Health Committee - Minutes of EvidenceHC 1583-II

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Oral Evidence

Taken before the Health Committee

on Tuesday 6 December 2011

Members present:

Mr Stephen Dorrell (Chair)

Rosie Cooper

Andrew George

Barbara Keeley

Grahame M Morris

Dr Daniel Poulter

Chris Skidmore

Valerie Vaz

Dr Sarah Wollaston


Examination of Witnesses

Witnesses: Andrew Dilnot CBE, Chair, Dame Jo Williams DBE, Commissioner, and the Rt Hon Lord Warner, Commissioner, The Commission on Funding of Care and Support, gave evidence.

Q374 Chair: Good morning. You have brought your entire collective self with you as a Commission. Thank you. You are all very welcome. We normally start by asking witnesses to introduce themselves, but I suspect that this morning, with the consent of the Committee, that is not necessary. If we may, we will move straight into the evidence session.

I want to begin by quoting to you something said to us by the Strategic Society Centre-I am reading from their evidence to us-"The Commission was tasked to produce a spending proposal: i.e. recommendations for how money is spent by the state on care and support for the population. The Commission was not asked to produce a funding proposal: i.e. recommendations for how more money could be directed into the social care system from a variety of public and private sources." Given your report is called a report of "The Commission on Funding of Care and Support," that evidence surprised me, and I wondered whether you agreed that was an accurate description of what, as a Commission, you thought you were doing.

Andrew Dilnot: I do not have that quote from Mr Lloyd in front of me, but it certainly is the case that we thought of ourselves as a Commission on the Funding of Care and Support. We felt, and feel very strongly still now, I believe, that the current funding arrangements-the arrangements that people are faced with when they need to pay for their care-are inadequate, confusing and wrong. The burden of our report was to identify the problems with the current funding regime and propose one which would bring together private and public spending to provide people with the opportunity to plan and prepare in this area as they do in all other areas. We certainly thought of ourselves as being about the funding structure. Of course, that is, in the end, about the spending of money-the spending of private and public money-but yes, we tackled the funding regime. Indeed, the terms of reference that we were set asked us to make recommendations on how to achieve an affordable and sustainable funding system or systems for care and support for all adults in England. That is what we thought we were doing.

Q375 Chair: I am grateful to you. I thought it was worth getting clear at the beginning what we are talking about: that there is a funding gap-first identified by Wanless well over 10 years ago-in the most recent round in the provision of social care. Your recommendations should be interpreted, should they, as recommendations about how a new public-private partnership should be constructed to address that funding gap in the delivery of social care?

Andrew Dilnot: They are partly to address the funding gap. They are also to address the gap between people’s expectations and what they can actually do. It is not simply that the current regime is inadequately funded, but that the opportunities people face to pool risks, which we face in all other areas of our lives, we do not face here. So the current system, the way in which the funding regime works, is inimical to people taking control and doing what they would like to. We are seeking to address not only the fact that the current system is underfunded, but that the structure of the current system is inefficient as well as unfair.

Q376 Chair: Would you therefore see it as an objective of your recommendations that, while the result of the recommendations may well be the spending of additional public money, it is a very explicit purpose of the recommendations that they facilitate the direction of more private money into this system as well?

Andrew Dilnot: Absolutely. The three of us felt very strongly that at the moment, as a nation, we are not spending enough on something that matters enormously to us: our care when we are vulnerable, whether as workingage adults or as older people. We want to see more money spent. Our conclusion is that to facilitate an increase in the amount of money spent, there needs to be some extra public spending, but the main burden of that extra public spending is to facilitate increased private spending so that we can have an adequate partnership between individuals and the state. The kind of partnership we see in many other areas of life, we think, is feasible and a way of delivering much higher amounts of money spend in higher quality and diversity of care provision.

Chair: That establishes the principles of what we are trying to do. Who would like go first?

Q377 Barbara Keeley: To what extent do your proposals on future funding depend on local authorities having the funding to deal with the current crisis? Thinking of the time scale in which you developed your recommendations-you talked about increasing need, which you recognised, and there being a gap at the point you looked at it-there have been cuts since then, which are now starting to bite. ADASS say it is about £2 billion of cuts across 2010-2012. Do you see that we cannot move to the future funding you have sketched out with the amount you have allocated if we do not fix this? Do you recommend that local authorities get more funding now?

Andrew Dilnot: The very first piece of work we had to do as a Commission was to put in a submission to the Comprehensive Spending Review in autumn last year. That was the very first thing we did. We wrote to the Chief Secretary to the Treasury, and I think possibly also copied in the Secretary of State for Health, saying that it was clearly absolutely vital the meanstested system was adequately funded. That had to be the prerequisite. Looking after the people who were most needy in terms of their need for care and who also had the lowest incomes and assets had to be the number one priority, and adequate funding of that system was essential. That was one of the things we believe led to the allocation of extra funding to social care just over a year ago.

There is little doubt-in fact, there is no doubt at all-that all that extra money has not found its way through into social care, which is something we deeply regret. We all feel that a decent society has to make sure that fundamental, meanstested floor is adequately funded. We do not believe there is a choice between these two; both need to be tackled. The meanstested system must be adequately funded and we must look after that group, but simply doing that would leave us in a situation where people were still exposed to extreme risks in a way they are not in any other area of their lives, and still we would not have the possibility of getting a partnership between individual funding and state funding. We do not think these are alternatives, but we do think proper funding of the meanstested system is essential.

Q378 Barbara Keeley: This is a small point, but do you think you can build towards your recommendations-your proposals-if, for instance, there was a substantial decline in quality and more care homes started to fold? It seems to me there is an extent to which, if the current crisis in funding causes more issues, it will be difficult to move to where you want with your recommendations. I am trying to gauge the degree to which that is an issue in the interim.

Andrew Dilnot: My own sense is that the worse the current system gets, the more difficult it gets to build on something, but also the more important it is to move towards a new regime-a regime where we can see private funding as well as public funding coming in. We would all stand foursquare behind the need to have adequate funding of the meanstested regime, but if that becomes even more problematic, I do not think it is an argument for not going forward for reform. It makes the need for reform even greater.

Lord Warner: Could I add one point? It is worth looking at what the King’s Fund said in their report last year: if you do nothing-if you do not have any Dilnot Commission-the public funding of this system will go up from £6.7 billion currently to, give or take, just over £12 billion by 2026. Doing nothing will mean that the public purse will spend substantially more money.

Q379 Rosie Cooper: You make a play about how we move forward, but we also have this great volume of unmet need out there which needs to be quantified, as you said. Do you think there are any moves towards whether that can actually be done?

To build on Barbara’s question, I was reading an article where Surrey County Council-the other end of the country from where I am, but I would suggest that Lancashire would be in a similar position-said that implementing Government proposals would cost it £102 million a year. Obviously, the exact costs would depend on the funding formulas, but that council’s director of social services thought 40% of the £102 million would fall upon the county. It would therefore become virtually impossible for them to deliver, especially in light of current cuts. How do you square what seems to be an increasingly shapeless mess? As you push on one end-a cut-and it goes forward, all I hear is people talking about how we are going to get better quality in this mess.

Andrew Dilnot: We accepted very early on that finding solutions here-as in almost any other area of public policy-is very difficult. We are talking about tradeoffs. There is no silver bullet, although we do think-I will come back to this in a moment-our core proposal tackles a huge inefficiency.

As far as unmet need is concerned, and I am sure you all know our report almost off by heart, there is a figure on page 14 of the main report, volume 1, which shows that even if we assume that in 2005-2006 demand was fully met by local authority expenditure on older people’s social care, a significant gap has grown up since then. Essentially, expenditure has remained flat while demand, because of demographic change, has risen. There is no doubt that there is increased unmet need. Quantifying it precisely is extraordinarily difficult. The first piece of work I ever did as an economist was trying to measure the scale of tax evasion. The informal economy is, by its very nature, things that are informal which you are not capturing in the system. I do not think we can know how big it is, but it is significant and it is growing.

Q380 Chris Skidmore: Yes, but do you accept the 4% per year figure that has been bandied around by the Department? Apart from it being unquantifiable, there seems to be some broad agreement that that is roughly where it stands.

Andrew Dilnot: In terms of a rate of growth in demand, yes. We can know the rate of growth of demand because we know, for example, that the number of people aged 85 and over will double over the next 25 years. What we cannot be so sure about is the current level of the gap between spending and resource.

How do we square this? We are absolutely convinced we need more resource. If we are going to get better quality, more diversity, more choice and better care we need more money going in. Let us call it "money" rather than "resource". Our recommendation is that there is a way of taking that forward by bringing together the public and the private sector and by allocating a little extra public money to take away the worst of the fear under the current regime, and by doing so we hope that will release significant spending. At the moment, one of the biggest problems in the system is that people are so terrified of ending up in the tail end of the risk distribution they will not spend any money, particularly early on in their care journey. We believe we have the structure of a system that can make a big difference, but to unlock that we need some extra public funds.

Q381 Rosie Cooper: I understand what you are saying, but we had various organisations before us a few weeks ago and we asked them whether they thought new providers of what we will call "insurance policies" would come to the table. Other than the person who was working at the Department of Health, the answer was a uniform no, although there was the possibility of equity release and that kind of thing. So those people do not appear to be racing to this market, especially in the light of the Secretary of State’s comments that perhaps this is too expensive and we cannot afford it. No doubt, we will be talking about the cap later. When you get your proposals implemented in whatever way, on the figure that falls on the county councils or the local authorities, what split do you think there should be between them and the Government? That is what my original question was, because 40:60 is-

Andrew Dilnot: The answer is that it will vary enormously across the country. Take Surrey; I spent a very interesting morning down in Surrey a couple of months ago with Sarah Mitchell, the director of adult social services there, and 400 of the people who work in that sector. In Surrey, the proportion of selffunders is enormous. Surrey is a relatively affluent part of the country. There might be other parts-the centres of some large cities such as London-where selffunders would be a much smaller proportion. The impact of proposals like this would vary radically between a rich part of the country, where a significant difference will be made, and a relatively less well off part of the country, where the difference will be much smaller. There is not a number we can apply to local authorities because it would vary enormously depending on how affluent that local authority is.

Q382 Rosie Cooper: I have a final question for you. Do you think the selffunders are the most overlooked and underserved people involved in the care system?

