Finance Committee

Meeting date: Tuesday, May 4, 2010

Official Report 398KB pdf

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Budget Strategy Phase 2011-12

Good afternoon and welcome to the 11th meeting in 2010 of the Finance Committee, in the third session of the Scottish Parliament. I have received apologies from Tom McCabe and Joe FitzPatrick. Stewart Maxwell will be present as a substitute member for agenda item 2. I ask everyone to turn off their mobile phones and pagers, please.

Item 1 is to continue taking evidence for our inquiry into efficient public services. The theme of this week’s meeting is demographic change. I welcome to the committee Ruth Hancock, who is a professor of the economics of health and welfare at the University of East Anglia; Dr Michael Harris, who is from the National Endowment for Science, Technology and the Arts; and Brian McKechnie, who is from the senior studies institute at the University of Strathclyde.

In our call for written evidence, we asked a specific question on demographics. Given reduced budgets, will the public sector have the capacity to deliver efficient public services while also responding to the longer-term challenge of demographic change? To set the scene for the meeting, it would be helpful if the witnesses could summarise what they consider to be the main challenges of such demographic change.

At this point, based on information from the General Register Office for Scotland, 18 per cent of Scotland’s population is under the age of 15 and 20 per cent is over the age of 60. Over the next 20 years, that 20 per cent will increase significantly to somewhere in the region of 1.7 million of our 5 million population, which is 34 per cent. One third of our population will be over the age of 60.

It might therefore be quite challenging to continue to operate in the way we have been doing because of budgetary constraints and suchlike. There will be a massive increase in the number of older adults and a modest decline in the number of younger people.

I am contributing to that statistic every year, which is a bit of a worry.

My area of expertise and interest is with the oldest old people because it is in long-term care financing, which is probably going to present one of the biggest challenges. Scotland is very similar to England in that it faces a very large increase in the number of people over the age of 85. Over the next 25 years, the number of people in that age group will more than double. That group is, of course, where the need for long-term care is greatest.

Although England and Scotland start from slightly different places because Scotland has introduced the free personal care policy, the debate for reform has gone on for many decades, and it seems as though there will continue to be pressures for reform because of concerns about underfunding and inequities in the current funding system. As far as I can tell, no one is saying that we spend too much on long-term care, so it is hard to see how we are going to address people’s concerns within the tightening fiscal situation. That will be one of the biggest challenges.

Given NESTA’s focus on innovation in the private sector and public services, our argument is that the challenge that faces public finances over the next few years only sharpens some of the questions about the long-term demands and expectations that have been circling around public services for some time. Of course, it is wrong to talk about opportunities, given the scale of the challenges that we face, but the twin challenges of the short-term demands of saving money, and the long-term demands coming from demographic change should, nonetheless, force us to think about new approaches in public services to deal with those twin pressures.

Can you give us any indication of the scale of resources that would be required to meet those challenges? Can you give us any statistics to let us understand the scope of what we face?

Obviously, the further out one gets, the more speculative some of the numbers become, but our reading of research that has been done elsewhere is that a cumulative figure would be around £300 billion in extra costs across the United Kingdom by about 2030. That is gathered from a number of sources, but we think that they are pretty respectable sources.

On the face of it, that is one of the most worrying aspects of the enormous change in demographics. If we continue with the current models of care, we will need very big amounts, which will be difficult to achieve under current budget projections. We have been thinking about the issue for quite a long time.

To what extent can the policy objectives of redesigning care and taking preventive action significantly reduce costs? I suppose that the general objectives that have been set are to have more people being looked after at home, rather than in care homes; to reduce the number of emergency admissions to hospital, which are extremely expensive; and to have more integrated continuous care in the community that prevents emergency admissions. There is also the agenda of preventive health care. With regard to old people, some of the focus is on lower-level activities that will prevent the crisis from developing. I suppose that that has been the framework for a year or two, but I am not sure whether we have made a lot of progress, given that emergency admissions to hospital continue to rise.

As Malcolm Chisholm suggests, it has been broadly agreed that those are the directions of travel that we have to take. We argue that the scale of the fiscal challenge should not deter us from taking bolder steps in those directions, but should instead be the impetus for making real changes and setting out on a 10 or 20-year journey towards ensuring that more preventive approaches are not at the margins of public services but are in the mainstream. I think that there is broad agreement about that policy framework, but the challenge is to make it happen. The innovations that we look at around the world show that significant savings can be made—in the range of 20 to 40 per cent—if you really go for those approaches and implement them on quite a large scale.

