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14 Dec 2009 : Column 688

Dr. Ladyman: I am keen to help the hon. Gentleman reconcile that point, because I am keen to promote extra care accommodation. With extra care accommodation, the individual lives in their own home, as either a tenant or the owner of that property; they do not live in somebody else's home and receive care. If it were possible for people to change the premise on which they lived in residential care in order to achieve the same objective, they would have been doing that all along, in order to avoid having the value of their property taken into account when their care needs are assessed.

Mr. Lansley: No, I am sorry, but I just do not accept that that is the case. I have visited extra care accommodation, and it is perfectly clear that many people are there on the basis of tenancies. The whole point of extra care is that as the years progress, so the accommodation that people live in can shift in that complex. They might begin living in their home, as it were, in extra care housing, but as time goes on and their care needs become critical, they may find that adaptations are made or they might even move to different accommodation in that extra care development. The point is that it is perfectly obvious that people who are trying to access free personal care will restructure their arrangements in order to try to make that happen.

Dr. Ladyman: I think that the hon. Gentleman is talking about a specific type of accommodation-usually a retirement village-where, instead of buying a particular property, people buy an equity stake that allows them to move around. However, in the vast majority of extra care accommodation, people are either leaseholders or tenants in a wider property. If he doubts me, I am quite happy to take him round a whole slew of such properties, so that he can see the benefits of extra care and become a convert to such accommodation.

Mr. Lansley: I am sorry, but the hon. Gentleman completely misunderstands what I am saying. I am not disputing the benefits of extra care housing. What I am disputing is the fact that, in their contrivance that free personal care will be available to people with critical care needs who live in extra care housing, the Government, whether intentionally or not, are creating a potential loophole for people who are currently in long-term residential care, who would not be regarded as being in extra care housing. They will inevitably restructure their arrangements at the point at which they enter care in order to make themselves eligible for free personal care, by distinguishing the accommodation element from the care element. The Bill does nothing to prevent that from happening. That seems to be an obvious flaw in the legislation.

The Bill is not well thought through, but is it well costed? Let us have a look at its impact assessment, which has one or two obvious flaws. On page 2, it manages to state that the average annual costs and benefits are exactly the same-£670 million-even though the total benefits are calculated as being £454 million more. Given that the Government are arguing-on the first page of the impact assessment-that the total benefits are greater than the costs, one would have thought that the average annual benefit would therefore be greater than the cost. That might be a simple error in how the impact assessment was transcribed, but as the care services Minister, signed it and the error was on
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page 2 of what he signed, he might also be able to explain why that should be the case.

It is also estimated in the impact assessment-based on what evidence we do not know-that 10 per cent. of the flow into residential care will switch to home care. On page 15 of the impact assessment, the net flow into residential care is stated as being 178,000 older people a year, 10 per cent. of which would be 17,800. However, in the table calculating the costs by reference to the number of people who would access free personal care, the figure referred to by the Government is not 17,800 a year, but just 2,384. Such a large difference in the number of claimants would mean an extra £77 million a year to provide free personal care that has not been taken into account.

In calculating the benefits of the policy in the impact assessment, the Government admit that most of the cost is a straight transfer payment from taxpayers for the benefit of those who have previously paid for care themselves. The calculation of the benefit of that is based on two elements. The first is the equity assumed to be gained by transferring cost from the general population to older people who fall into, on average, lower segments of income distribution in the population; therefore, there is a distributional equity gain over the population as a whole. Unfortunately, the calculations in the impact assessment are mathematically incorrect. They also use the upper weightings of the Treasury Green Book, rather than the mid-point averages. If those two things were corrected-the mathematics and the use of the mid-point averages-the overall benefit of that element would be reduced to zero.

The second element is the assumption that people benefit because they would pay extra for certainty, in the same way that they pay extra for the certainty reflected in an insurance premium. In the impact assessment, the Government use US health insurance as a proxy for UK personal care insurance. They therefore assert that the medical loss ratio on health insurance would apply equally in this country to personal care insurance. Both points are wrong. There is no justification for making the assumption that health insurance is treated by people in the same way as personal care insurance. We know that that is so here, because we do not have a market for social care insurance; as things stand, people are not willing to pay for that certainty, whereas large numbers of people are willing to pay a premium for medical insurance in circumstances where, frankly, they often do not need to.

The difference between health insurance and personal care insurance is perfectly obvious, but in any case, the Government assume in their Green Paper that only 20 per cent. of people would pay voluntarily for care insurance. If we simply reduced the benefit to 20 per cent.-at the moment, the Government have assumed that everybody getting personal care would have valued it as if they had been willing to pay for personal care insurance-the overall benefit in the calculation would be reduced from £365 million to £51 million. The overall effect of reducing those benefits-the benefits that justified the cost-benefit analysis in the impact assessment-is that the total costs exceed the benefits. In addition, when the £402 million opportunity cost of raising the
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taxation required to fund the measure is taken into account, as it should be, the policy has a significant cost in excess of the benefit.