Andrew Dilnot: I will allow my colleagues to come in on this one because that is a difficult question. By and large, I avoid making ranking lists. My view is that everybody in the social care system is inappropriately served at the moment. That means all of us: I have said again and again that the risk or probability of needing care in your old age is greater than the risk of falling pregnant. Half of us are not going to fall pregnant and three quarters of us are going to need care in our older age. At the moment, we have a system that does not work for any of us effectively. It does not work for people as they look forward to the possibility of needing care and it does not work for people at the point where they need care. The system is bust. I would be wary of saying there was a particular bit of the system I thought more bust than any other, but let me turn to Jo or Norman to see if they have anything to add.

Dame Jo Williams: One of the issues with the current system we were very clear about-certainly when we talked to people either in receipt of care or with family carers-is that there is lack of clarity and good information. We met many people who had struggled for many years without knowing how to access the right sort of information and services. Clearly, those who have had no involvement with the local authority through social services may be even more mystified by the system than people who have already made contact.

Q383 Rosie Cooper: I am sorry, but I may not have directed the question sufficiently. There is a great anger among selffunders. They pay extra when they go into care homes to make up the fees of those paid for by the local authority, which pays reduced rates. Those selffunders are not only paying for themselves but are contributing to other people’s care. How unjust is that? Are they underserved and do they have to over-provide?

Lord Warner: It certainly was said to us, and has been said to me by many providers of residential and nursing home care, that the local authorities, as their funding has been more stretched, have done two things: they have tightened the eligibility criteria and they have reduced the unit price they pay for the statefunded residents in their homes. The consequence is that providers have been able to keep going, basically, by having differential pricing in many of their homes where they have a mix of selffunders and state-funded. Inevitably, that means a degree of crosssubsidy in reality, I suspect.

The other bit, which was put to us very strongly, was that the ability of selffunders across the country to get good information about what services were available was very mixed. That is why we made a recommendation that local authorities should have a wider set of duties in relation to making information available about the services in their particular areas. There was a sense that the people paying their own way, if I may put it like that, were not getting a good service in terms of information and ability to access services. There was a double whammy on the selffunders.

Rosie Cooper: I think most of the country thinks they are being ripped off.

Q384 Valerie Vaz: I will stick with local authorities but, first, let me say that you have done a huge amount of work and that whatever happens to the report-I hope something does happen to the report-clearly it is there for everyone to see.

Did you manage to speak to all the 152 local authorities who deliver care? Did you get some information from them on how much they spend?

Andrew Dilnot: I spoke to the Local Government Association on a number of occasions. I spoke to ADASS on a number of occasions. I spoke at NCAS. Yes, we spoke in large fora and we also spoke with representatives of individual local authorities. The Local Government Association and ADASS were extremely helpful to us throughout. One of the striking things about this area is that data is not as readily available as one might expect it to be because it has been a local authority responsibility. We had to rely quite heavily on data from local authorities, so yes, we had extensive discussions with them.

Q385 Valerie Vaz: Is spending on services different in each local authority?

Andrew Dilnot: Yes, it is radically different. One of the striking things about spending in this area-one of the things it is important to recognise-and one of the reasons it has been so hard hit in the last year is that it seems local authorities were spending more than they were allocated on social care, so when their overall budgets were cut, the social care budget was cut particularly hard. Local authorities like spending money on people who need to be looked after. It is not the case that social care is an unpopular thing. If you are running a local authority and you have somebody in front of you who needs care and support, by and large you want to give it. One of the reasons it has been especially hard in the last year is that, given how much was being spent, when the overall local authority budgets were cut, the impact on social care was multiplied because more was being spent than had previously been allocated.

Q386 Valerie Vaz: Given this is a national issue and one for society as a whole, how would you recommend that national Government and local government deal with this together?

Andrew Dilnot: This might take us on to some new areas. Before I go on to that, can I say, in response to Rosie Cooper’s remarks about the role of the private sector and financial services, and I hope we will come back to that-

Valerie Vaz: Yes, we will.

Andrew Dilnot: -we think there is an argument for variation in exactly what care is delivered across different parts of the country. The appropriate way of looking after someone in the Lake District and someone in Lewisham will be different. Even if their needs are the same, what is appropriate in a rural area in terms of care may be different in a city. That degree of variation, we think, is sensible, but we are not at all persuaded that variation in eligibility makes sense-I might ask Jo to say more about this in a moment. That seems to us simply wrong. One of the most unanimous responses to our consultation was people saying, "We do not think this is right."

That leads you to take a different view about processes of assessment. We have a strong view that the current processes of assessment, while well intentioned, are too subjective and too complicated and they do not work. We argue strongly that local government and central Government need to come together and say there are national eligibility criteria and there are national assessment processes. The way in which care is delivered may vary, but not the question of whether you are entitled to it. Jo, is there more you want to say?

Dame Jo Williams: The only thing I want to add is that we heard from many people who were saying not only are the assessment processes very complex, with many having to repeat a story over and over again, but there should be the opportunity to take their assessment to a new area-the portability argument. People felt that, having reached a level of assessed need in one local authority, it should apply elsewhere with, as Andrew says, potentially different services because of what is available in that area. Those are the two things we felt could be addressed quite urgently: to come up with a universal assessment system, which would be much clearer and much more transparent, so that people could understand the basis for the decisions being made; and that that assessment could go with you wherever you chose to live, so that if your relative was looking to get you nearer to them, or whatever, that would be possible. I think there was great support for that.

Lord Warner: The other thing that people did say about the situation was that, in different areas, there were different abilities to access the NHS for continuing care. The assessment processes for continuing care did vary quite a lot. Certainly, when we looked at the actual process the Department of Health has for continuing care, it would be a masterpiece of understatement to say it is a little opaque. There is a set of issues about national interpretation of entitlement to NHS services for continuing care.

Q387 Dr Poulter: I want to pick up on a couple of points that have already been made. First, Andrew Dilnot made earlier what to me is a key point: that the worse the current system gets-or words to this effect-the more difficult it is to build on your recommendations for the future. Lord Warner, I would be very interested in your view on this as well. At the moment, there is very much a focus upon better integrating adult social care with NHS care, and that is something you touch upon in the report. Is that something you feel is absolutely essential if we are going to have a sustainable and better system for today but also something which, if your recommendations are implemented, would be able to be built on in an effective way?

Andrew Dilnot: We do think it is essential. One of the earliest pieces of analysis that we asked our colleagues on the secretariat to do was to draw us a chart-reproduced on page 57 of our report-which shows how much public spending in England there is on older people. It shows that total spending is about £145 billion a year: nearly £3,000 for every man, woman and child in England is spent on an older person. Of that, more than half is social security benefits, principally the state social security pension, but also housing benefit, pension credits and so on; £50 billion is the NHS; and just £8 billion is social care. It is pretty clear to us that, if you started with a bar that was £145 billion high, you would not draw the lines in that position, particularly the distinction with this very small amount of separate money spent on social care and the much larger amount spent on healthcare.

I will turn to Norman in a minute, who is much more expert on this than I am, but our strong sense was that the balance is not right and there is inefficiency and reduced welfare as a result of that split between social care and the NHS. Because of the way the systems work at the moment-the lack of pooled budgets and of working together-there is a barrier to getting sensible allocation of resource across the piece. We need to tackle that. We think it is essential, and certainly something to be looked at. It is a slightly different point to the point that leads us to the cap and the change to the means test, which is that the current funding system is nuts.

Q388 Valerie Vaz: Our map says it is a £100 billion for the NHS and £50 billion for social security. Is that right?

Andrew Dilnot: In total, it is £145 billion. The first £85 billion is social security. Then the next £50 billion is NHS and then the little slice at the top is social care.

Lord Warner: This issue of integration has been around for a very long time. Successive Health Ministers have made grand speeches about integration of services for at least 20 or 30 years. The real problem has been defining what you mean by it and looking at how you can deliver it. As far as our report is concerned, there is nothing in it at all which thwarts integration. In a sense, our report helps the personalisation agenda, where you can mix and match state and individual funding for putting your own package of care together as an older person. There is nothing to stop that in this report.

The real problem people have been struggling with-it has come up time and time again in the Health and Social Care Bill, which is wending its way slightly slowly through the House of Lords; we have had a number of debates, and we will have another go at this tomorrow on integration-is finding some mechanisms which will deliver it for individual people. At the core is the point I made just now: the problem of the different interpretations of what the NHS is responsible for in terms of continuing care in different parts of the country. That does cause a problem. It seems to cause a problem, from the evidence given to us, in the area of dementia, where you have quite variable interpretations in different parts of the country as to whether a person does or does not fall on the health side of the line. What you have is a boundary which is often about avoiding taking responsibility for costs rather than a boundary which is more porous in terms of people integrating care.

Q389 Dr Poulter: What you are saying is that, at the moment, we have arbitrary boundaries in the system between social care and the NHS which are cost boundaries but not boundaries that benefit the patient or the person. Is that a fair assessment?

Lord Warner: Except in some places like Trafford, where people are trying very hard-an excellent report has recently come out from the Nuffield Trust on Trafford-and Torbay is always mentioned, but in population terms they are relatively small areas.

Q390 Dr Poulter: I have one other simple question which will, hopefully, be quick to answer. Lord Warner, you also made the point earlier about the King’s Fund report that looked at the increasing cost of caring for an ageing population. That is quite an important piece of work. What I am trying to draw from you as a group is this. Your costing implications about where a cap would be and what costs would fall to the taxpayer are, effectively, cost implications for today, but if we put off this decision about possibly tackling the larger issue of how we are going to fund adult social care, what we are saying is that the costs could go up dramatically-possibly by, I presume, several billion pounds-by the end of this decade. Is that what we potentially are saying?

Andrew Dilnot: I always like to talk in terms of percentages of GDP because then we do not have to worry about inflation and how big the economy is. Our core recommendation would cost 0.14% of GDP at the moment.

Q391 Chair: Can I make the point that people pay taxes in pounds rather than percentages of GDP?

Andrew Dilnot: They do, but the amount of tax they pay rises as inflation increases their income and as the economy grows. As a share of national income, the current cost would be 0.14% of national income, one seventh of 1% of national income, if the scheme had been fully implemented and was fully mature now.

Q392 Chris Skidmore: On top of GDP spend of, what is it, 1%?

Andrew Dilnot: That is, on the total social care bill, slightly over 1% of GDP at the moment. That would rise, over the next 10 to 15 years, to 0.22% of GDP, so from 0.14%, one seventh of 1% of GDP, to 0.22%, slightly over one fifth. The rise is driven by the very substantial increase in the number of older people. The number of people aged 85 and over is going to double.

