It is Andy Burnham’s first Labour conference as PM. The big headline is that he wants social care to be free at the point of use, and that some, but not by any means all, of the funding will come from scaling back the pensions triple lock.
At first sight, this sounds like an obviously progressive policy. Social care is expensive, the existing system is complicated and frequently unfair, and the distinction between somebody receiving free NHS treatment for cancer and somebody potentially spending much of their savings because they develop dementia has always been difficult to defend.
Burnham wants to end that distinction. Speaking at the Labour conference, he has committed himself to putting proposals for social care that is free at the point of use, with its costs spread across the population, before voters at the next general election.
This would be an enormous extension of the welfare state. It could also be surprisingly regressive.
That is the uncomfortable question at the centre of this debate. Making social care universally free doesn’t simply provide additional help to poor people, because many of them already receive substantial help through the means-tested system. It also means taxpayers picking up bills currently paid privately by people precisely because they possess substantial assets. In modern Britain, those assets overwhelmingly mean houses, pensions and other wealth accumulated disproportionately by older generations.
There is therefore a danger that a Labour government could spend billions of pounds extending the welfare state only to discover that one of the largest effects of its new universal benefit was to protect the accumulated wealth of some of the richest households in the country. Worse still, that protected wealth does not disappear when its owners die. It passes disproportionately to their children, potentially reinforcing the very wealth inequalities a Labour government might reasonably be expected to reduce.
Before deciding whether this is a good idea, we need to ask a more fundamental question. Is social care principally an individual responsibility, with the state helping those who cannot afford it? Is it an insurable individual risk, where people meet reasonable costs themselves but society protects everybody against catastrophic losses? Or is it a collective risk like healthcare, whose costs should be pooled across the population regardless of individual wealth?
Those are three fundamentally different conceptions of the welfare state. Britain has confronted this choice before, and in 1948 it made a clear decision.
The choice made in 1948
The creation of the NHS is so deeply embedded in Britain’s national mythology that we sometimes forget what wasn’t created alongside it. Attlee’s government didn’t establish a general principle that every human need should be provided universally by the state. It drew boundaries. Healthcare was brought within a national service and provided largely according to clinical need rather than ability to pay. What we now call social care was treated differently.
The National Assistance Act 1948 placed responsibilities on local authorities, but social care remained means-tested and chargeable. A subsequent House of Commons Health Committee described the contrast rather starkly: the NHS became universal, national and tax-funded, while social care remained locally administered, means-tested and based substantially upon an expectation that individuals and families would shoulder responsibility where they could.
Attlee and Bevan therefore socialised the financial risk of becoming ill without fully socialising the financial risk of becoming dependent upon somebody else to wash, dress, feed or look after you. That distinction has survived for nearly eighty years, but it creates outcomes which increasingly appear difficult to explain. Develop cancer and the NHS may spend hundreds of thousands of pounds treating you without asking whether you own a house. Develop dementia, remain physically healthy enough to live for years and require substantial personal care, and the value of that house can suddenly become extremely important. Around one in seven people reaching 65 can expect lifetime social-care costs above £100,000.
Burnham is proposing to move the boundary drawn in 1948. If social care becomes comprehensive and free at the point of use regardless of wealth, this isn’t simply another increase in council funding or another reorganisation of care homes. It extends the principle underlying the NHS into an area which the architects of the post-war welfare state deliberately treated differently.
And it isn’t cheap. The Health Foundation estimates that introducing Scottish-style free personal and nursing care for people over 65 in England would cost around £6.5 billion a year initially and £7.5 billion by 2035–36. Moving all the way to comprehensive NHS-style social care, under which everybody currently paying privately became eligible for publicly funded care, could require around £18.5 billion of additional public spending each year by 2035–36.
That last point matters. Some of this additional money would undoubtedly buy more or better care, and unmet need means the eventual bill could actually be higher. But a significant purpose of the reform is different. It changes who pays for care which is already being consumed.
Follow the money
Imagine two elderly people with identical care needs. One has virtually no assets and already receives substantial state assistance through the existing means-tested system. The other owns a mortgage-free £750,000 house and has substantial savings, and consequently pays privately for much of their care.
Make that care universally free and the first person may receive relatively little additional financial benefit because the taxpayer was already meeting much of their bill. The second could receive an enormous financial benefit. Instead of spending £100,000 of their accumulated wealth on care, they retain it.
