POLICY BRIEFING. Ready for Ageing? Public Service and Demographic Change Select Committee

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1 Ready for Ageing? Public Service and Demographic Change Select Committee Author: Andrea Davies, LGiU associate Date: 2 April 2013 Summary The House of Lords Select Committee on Public Service and Demographic Change concluded in its report, Ready for Ageing? that the Government and our society are woefully unprepared for the rapid ageing of the UK population million people in Great Britain can currently expect inadequate pensions; the major shift to defined contribution pensions through money purchase discourages saving, a major defect which the Government, pensions industry and employers must address. There is a serious funding gap for long-term social care in England; before the next election, all political parties should consider the balance of responsibility between individuals and the Government in meeting the needs of an ageing society. Current NHS reforms are set to complicate service integration but since further major structural upheaval of the health care system would be counterproductive, local authorities and clinical commissioning groups should innovate, especially with new forms of cross-service outcome-based commissioning. This briefing is of interest to all and especially to local Councillors, senior officers and those working in Adult Care Services and Local Planning and Housing Departments. Briefing in full The Ready for Ageing? 105-page report was written by the Committee on Public Service and Demographic Change; it focuses principally on England. The report sets the context with some sobering statistical projections between now and The number of people aged 65+ is set to increase by just over half (51%)

2 and the number of those aged 85+ will double (101%) by 2030 compared to 2010, according to projections by the Office of National Statistics. In terms of ill-health, in five years time, over 50% more people will experience at least three long-term conditions. And the Department of Work and Pensions estimates that by 2030, 10.7 million people in Great Britain will not have adequate retirement incomes. Disincentives to later working In terms of average life expectancy, men aged 65 are expected to live to 88 and women to 91 by 2030 in the UK. The idea of a fixed retirement underpinning many pension structures, tax and benefit thresholds and employment cultures is outdated. People should take their own decision about when to retire. There should be a review of incentives in the pensions, tax and benefit system to retire early. The response to increased longevity is to work longer not only for financial reasons but also for the health benefits often associated with working longer. It is no longer realistic to count on tax-payers alone to fund incomes high enough to secure quality of life during long sunset years. The dependency ratio would simply be too high, with too few working age people supporting dependents. A change in attitudes is needed to make longer working a reality. Employers should take a positive attitude to employing older people in both office-based and manual work, and help them re-adapt. The Committee s report stresses that welfare to work policies should go further and faster to take account of the needs of older workers in manual and unskilled jobs. This group faces steep hurdles and retraining and upskilling should be options. In addition, employers should help their older employees move to roles and hours that suit them; they should enable those with caring responsibilities to work part-time and more flexibly. Some employers such as BT and BQ are making encouraging progress in enabling older workers to stay longer in work primarily because they see that it improves their profitability. However, the Committee was disappointed that so few other employers submitted evidence along these lines. In fact, achieving attitudinal change among employers is a major challenge. For this reason, Kayte Lawton, Senior Research Fellow at the IPPR, proposed resorting to smart regulations for part-time and flexible work for older people, along the lines of maternity leave. Taking jobs from the young? A common misconception is that people working longer are depriving the young of jobs. The report takes a strong line on this lump of labour fallacy. Employers and the Government should publicly reject this misconception: A larger workforce, with more people in work and earning, creates its own demand; and we know that in practice the fallacy does not hold - previous attempts, both in the UK and abroad, to create jobs for young people by encouraging early labour market withdrawal have failed miserably. A 2008