The only other thing I want to say there is that, again and again as I have spoken about this, I have emphasised that we should be delighted. I hate people talking about "the burden of ageing" because I quite hope it happens to me. The alternative to the burden of ageing is the burden of being dead. I would far prefer the challenge of reallocating resources within the national economy and within my own personal economy because I am living longer than previous generations. We have got into a bit of a muddle in thinking about something we should celebrate. It is fabulous that we are living longer. It is a result of much improved healthcare and nutrition and much improved average incomes, which means we have to make new choices about how we allocate the much larger level of income and wealth that we have than our previous generations. We are on average four times as well off as generations 50 years ago. To say that we cannot afford something like this always seems wrong to me. We have to make choices, and they are difficult, but they are choices we are empowered to make.

Q393 Dr Sarah Wollaston: The trouble is that everybody thinks somebody else should pay for it. Can I return to the point that you raised at the beginning about this being a private and public partnership? How far do you think this will be undermined by the mis-selling which has been in the news this week with HSBC? How likely is it that older people are going to want to take out these products when they look at what has happened?

Andrew Dilnot: Let me stand back a little from this. I will come directly to that point in a moment. There has been some confusion. It seems to me there was a little confusion in some of the evidence that was heard a week or two ago about precisely what we are saying about the partnership between the state and the individual. It is clear to us there needs to be greater private spending than there is at the moment. That is not the same as saying there needs to be greater private saving. One of the effects of the current system is that, because there is no risk pooling-you will all have heard this from your constituents-you find people of very moderate wealth frightened they may end up needing residential care for some considerable time which they will have to pay for themselves, until they are to down to their last £23,250. They are terrified of spending and they are hoarding assets against the not very likely probability they end up needing residential care for a long time. The biggest effect of our proposals, by taking away the worst case-by saying to everybody, "The worst case you will face is that you have to spend £35,000 on your care, not £150,000 or £250,000"-will be the release of spending.

The way that risk pooling works is this. Imagine a world where somebody thought the worst case was they might have 20 years in a residential care home. Under the current regime that would mean they would need to hold £600,000 of assets which they must not spend on anything else just in case they end up here. Under our new regime, they know the worst case is £35,000 of the assets they have accumulated. Many people have accumulated assets-not massive, but most of the population now has housing and a little bit of saving-and they will be able to spend that resource. The response to our report’s recommendations for many people will be, "If that is the worst case, I do not mind that coming out of my house when I die. I am now willing to think about putting in a handrail, a stair lift or a downstairs loo because I am no longer so terrified." A lot of what will happen, I think, is the release of spending. That is what happens when you pool risk.

Will there be new products? Yes, I think there will be new sorts of products. There will be a variety of products. Most of them will be based on either houses or pensions. The way the tax system works, those two assets are so much more tax privileged than anything else it is very difficult to save in anything other than houses or pensions. With houses, we will see the effect of new and better equity release schemes coming through. The reason that will work better is, at the moment, if you go into residential care, you do not know how much you might need to take out of the value of your house. It is open ended. I think we will see simpler and better schemes.

As to pensionrelated things, our view is that care in older age should be thought of as part of the ageing process. It should be tackled in the same way that we tackle all the other financial consequences of growing older. At the moment we cannot do that because there is nothing to grasp on to. Our own conversations with the financial services sector have been very encouraging. We spoke throughout the term of our Commission to many representatives of the sector. At the launch of our report, the Chairman of the Association of British Insurers, the industry body, who is also the chief executive of Legal & General, said that, as an industry, they are ready to provide innovative solutions for funding longterm care. He said, "What we need going forward is a clear, stable framework. This report offers hope of just such a framework, agreed between government, the insurance industry and care providers." I think the industry will come up with products that will help people. We can talk about those in more detail later perhaps.

As to HSBC, of course, it was a terrible, terrible thing. Over the last 30 years that I have been active in this area, we have seen repeated problems across the financial services sector, and each of them does damage to confidence. They do particular damage to confidence in markets that are very small, which this one has been because it has not been a well functioning market. It is important to remember that there are other aspects of the financial services industry that do a pretty good job for most of us. I suspect most of the people in this room own houses which they have been able to buy through the services of the financial services sector. Most of the people in this room have pensions with which they are probably not entirely satisfied but at least are better than nothing. We need to recognise that financial services are complicated, that they are not well understood and that it will be difficult to get a market to grow effectively, but we are confident that it will grow. We have spoken, as I say, to representatives of the large players who are not in this market at the moment because there is no good product for them to offer. They are confident that, with the kind of system we describe, there would be a space. They will have to work very hard to overcome the consequences of things like the HSBC scandal, but they will be able to because we all need that help.

Q394 Dr Sarah Wollaston: Thank you for that. I want to follow that up with a quick question about how realistic the cap will be. If you are a resident in a relatively expensive nursing home, say, and you have used up your cap, is it realistic that the extra costs would then be topped up by the taxpayer? If not, surely those people are still going to end up paying for it themselves or being crosssubsidised by other residents, as was touched on earlier?

Andrew Dilnot: It is absolutely clear to us that the amount local authorities should pay should continue to be constrained. Let us imagine my choice, in 40 years’ time, is to go and stay in a very expensive hotel and be looked after there. It should not be the taxpayers’ responsibility to fund that, even once I am beyond my cap. The taxpayers’ responsibility should be to provide funding at the level the local authority would deem appropriate. That would mean people have the capacity to top up in a way that would be much more straightforward than is the case at the moment. Certainly, the taxpayer should only provide support at the level that, as a population, we think is the level that should be delivered. If somebody chooses to stay somewhere more expensive than that, with higher general living and accommodation costs, they should be free to do so. They should still get the support they would get if they were staying in the standard sort of place, but if they want to stay somewhere more expensive they should be responsible for that payment themselves. That is an example of the kind of financial product which I think will develop quite quickly and is relatively straightforward. It will not be related to care costs. It will simply be related to accommodation costs. One of the markets I suspect will grow up first will be topup provision for people who want to choose to stay in more expensive accommodation.

Q395 Andrew George: Can I come back to the point you make on page 57 of the report about the totality of funding? You make some very good points there about looking at the amount of money going into the NHS; how much money is spent on older people in the NHS through DWP as well as social care, and the perishingly small amount, relatively, going into social care. Your commentary on it implies it is very imbalanced against social care, but you do not address the issue of how you go through a transition. I know you raised this with Government at an earlier stage, but is not the reality that any transitional arrangement would need to be front-loaded? You would not withdraw hospital services from older people unless you had improved the care services in advance of that. You would have to have front-loaded the care services in advance of that, and that is going to cost money. Is that not true?

Andrew Dilnot: Norman, would you like to answer this?

Lord Warner: Up to a point, is the answer. You have to start from the position about what happens if you do nothing. On the evidence available, the effect has been that as local authorities have tightened the criteria for eligibility, in some parts of the country more elderly people have ended up in NHS care faster. That is, in fact, what has happened. Logically, looking at the chart on page 57, the boundary will shift. The 6% may stay static. The 35% NHS may increase over time, if you do nothing.

The situation is that the organisation which takes up the "slack" in the system, if I may put it that way, is the NHS. That is inevitable. Then you get into a set of judgments-which we certainly did not look at but they probably do need to be looked at-as to the spare capacity in the adult social care field and whether there is spare capacity also in the medical wards of acute hospitals. They are the two systems in play. It was not our job to look at the delivery systems. You are right in a sense, but I am not sure that anyone knows what the spare capacity is in those two systems, and whether, if you started progressing more money to the adult social care system quite quickly, there is enough spare capacity to take a lot of people out of NHS care into publicly funded care in the adult social care sector, the nursing homes and the residential care homes. That then sets up another set of issues which the NHS has found difficult to deal with. What do you do with the spare beds you have actually created in the NHS? The costs you have to take out of the system then become nothing to do with the adult social care sector. They are all to do with how you release the money from the NHS sector.

My personal view would be that there is a serious piece of work to be done by the Department of Health on that issue and mechanisms for releasing costs from the NHS and transferring them over the boundary.

Q396 Andrew George: Let us face reality. That is rather fanciful and theoretical, is it not? The LGA are currently telling us that the net effect of recent spending has resulted in about £1 billion being taken out of frontline social care. That is quite the opposite of front-loading social care so that the pressure is taken off the NHS. That bar chart, or whatever you call it-you are a statistician, so you will be able to explain what it is to me-or piece of cake that is sliced up in that way ends with up with a larger slice going to social care, with less needed for and going into the NHS. Although yes, there are of course pressures on the NHS to discourage unnecessary admissions and to discharge much earlier-we know that is going on-those are pressures going into the system to try and cut that budget. The reality is that nothing is going to precipitate a change in the relative spending in those two arenas. Is that not right?

Lord Warner: No. My analysis was not fanciful. My understanding comes-and your Chairman has made some excellent speeches on this-from what is called the Nicholson challenge: £20 billion to be taken out of the NHS over four years. The question is what do you do? You could be very sceptical about whether the NHS will deliver it, and I would join you in that scepticism, but, theoretically at least, it is Government policy to take that £20 billion out over four years, or perhaps a bit longer. There is then an issue about whether you use any of that money to enhance capacity in the adult social care sector. I fully accept that the reconfigurations involved in the NHS are politically difficult, managerially difficult and all the rest of it, but I do not think it is fanciful, given the Government has committed itself to making that £20 billion saving.

Q397 Andrew George: What has the Government said in response to the point you are making about the relative balance of funding?

Andrew Dilnot: In their Comprehensive Spending Review, they allocated some funds from the health service to social care. I am an economist so I believe in "reveal the preference"-look at what they do, rather than what they say. What they did-surprisingly-was take £1 billion out of the NHS budget and swing it across. It would be surprising if reasonable people did not think this was one of the ways in which you might increase the overall efficiency of the system. We all know there is enormous budgetary pressure in all these areas and we can also all see that one of the areas where there might be greater scope for efficiency gains would be in sliding activity across the boundary, but of course it is not straightforward.

Q398 Andrew George: You also said that the system is bust-the system is bust and there is an urgent issue which needs to be addressed. You did not comment on the extent of the sustainability of the current system, which is built on the backs of the lowestpaid people in this country being expected to do jobs which no one in this room would be prepared to do, particularly at that wage, all hours of the day and night. Do you think the current system is sustainable as far as that is concerned, or do you think we can take those workers for granted?