Their care doesn’t necessarily improve. Their standard of living needn’t change by a penny. What changes is their balance sheet.
And, eventually, quite possibly their children’s inheritance.
This doesn’t make universal social care inherently wrong. There is a powerful argument that nobody should face a financial catastrophe simply because they happen to develop dementia rather than cancer. But it does mean we should stop assuming that making something universal automatically makes it progressive.
That matters particularly because of what has happened to British wealth during the past few decades. The latest ONS Wealth and Assets Survey puts median household wealth at £293,700. Among households headed by someone aged 65 to 74, however, it is £502,500. Households owning their homes outright have median wealth of £647,400, while renters have just £40,800. Net property alone accounts for 40% of household wealth.
There are important caveats around those ONS figures — accreditation of the latest Wealth and Assets Survey estimates has subsequently been suspended because of data-quality concerns — but the broad distribution is hardly mysterious. Older homeowners are vastly wealthier than younger renters, and property is central to that difference.
Much of this wasn’t accumulated through extraordinary thrift or productivity. Older generations happened to own an asset during an extraordinary increase in British land and property values. Rising house prices enriched existing homeowners while simultaneously increasing the cost of entry for those who came afterwards.
Government policy has reinforced some of these generational effects. The pension triple lock guarantees that the state pension rises by whichever is highest of earnings, inflation or 2.5%. The IFS says it has materially increased both the generosity and cost of the state pension since 2011, and notes that because wealthier people tend to live longer, they benefit more from the additional pension generated by the triple lock than poorer people with shorter lives.
None of this means pensioners are uniformly rich. They plainly aren’t. Nor are younger people uniformly poor. The important point is that age has become increasingly associated with accumulated wealth, particularly housing wealth, while inherited wealth is becoming more important in determining the economic prospects of the generations following them.
Burnham risks adding another transfer to this process. A younger worker who cannot afford to buy a house could pay additional tax so that an older person sitting on several hundred thousand pounds of housing wealth doesn’t have to use that wealth to pay for care. The house can then pass to the owner’s children.
And those inheritances aren’t distributed evenly among younger people.
The IFS estimates that among people born in the 1980s, one fifth have parental wealth of less than £10,000 per heir. At the other end, a quarter have parental wealth of £300,000 or more per heir. It expects a fifth of this generation eventually to inherit less than £10,000, while a quarter inherit more than £280,000.
So the transfer isn’t simply from young to old. It can become a transfer from poorer younger taxpayers towards wealthier older households and ultimately towards the already more fortunate children of wealthier families.
That is how a policy intended to increase social solidarity could end up reinforcing wealth inequality.
Scotland and the problem with universalism
Scotland provides an uncomfortable illustration of the problem. Free personal care was introduced there in 2002 by the Labour–Liberal Democrat government and subsequently maintained and extended under the SNP. It is often cited as evidence that England could provide universal personal care too, and indeed it is the model used by the Health Foundation when costing the more limited version of reform.
But equality of entitlement isn’t necessarily equality of benefit.
The differences in health between rich and poor Scotland are astonishing. National Records of Scotland estimates that men living in the most deprived tenth of Scottish areas can expect just 44.8 years of healthy life. In the least deprived tenth, the figure is 70.4 years. For women it is 44.2 years in the most deprived areas and 70.9 in the least deprived. The gap in healthy life expectancy is therefore 25.6 years for men and 26.7 years for women.
That doesn’t mean poorer Scots don’t need social care. Quite the opposite: poor health creates care needs of its own, and social care isn’t exclusively an old-age service. Disabled working-age adults are an important part of the system. But longevity matters enormously to the value of benefits concentrated in later life.
The same phenomenon already appears in pensions. If two people receive the same annual pension but one dies at 70 and another lives to 95, they have not received remotely the same lifetime benefit from the state. The IFS explicitly finds that the additional value created by the triple lock is greater for wealthier people partly because they are more likely to survive into their eighties and nineties.
Social care potentially compounds the problem. The people who live longest have more opportunities to consume years of publicly financed later-life care, while also tending to possess greater wealth for the state to protect.
So there is a legitimate question for a Labour government contemplating another £6.5 billion, £10 billion or eventually £18.5 billion of expenditure. If the objective is to reduce inequality, is paying the care bills of people sitting on substantial accumulated wealth really the most progressive use of that money?
