Examination of Witnesses (Question Numbers
260-279)
MR RICHARD
HUMPHRIES, MR
JAMES LLOYD
AND MR
DONALD HIRSCH
5 NOVEMBER 2009
Q260 Chairman: If I had stayed working
in industry and retired, as opposed to coming in here, I would
be paying less tax on my pension than I will be after leaving
here. Has anybody studied baby-boomer retirees' taxation at all?
Mr Lloyd: We are getting into
the private sector/public sector pension debate. Most people in
retirement are asset rich and slightly more income poor. There
is a huge variation in retirement incomes and I definitely take
your point that people do pay income tax in retirement but I would
go back to the point that I made that people over their life course
will pay the bulk of their contributions through income tax when
they are of working age.
Q261 Dr Taylor: Can we look at Scotland?
I think James said that free personal care for England would put
the cost up by tens of billions. How are they affording it in
Scotland? What are the losses? What lessons can we learn from
Scotland?
Mr Lloyd: The short answer is
that Scotland does not have a system of free personal care. It
has a much more generous system of contributions towards personal
care costs, but the majority of people are still making out-of-pocket
contributions to personal care and residential care.
Q262 Dr Taylor: They are paying hotel
costs.
Mr Lloyd: They are paying hotel
costs.
Q263 Dr Taylor: What contribution
are they making to personal care?
Mr Lloyd: The levels of entitlement
are in 2004 figures; this was research by Bell and Bowes. The
cost of an average care home place in Scotland was £427 per
week. After the £210 per week contribution from the state
self-funders were therefore still paying an average of £217
per week.
Q264 Dr Taylor: So really it is a
bit of a myth that it is totally free.
Mr Lloyd: Oh, yes.
Q265 Dr Taylor: Can we learn lessons
from what they have done up there? Correct me if I am wrong, but
one of the huge problems we heard about when we did the continuing
care inquiry some years ago was that carers could be doing exactly
the same job as nurses and if a nurse was doing it then everything
was free, whereas if the carer was doing it, it was not. Have
Scotland not eliminated that sort of problem?
Mr Lloyd: Following the Royal
Commission, nursing care across the UK became state funded. Scotland
made the step of introducing universal non-means-tested entitlement.
Q266 Dr Taylor: But the definition
of nursing care seems to be the care given by a nurse, not what
the care actually is. That was absolutely clear from people sitting
at that table in the previous inquiry.
Mr Lloyd: I am not an expert on
the Scottish system. I do not know how they distinguish between
nursing care and personal care. It is a very precise definition.
As you said, the rule of thumb is that nursing care is clinical
care provided by a nurse or other medical professional. Personal
care is care with the personal activities of daily living. The
critical feature is that yes, in Scotland they have not given
people blank cheques and said that any personal care that you
consume will be entirely paid for by the state. All they have
done is increase the level of entitlement and done that on a non-means-tested
basis.
Mr Humphries: One of the big lessons
of the Scottish experience for me is that whatever funding mechanism
you adopt, it does not fudge the fundamental question of how much
you need to spend on good social care. The Scottish experience
has been that they have run out of money and therefore care has
had to be rationed either through waiting or through eligibility
criteria. The other thing they have done in Scotland is highlight
variations from one local authority to another in how they have
applied the definitions and the assessment and so on. A third
lesson is about Attendance Allowance. When they introduced free
personal care in Scotland my understanding is that you could no
longer get Attendance Allowance if you were in residential care
and receiving free personal care. This is the crunch: instead
of that Attendance Allowance money going into the care budget
it was retained by DWP as a saving against their budget and that
explains some of the shortfall in the care funding in Scotland.
Q267 Dr Taylor: So there have been
very real disadvantages of the system up there.
Mr Humphries: It depends how you
configure it. The learning point about Attendance Allowance is
that whatever Government does about Attendance Allowance that
money does need to be ring-fenced in their system and not disappear
as some kind of saving into another Whitehall budget.
Q268 Dr Naysmith: Have Scotland introduced
the universal assessment that everyone is entitled to it no matter
what?
Mr Humphries: I am not sure that
they have. There is a national assessment but there is a problem
about authorities interpreting it differently.
Q269 Dr Naysmith: That would be essential.
Mr Humphries: It would. They certainly
have not gone as far as the Green Paper proposal here that there
should be a national definition of assessment and eligibility.
Q270 Sandra Gidley: I just want to
clarify something James Lloyd said. You read out the figures of
what people were contributing personally but I think you have
missed the point. Is personal care in Scotland just the personal
care needs and hotel needs are picked up by the individual? You
were not actually quoting personal care costs that were being
picked up by the individual; you were quoting hotel costs that
were being picked up by the individual. It is important to clarify
that. Is that the case?
Mr Lloyd: Yes. I am going to say
yes, but I am not an expert on the Scottish system, so I would
refer you to somebody who is and who has done studies of it. It
is important to be clear that it is an entitlement to a fixed
level of entitlement that still leaves an awful lot of people
paying out of pocket whether that is for domiciliary care or care
in a residential care home.
Q271 Sandra Gidley: But it is quite
clear that they do not pick up the hotel costs which at the moment
are picked up.
Mr Lloyd: Yes.
Mr Hirsch: That is correct.
Q272 Chairman: We have been joined
by our third witness now. Welcome. May I just ask you to give
us your name and the position you hold for the record?
Mr Hirsch: I apologise; I was
unavoidably delayed. My name is Donald Hirsch. I am an independent
consultant on social policy. I have done a lot of work for the
Joseph Rowntree Foundation on this subject and written several
reports for them.
Chairman: Welcome. We have a specific
question for you about your work with the Joseph Rowntree Foundation.