Andrew Dilnot: We think the current system is unsustainable in almost every way because it is not doing a good job. It should be the system that looks after us all when we are at our most vulnerable. There is some marvellous care being delivered in this country by informal carers and by formal carers. When you go and see the care being delivered, often you come away very moved and with enormous respect for the people who are delivering it. However, the system does not work. There is not enough funding going into it overall and people are faced with a degree of fear and uncertainty that they are not faced with in any other area of their lives. As a result, we are not looking after the market as a whole, we are not getting the kind of diversity and choice we should expect, and we are not even always giving the right level of sustained support to those delivering the care. It is bust in every dimension.

I would go back again to the Government’s Coalition Agreement-I am sure the Government remember every part of it with delight-where they said: "We understand the urgency of reforming the system of social care to provide much more control to individuals and their carers, and to ease the cost burden that they and their families face." We simply say, "Hear, hear."

Q399 Grahame M Morris: There are a couple of areas, which you have already touched on, that I would like to cover in a little more detail. One is the whole basis of the Commission’s report. As Lord Warner said, the Commission were charged with coming up with a set of proposals that were fair and reasonable. My question is: is it fair to characterise these proposals as regressive, given that the bulk of the new money going into the system will go towards the wealthiest people in society, the ones who are asset-rich?

Andrew Dilnot: The short answer is no. It is important that whenever we talk about "regressivity" or "progressivity", we talk about the system as whole, both the revenue-raising and the spending side of it. At a very simple level, if you were to ask, "Where does the money go?", 80% of the extra funds under our proposals go to people with housing wealth of less than £200,000. That does not sound like very much to me, as only about 10% of people have housing wealth in excess of £300,000. The truth is that among the older population-the population likely to go into care-it simply is not the case that there are very many people who are extremely wealthy.

Let me point you to possibly my favourite chart of the report, which I think answers this most directly. If you look at page 7, you will see a chart that shows, for different levels of housing wealth-starting at zero and going up to £500,000-what proportion of assets is lost under the current regime. The people hardest hit under the current regime are those just below the median-people with wealth, on going into care, of about £175,000, who lose 87% of all their assets under the current regime. That tails off by the time you get to wealth even of £500,000 under the current regime; they lose only 30%. Our proposals would cut that 87% for the person just below halfway up the wealth distribution to about 20%. Much the biggest effect of these proposals is to reduce the burden of the current regime on the poorest half of the population.

I have been passed an extremely helpful note. On page 98 of volume 2 of our report is a chart that shows the progressivity of the total system after our reforms. It shows that the bulk of all the support still goes to the poorest 60% of the population. So no, I quite disagree with that characterisation, which I am sure you do not share.

Q400 Grahame M Morris: You gave the earlier example of an individual in Surrey, I think it was. It was a very useful explanation about risk pooling and the fact that having a system like this in place would release spend. You suggested that individuals might be holding back £600,000 worth of assets. There must be a huge geographical spread. In my area, that would be a huge sum of money and there would be a relatively small percentage of people in that category.

On the same theme, I come to the recommendations regarding contributions towards living costs of between £7,000 and £10,000. Again, looking at people at the lower end of the income spectrum-people who do not have property to sell-how would they mitigate these care costs? It would swallow up all of their income, would it not, because they could not mitigate by selling property to generate income?

Andrew Dilnot: The reason for the points we make on living costs is this: one of the general principles we had throughout our work was that it was very important the funding regime did not discriminate between different types of care. At the moment we have a regime where, if you are in residential care, your house counts. There is a financial incentive for local authorities to get you into residential care so they can take that asset into account, and there is a financial incentive for individuals to stay in domiciliary care. We wanted to remove that. If you are in your own home, then of course you pay for your heating, food and all your accommodation costs. It seemed to us right that the same should be true in residential care.

Q401 Grahame M Morris: But what if you live in accommodation rented from the local authority or a private landlord and you cannot mitigate those living costs by selling your house? All the income would be swallowed up, would it not, in your notional £7,000 to £10,000?

Andrew Dilnot: It is certainly the case that, just as your income will be spent on your accommodation costs if you are living at home, it will be swallowed up if you are in residential care, but if you are somebody who is dependent entirely on state social security benefits, you will be no worse off than you are under the current regime.

Q402 Chair: Presumably the move from £23,250 to £100,000 would help protect that family.

Andrew Dilnot: Yes.

Q403 Rosie Cooper: This a leftfield question. When you did this, did you do it as an academic exercise; or did you go out across the country into residential care homes, and if so, how did you choose them and what did you see?

Andrew Dilnot: Did we do it as an academic exercise? We certainly brought all our skills to bear, including our intellectual ones, and thought very hard about it. We began with a process of thinking, but we did that based on a great deal of engagement with individuals, organisations and care homes. Jo might want to say more about this. We tried to make sure it was built on people’s lived experience through our own engagement with them and also through a whole variety of exercises to engage them.

Q404 Rosie Cooper: Did you go into the homes?

Dame Jo Williams: Yes, indeed.

Andrew Dilnot: Yes.

Q405 Rosie Cooper: Was that across the country?

Andrew Dilnot: Yes. I went to all parts of the country. I visited all of the devolved Administrations.

Q406 Rosie Cooper: Did you go to Liverpool?

Andrew Dilnot: No, I did not go to Liverpool. I did go to Scotland, Northern Ireland and Wales and I went to Bristol and Reading. Jo can also list some of hers.

Q407 Rosie Cooper: There is no big metropolitan council in that list of places, is there?

Andrew Dilnot: Newcastle.

Dame Jo Williams: Aside from doing visits, we met with a wide range of carers as well, so we heard stories from people directly. The other area that we looked at was some of the new developments in terms of people making choices to move into what you might call extra care housing. Again, people were telling us their stories about why they had done that. Interestingly, one of the things that kept coming up was that, for many older people, the difficulty of giving up their own home is that they do not feel safe. It was increasingly an issue for them that, living in their local communities, they were not feeling they got the right kind of protection, in a way. Some of those people had chosen to go into, as I say, extra care housing and felt very positive about it because there were all sorts of activities going on. They had worked with the organisations providing that service, looking at the totality of their finances. Again, it reinforced for us the idea that we needed to have a system in place which would enable people to plan. The people we met in those circumstances are in a minority. The majority of people have not entered into that world at the moment.

Q408 Rosie Cooper: Absolutely. Care villages are a great upcoming concept and there will be more of them, I am sure. For people with those kinds of choices, that will be great.

I asked the question to bring us back to a point made by Mr Dilnot. You said the state should only pay for the basic cost of care-we will call it a £35,000 cap, although probably, if it ever happens, it will be much higher than that-once you reach that £35,000 cap. Within the last year I have been with relatives around home after home. When you look at what a local authority is providing for £500 a week, you find that the actual costs to the home are much more, and the CQC-I have asked questions-measure against minimum standards. The reality is that, for that amount of money, quality is being driven down. Those people who can pay are crosssubsidising, being ripped off, and paying twice for the bit that the local authority is not paying. Once the £35,000 is reached, what we are saying is that it is not a cap; it is very, very porous. Then, if you want to be housed in anything other than the poorest, smelliest or whatever place, you are going to have to pay a lot more. I have heard stories where homes are costing £1,100. In my case, the family had to pay almost £1,000 a month in topup. I will not go into it because it got really bad after that and went up and up.

When people hear you talk about £35,000 they stop listening because they think, "Ah, £35,000,"-when the truth is that they will pay more if they want to stay-"the state should meet that basic cost." They are not hearing the bit about hotel costs and all those other things. We had a figure put to us that before the state would pay a penny-before you got any assistance-you would probably have to be in the system for two to twoandahalf years. Is that how you see it?

Andrew Dilnot: How long you would have to be in the system before getting assistance would depend on how significant your needs were. It could be two to twoandahalf years or a little more than one year. It depends entirely on what your assessed level of need is. I fully sympathise with your concern that, for any system to work appropriately, the quality of care deemed to be necessary by the state must be a quality of care that we all think is appropriate and respects the needs of people and what they can justly look forward to. It is certainly not the case that our recommendations are about driving that level down, but it is important for us to recognise that some people will want to make choices that go beyond that level. If people want to make choices which go beyond that level, then that is a choice we would expect them to pay for themselves. We would be very disappointed if the quality of the standard package of care and accommodation continued to be as poor as we certainly see available now in some local authorities. One of the many reasons why we need reform is to unlock all of this so that we get better quality.

As for what people understand at the moment, our sense-this is borne out by a lot of the research done for us and hundreds of conversations we had with individuals-is that people do not understand the system. They do not understand the system because it is almost never talked about. Why is it not talked about? It is complicated, but it is also a mess. Frankly, as either a local government politician or a central Government politician, if you are responsible for this, it is unlikely you would want to talk about it very much because it is not something to be proud of.

One of our great hopes is that, once we have a decent new system in place we can start to feel proud of, people will begin to talk about it more and understand it better. Also, the reason it is not understood at the moment is that it is like a juggernaut coming at you. There is nothing you can do except cross your fingers and hope it does not happen to you. As a result, there is no discussion. People never make choices because they do not feel they have any control. Once there is a system where people can start to make some choices about what they want to do, we will build up skills and understanding about how the system works. That will take a while. Yes, it is not fully understood and our proposals are not as fully understood as we wish they were, but we have to do something. We are pretty sure that this is as good as we can do.

Q409 Valerie Vaz: Clearly, people have been thinking about it. It is why you were commissioned to do the report. All parties are thinking about having crossparty talks on what to do. People are thinking about it.

Andrew Dilnot: Yes, politicians are thinking about it but the level of understanding in the wider population is very poor.

Valerie Vaz: We are thinking about it because we are getting information from the wider population that something needs to be done.

Q410 Rosie Cooper: Having done the research you have done and looked at it out in the field and academically, can you say, if I was somebody wanting to go into this field, why I would open a residential home? Why would I want to get involved in this area, facing reducing costs, increasing pressures, a lack of skillset among staff and delivering, against such a very low cost base, poor quality? Why would anybody want to get into it? If some people do not get into it, what is going to happen to us?

Andrew Dilnot: Why would you want to get into it? You would want there to be a new system. Under the current regime, one of the ways in which the system is not sustainable is that it is not a terribly attractive proposition, but the number of older people is rising very quickly and the overall level of our wealth, decade on decade, is also rising. This is something that we care deeply about. Most of us in this room will have had family members who have faced these kinds of challenges; that helps us to realise it is going to happen to us. We all know that this is something we want to be a part of.