Of course, the care services Minister was no doubt untroubled by any of those thoughts when he signed the impact assessment on 22 November. I am sure, therefore, that he will wish to disclose in full to the House his scrutiny of the impact assessment in responding to this debate. If he does not do so, he will doubtless want to do so in response to the freedom of information request I made today, asking him what questions he asked on the impact assessment before he signed it.

This is a short Bill, but it requires amendment to become much more flexible if it is to help in the longer-term process of delivering social care reform. It needs to accommodate insurance-based solutions. Amendments are also required to make much clearer the range of preventive measures and solutions that can be provided by local authorities. As I have said, the Bill also seems to have a serious potential flaw, in that it would distort the care market. It therefore also needs to show flexibility regarding domiciliary care and long-term residential care.

Members of the Labour party in another place have been pretty critical of the Bill. Lord Lipsey said:

I am not sure who dubbed it the Exocet; perhaps he did-

In the same debate, Lord Warner said:

The Government could of course close their ears to criticism now and use their majority to push the Bill through the House of Commons, but it would then get bogged down in the House of Lords. Alternatively, they could make time available to work with us in this place to try to make the Bill a genuine bridge towards the reform of long-term care and support, to make it enabling rather than prescriptive on the structure of care and funding, and to allow it to promote a portable assessment of need and financial support, with a continuing central role for local authorities in commissioning and funding social care services in their areas. It is clear that local authorities and the NHS must be partners in this, and that they must enable individuals to exercise greater control. The last thing we need is what the Health Service Journal described last week as a takeover grab by the NHS for adult social care, or for primary care trusts to become responsible for all the commissioning activity and all the budgets.

The Bill needs amendment and further consideration in this place. We will not divide the House on its principle, but it must be made flexible. That means it should be given time in Committee and on Report in this House not only to investigate what it actually means-the need for that is becoming more evident as
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we ask questions-but to amend it. The programme motion seems offensive in terms of parliamentary scrutiny. The Government seem to be making the assumption that, because the Prime Minister stood up at the Labour party conference and announced something, it should be passed through this House without scrutiny or question. The Prime Minister does not control the other place, but it is an abuse of this House for the Government to behave in that way.

The Bill is required to be considered in Committee before its Report stage, and it needs to be reported to the House in the normal way, with an opportunity for further amendment and debate after adequate further reflection. So, although we shall not divide the House on the principle of the Bill, we shall divide on the programme motion later this evening.

6.32 pm

Dr. Stephen Ladyman (South Thanet) (Lab): The hon. Member for South Cambridgeshire (Mr. Lansley) described this as a short Bill, but it seemed to require him to make an inordinately long speech. In fact, his speech reminded me of the restaurant at the end of the universe in "The Hitchhiker's Guide to the Galaxy", especially when he talked about the Conservatives' proposals to pay for residential care costs by putting £8,000 into a fund that would somehow make it grow in real terms to over £50,000. In "The Hitchhiker's Guide to the Galaxy", customers paid the exorbitant cost of their meal at the restaurant at the end of the universe by putting one penny into a bank account which earned compound interest over an almost infinite amount of time. By the time they had reached the end of the universe, they had amassed enough money to pay for their meal. There seems to be no way in which £8,000 can be put into any sort of fund and increase to £50,000 in real terms over 20 years. If the hon. Gentleman could tell me where to find such a fund, I would be very grateful. I would certainly put some of my savings into it as soon as possible.

The hon. Gentleman was right to say that, if the free personal care that we are discussing involved the entirety of personal care, it would be unaffordable. The Bill is not proposing to provide all personal care free to everyone, however. It proposes to provide a very small subset of people with free personal care. It proposes to provide the people with the most urgent and the most serious needs with relief now. To that extent, the Bill is a first step on the road to producing the National Care Service that the Government have talked about, and which I fully support. The fact that it is a first step, however, does not mean that it should not be carefully considered, or that we should not know anything about the other steps involved. I shall make a few comments about those in a moment.

I congratulate the Minister of State, Department of Health, my hon. Friend the Member for Corby (Phil Hope), and the Government on some of the elements that they have identified, especially in the explanatory notes, rather than in the Bill itself, as the Bill is a rather simple mechanism designed to achieve its ends. The Government recognise explicitly the benefits of extra care accommodation, of telecare and of encouraging independent living. Members on both sides of the House ought to be able to agree that those are laudable objectives.

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I have been campaigning on extra care accommodation for some time. Last Thursday, I attended the conference of the Association of Retirement Housing Managers, many of whom promote extra care accommodation. We need to recognise its benefits in reducing the cost of delivery of care and improving the welfare of older people. I encourage the hon. Member for South Cambridgeshire, who seemed completely to misunderstand the benefits of such care, to give further consideration to that mechanism of providing accommodation and care to older people.

