is that a cap of £75,000 will encourage insurers to offer policies to cover costs below this amount. As Hunt said on The Andrew Marr Show yesterday, "We don't want anyone to pay anything at all. By setting an upper limit to how much people have to pay, then it makes it possible for insurance companies to offer policies for people to have options on their pensions so that anything you pay under the cap is covered."

But Labour is highlighting the fact that Nick Starling, the director of general insurance and health at the Association of British Insurers, has previously dismissed this as wishful thinking. He told the health select committee in November 2011: "I do not think there will be pre-funded products. That is unlikely. I speak on behalf of the insurance industry, but I bring independence in the sense that, except for the immediate needs annuities which [Chris] Mr Horlick [of Care Partnership Assurance] provides, there are no products out there. I am not grinding a particular axe about particular forms of products. I am saying that, in a sense, we have a chance to think in quite an open way, unencumbered by a whole forest of products already out there. In that sense, the thinking we have been doing on this is independent."

A cap on costs is, as Dilnot suggested, better than no cap at all. But unless Hunt springs a surprise on MPs today, it is already clear that this will not be a lasting solution to the care problem. For that, one suspects, we will have to wait for a change of government.  

Health Secretary Jeremy Hunt will announce the government's planned social care reforms today.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.