There is no question that demand is growing. That is the kind of thing that would tend to make a businesswoman or man want to be in that sector. The trouble is that the demand at the moment is ineffective because the funding regime is in such a muddle the demand does not turn into something. My response to you, if I were a businesswoman or businessman thinking of this, would be that I would jolly well want there to be some certainty and a reformed system. That is one of the reasons there has to be a reformed system. Otherwise, there is a risk that the supply of care will continue to decline, and the disaster facing all of us who have any responsibility for it will then be even bigger.

Lord Warner: Could I add something to help Rosie Cooper? I have talked to some of the people who are making decisions now about their future investments in residential and nursing home care. You have to remember about 40% of this market are selfpayers. What they are going to do, unless we revise the system, is concentrate their efforts on selfpayers. Many of your constituents will be left without some of these options. That is why, in terms of fairness and decency, as a civilised society we have to change the system. If we do not change the system, people will still invest in this sector but in a way which attracts selfpayers.

Q411 Barbara Keeley: While we are on the point about fairness, you have talked about other aspects of fairness in your report-national eligibility setting and portable assessments-but is it not one of the great unfairnesses that informal care given by family members does not count towards that meter of care costs before reaching the cap? That is going to lead to all kinds of things-people pretending, perhaps, that they are worse than they are and people saying that they are not prepared to give that care. Why does not that crucial informal care given by 6.4 million people count in the system?

Andrew Dilnot: We certainly took the informal care very seriously, and I might turn to Jo in a moment to say a little more about this. That informal care is, as you say, the absolute backbone of the system. That is how families and care works and, without it, many millions of people would be bereft of care and in a terrible situation. We looked very hard at and talked at great length with organisations like Carers UK about what needed to be done. What they cared most about was the terrible lack of information and advice they find at the moment.

Perhaps the single issue where we do say something very explicit is the way in which carers’ assessments work at the moment. It is not our view that we could move to a world which was carer blind. People feel a responsibility to care for those closest to them and we have to recognise that in the system. If we move to a carerblind system, it is too big a step for us. There are statutory assessments of carers that are meant to take into account the needs of the carers. At the moment, on many occasions, those occur many months after the assessment of the caredfor person and then nothing happens. We did feel very strongly, and one of our recommendations is that that needs to be tackled. Carers’ assessments need to be integrated into the assessment of the caredfor person and something needs to happen. Jo, is there any more you can add?

Dame Jo Williams: The only other point I would make, absolutely endorsing what Andrew has said, is about carers’ inability to plan as well. We believe that, if our recommendations are taken forward, it will not only enable the individual to do some planning but also the families. For instance, a family may feel that making some modifications to their own property is the right kind of investment, because they know what the state is prepared do-using their assets, if they have them, in a different way. Again, that was a message to us: "Take away some of the uncertainty as well as give us better information."

Q412 Barbara Keeley: I have a second point. You said earlier that the organisation which currently takes up the slack in the system is the NHS; if social care is not providing it, the NHS is. In many ways, though, it is not only the NHS, is it? The other part of the system that takes up the slack is the informal carer. I am sure the position of carers has got much worse because of the cuts. Even the NHS cuts, I think-the efficiency cuts, the £20 billion you talked about-will be affecting social care. For instance, in my area the NHS has ended a system of active case management for people with longterm conditions which means they are not being monitored and everything falls back on the GP and the family. Did you do modelling about the impact on carers of different aspects of the system and do you accept that the situation has probably got worse for carers since you did your work with them?

Andrew Dilnot: I will say a little and then turn to Norman to see if there is more he would like to add. Certainly one of the consequences of the ageing of the population, which, to me, is entirely welcome, and also of the longer lifetimes of workingage people with significant needs, which is also something we should celebrate, is that carers are bearing a heavier burden. There can be cases of workingage people with care needs who are now living long enough that there is a risk their parents may predecease them and that the parents will still have caring responsibilities as they themselves grow frail. As people are living longer and longer, at extreme old age, often, we will find that the care is being provided by somebody who herself or himself is pretty mature.

It is also important to recognise that this is very much a women’s issue-the great bulk of care is provided by women. You are right to say that this informal care has been the other part of taking up the slack in the system. As the population has aged and we have more and more people with care needs, it is informal care that has taken up a large part of that burden. That group of informal carers is very hard hit by the openended nature of the current system. In many ways we would love to suggest more, but by at least taking away the fear of this tailend experience we would make a significant difference to the experience of carers.

Lord Warner: You are quite right. I should have included carers as taking up the slack in the system, which is absolutely right. Pages 51 to 55 of the report very much reflect what the carers’ representatives said to us. We have reflected very much their priorities and their concerns in this report. What they consistently said they wanted was a proper recognition of their needs in the assessment of those needs and for that to be done at the same time, but separately, from the person being cared for. That was an absolutely key issue.

The other thing which they majored on very strongly, which is in our report, is the issue of carers who are themselves working. They saw the attitude of employers, as much as anything, as a big issue in their ability to cope. We have tried to reflect in this report what the carers’ representatives were saying. I have heard nothing contrary since then, and I am still in touch with the carers’ representatives. I was a trustee of Carers National Association, which dates me a bit. I have not heard them saying that our report does not reflect their concerns-what they wanted to get across to the Commission.

Q413 Chris Skidmore: I want to turn to who you might consider to be the beneficiaries of the report. There is a graph in the report looking at the net expenditure by income quintile. I know, Andrew, you have said the proposals are highly progressive, but there are alternative arguments which have said that the report would, in fact, be regressive as the bulk of new money would benefit the top two income quintiles. In particular, we have heard evidence from United for All Ages who have been quite outspoken in saying that "the cap"-£35,000-"is regressive-everyone (except those below the proposed assets threshold) would be required to find the same amount of money regardless of their wealth. This could be seen as a care ‘poll tax’ for the socalled squeezed middle."

Perhaps, more worryingly for yourself-you probably read it in the Health Service Journal on 26th October 2011-the Secretary of State is said to have labelled the proposals "regressive" himself at a private meeting with representatives from local government in October this year. What comments would you have for any critics of the report who would say that you are, in effect, penalising the squeezed middle and that this report will only benefit the upper middle classes?

Andrew Dilnot: There are a number of things. First of all, is it regressive or not? At one level, it is true that with any change from an entirely meanstested system, which is where we are at the moment, it is necessarily the case that a disproportionate amount of any spend will not go to those on the very lowest levels of income. If we had an entirely meanstested health service and we moved to a health service where everybody was entitled to care, that could be characterised as regressive at one level, but I do not believe anybody would think that was a sensible way of characterising it. We would say it was a way of helping people who had high care needs. We are proposing a way of helping people with high social care needs.

Is it a way of hitting the squeezed middle? That seems to me to be simply incorrect. I am sure that is your own view as well. I do not know whether you have the second volume of our report in front of you-some of you probably do not-but there is a chart on page 27 of the second volume which shows, for different levels of the wealth distribution, who benefits most. It shows that the group most benefited by this is the group at the median of the wealth distribution. It is in the bottom half of the wealth distribution that most difference is made. At the moment, the person from the bottom one-twentieth of the wealth distribution loses 75% of all her assets if she needs to go into care. The bottom one-twentieth of our society loses practically all of the assets she has ever built up. That is somebody with wealth of only £70,000. The people who are really hard hit by the current system are the bottom half of the wealth distribution for whom the prospect is that, if they are unlucky enough to end up in the tail end of this risk distribution, they lose all economic control.

Some people have said to me, "That simply means you are proposing a scheme to protect people’s inheritances." Again, you could characterise the NHS as a scheme for protecting people’s inheritances because, in the absence of the NHS, if you had a serious healthcare problem you would certainly not have any money to leave, but that is not what it is doing. If you want to tax inheritances more effectively, by all means do it, but do not do it for the one person in 10 who ends up having to have social care needs met.

The important point to make is that the beginning of a care journey is not death. Many people begin a care journey and then have fruitful lives for many years. We want them to have some chance of economic control and stewardship over their own life then. It is very important that we have a system where there is a way of planning and a way of managing your resources. We feel strongly that this is not about helping the wealthiest. Of course, it is true that if you were a very wealthy person and you had an extraordinarily long period in residential care you would benefit from it. Most people do not. What we are doing is taking away fear. The story we heard again and again as we spoke to people was of fear-the fear of losing everything, which paralysed them from taking any action.

I am pretty robust in saying, no, it is not regressive. Anyway, it does not make sense to talk about progressivity or regressivity without thinking about where the money might come from. That was not our job, but I am sure that any way the Government finds the money for this would, overall, be net progressive.

Q414 Chris Skidmore: Taking it from the other end, are you worried about people gaming the system if you raise the cap to £100,000? A lot of people-my constituents-come to me in various degrees of frustration saying, "I might as well just piss it all up against the wall." Basically, if you go underneath that cap, it is all prepared for you. With raising the threshold so high, is there not a danger that you are going to have a large net of people who will take-

Andrew Dilnot: I am very worried about gaming in the current system. I am going to read something that was sent to me a couple of weeks ago by a lawyer. It states: "DO YOU KNOW THAT THE AVERAGE COST OF RESIDENTIAL CARE IS £464 PER WEEK? The cost of care for an elderly or infirm relative can be upwards of £450 per week. A local authority will only make a contribution towards this once the individual’s capital assets are worth less than £23,250. It is possible to protect the value of the family home by taking it out of the equation so far as local authority funding is concerned, while still ensuring that the homeowner has a right to live there for as long as is needed. If you would like further details, and a free review of what we could do for you or a relative, then please complete the enclosed reply slip." The current regime, which potentially exposes all of somebody’s assets to the means test, is an encouragement to cheating.

Q415 Chris Skidmore: That is quite similar to the deferred payment scheme that local authorities might offer.

Andrew Dilnot: No, the deferred payment scheme would still be a payment scheme. This is a way of alienating the asset and escaping altogether. This is an encouragement to cheat. Cheating is always wrong-always wrong-but a system that provides so massive an incentive to cheat is a bad system. One of the things that putting a cap in place does is to massively reduce the potential gain from cheating-from, at the moment, all of your assets to whatever the level of the cap is. Gaming is always a worry but, by putting a cap in place, we would massively reduce the incentive to cheat. Coincidentally, that is one of the ways in which the costing of our proposals was probably unduly conservative. We did not assume any reduction in gaming and I think there will be a very significant reduction in gaming. There is something puzzling about the statistics. There appear to be not enough selffunders. More people than we would expect end up passing the means test, which suggests there is something funny going on.

Q416 Chris Skidmore: This is a separate point on the modelling you have done. What account did you take of levels of dementia rising?