3 report by the Institute for Fiscal Studies on early retirement and youth unemployment concluded we find no evidence of long-term crowding out of younger individuals from the labour market by older workers. Para 108 Shifting pension risk The Committee deems that for many savers, defined contribution pensions are seriously inadequate. The major shift to defined contribution pensions means that risk is transferred to employees who are not in a position to know how much their pension or annuity will be worth at the time of retirement. (Defined contribution pensions (DC) are money purchase pension schemes whereas defined benefit pensions are based on salary and the number of years worked.) According to Paul Johnson, Director, Institute for Fiscal Studies (IFS): we have moved from a world where the state, which is pretty good at bearing these kinds of risks... was bearing most of the risk, through a period when employers were bearing most of the risk, to a situation for the current working generation where individuals are bearing most of the risk, and they are probably least well set up for bearing that risk. The Committee report concludes: As individuals become aware of the increased risk that is falling on their shoulders, this situation may not be politically or practically sustainable. The incomplete capacity of individuals to make good decisions for the long term, and of markets to cope with the uncertainties and risks of old age, is the fundamental reason why the Government have to take a leading role in helping the country to adapt to and plan for its ageing population. Para 115 One of the Committee s recommendations is to urge the Government, pensions industry and employers to tackle the lack of certainty in defined contribution pensions and address their serious defects to make it clearer what people can expect to get from their pensions as a result of the savings they make. Equity release For home owners, the Committee recommends that the financial services industry and the Government work together to enable those older people with equity to release it simply, without excessive charges or risk. This generation of older people have benefited from the property boom. It would be unfair to pass on the full costs of social care and home adaptation for older people to the younger generation. Specialist Housing Markets are failing to provide the pensions, long-term care insurance, as well as specialist housing which older people need. The Committee recommends that central and local government, housing associations and house builders plan how to meet the housing needs of the older generation as a matter of urgency. They need

4 to give as much priority to promoting an adequate market and social housing for older people as is given to housing for younger people (para 37). The briefing on HAPPI 2 Housing our Ageing Population: Plan for Implementation presents a set of useful proposals. The growing need for social care: market failure While ageing is an individual process, the Personal Social Services Unit concluded in 2011 that two-thirds of men and 84% of women will need some form of social care. Older people s care urgently needs a new model focused on prevention, early diagnosis, intervention, and chronic illness management - moving away from acute hospital care. The new model must be person-centred with an end to discrimination towards older people and their carers; it must encourage the person to be involved in health management decisions; it must be home-based, with emotional and practical support for the cared and caregivers, and access to round-the-clock medical care. Social care and its funding are already in crisis. There is a considerable public funding gap in social care in England; some people still shoulder extremely high costs for their social care. Responding to the Dilnot Commission s report, the Government has proposed raising the asset limit at which people must pay for care to 123,000 in 2017/18 prices, and limiting to 75,000 the total they pay for care. However, the Committee points out that the Government s response to the Dilnot Commission does not address the current funding crisis or the problem of expanding need in the coming decades (para 24). Rather, part of the solution is for older home owners to unlock the value of their housing asset to make a fair contribution to the rising costs of their care (para 194). Advances in medical care are being made at such a pace that insurers can no longer resort to probability for assessment. In fact, the Dilnot Commission found that by July 2011, no major financial services providers offered pre-funded insurance against social care costs (para 24). Untried Pensions and long-term care funding paths Our Government has adopted untried approaches to pensions and long-term care: With regard to social care, while other countries have introduced compulsory social insurance for long-term care, England s attempt to kick-start a private market in long-term care insurance, by the Government taking on the catastrophic risks associated with care (as recommended by the Dilnot Commission), will be highly innovative. The UK with pensions, and England with long-term care, are following their own untried and as yet uncompleted paths to support an ageing population. While this does not mean that these

5 paths are misguided, these evolving strategies need to be kept under careful review to see if they are working. Para 118 Institutionalised fragmentation Currently, health and social care services across the countries perform very unevenly, ranging from excellent to poor. Such variation can be explained by the institutionalised fragmentation, namely organisational separation between the NHS and local authorities, and between mental health providers, acute hospital providers and primary care. The separations between NHS, local authority and private money partly account for this fragmentation. Mike Farrar, Chief Executive of the NHS Confederation, told the Committee that he wanted the integration of not just community social care funding and community healthcare funding, but also primary care funding, through GP practices. Para 202 Committee witnesses contributed some differing views on the effect of the Health and Wellbeing Boards, and the Clinical Commissioning Groups (CCGs), several being more optimistic than their colleagues. However, concern about NHS reforms was frequently expressed. Dennis Holmes, Deputy Director of Adult Services at Leeds City Council is worried about working with multiple CCGs instead of the single Primary Care Trust. Without dismissing the positive role of commissioning support units, Mike Farrar said of current NHS reforms: we stepped backwards from integrated commissioning, because effectively in these reforms we have taken primary care spend and moved it to a National Commissioning Board; we have moved specialist care spend into a different bit of the National Commissioning Board; community hospital and community services health spend has gone into the CCGs; and local government has health improvement spend in one bit of it, and social care for adults and social care for children in different bits. Para 206 However, Mr. Farrar was hopeful that commissioning support units would unite the technical support to the various commissioning bodies and might succeed in securing integrated care. Local innovation in the absence of systemic change The Committee calls for an end to the structural split between health and social care since it seriously hinders efficient care delivery to the elderly. However, it also concludes that further major structural upheaval of the healthcare system at this point would be undesirable and counter-productive (para 207).

