My Lords, I should have put my name to this excellent amendment.
It would not be the first time that the OBR has looked at this issue because there is some valuable material in its report on fiscal sustainability in July 2013, to which I will return in a minute. My noble friend concentrated on how serious the problem is now and how serious it will be in 2016. Perhaps I may detain the House for a few minutes to describe the slightly further away prospect because, if we are in problems now, we shall be in crisis unless something major changes within the next eight or 10 years.
The demographic factors have been widely appreciated, most notably in the report from the Select Committee of your Lordships’ House, Ready for Ageing, which indicates that there will be 39% more people aged 85 and over by 2021 compared with 2011, and 101% more—more than double—by 2030. The Select Committee concluded that what will happen is that they will get shoved into hospital, which will be,
“contrary to their wishes, not in their best interests, and more expensive”.
That is not a very good prospect. Moreover, as the OBR has shown, there is the prospect that stays in residential care may get longer and, therefore, cost more. It calculates a variant with a 20% longer stay, which is not implausible. So, just demographically, the situation is very difficult.
However, some less noticed factors all point the same way and add to the pressures. The most prominent factor is workforce issues. Many of your Lordships will have read the excellent report produced last week by the King’s Fund. It projects that by 2025 there will be a shortage in the care sector of 1 million workers—that is 35% of the current workforce. That is assuming that the Government’s immigration policy does not bite even more sharply than we think. You have only to go into a home to see how they are kept going by caring people who have come from overseas and are willing to work for the minimum wage, or near it, to look after our older people for us. Given the Government’s policy, these people will increasingly not be available for this purpose and so wages will inevitably go up. That will be a good thing because these people are terribly underpaid for what they do—it amazes me that the services are as good as they are, not that they occasionally fall short—but the cost to the Government is very sensitive to wages: it is the main expense because around 70% of the costs of an old persons’ home are paid out in wages.
The trite response to that is, “Let productivity increase”. However, in this sector, where one person looks after another, an increase in productivity will invariably lead to a decline in the standards of service. We know this because productivity is going down—it is down 20% over the years 1997-2010—simply because we rightly expect better services for people in the homes. There is no offset available through productivity. Those are the workforce issues.
As to the related fees shortfall, the system works at the moment by local authorities paying rock-bottom prices for the care they buy and self-funders paying rather more. The noble Baroness, Lady Greengross, sees this as an unfair tax but, being an economist, I know about marginal and average costs and I am therefore less shocked than I should be. However, it is a fact that it is taking place. The shortfall in fees over what will be necessary to provide an economic return for these homes would have cost local authorities £540 million in 2008-09, according to the latest published study by Laing and Buisson, to get the fees up to a level where they provide a reasonable return to the homes.
However, it will be much more difficult under the Bill’s scheme, because at the moment self-funders have no idea what the local authorities are paying for the
same places that they are enjoying; they are not told. I was glad to hear the Minister confirm that under the Bill, self-funders will be told what the local authority pays. They will have to be told because the amount the local authority pays is what counts towards the cap. Thus a self-funder may be told that while they are paying £700, the local authority is only allowing £400. Your Lordships can imagine what is going to happen. I do not think that many self-funders will say, “Oh, I’ll be delighted to go on paying £700. After all, I may benefit from the cap if I live for a very long time”. They are going to be enraged. It is not a system that can be sustained. I have no doubt that the fees paid by local authorities and the fees paid by self-funders will come closer together, and that will mean increased bills for local authorities.
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The final factor I shall mention is this. Generally in society, we become accustomed to better standards as time goes on, and it is going to be no different in care homes. As a society we were quite content, 40 or 50 years ago, to shove older people into hospital geriatric wards where they received the absolute minimum of care in sometimes frightful situations. That was the standard of the day. Today, there are some extremely good care homes. My spirits are lifted every time I visit the care home in Oxford where my mum is because the standards are so wonderfully high—not that they are within the range of what the fees the local authority pays would provide, but they are high. The worst are dreadful and occasionally get exposed, but the majority, I would say, are so-so. They have strengths, they have weaknesses; they have good points, they have bad points.
My generation, the generation mostly in the House today, will not put up with the standards that would have been accepted by a previous generation any more than people today say, “I would not want to bother the doctor”, in the way that my mother’s generation used to do. They will require something better and they will rightly say, “Parliament will not pass legislation allowing us to do ourselves in so we have no choice but to go on living. We demand and have a right to the standards that we should expect in order to make the best of what may never be wonderful last years.” There is thus a definite scenario which is going to mean ever-increasing costs against budgets which the Government are going to have to, and already are, keeping down.
Of course there are magic wands that can be waved. There is the NHS social care integration magic wand. People have been waving this wand since at least 1999 when I was on the Royal Commission. Much less has happened when the wand has been waved. There are reasons why it is difficult, and in any case it is simply not a remedy of sufficient scale to change what is going on. People say that we should spend more on prevention. I totally agree, but the reality is that prevention postpones but does not avoid. It means that on the whole people start going into care later, but it does not mean that they will never require help. There has to be more money both from the public purse and the private purse. It is important that the insurance industry steps up to the plate and allows people to take out
policies that will provide them with money, either on the basis of their housing equity or from drawing on their pension pots, that will enable them to chip in their fair share of the costs of keeping them in their old age.
Although I have gone on for quite a while, this is but a brief summary of a highly complicated case. Putting together the various elements reveals the dangers that we are walking into—dangers of which only some people appreciate some parts. A proper and detailed OBR investigation of the facts and the trends would throw enormous light on this issue and, even more importantly, lead to action.