Andrew Dilnot: We took the standard assumptions-I cannot remember the precise numbers-so a significant increase in that, but neither accelerating nor decelerating. Certainly, one of the groups that we hope would be particularly helped by the production of the cap would be those with advanced and rapidonset dementia. I have here a note from one of my colleagues. We assumed that the age profile prevalence was unchanged overall, but the big increase in dementia will come through the ageing of the population.

Q417 Valerie Vaz: My colleague mentioned the Secretary of State. What discussions have you had with either him or the Department of Health about how you are going to progress your report?

Andrew Dilnot: I have had extensive discussions over 18 months with members of the Government and with members of the main Opposition party and their advisers through the whole period, both before and afterwards. There are nascent crossparty talks going on. I continue to be involved in discussions with all those players.

Q418 Valerie Vaz: What is the Government saying about your report and whether it will be implemented?

Andrew Dilnot: The Government is saying that it has set up a consultation process, which finished on Friday last week. There will be a report back from the six strands of that. I imagine that will now be early next year rather than before Christmas. They have said there will be a White Paper and a report on progress on funding by either Easter or April. I cannot remember which.

Q419 Chair: It is spring, is it not-an elastic concept?

Andrew Dilnot: I am pretty sure that I have been told that it will be by April, certainly by the end of April. There were some who said, "Are you not a bit frustrated? You have spent a year doing a consultation?" My response is, "No. It is an independent commission." We have done a consultation and it is perfectly reasonable for the Government to check that what we say is what other people think. It seems to me to have given space for the stakeholder community to come out with an unprecedented degree of consensus-a degree of consensus we have not seen before.

Q420 Valerie Vaz: Was that your expectation when you did the report? Clearly something needed to be done and you spent a lot of time on it. How much has it cost altogether?

Andrew Dilnot: As to the report, I do not know the answer to that. We could get you a note. I think it is significantly less than the budget set for it. The budget was something like £3 million. It is a great deal less than that. We expected, by the time we got to the end of our report, that there would be consensus because, throughout the report, Norman, Jo and I consulted with many people in this room but also the stakeholders.

Q421 Valerie Vaz: Are you surprised about the "noises off" from the Secretary of State?

Andrew Dilnot: All I have seen is that the Secretary of State was reported as saying it was regressive. He has not said such a thing to me nor has he said it on the record, and I do not imagine that is-

Q422 Valerie Vaz: It is never on the record.

Andrew Dilnot: The responses I have had-and I will now be a little more explicit-from all the politicians with whom I have spoken across all parties have been positive. There is a widespread acceptance that this is an area which is something of an embarrassment to us as a society. It is an area where we are letting ourselves and other people down and there is a real desire to get a way forward that has some crossparty consensus.

We are not naive. We realise how difficult that is. We also realise that the public finances are in a more difficult position than at any time in the last 30 years. On that, one thing I would say is that the costs that have been much talked about-the £1.7 billion a year-are what it would be costing now if it had been fully implemented. The amounts of money we are talking about in this Parliament, by the time it is implemented and starts running, will be in the low hundreds of millions of pounds. Our own view, repeated, is that £1.7 billion-0.14% of GDP-is a small sum of money relative to the overall activity of Government. It is not a small sum of money, but it is about one-four-hundredth of what Government does. Our view is that this is more important than that. Therefore, although it is difficult to work out precisely where the money might come from and how it would be introduced, it is a significant enough change which, in our view, would make a real step forward and allow the kind of partnership that we have not seen before, that all parties should try and come together.

Q423 Valerie Vaz: To draw down into the mindset of all three of you when you were producing the report, did you have in mind all the evidence or did you think, "This is going to be a pragmatic report. We want it accepted because this is the way forward"?

Andrew Dilnot: I think both. If we had felt that the right way forward was a way that would not have been implemented, we would have said so. We really would have said so. It is not the case that we have been grubbily pragmatic. We believe that the key elements of going forward are: we have to tackle the fear, which means tackling the tailend risk; we have to come up with a partnership; we have to tackle the poorest, which is why we argue for a significant increase in the upper assets threshold in the means test from £23,500 to £100,000; we have to tackle information and advice; and we have to tackle the role of carers. I do not think that, in any area, we have stepped back from things that we passionately believe. We recognise there are tradeoffs to be made about the levels in all of these cases but we genuinely believe-certainly, I genuinely believe-that this is the right framework, a framework that combines individual and state provision, where the state is tackling the vulnerability that we all face and where we get a way of respecting carers and delivering information and advice. Although there is pragmatism in the detail, at the general level we were horribly principled.

Q424 Barbara Keeley: Before we leave your role-and I understand you will be busy elsewhere in the House later looking at a new role-you have done an awful lot of presentations and meetings. I think I heard you say last week that it was 40 meetings at which you had spoken about your recommendations. Allparty groups here in the House have suggested that there be a continuing role for you and the Commissioners and that you needed a secretariat. There need to be some resources behind this. There is a question of how we get and keep a debate going and, unfortunately, the spring date for the White Paper is quite a bit later than your original recommendations. If you are now moving off-and best of luck with your appointment-how on earth are we to keep a debate going that is only just, in effect, starting?

Lord Warner: Could I help the Committee? We do need to keep speaking and we are doing so on this. In a spirit of helpfulness to the Government, I and a number of Cross Benchers have put an amendment down to the Health and Social Care Bill to be debated in Committee tomorrow which would give the Government powers to implement this, among other things, using the affirmative procedure. If the Government does have an appetite, having now completed its consultation, it would be possible for it to take this away for the Report stage and come back with proposals. I suspect and would hope that across the parties-across the benches-there would be some support for taking powers in the current Bill, which is, after all, a Health and Social Care Bill, for progressing this, but it does depend on crossparty support. It would need all the parties to be willing to take the step of giving the Government powers to make regulations which would deal with all the assessment issues, the eligibility issues, the charging issues and so forth. There is an opportunity to progress this, using the current Bill, if there is sufficient political appetite.

Chris Skidmore: The time scale-

Chair: If this were the BBC, I would congratulate you for getting your plug in.

Andrew Dilnot: In response to Barbara Keeley’s point, it is possible that I may be moving on to do something else but I have made it clear in those discussions that I would not be willing to start doing that until April, because I am committed, until the White Paper is produced, to continuing to spend a great deal of my time on this, as I have since the Commission finished. Like Norman and Jo, I really, really, really, really care about this.

Chair: Thank you.

Q425 Dr Sarah Wollaston: I have a very short question. To what extent do you think direct payments solve a number of problems that would be a cause of difficulty? I am thinking of things like the difficulty of metering care costs, the difficulties that carers face not having their contribution recognised, the problem that you touched on earlier about money being allocated to local authorities but not reaching social care, and even issues like fairness within the system. How does an inner-city metropolitan area benefit relative to an area like Surrey where, obviously, the care costs are somewhat different? How hopeful are you that that would be introduced and be helpful?

Dame Jo Williams: The point about the personalised budget is that it potentially gives people more choice. But in accessing those budgets they are still going through the current system with all its limitations we have talked about this morning. Potentially, it enables people to think more carefully about how they might make arrangements themselves to stay at home, possibly using family carers to do that, so there is more flexibility. I do not think it addresses the fundamental question we tried to address in our recommendations: what is the contribution of the state and what is the contribution of the individual as we go forward? As a mechanism for helping people live the life they want to lead, it has many advantages, but it does not address the funding issues.

Q426 Dr Sarah Wollaston: Can I stay with you, Dame Jo? One of the aspects you touched on in your report was better information for carers. Obviously with your CQC hat on at the same time, can you say what progress is being made in delivering genuinely good information? It is dreadful, as you say.

Dame Jo Williams: From the point of view of the CQC, we now have a website which gives more information. It was open for business towards the end of October. When we were looking at the totality of information that people have in their local communities, we heard from many people that they did not know who to go to. Some of the voluntary organisations have been extraordinarily good at getting information to those people who know about them, but, for some, they are not aware there is a voluntary organisation in their community that can help them. Maybe there is an opportunity for central Government to think about whether there should be a simplified national information system. Also, local authorities have a responsibility to ensure that not only those people in the system but those potentially in the system, their citizens, understand what their choices are in their local communities. There is a combination of things that need to change, a role for central Government, and maybe the voluntary sector doing more, supported by what is happening in the local community.

Lord Warner: May I add to that last point? What came across from the people who gave evidence to us was that they thought it was absolutely essential the Government had a role in ensuring that the sources of this information were trustworthy, particularly in and around the financial services sector. There was a kind of kitemarking issue about the quality of the advice and information.

Q427 Dr Sarah Wollaston: As I understand it, organisations like Help the Aged were backing things like the HSBC policies. Who should undertake that? Who should be giving them the seal of respectability?

Andrew Dilnot: That is a tricky question. One particular set of issues does relate to financial services products and there we recommended, and have already initiated as a result of our report, Financial Services Authority involvement. As these proposals go through, the FSA’s involvement in trying to work out how best to make this work is very important. Part of the problem is that too often, because of the vulnerability, in the sense of risk, people do not get to thinking about this until they are in crisis, and that is almost always too late. It would be interesting to consider the idea that the point of retirement is a point at which it is possible to trigger information and advice. That is a time when people might start thinking about it but they are not yet in a crisis. The worst possible time to be thinking about financial products is when you are faced with a traumatic care need in your own family. Finding trigger points that are not care triggered may be a way forward.

Q428 Chair: Before I bring Dan in, I have a related question which goes back to some of the things you were saying about the importance of a national care assessment in order to provide greater clarity in the system, to facilitate portability and to facilitate greater personalisation of care. All of those are familiar arguments for a national care assessment. I wonder whether this is leading social care back to where it came from, which is a branch of social security, and whether you think that is a good thing or a bad thing. It is perhaps worth asking you whether we should also reflect on the reasons that led to social care-care of the elderly-being moved out of the social security system. Are we heading back to a world we came from without adequately taking account of the risks that come with it?

Andrew Dilnot: That is a very interesting point. It is the case that there are many characteristics of social care-particularly for older people-that look like characteristics of the social security system. Take the old age pension. The state provides some help for people as they age but also expects people to provide help for themselves because ageing is a predictable event. Most of us are going to age and most of us are going to have care needs. In fact, the principal line behind why, in the end, we think it is reasonable to expect people to make some contribution in the first slab is that most of us can expect it. That looks like an expectation that is nationwide.