The answer might still be yes. Collective insurance can be worthwhile even when some rich people benefit from it. The NHS itself is universal. But universality isn’t an answer to the distributional question. It merely makes the financing of the service even more important.
Burnham has been here before
There is a fascinating historical twist to all this, because Burnham’s enthusiasm for a National Care Service isn’t new.
In July 2009, just weeks after he became Health Secretary, Gordon Brown’s government published Shaping the Future of Care Together. The Green Paper is worth returning to because it asked essentially the same question we are confronting today. It proposed a National Care Service but considered different ways of distributing responsibility between the individual and the state.
One approach was partnership: the state would meet some care costs and individuals would contribute the remainder. Another involved insurance, allowing people to protect themselves against their liability. The most comprehensive option pooled much more of the risk collectively.
Those weren’t simply alternative ways of finding some money. They represented competing conceptions of the welfare state. Is care principally your responsibility? Is it your responsibility but a risk against which society should insure you? Or is it our collective responsibility?
By 2010 Burnham had moved increasingly towards the third answer and Labour proposed a National Care Service. Then it ran straight into the problem which has haunted almost every subsequent attempt at reform: who pays?
The Conservatives attacked proposals under discussion for an estate levy as a “death tax”. Labour lost the election and the National Care Service disappeared. What followed was sixteen years in which successive governments repeatedly attempted to solve the funding problem without resolving the underlying argument.
Andrew Dilnot’s commission offered what was essentially social insurance against catastrophe. Individuals would continue paying some of their own costs, but there would be a lifetime limit on their exposure. The principle eventually appeared in the Care Act, with a £72,000 cap due to begin in 2016. It was postponed before it ever happened.
Theresa May tried another answer in the 2017 election. Her manifesto proposed bringing housing wealth more fully into assessments for care received at home while simultaneously increasing the amount of assets people could retain to £100,000. Economically there was a comprehensible argument behind it. If somebody possesses substantial housing wealth, why should taxpayers subsidise them simply because their wealth happens to be stored in bricks rather than a bank account?
Politically it detonated. Labour branded the proposal the “dementia tax”, May retreated during the campaign and the episode taught Westminster a brutal lesson: touching pensioners’ housing wealth is electorally dangerous.
Boris Johnson therefore arrived in Downing Street in 2019 promising to “fix the crisis in social care once and for all”, saying that a clear plan had already been prepared. It took another two years before that plan emerged. Johnson eventually proposed an £86,000 lifetime cap and a more generous means test, financed alongside additional NHS expenditure through a new 1.25% Health and Social Care Levy. The levy was subsequently abolished, implementation of the cap was delayed again, and Labour eventually abandoned the planned charging reforms after returning to government.
The striking thing isn’t that politicians haven’t thought about social care. They have thought about it endlessly. The difficulty is that almost every solution creates identifiable losers, and those losers tend to notice.
Why not insure the risk?
There is an important middle ground between today’s system and comprehensive universal care, and it is essentially the answer Dilnot gave.
Treat social care as an insurable risk.
We don’t know which of us will develop dementia, suffer a disabling stroke or require years of intensive care. That uncertainty makes collective insurance economically attractive. What doesn’t necessarily follow is that government therefore needs to pay every pound of everybody’s care costs.
The numbers illustrate the distinction rather dramatically. The Health Foundation estimates that introducing an £86,000 lifetime cap would require around £3.5 billion of additional annual expenditure by 2035–36. Comprehensive universal care could require around £18.5 billion.
That is a difference of around £15 billion a year.
If the principal problem is that nobody should lose most of their lifetime savings because they happen to require years of dementia care, a cap tackles that problem directly. It socialises the catastrophic tail of the risk without requiring taxpayers to meet routine care costs for everybody irrespective of their ability to pay.
Burnham may have good reasons for going further. But if he wants the state to assume the entire liability, rather than insuring people against catastrophic liability, he needs to explain why. “The NHS is free” isn’t sufficient, because the very distinction under debate is whether social care should be treated in precisely the same way as healthcare.
Socialise the risk, not the inheritance
There is another way of reconciling these competing principles.
Suppose we accept Burnham’s central argument. Needing substantial social care is largely a matter of luck, so the risk should be pooled. Nobody should spend their final years wondering whether dementia will consume the house they spent their working life paying for.
Fine.
That still doesn’t require government to guarantee that the resulting housing wealth passes intact to the next generation.
