Centre for Ageing Better
28 Mar 2019
Nearly every announcement from the Chancellor is quickly followed by an analysis of winners and losers. In the analysis that followed the comprehensive spending review 2015, the NHS was seen to be a winner (at least compared to other areas of public spending – many of which saw further swinging cuts to budgets). But who are the winners and losers between the generations?
Older people are usually depicted as winners, benefitting from the triple lock on pensions, the rise in house prices (particularly in the South East), and generous employer pensions. Meanwhile, welfare benefits for working age adults are cut, home ownership is unaffordable for many young people and most defined benefit pension schemes having closed to new entrants. While there are undoubtedly economic inequalities between generations, there are also profound inequalities within generations as our Centre for Ageing Better research on Wellbeing in Later Life showed.
In terms of NHS funding, older people appear to be winners. More than two-fifths of the NHS budget is spent on people aged 65 and over. However, much of this expenditure is on treating preventable chronic conditions, admissions to hospital resulting from acute exacerbations, falls or other acute ambulatory conditions such as UTIs, lengthy stays in hospital due to a lack of suitable alternative care settings, and intensive medical intervention near end of life. If the resources were spent on enabling people to be healthier, supporting them to manage long term conditions, providing proactive care in the community or home, and support to die at home or in a home like environment, people could be real winners.
On social care, older people look to be losers. Over the past five years some estimated 400,000 people have not received care who would previously have been eligible, as resources have been focused on those people with the highest and most critical levels of need. Changes to local government finances together with rises in the minimum wage look set to increase pressure on social care budgets further. It is estimated there will be a gap of between £2.8-3.5 bn per annum in social care funding by the end of the parliament.
Three former health ministers from across the political spectrum have called for a commission into health and social care. While it is hard to see how health and social care services can be adequately provided without an increase in funding, I don’t believe the issue can be settled by simply looking at health and social care. The growth in the proportion of the population over 65 years old demands a more radical and holistic view of tax, spending and entitlements. The Chief Executive of NHS England, Simon Stevens, has suggested the need for greater flexibility between disconnected funding streams and options for families to draw down resources tied up in housing, pension pots and other benefits and entitlements. I tend to agree.
Other changes in benefits are likely to have mixed impact on older people. The housing benefit cap, announced in the spending review, potentially poses a significant challenge to specialist housing and extra care housing providers, if they are not exempt. On the other hand the Disabled Facilities Grant, which local authorities provide to disabled people to fund changes in the home, was doubled.
The final settlement for local government for 2016/2017 included full business rate retention and some additional funding for rural authorities. Further consultation on proposals to devolve attendance allowance to local government, worth some £5 billion currently, are still awaited. This benefit which is not means tested is paid to people aged over 65 who need help due to mental or physical disabilities. This opens up opportunities to align the benefit more closely with other funding at local level through for example direct payments and personal budgets, as long as its value is not eroded.
The Work and Pensions Committee has recently launched an inquiry into intergenerational fairness. An increasing number of us are part of multi-generational families as the recent report by the Social Market Foundation shows. We need tax and welfare policies which are not only fair across generations, but also between those who are well off and those who live in poverty, between different areas of the country, and between those who are healthy and those who are sick and disabled. This means a more sophisticated approach to public policy which does not assume that our chronological age is what defines us and looks beyond the individual at intergenerational family relationships.
Throughout our lives there will be times when we can contribute fiscally or in other ways to society, and times when we need assistance. Age is an outdated criterion for tax and welfare. Future reforms to tax, spending and entitlements need to recognise this. I hope the Work and Pensions Committee doesn’t pit one generation off against another but takes a nuanced approach to what are complex fairness issues within and between the generations.