The way in which social care became local authority led-almost as the last vestige of the Poor Law, though not in the pejorative sense-does seem slightly out of place. Our recommendations are indeed moving towards seeing this as a national responsibility, as something where the state has a role, and it needs to be clear what the balance is between the state’s role and the individual’s role. In many ways, that does look rather more like a social securitytype structure. Are there anxieties that come along with that? One anxiety is moving away from so much local variability, but that seems to be something that, by and large, the population is keen to do. Other than that, I do not see-

Q429 Chair: To remind ourselves of one of the reasons why, in the early 1990s, a substantial part of this budget was moved out of social security into local authority management, it increasingly became a definition of entitlement, and there was a sense that the result was not a system that led to proper prioritisation in the use of resources or, indeed, proper manageability of the total quantum of resources involved.

Lord Warner: Could I respond on that? I was the senior civil servant in the then Department of Health and Social Security who had to deal with what happened to the social security system in that period. Almost by accident, social security got involved in this system because people were claiming benefits for their residential and nursing home care. It was finally spotted that that budget was growing extremely rapidly. Indeed, you could argue that the social security system largely financed the birth of a nursing home sector in this country. In order to ensure you did not skew the total system too far towards residential and nursing home care but could balance the system more towards out-of-institution care, there was a gradual move back to local authority responsibility. This, in fact, led to a growth in home care. We then saw the growth of the domiciliary care sector coming out of the traditional home help service, which had always been a local government service. There had always been a part of this service which was earthed in social services.

Could I mention something which has not had a lot of attention? We did look at what other countries were doing and one of the interesting things I have in my head is a seminar we had on that. It was, I think, the PSSRU who did the work on this. One of the things they found-I have Spain in my head as the example-was that the state was making an offer of care support but also saying that if people wanted to take the cash and look after themselves, in effect a personal budget, it would offer them less than the total cost of the care that the state would provide to help people personalise the care packages they wanted. What seemed to have surprised some of these governments, particularly in Spain, was the extent to which people took the money rather than the care package provided by the state, even though the value was, in some senses, quite a lot less. So there are some things going on in other countries as they wrestle with this issue of the demographics and what part the state, in some kind of partnership with the citizenry, should play in coping with that. There were some very interesting things we found which came out of that.

Q430 Chris Skidmore: You did not make any recommendations about incentivising families to take a greater role in the care of an elderly relative within the report. That would be a classic example of how you could do so. One other idea, off the top of my head, would be for a local authority to suspend council tax for the family caring for someone else. It would be an easy way in which you would be able to achieve a greater responsibility within a family to look after their relative.

Q431 Valerie Vaz: I am not getting into a debate on this now, but the societies are slightly different. They are much more in favour of an extended family in Spain and they do not have a history of social care, do they?

Lord Warner: I am not arguing that we should do that.

Q432 Valerie Vaz: No, but we have different starting points, don’t we?

Lord Warner: The point is that these different countries are wrestling with this issue about what is the right balance between the individual and the state in order to provide a care and support system in old age. Nobody has a silver bullet. Nobody has a perfect solution which is going to crack that. We have, in our proposals, to some extent moved down the road Mr Skidmore is suggesting. The national equity release scheme that we have suggested does make it easier for the citizen to pay you some of the accumulated assets to fund, admittedly retrospectively, the care that they have consumed. There is nothing in our report which demolishes the argument for more personal budgets, but it is very difficult to see personal budgets being the solution unless you increase the pot of money available. In a sense, you cannot have your expansion of personal care budgets with help from the state unless we can increase the pot.

Q433 Chair: The dilemma here, surely, is that if you allow the conversion of a care assessment into a cash sum at full value, you will almost certainly have increased the cost of the total system.

Lord Warner: Yes, sure.

Q434 Chair: Whereas if you apply the Spanish principle of converting the care package into a reduced cash sum, that will create a very strong negative reaction. Given that dilemma on cash conversion, is it not an implication of a national care assessment that we are going straight into that dilemma with our eyes shut? That is my question.

Lord Warner: I suspect it depends on a political judgment about where people stand on the issue of choice and people’s ability to make sensible judgments about their own needs. As an unreconstructed supporter of choice, I think people ought to be able to have the chance to make some of those judgments themselves where they feel able to do so, without forcing them to do so.

Chair: I leave the question in the air a little bit.

Q435 Rosie Cooper: I do not think people understand that until they experience imposed state or care services which are too rigid and dreadful.

Q436 Dr Poulter: I have a couple of questions. First of all, Lord Warner made the comment about pots of money. If the Government were to support your proposals and invested £2 billion or £3 billion into the system-or £1.7 billion, depending on where the cap is set-can you clearly articulate what benefit or additional resource this would bring to the system? What additionally would the Government’s investment bring to the current system and how would that support your proposals?

Andrew Dilnot: The immediate impact would be a taking away of fear. The day one effect would be that people who, at the moment, are terrified by this prospect would no longer be terrified by it. The day two effect would be that people would start spending money which, until now, they have held off from spending because they have been so frightened they might end up in the tail end of this distribution. I think we would see greater spending on prevention and adaptation. We would then quite quickly see a development of a wider range of forms of care provision, and alongside that we would see greater choice and the slow and steady development of a financial services market. The immediate impact would be that people would stop being frightened and, as a result there would be more spending. As a result of more spending, there would be greater diversity, higher quality and better care, which seem to me precisely the things we most desperately need.

Q437 Dr Poulter: Do you think that that investment by Government of £2 billion or £3 billion-whatever the sum is, depending on whether your proposals are implemented and what the cap was set at-would be enough to address this big funding gap we have been talking about in terms of adequately providing for adult social care, particularly looking after the elderly?

Andrew Dilnot: It is not an answer to the unmet need in the current meanstested system. There is a range of people at the moment who would pass the means test but are not eligible for any care because of the constraint. Unless something is done about that system, that problem would still be there. In the short, medium and long term, this would significantly reduce the amount of unmet need, but changing the funding regime will not tackle the problem of the current unmet need, which is a problem of an underfunded meanstested regime.

Q438 Dr Poulter: In response to my earlier questions about improved integration, Lord Warner was right to make the point that this has been often talked about but what it means has not been pinned down. Drawing on examples where there is better integration of social services care with NHS care, breaking down the funding silos that exist-I am presuming from the other parts of your report-has to be an essential part of dealing with the funding gap.

Andrew Dilnot: At the moment, we are certainly not efficiently using the money that is being spent. If we could get better integration we could move a long way forward. That requires other structural changes within the NHS and social care system that are not strictly about funding, but it is certainly something that we quite explicitly support-it is one of our recommendations-and is vital to getting the best use of the funds.

Q439 Dr Poulter: I have one last question for you, and then, please excuse me, I have to go to a meeting at the Department of Health. You have talked-this is a key point-about the almost perverse incentives that exist in the current system. We have spoken already about the fact that the current system is financially not sustainable. That is generally the view. One of the perverse incentives in place, for example, is the drive by local authorities to put people in residential care because of their ability to take and utilise some people’s assets as a way of paying for that. Clearly, what we are saying is that, financially, the current system is a broken system and we have to have a longterm funding solution. In terms of how the system operates, both in terms of integrated care and of the drivers in the system-not drivers that are necessarily for the benefit of people but financial drivers; the two can often be very distinct-would you say that your proposals help to reduce and remove some of these perverse incentives? That is certainly my view. I wonder if you might be able to comment.

Andrew Dilnot: Absolutely. That was one of the objects we had in mind. We all know that any system has unintended consequences and that there will be incentives for goodness knows what, but when we looked at the current system, we thought, "This does look a muddle. Let us try to identify some of the worst of those perverse incentives and remove them." I am sure there are some we have missed and probably some we would create, but on the whole our sense is that if we got something like this we would radically reduce that. One example is the nonsense of the current means test where wealthy people are encouraged to cheat, at great cost to the state and huge cost to public morale. Yes, we thought that very important and we hope it will make a difference.

Q440 Rosie Cooper: Following on from that, and almost going back to the beginning, you signalled your intention to look at the totality of public spending on older people. I would like to ask you what the Government reaction to that was and did the Government make suggestions as to the scope of your review?

Andrew Dilnot: Our terms of reference are pretty clear: the funding system for care and support. The health service, the social security system, essentially, is outside our remit. In our early response to the Comprehensive Spending Review, I made it very plain that it made no sense to think about this divorced from everything else. We did not think about it divorced from everything else. We did not attempt to make recommendations about how the structure of the Health Service funding regime works, although we did make it clear that we thought further integration was important. We did discuss the role of the social security system and, in particular, the benefits for people with disabilities. So we did think about it in the round, although our core recommendations are about the social care end of the system.

Q441 Rosie Cooper: Did the Government limit your scope?

Andrew Dilnot: At no point did the Government attempt to put any pressure on us. When I was asked to take this on, I said I was delighted to take it on. I knew that the Government was looking for an independent report. One of the reasons I knew that was that they knew that if any attempt was made to put any pressure on me, I would go back to my day job. At no point was there any suggestion of any such pressure and nor has there been from any of the political parties. We did not feel limited. We only had a year and our sense was that, although it would have been possible to widen the scope to look in more detail, for example, at integration between health and social care, it was a job for another place. There was enough of a muddle in the funding regime for care and support for us to know that if we could come up with what we thought was the right essential model-which is a partnership, with the tail-end risk removed-we would be doing our job.

Q442 Rosie Cooper: I do congratulate you on your report, but for somebody like me there are so many real definitive crossover areas. Lord Warner talked about the opaqueness of continuing care assessments. That is fundamental to all of this and yet my guess is that you would not have discussed it.

Andrew Dilnot: We discussed it.

Dame Jo Williams: We did.

Andrew Dilnot: You have no idea how much discussion there was. We have looked at the decision tool. We did discuss many of these issues which might be thought of as peripheral, not in the sense of being less important but as being on the boundaries. What we have tried to do in all of them-continuing care is an example-is make sure that our core recommendations are consistent with what we think should be the sensible direction of travel and that, where possible, they reduce some of the problems. Take the problem of continuing care. Many people who end up going through that process are people who, once there is a cap in place, would already be beyond the cap. That horrible process which can be so distressing and timeconsuming would no longer be necessary for them. For some people, such as those who have an acute problem, it could still be necessary. We had lengthy discussions about it. In the end, we restricted ourselves to recommendations about our core areas of concern while trying to make sure that we took into account as many as possible of these other issues.