6 Norman Lamb MP, Minister of State for Care and Support, said that he wanted to see a culture that facilitates experimentation within a vision of what the system needs to achieve (para 211). The Committee recommends that: In the absence of counter-productive systemic change in the near future, and because full integration cannot be achieved immediately, there needs to be significant experimental work at the local level over the next five years. Local authorities and clinical commissioning groups must be allowed licence to experiment, and they must be pushed to innovate, especially with new forms of cross-service outcome-based commissioning, despite the local variations that would emerge Para 211 Progress on integrated service has to be achieved through innovation within the current framework, following examples of successful integration in Leeds, Torbay and South Devon. Leeds City Council is co-locating adult social care workers with community NHS staff, grouped around GP practices, and sharing outcomes with the NHS through collective spending. Leeds has also adopted a whole-council approach covering planning and housing provision, and has developed a volunteer befriending scheme for older people. Dr Jennifer Dixon, Chair of the Nuffield Trust, suggested centralised support to evaluate integrated projects. Calling the Government to account for public services The Committee calls for the publication well before the 2015 elections of a White Paper developing the Government s vision for public services in an ageing society. After the 2015 elections, the Government should immediately set up two cross-party consultation commissions on how to improve pensions, savings and equity release, and how to end the structural and financial split between health and social care. Both Commissions should report within a year, and put forward clear recommendations to be implemented as a matter of urgency. Political parties manifestos should set out the wider implications of the ageing society for the balance of responsibilities between individuals and the Government (para 54). Comment That Government and society are woefully unprepared for the rapid ageing of our population is a crushing assessment. Thankfully, the Committee on Public Service and Demographic Change is inviting us to wake up to demographic reality. Our culture s addiction to youthfulness makes the harsh fact of unavoidable ageing that much harder to face. The unintended consequences of the property boom and of an unregulated banking system have made access to education, employment and housing much more difficult for the young. The market alone delivers more inequality instead of the Common Good.

7 Noting that England is kick-starting a private market in long-term care insurance, the Committee report provides no solution to the social care funding gap. But the report is asking the right question about the need for a complete rethink of what constitutes the appropriate balance of responsibility between Government and individuals: it should have addressed intergenerational balance as well. NHS reforms could complicate local service integration; this will add more on pressure on local authorities and clinical commissioning groups to innovate for better service integration. How to handle the social care and pension crisis will be a critical question for the next Government. A nation-wide debate about the systemic change needed should be initiated now. The Committee calls on the Government, pensions industry and employers to tackle the serious defects of defined contribution pensions - as the UK sails into uncharted territory with its untried and uncompleted pension system. The Government recently rejected amendments for a fiduciary duty towards investors or beneficiaries in the Financial Services Bill and the Enterprise and Regulatory Reform Bill. This is an area where urgent reform is needed. For more information about this, or any other LGiU member briefing, please contact Janet Sillett, Briefings Manager, on janet.sillett@lgiu.org.uk

PUBLIC HEALTH PROGRAMME GUIDANCE SCOPE

NATIONAL INSTITUTE FOR HEALTH AND CLINICAL EXCELLENCE PUBLIC HEALTH PROGRAMME GUIDANCE SCOPE 1 Guidance title Guidance for primary care services and employers on the management of long-term sickness and