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Will the Treasury block social care reform again?

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What is it about social care refinancing and reform that means nothing ever happens?

Charity Director Caroline Abrahams asks why we're still waiting for action to ‘fix’ social care.

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More than a year on from the PM entering office and saying he would ‘fix’ social care we are still waiting for action. Given COVID-19 it may be unreasonable to expect the Government to find the bandwidth to bring reforms forward at the moment, but this does not explain why we have waited for year after year for a programme of social care reform and the funding to make it fly.

Why did David Cameron get quite close to the fence and then refuse to jump over it with the Dilnot Commission? And why didn’t the governments of Tony Blair, Gordon Brown or John Major emulate their counterparts in Japan and Germany gripping this policy challenge and resolving it?

‘The Treasury View’

What is it about social care refinancing and reform in this country that means nothing ever happens, even though it is completely obvious to those of us who know a bit about it that it is high time it should?

I would like to propose an answer and it is, quite simply, ‘the Treasury view’. I submit that the reason social care seems always to be the bridesmaid and never the bride is because ultimately the Treasury says ‘no’ and that invariably there is insufficient political clout or inclination in No 10 Downing Street to overrule it.

The idea that there is something called ‘the Treasury view’ goes back to at least the 1920s and 1930s. It is an institutional mindset affecting politicians of all parties and civil servants alike, one that certainly changes with the times and comes and goes in response to the economic and political context, but which is always there to a degree. It derives from the role the Treasury plays within Government and is often manifest as an aversion to spending public money because that is central to the Treasury’s job – to protect the public finances from other departments that all want to spend more than the country can afford (as they would say).

If you want to get a sense of what ‘the Treasury View’ looks like in practice it’s worth following Nick McPherson on Twitter (his twitter handle is @nickmacpherson2). Mr McPherson is a relatively recent incumbent in the job of Permanent Secretary at the Treasury and now, freed from the constraints of being a senior civil servant, he comments – often acerbically – on the performance of the government of the day. Many of his tweets include the hashtag #soundmoney, denoting the fact that a successful economy needs its money not to be prone to sudden appreciation or depreciation. This speaks to the need to run an economy ‘prudently’ (as Gordon Brown used to say) and part of this is resisting the temptation to ‘splash the cash’, unless as a country you really have got it to spend.

The impact of ‘the Treasury view’ on social care decisions

What on earth has all this got to do with social care? Rather a lot I think. When it comes to social care the Treasury is generally thought to take the view that significant investment offers poor value for money; more specifically that it runs the risk of being ‘dead weight’ public spending in governmental jargon – i.e. spending on something that might otherwise have been obtained for free, and therefore wasteful. This is essentially because of the enormous contributions of unpaid carers and the fact that hard-pressed care staff often go the extra mile out of decency and a commitment to their clients. This is brilliant from a Treasury perspective. At the very least, as they would see it, it weakens the case for additional public spending. It may also help to explain why there’s a clear pattern of the Treasury injecting just enough money periodically into social care to avert complete collapse, but no more.

A linked Treasury argument is that investing in social care and, to a degree, in the NHS, is like ‘pouring money down a black hole’: there is never enough and it is unclear what lasting good it does. Part of the problem is that social care has been so underfunded for so long, and there is so much unmet need, that showing sustained positive results is tough, let alone guaranteeing an ‘end to the demand for more’.

A year or so ago I gave evidence to the House of Lords Economic Affairs Committee which was holding an enquiry into social care. At the time the Committee included 2 former Chancellors of the Exchequer and 3 former Permanent Secretaries to the Treasury (not Mr MacPherson), as well as some other very distinguished policy makers. I was treated with great courtesy but I have to say I was fairly astonished by one exchange that took place, and it went to the heart of this idea of ‘the Treasury view’ of social care. A former Treasury Permanent Secretary and I had the following discussion during this session, following a reference to the kind of social care system often described as ‘free personal care’.

Committee member: “We have spoken about a national care service, which seems to imply a convergence between the NHS and the care system. It implies to me that, first, there would be a widening of the conditions that are assisted. At the moment, a medical condition is paid in full, but something long-term is not.

Secondly, you are converging on a service that has no patient contribution. The problem that we have to face is the cost of this…. If you make the system wider and more generous, there must be some behavioural consequences of that, and the first consequence is that Mrs X will say, “Well, I can go back to work now that my mother is being better looked after”. That might be good for the economy, but it is not very good for the taxpayer. Is it realistic to expect to be able to afford a system in which the behavioural incentives are to expand the service? That is pretty much what happened in 1948 when the National Health Service was created: lots of people who had never gone anywhere near a doctor thought, “That’s fine, I can get treatment”. The costs would be a lot greater and the informal family contribution would be backed out.”