Q443 Rosie Cooper: If you had comments and the results of that discussion and you could pass them back to the Department of Health, that would, in my view, be very useful. I was horrified when I saw that system close up. A lady who was incontinent, not able to feed herself and not able to talk was having to be discharged from a hospital to a nursing home as she was not deemed to be in need of continuing care. She died within five days. The family were told that, because they were in the room, they had taken part in that discussion, whereas in fact what the Knowsley social workers did at Whiston hospital was speak, tick a lot of boxes and say, "No, she does not meet the criteria. Away you go. Fund this." When I heard about it I said, "Get a copy." They were told, "No, you cannot have a copy of the questions and answers." When they said, "We will apply for it using Freedom of Information," they said, "No, you cannot," and, because she died so soon thereafter, it never took place. Families out and about the length of this country are being treated like that. Any comments that you had and could feed back to the Department of Health and the social services departments would be very useful methinks.

Lord Warner: We have made it pretty clear that if you go along the route we have proposed in this report, you have to have a national system for eligibility criteria for adult social care. It then follows that you have to do something about how that butts up against the continuing care system assessment. There is no escape. I am quite sure the Department of Health will find this a difficult issue to wrestle with. I am absolutely confident that they are finding it a difficult issue to wrestle with. I do not think you can have our system without having greater consistency and more openness about the way continuing care is assessed for individuals. Where we are heading now, if we do nothing, is that local authorities will be increasingly concentrating, under the FACS system, on those with critical care needs. They are the very people who overlap with the continuing care assessments.

Q444 Chris Skidmore: May I return quickly to the potential for creating, as you say in your report, space for new financial products? I was quite encouraged by what you were saying, Andrew, about having conversations with various insurance companies. Our experience in the Committee in the past few weeks has been that a couple of people have said there is not an enthusiasm from insurers to create new products. Obviously, there are various schemes already around such as immediate needs annuities, but only about a thousand a year and there are many supplyside barriers anyway to creating those products. With immediate needs annuities, given that they cost around about £100,000-we were told by Partnership Insurance when they gave oral evidence to the Committee that, under your proposals, that cost is only likely to reduce by about 5% to 10%-there is still going to be a huge element whereby people prefer to take that risk you were talking about rather than actually invest for the future.

Andrew Dilnot: I have read the uncorrected transcript of that session. Immediate needs annuities are a good thing. The way of thinking about an immediate needs annuity is as though it is the only insurance product available for your car and it is in the split second before you have a car crash that you get the opportunity to share your risk with everyone else who is having a crash at the same time. We would prefer that to nothing, but it is not very attractive.

I have no doubt at all, having spoken to the really big players in the financial services sector at the highest and most senior level throughout this, that there is enthusiasm for getting into this market. The financial services strand of the Department of Health’s consultation on this has already published some of its developing findings. It says things like, "There is strong support for capping care costs:-This would provide a major opportunity for behaviour change," and, "It would facilitate a range of financial products." That is across the financial services sector as a whole.

In your evidence session you had evidence from the Association of British Insurers, who I read as being extremely enthusiastic, and you had evidence from Mr Horlick who works at Partnership, which is an important part of the extremely small niche market that exists at the moment. Our view is that there would be very significant development in two areas, mainly housing-related and pension-related, because those are the two big assets that people build up. For many people, once a cap is in place they will simply treat the funding up to the cap as part of their general asset accumulation strategy. They will want to build up some assets that they might use to help out one of their children, go on a long holiday, build an extension or do the things they have wanted to do. Rather than wanting an insurance product, it will be part of their lifetime savings strategy. They might then spend that money through either equity release from their house or by a policy that was related to their pension.

The natural way of doing it through your pension would be to see the creation of a thing called a disabilitylinked annuity rather than taking a flat annuity. Say you had a pension pot that would give you a pension of £10,000: rather than taking a pension of £10,000 a year you would take a pension of £9,000 a year and that would then treble to £27,000 a year if you had a social care need. That works because these risks are negatively correlated. In general, on average, once you have a social care need you are likely to die sooner rather than later. I have no doubt that the financial services sector is willing and interested to do this. The reason they are willing and interested to do this is that the number of us getting into this area is growing all of the time, average levels of income and wealth are growing and, at the moment, they are not able to get involved in this market because there is nothing they can do.

Q445 Chris Skidmore: You also recommended that a duty should be placed on local authorities to offer deferred payment schemes, and, obviously, they can charge interest to make those cost-neutral. If I could take up this local authority proposal for a deferred payment scheme, what would be the point of an equity release product? Why would I get involved in that? Does it not act as a disincentive?

Andrew Dilnot: It might do, but you might prefer to deal with all of your liabilities before you died. That is certainly perfectly possible. I also think we need to focus on what people will do that they do not do at the moment. The biggest problem in social care is that almost all social care needs are only tackled once they become acute. People do not make adaptations early on or move to appropriate housing; they do not put in hand rails, stair lifts and downstairs loos, and the reason they do not do that is because of the downside risk-they might end up with a large liability. That is our strongest sense of the behaviour change that is potentially exciting and might have a big impact on the health service. One of the things people tend to forget until they work in this area is that the health service is, by and large, about looking after older people. Our hospitals are filled with people who, in many cases, if there had been sensible social care interventions early on, would not have ended up there. Those are the kinds of changes that we think could be very important.

Q446 Chris Skidmore: But while the NHS is still there to pick up the tab, you could simply say, "Go off and leave it." There is no sense in which-

Andrew Dilnot: People do not want to fall down the stairs. People want to be healthy. As an economist thinking about incentives, you need to divide things into where you are worried about incentives and things where you are not. I am not worried about people having an incentive to be healthy; people have an inherent incentive to be healthy. At the moment there is a huge financial difficulty which prevents them doing that.

Q447 Chris Skidmore: I would contrast that against the rising levels of type 2 diabetes which will take up 25% of the NHS budget-it is 11% now. Surely, these are demographics which go against that argument.

Andrew Dilnot: I am not saying that everybody is well controlled. I am saying that, when I am thinking about incentives, if I am worried about incentives that might encourage people to do something financially good for them, I am always very worried about financial incentives. People want to be healthy. If we create a world that makes it easier for them to make choices that will help them to be healthy-of course some people will still make unhealthy choices-more people will do that. The kind of system we are proposing will lead to more prevention and adaptation.

Lord Warner: If we want to carry on putting people aged over 80 in the medical wards of acute hospitals at £3,000 a week, we should do nothing about the adult social care system. We can carry on doing that, which is an option for us. Or we can do something which would provide a cheaper alternative in adult social care, something which people prefer. People are not queuing up to be admitted to NHS hospitals. We have options, as a country, to do something different.

Q448 Chris Skidmore: Finishing on a point of process-and this is more of a political point as well so you may not want to answer-I see in the Health Service Journal, Andrew, you are quoted as saying, "Will it happen? I think there is an eight out of 10 chance." You agree with that comment. You mentioned a tradeoff of levels. Is this essentially going to come down to where the cap is set? You may not want to answer this, but you have said £35,000. At what point would you think it is unacceptably high? Would you be happy with £50,000 or would you be happy with £60,000? To what extent would you say, "The model I proposed will no longer have the desired effect if it is raised too high"?

Andrew Dilnot: It is an entirely appropriate and fair question. In our report we used the number £35,000, but in the detailed workings of our report we say that we think the number should be between £25,000 and £50,000 a year in current-day terms. The reason we fixed on £50,000 as the level beyond which we thought it should not go at the moment was this. If you go much beyond that it is important to remember there are many parts of the country where that is a plausible level of housing wealth for a single elderly widower or widow. If you go much beyond that, you are not capping the risk effectively. It is an individual thing, so you have to double it for couples. Our feeling is that much beyond £50,000 would not work.

The financial services industry, in its consultation, has talked about a figure of between £50,000 and £60,000 by implementation. Those are figures that are not in any way unreasonable. If it goes much beyond that, then it is not something that would mean enough to the population as a whole. If it did not mean much to the population as whole, we would not get innovation in the financial services industry. Of course, in general, I would like to see it lower rather than higher because of the concerns about progressivity. The higher it is, the less help you are giving to the person on the lowest levels of wealth. That is the argument going the other way. That is why we thought something of the order of £25,000 to £50,000 or so. I do not think any of us would die in a ditch about a particular number, but I would, for example, say that if the cap got up to £100,000, that would not do the job. That is what the financial services industry is saying as well. If you go a little above £50,000, because there will be a bit of inflation anyway before this gets implemented, that is the kind of level that seemed to us to make sense. We talked about this with the financial services industry, with the whole stakeholder community, with all of the charities and with individuals, and that seems to us about the right sum of money.

Q449 Chair: It is fair to say, is it not, that your strategy is to change the rules of public sector support to this sector in the belief that that will produce a private sector response? Did you consider at all making the changes to the public sector rules conditional on some private or individual response?

Andrew Dilnot: We certainly talked that through, and that is something which has been discussed in other countries. Indeed, you could categorise some of what has happened in the US-or, in the end, not happened in the US in the CLASS Act-as trying to go down that road. In the end, our feeling was that this is something that affects all of us. We all face this prospect. It is simply wrong that this should be the one area where there is unpooled risk. After lengthy consideration, our view was that the pooling of this tailend risk is something that the private sector will not do. It is not unreasonable for the private sector financial services industry to say they will not do it. For you and me, Chairman, I hope that, on average, it will be at least 30 years before we might need such care. That is too far away to ask the financial services industry to give us a fixed premium. We cannot insure our houses and cars for 30 years from now. There is no way they can take that risk. Laying it off to the private sector is not going to work. This is an example of something where only the whole community-in this case represented through the state-can take action. In principle, that could have been done through, I suppose, a compulsory impost. In the end, that is what the state doing it would be.

Q450 Chair: Compulsion is one way, but another is to say that there is one set of entitlement rules for people who have taken certain actions and another set of entitlement rules for those who have not.

Andrew Dilnot: Sure. I can see that possibility. Part of what one has to face in all of this is that one needs to think about three groups. There is the age group facing the prospect of the need for care now. There is very little that that group can do about it. Then there is the group that is retired and is planning. Then there is the group before retirement. It seems to me that the group that has not yet retired is the group where one might think about such actions. I do not think we would rule out the possibility that there might even be autoenrolment into something that might encourage such action once the NEST scheme has got itself underway. But that is in decades and a long way away from having an impact. In terms of the current system, it seemed to us that, for those who already faced the prospect for the need for care or those who are retired, we have to act.

Chair: Do we have any other questions? No. You have been going for well over two hours, and it has been a very interesting and useful session. Thank you for your time.

Prepared 7th February 2012