Q273 Sandra Gidley: In 2006 you wrote
a report for the Joseph Rowntree Foundation and that suggested
a partnership model with a state contribution of 80% to the cost
of care. How do you go about determining what the level of state
contribution should be in a partnership model? Obviously Wanless
came up with a different figure and the Green Paper is yet again.
Mr Hirsch: We have to be very
clear about these different bases. Our calculation there was actually
a particular illustration. What it showed was that if you took
everything which was being spent on care home fees and registered
domiciliary care, by public agencies and private individuals,
put all of that together, actually about two thirds of that was
already public but the remaining third was unaffordable to many
people. If you wanted to create a system without any means-testing
and a co-payment that everybody could afford, we reckoned that
20% was something that even with an averaged cost for a nursing
home and somebody who was on pension credit, not the absolute
maximum cost but something at the high cost end, somebody on a
minimum entitlement could still afford to pay 20%. The point we
were making there was that, if you wanted something which was
really doing away with means-testing and it was a universal entitlement
but with a common payment that everybody could afford, round about
20% would be right. Actually the Wanless figure was not so different
from ours because it actually comes out at one sixth, which is
162/3%; ours was 19%. We subsequently were
involved with The King's Fund in a thing called Caring Choices.
There we were talking to a lot of stakeholders, including individuals
who were clients and people who were working in the system and
a wide range of people, to consider whether it was fair to have
a co-payment and roundabout where it should be. There was general
consensus on two things. One is yes, everybody ought to make a
contribution. Secondly, the state needs to contribute most of
the cost, certainly for people who are on lowish incomes because
it is simply unaffordable. If you want to get means-testing out
of the system, then the simple partnership model in the Green
Paper would not do that because most people could not afford to
pay two thirds themselves.
Q274 Chairman: May I just ask something
specifically about the Joseph Rowntree Foundation? I am advised
that previous reports of the Foundation have highlighted some
of the short-term fixes which should be introduced to the current
means-tested system. Can you tell us what they are and why they
should be introduced?
Mr Hirsch: These were suggestions
of things you could do while you were fixing the present system
in the long term. They were not meant to be permanent solutions.
It tried to identify some areas where people were really in difficulties
which could be addressed and areas where people felt a sense of
injustice which could be addressed in that way. One was increasing
the personal expenses allowance for people who were in care homes
and that was just a matter of dignity that we thought roughly
£20 a week was just not compatible with dignity and it would
not cost a lot to double that in the overall order of things.
Another was, in a way, people who had more resources but who were
having to draw down their capital. It was suggesting that you
could increase the capital threshold so that at least people would
feel they had something to preserve in a worst case scenario.
Again the cost of doubling it was significant.
Q275 Chairman: Lifting the threshold
of capital has happened over several decades now, has it not in
a sense?
Mr Hirsch: I have not studied
this. I am not sure whether it has lifted in proportion to people's
assets.
Q276 Chairman: It would be a significant
lift.
Mr Hirsch: Yes. The other thing
about it is that there are more people who are in that situation
of having housing assets so the issue has changed. We also looked
at how you might redistribute some of the money that goes to people
with the highest needs, particularly in care homes. There is the
strange situation where some people get everything under the continuing
care criteria and others get next to nothing, even though they
may have very high needs and we looked at the way that could be
distributed either at zero cost or at low cost. We also suggested
that more public support for equity release and possibly a scheme
like student loans might actually cost very little and help people,
particularly with high domiciliary care costs. I have to say I
think personally that those arguments are fading or rather the
more important argument at the moment is how you get the Green
Paper issues sorted out. There are some similarities between proposals
which went on the table this autumn as short-term fixes and what
was being proposed there and I am not sure that is always helpful
because if you are discussing two things at once it is very difficult.
Q277 Sandra Gidley: You said everybody
agreed that there should be a contribution. Who is "everybody"?
Mr Hirsch: I did not say everybody.
If I did, I spoke wrongly. There is general consensus. This was
a deliberative process, a series of six public debates and discussions
and all-day sessions with several hundred people involved. Some
of them were actual users, some of them were carers, some of them
were professionals working in the field. There has also been some
opinion polling which has confirmed this. It always depends how
you ask the question, but the idea that individuals should contribute
something seems in all the studies and surveys I have seen recently
to be something which the majority but not everybody agrees with.
Q278 Sandra Gidley: If we are going
to have an 80% state-funded system that introduces the 20% with
a huge amount of bureaucracy, would it not be simpler just to
go the whole hog and have it 100% state funded?
Mr Hirsch: If it were the case
that presently the state was contributing zero and we were debating
whether to go to 80% or 100%, I would see your point. Actually
we worked out that of those costs we were talking about the state
is already contributing two thirds. So if the individual is going
from contributing one third on average—of course you have
to have means-testing when it is that high—to 20% across
the board, that would cost roughly half, slightly less than half
additionally what it would cost to go all the way to 100%. It
is a very different financial proposition for the Government.
There is also a sense in which I thought people were being realistic
saying the national care service is not the same as the National
Health Service in that sense, it is something where we get some
really strong guarantees that we do make a contribution. For the
future, where you may want to increase the contributions in order
to fund something better as people are more able to contribute,
the precedent of saying "Look, this is not something where
we are going to say everybody is going to get it free from now
on" leaves you more room for manoeuvre than if you just say
"From now on this is all going to be free" which could
very expensive in the long term.
Q279 Sandra Gidley: You mentioned
that there is a step in the increase in costs. Does that include
an assessment of how much it would take to administer? Surely
if everybody gets the universal benefit it is much cheaper to
administer. How was that factored into your assessments or was
it not?
Mr Hirsch: No, it was not. We
are talking about billions of pounds here. We thought it would
cost £2 billion and if you went the whole way it might cost
£5 billion. It is not just an administrative issue.
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