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A prudent system of checks and balances for care of the elderly but no blank cheques

Submitted by on 23 Nov 2010 – 10:52

Poverty in old age gas veeb substantially reduced, thanks to pensioner tax credits.

By Lord Lipsey

At last, there is hope for progress on that most wicked of wicked issues, long-term care of the elderly. In July, the government set up a three-man commission to tackle the problem, under the chairmanship of Andrew Dilnot, Principal of St Hugh’s College, Oxford.

He will bring to the task the essential skill required to tackle it. As an economist and former head of the Institute for Fiscal Studies, he will be disinclined to write blank cheques which are only too liable to bounce.

The shortage of state cash will, of course, be most acute over the next few years. By common consent, Britain’s budget deficit has to come down. This means an alarming combination of tax increases and spending cuts. The chances of some big new pot becoming available for long-term care in the near future are zero. So, as its members will understand, any suggestion from the Commission that requires big short-term spending increases will be a non-runner.

A temptation is to issue a blank cheque but post-dated. That is to say, Dilnot and his colleagues could come up with a scheme that involves much-increased public spending on long-term care, but with the increase starting in a few years time, when the current crisis will, we hope, be behind us.

The sums involved could be eye-watering. In Scotland, where a system providing long-term care free was adopted in the early 2000s, spending has escalated out of control. For care for people in their own homes, it more than doubled in real terms in five years. The Scots are now considering ending their free care policy before it bankrupts their government.

However, there is another reason for avoiding huge new expenditures on long-term care. It is simply this: that today’s pensioners are doing very well from the existing benefits they receive.

Poverty in old age has been substantially reduced, thanks to pensioner tax credits. But better-off pensioners are also eligible for valuable long-term benefits. They get free prescriptions. They receive winter fuel allowances. They can travel all they want for nothing on buses and for bargain basement prices on trains. At 75, their TV licences are free.

This comes on top of the fact that those who have retired now are often reaping the benefits of final salary pensions, which will not be available to successor benefits. And the notoriously generous public sector pension schemes are similarly likely, following the inquiry being conducted by Lord Hutton, to be on the way out.

The coalition government has added to this munificence. Its first budget included a three way guarantee for pensioners: basic state pension would go up each year by whatever is largest of price inflation, earnings inflation and 2.5%. In these harsh times, this is an enviable bonanza.

Meanwhile, old people are living longer and longer. The increase in longevity is gradually accelerating. So better-off old people enjoy these benefits for longer.

Increased longevity has another little-noticed effect. It is better-off older people who live longest. They therefore benefit for longer from this free distribution of goodies – paid for by the hard-pressed working population. Dark talk of a taxpayers’ revolt against the generous treatment of our elderly may be exaggerated. But that there will be resentment, on the part of young families struggling to get by, can hardly be doubted.

All these problems would be exacerbated if the Dilnot Commission added to the benefits the elderly already receive by giving them more care, and making them pay less for it.  This will not escape the Commission. It is to be hoped, it will condition the expectations the elderly lobby has for what they might get from it. For a solution to work, it must be affordable for taxpayers – and fair not just to pensioners but between generations.