There is a considerable difference between protecting somebody from financial catastrophe while they are alive and protecting their children’s inheritance after they die. Inheritance tax potentially provides a bridge between the two principles.
Care could be available according to need without means tests at the point at which somebody becomes frail. The cost could then be recovered progressively through taxation, including taxation of accumulated wealth as it passes between generations.
That changes the proposition substantially. Instead of telling one elderly person, “You developed dementia, so you must spend £150,000 of your house on care”, while their neighbour with cancer pays nothing, society collectively insures both against the risk of illness and dependency. But society needn’t simultaneously promise that every pound of the property wealth thereby protected will pass untouched to their children.
There is a pleasing symmetry to using inheritance taxation for this purpose. A substantial part of the wealth requiring protection was itself created by rising property values. Taxing some of that windfall as it passes between generations could finance the services required by the ageing generation which owns it, rather than placing the entire additional burden on the earnings of younger workers.
Inheritance tax currently raises £8.5 billion a year. That plainly isn’t enough on its own to finance an eventual £18.5 billion comprehensive system, particularly since existing receipts already finance other government expenditure. A serious proposal would therefore require decisions about thresholds, reliefs, rates and whether other taxes were also necessary.
But there is an interesting development here. Burnham is reportedly considering precisely this territory: a national care levy on estates has been under discussion as one potential funding mechanism. If so, the design of that levy may be every bit as important as the design of the National Care Service itself.
The political temptation will be to separate the attractive promise — free social care — from the unpleasant discussion about taxation. That would be a mistake. The distributional character of the policy depends upon the two being considered together.
A universal care service funded predominantly from taxes on working-age earnings could represent a substantial transfer towards asset-rich older households. The same universal service funded significantly by progressive taxation of estates and accumulated wealth could produce a very different distributional result.
The welfare state isn’t automatically progressive
This is the uncomfortable argument Labour needs to have.
The left has sometimes treated the size of the state as a proxy for progressiveness. More public spending, more universal provision and more generous benefits are assumed to produce a more progressive society.
They don’t necessarily.
Distribution matters. A government can increase public expenditure while transferring resources towards people who are already wealthy. It can create a universal entitlement whose largest cash gains accrue to households with hundreds of thousands or millions of pounds of accumulated assets. It can tax people who don’t own homes in order to protect the housing wealth of people who do.
And because the resulting wealth will eventually be inherited unequally, the consequences can survive for another generation.
None of this is an argument for leaving social care as it is. The present system is deeply unsatisfactory. The distinction between cancer and dementia is difficult to justify. Catastrophic care costs are an obvious candidate for collective insurance, and demographic change means the pressure on the system isn’t going away.
Nor is it an argument that every older homeowner is rich. The distribution of wealth within generations remains enormous, and many elderly people have little beyond the state pension. That is precisely why distribution matters more than crude generational labels.
But Britain has already experienced a profound shift in wealth towards those who happened to own property during decades of rising prices, while inherited wealth is becoming increasingly important in determining the economic prospects of their children. Government has simultaneously made the state pension more generous through the triple lock, whose lifetime benefits are greater for those who live longest.
Against that background, another enormous universal benefit concentrated substantially in later life deserves rather more scrutiny than the comforting description “free social care”.
If the problem is that poorer people cannot obtain adequate care, spend more on their care. If the problem is that nobody can insure themselves against catastrophic care costs, create collective insurance. If the argument is that social care should instead become a collective responsibility exactly like healthcare, then say so — because that means consciously redrawing one of the boundaries established when the modern welfare state was created.
Then decide who should pay for it.
There is nothing inherently progressive about taking money from a 30-year-old renter to protect the £750,000 house of an 80-year-old homeowner. Equally, there is something profoundly arbitrary about allowing one person’s cancer treatment to be collectively funded while their neighbour’s dementia consumes their lifetime savings.
The challenge for Burnham is therefore more difficult than simply creating a National Care Service. It is finding a way to socialise the unpredictable risk of needing care without using the welfare state to socialise the cost of protecting private inheritance.
That is the argument Britain failed to settle in 2009. It is the argument Dilnot tried to sidestep with insurance, Theresa May discovered was politically explosive, and Boris Johnson promised to resolve before retreating into another abandoned cap.
Seventeen years later, Burnham has brought us back to where he started.
This time, we should probably answer the question.
https://www.gov.uk/government/publications/shaping-the-future-of-care-together