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Devolution
made a big psychological difference to the people of Scotland but brought few
big changes in the way public money is spent there. The main exceptions -
free higher education and heavily subsidised care for the elderly - consume
only a tiny portion of the Scottish Executive's budget, but they highlight
choices that all countries are having to make about the state's role in
helping people cope with extra costs arising at certain moments in their
lives.
We will spend much more of our time studying and being cared for in old age
in this century than we did in the last, when our welfare systems were
designed. Can we expect the state to help us?
The debate about care funding is starting to well up, and it is producing
some unholy alliances, as happened in higher education. On 27 April the
Joseph Rowntree Foundation publishes proposals that would give extra public
help both to middle-class pensioners who may have to sell their homes to pay
for care and to the poorest who already have their care financed by local
authorities, but only if they give up almost all of their pensions. These
ideas are getting support not just from parts of the press that favour
redistribution, but also from papers sticking up for people on modest incomes
who feel they are being punished for saving.
A former NatWest boss, Sir Derek Wanless, published a study of care funding
in March which said it needed an extra £1.7bn of public money each year to
make it sustainable. When people with such non-radical credentials reach such
stark conclusions, ministers listen. The social care minister, Liam Byrne,
immediately set up a "zero-based" review - that is, one that looks
at spending needs afresh rather than from today's starting point - which will
feed into the 2007 Comprehensive Spending Review.
The underlying issue is whether to follow Scotland and many other countries
in providing "universal" benefits regardless of means, or to keep
costs down by focusing on the poor as now.
Gordon Brown is an instinctive means-tester, but this approach causes
resentment among the middle classes, who are unable to provide for care
through private insurance (financial institutions will not take on the risk
of longer lives and increasingly expensive care without charging huge
premiums).
As with higher education, compromises are available. Offsetting higher fees,
the new student finance system gives enormous subsidies to middle-class
families through the terms of its loans. The Rowntree report suggests ways of
sharing care costs between the government and users. One is through soft
loans for people who want to buy costly services while living in their own
homes.
This would offer an alternative to moving into residential care, but financed
by a house sale. The loans would be secured against home equity, but the bill
would come in only when an older person died or eventually could not live
independently.
This would be attractive not just to older people wanting to remain
independent, but also to the Chancellor, because under Treasury rules the
net, long-term cost of subsidising the loans would not count against the
global total for current government expenditure. So the effect on the ability
to meet the sacrosanct Golden Rule would be zero.
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