Sir Andrew Dilnot has revisited Britain's long-term care system, describing it as 'absolute chaos' while discussing implications and reforms for the government, insurance market and pensioner benefits.
Giving a lecture at the Resolution Foundation, he described the UK long-term care system as "an absolute shambles". "It's in freefall," he continued. "It's a sector that should be a symbol of what kind of society we are and it's full of people trying to do their very best -and its absolute chaos.
"It's underfunded, the structures are completely ineffective and the market failure is absolutely unbelievable in its extent. It's perfectly feasible to do something to make this better.
"Although it's in a terrible mess at the moment, it is an area where we can make remarkable progress without spending unfeasible amounts of money and progress through understanding."
This was the economist's first speech since he ended his five-year term of the chair of the UK Statistics Authority last week.
Six years ago, Dilnot had recommended a cap on care costs in a government-commissioned review. The government said it would implement the cap at £72,000, a higher level than Dilnot had proposed in his review.
After some delays, the government pledged that the cap would take effect from 2020. In the last budget, however, Chancellor Philip Hammond said that a Green Paper on social care was due later on this year.
Dilnot argued against the continued underfunding of care: "One thing to be clear about is there is plenty of money. GDP is more than 5.5 times as big as it was in 1948, after adjusting for inflation. So if anyone says to you, we can't afford X, Y or Z, the appropriate response is: ‘That is not a well-formed formula'.
"As individuals and the state, we may choose not to afford it but the notion that we can't afford something, given what has happened to our income is striking and quite surprising, and doesn't strike me as correct."
Dilnot also highlighted that pension and insurance wealth had increased as share of GDP and suggested that, if the public were asked whether it was reasonable to make a contribution towards long-term care costs, most people would broadly agree.
Dilnot also discussed the private sector and questioned why there was no pooling of risk in relation to long-term care costs.
"We want to pool risk," he said. "At the moment the government doesn't pool risk - it only provides means-tested provision. Social care without pooling is like a shop with no prices - you have no idea how many weeks or months care may last, so why doesn't the private sector provide insurance?
"This would be quite easy for a private insurer if we knew what the shape of this [longevity and care needs] curve was going to continue to be. We don't know what this would look like when the people who would want pre-funded care insurance pick it up.
"For me to buy insurance, I would want someone to guarantee to me, say in 45 years from now when I might need care, they'll deal with it. That's why it would never happen.
"A few people have tried here and in the US and it hasn't worked due to aggregate shocks. It's fine if we know what the distribution [of the numbers of people needing care and for how long] looks like but if we don't and it increases [significantly], if you're the insurer you are stuffed."
Dilnot discussed a partial form of social insurance that would tackle some of the problems including the cap and changes to other pensioner benefits.
He explained: "This would enable consumers to think about the financial consequences. Instead of hoarding wealth for self-insurance, they can spend it actively. There would be more [government] spending on prevention; more choice for individuals.
"Financial service institutions would have a role in covering people up to the excess [with the care cap], or for those who want to put more money towards [paying for a more expensive care home for example.]"
Dilnot also suggested changes to the state pension triple lock - which guarantees that pensions rise each year by the highest of average earnings growth, the consumer price index or 2.5% - and the winter fuel allowance for pensioners to free up funding for social care.
He said: "It would be entirely reasonable to look again at the triple lock and say, ‘Let's substitute some of the more expensive elements of the triple lock. Let's turn them into a new triple lock with social care as part of the triple lock.' I also think it would be perfectly reasonable to recast the winter fuel allowance."
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