Me: “The evidence is contrary in other countries where they are more generous….[and here] an enormous quantity of people are providing care on a pretty intensive basis for nothing or virtually nothing, and they do it because they want to…. That is a strong human motivation, and I do not think it would suddenly be changed by whatever we did in this way. However, it would mean that people who did not have that—for example, there are growing numbers of people in our society who do not have children—would not be left in the pretty desperate position that they are now.”

Committee member: “I am not sure I share your optimism, but it would be nice if it were like that.”

So setting aside the fact that if this kind of argument had prevailed in the 1940s we would never have created the NHS, here is a former Treasury mandarin saying that the problem with creating a social care system worthy of the name is that informal carers, who are of often but by no means always women, might be tempted back into the labour market, whereas it makes more economic sense for the country for them to ‘stay at home’ and a ‘constrained’ social care system helps to enable this.

From an economic perspective this may have some validity but from a social and ethical perspective it sucks! It leaves millions of older and disabled people relying on a service which is wholly inadequate and it cynically exploits the goodwill of both (under)paid and informal carers to try to fill the gaps. And goodness knows what happens to those with care needs who don’t have anyone to help them, such as the growing numbers who are ageing without children.

Is ‘the Treasury view’ about to prevail once again?

When it comes to social care ‘the Treasury view’ is wide open to the claim that it “knows the price of everything but the value of nothing”, but the Treasury does not always carry the day. The outcome of Whitehall disagreements over spending depend on the dynamics across government and, in particular, the friendliness or otherwise between the PM and the Chancellor, and the willingness and ability of the PM to overrule the Treasury if required. The broader political and economic context matters too; for example, when borrowing is cheap, as it is now, even cautious economists feel more comfortable than usual in advocating it.

Are we about to experience another disappointment after the PM’s promise to act and, if we do, will it be partly because ‘The Treasury View’ wins as it has done so many times before? There is certainly a rumour that the Treasury is currently becoming a more assertive force in Whitehall discussions about the future of social care and, as usual, not in a helpful way.

At the moment these decisions are supposed to be made as part of the Treasury-led Comprehensive Spending Review scheduled for the autumn. However, commentators are now suggesting that an autumn CSR is impossible because of the huge economic uncertainty due to COVID-19 and Brexit, as well as a resultant lack of time and space for officials to investigate the issues to the degree required. As a result it is widely expected that we will end up with a one year SR in spring 2021 instead. If so, questions will arise over whether there is still time for the Government to develop and start implementing social care reforms by the next Election, given the likely need for legislation as well as investment. The ‘Treasury View’ might say ‘job done’ if so – the social care can kicked successfully down the road once again into the next Parliament. I am told that delay is one of the Treasury’s favourite tactics.

That’s the pessimistic view, but there are reasons for optimism too. Reforming and refinancing social care would cost billions, but only very trivial sums compared to what we spend on the NHS and more recently on propping up the economy during the pandemic. Also, there comes a point at which the case for reform becomes impossible to put off any more. The House of Lords Economic Affairs committee did eventually produce its report on social care last year and, despite the exchange reported above, it agreed unanimously to recommend a sweeping and ambitious programme of reform, including an immediate injection of £8 billion to bring the social care back to the more stable position it was in a decade ago. After that the committee wanted us to move towards a national approach to providing care much more akin to those in Germany and Japan. Some of us may wish the committee members had been as enlightened when they were running the Treasury but still, a late conversion is better than none at all.

And then there’s the pandemic and its catastrophic impact on social care, its users and staff – one made worse by years of under-funding and policy neglect. This creates a moral case for change such as we have never seen before. Even ‘Mr Sound Money’ seems to agree, for in an article in May McPherson wrote “The problem facing the country is that the post-crisis state is likely to be much bigger. That will partly be the legacy of wholesale government lending and guarantees. But it will also reflect demands that the NHS should have more spare capacity and that “something must be done about care homes, many of which have been run on a shoestring for far too long.”

So perhaps, finally, ‘the Treasury view’ – and the ageism which goes along with it - will be overcome and social care refinancing and reform will happen at last. After all, the PM has repeatedly stated his intention to act and despite the many challenges his Government faces he still has a huge Parliamentary majority. However, as campaigners we shouldn’t bank on it and our task is surely to keep up the pressure on the PM to stick to his word – even if that means he has to use some of his political capital to get the Treasury to agree.

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Last updated: Aug 20 2020

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