There is one key point that I want to put to my hon. Friend the Minister. The subject was also mentioned by the hon. Member for South Cambridgeshire, and I agree with him on this. We need to understand where this first step fits into the totality of the reforms that we are ultimately going to have to agree on. I want to highlight a concern relating to the three funding models in the Green Paper that are being actively considered. They are the so-called partnership model, the voluntary insurance model and the comprehensive model. I can see how the arrangements proposed in the Bill would fit with the partnership model, in that that model explicitly says that the state will provide part of people's personal care. I can also see how they would fit with the comprehensive model, which would involve everyone having to take out an insurance policy.

My concern is that the arrangements in the Bill might not fit very well with the insurance model. People would have to assess the risk when deciding whether to take out insurance. They would have to strike a balance and decide whether it was worth their while to take the risk, or whether they should take some of their capital and buy an insurance policy with it. When there was no free personal care and it was means-tested except for the poorest people, the risk assessment would have come out in favour of taking up an insurance scheme if one became available. However, if we say that the state is going to provide free personal care for the most needy, I worry that that might tip the risk balance the other way, and that people might decide to take a chance. They would know that, if their needs became particularly serious later in life, the state would step in, so I do not see how the proposals would fit in with the insurance model.

That is important because we need to find a way of leveraging some part of people's personal equity into meeting the cost of social care in the future. As we have all said, free personal care provided entirely by the state would be unaffordable. We therefore have to ask ourselves how we are going to leverage more money into the process. It could be done through higher taxes, or by finding ways of encouraging people to put part of their equity into the process. My favourite way of doing it, which I do not think any party is proposing at the moment, would be to use a hypothecated inheritance tax to meet the cost of social care. Instead of getting into the rather unfortunate bidding war over who was going to do the most to reduce inheritance tax liabilities, I would have proposed keeping part of the tax back to pay for social care. We could then have provided a much more comprehensive system. Such a tax would also be progressive, in that it would be related to people's wealth.

Kelvin Hopkins (Luton, North) (Lab): My hon. Friend says, as so many Members do, that free long-term care is unaffordable, but that assumption is based on the
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present levels of tax. If we raised taxes and redistributed a bit more, it would be affordable. It is a question of whether we decide that it is affordable, not whether it is affordable objectively.

Dr. Ladyman: I accept that it is objectively true that if we raised tax, we could afford it. My hon. Friend and I have had the debate many times before as to whether people would accept that level of tax increases, particularly if it were income tax or taxes on earnings. I personally do not believe that they would; I know that he is a strong advocate of the case that they would accept it if they knew that it was going clearly into social care-that is the difference of opinion we have. That is exactly why my preferred solution to the problem would be a hypothecated inheritance tax. I think that that would be far more acceptable to people at large than extra tax on earnings, but that is a debate for another day.

When the Minister winds up the debate, I want to hear how he sees this Bill fitting into the wider reform. If he cannot tell us today because he is not ready to produce the White Paper, he needs at least to give us the assurance that, when he does produce it, it will clearly say how the measures in the Bill are going to fit in.

The hon. Member for South Cambridgeshire raised some points with which I had some sympathy. One is the exclusion from the Bill of personal care costs if people go into residential accommodation. If we are going to pay people's personal care costs if they have the most serious needs, I do not see why we would want to exclude meeting those costs in residential care. We should not go down the route of paying people's board and lodgings, as I believe that we all have a fundamental duty to contribute to our board and lodgings, irrespective of the level of our care needs, but we should eventually meet the element of residential care costs to do with personal care. I realise that that is excluded from the Bill, but when we produce the White Paper and move on to the next stage of reform, I encourage the Minister to indicate how that need is going to be met.

Carers also need to be taken into consideration. As I said in an intervention, under the Community Care (Delayed Discharges etc.) Act 2003, anyone making an assessment of someone's care needs also has to carry out a carer's assessment. It seems to me that if somebody is receiving personal care in their home and part of that care is coming from a voluntary carer, and if as part of the care plan that the Secretary of State talked about, the need for that carer to have some respite from time to time is identified, I would hope that we could include the cost of that respite within the ambit of the Bill.

The issue of benefits is certainly going to be raised. I have spoken to the Minister and to the Secretary of State about my concerns. Frankly, I would deal with that by allowing people to continue to receive attendance allowance, and not reform it. I have previously described attendance allowance as the ultimate direct payment, since it is not means-tested and provides cash that can be spent however the person wants to meet their care needs, as long as they go over a particular care threshold. Because of that, it is very valuable. For people who have saved and have some income, as a result of which they are excluded from pension credit, it can be a godsend if a non-means-tested benefit is available to them.

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