I sound a note of caution, in that we have rather little evidence on the savings that can be made from prevention, although that is not to say that we should not be trying it. The tension will always be around where you put the money. Do you put it into prevention and helping people who have relatively low needs at the expense of those who have extreme needs? That is a very difficult political decision to make. The fact that you are facing financial constraints will make it even harder to put the money into prevention, because you will be fire-fighting the whole time.

It is not possible to avoid asking where the division of responsibility between the public services and private mechanisms of payment is. You might have to accept that more of the cost has to fall on individuals who can afford to pay.

I will give a couple of examples of good things that are already happening and that have made a real impact. Free travel has had a significant impact on the lives of many older adults because they are more able to go out and socialise together, to access amenities in their cities and so on; it is also important in a rural context. It is a positive thing, because it is about active ageing. It is not about looking after people when they develop a problem but about people accessing things for themselves.





Individual learning accounts are also important. If people are to be able to access employment for longer and to get involved in caring—as a voluntary activity or whatever—access to and support for further training and education are important. Such opportunities make a difference in people’s lives, although that is difficult to quantify.

At the University of Strathclyde, the senior studies institute caters for people over 50. About 4,000 students from the greater Glasgow area are involved in some form of learning. As a group, they are much healthier and more active. Is that just a reflection of the type of people who are attracted to the programme? Do people feel that they have more opportunity to get involved? Enabling people to do things—whatever the activity—that make them more active as they get older is important.

Those areas are important in the context of future funding.

It is important to be active physically and mentally.

Brian McKechnie’s comments have emphasised the wider agenda to do with the contribution of, and opportunities for, older people, of which we are very aware in Scotland. We must remind ourselves of that when we talk about care costs. I should say for the benefit of our guests from England that the current Administration and the previous Administration have sought in one way or another to implement Scotland’s strategy for an ageing population.

The contrast between what Dr Harris said and what Professor Hancock said perhaps takes us to the heart of the matter. I would like to believe Dr Harris, because his financial projections are more comforting and the approach that he talked about is consistent with good models of care. However, we must listen carefully to the expertise of Professor Hancock. Professor Hancock seemed to say that we need to do many things differently and that she is not confident that that will save money. Given the public expenditure projections, how can we manage the budgets? If we cannot save money by doing things differently, the budgets will increase—if not rocket—given the demographics and, in particular, the increase in the number of over-85s.

Let me add a point on the benefits of having an ageing population: older people themselves do a lot of the caring and provide much value in that way.

It would be a mistake to think that we can do everything by doing things differently. A big issue for Scotland—it is now a big issue in England, too—is the financing mechanism for long-term care. Scotland adopted a system of free personal care. We did not do that in England, because for many years Governments were concerned not just about the cost but that the main beneficiaries might be better-off people.

The position now in England is interesting. Just before the election was called, the Government published a white paper, which seems to commit us long term to a policy of free personal care, which if anything could be more expensive than the policy in Scotland because, from what I have seen of the figures, it seems to assume a larger contribution to care costs for people in residential care. It also seems to define care at home more broadly.

Given the tight fiscal position that we are in, such ambitions raise all sorts of questions about how the money will be raised. I do not have the answers on what Scotland should do if it wants to continue with its policy. We are talking about efficient services and the most efficient use of resources. If we are concerned to spend moneys in ways that are targeted on the people who are most in need, we must consider who those people are. We can argue that they are the people who have the most care needs and so the approach should be like the approach that is taken in our national health service, whereby all that matters is someone’s need for care. We could, otherwise, argue that we should target resources on the people who are least able to finance their own care. When it comes to social security benefits, in times of tight fiscal constraints people have tended to go down the means-testing route rather than the universal route.

14:15

We hear what you say on that.

I want to focus on emergency admissions. A highly significant proportion of hospital budgets is spent on emergency admissions of older people. In the previous session of Parliament, a report that you may have heard of was published by a group that was chaired by David Kerr. At the heart of that report was the idea that we cannot continue to have such a high level of emergency admissions of elderly people, because it is driving big increases in the health budget, and that there must be a shift towards continuous integrated care in the community. Is that a pious aspiration, or could progress be made in that area that would unlock financial savings as well as health advantages? I do not know whether such progress has been made in England, but we do not seem to be making the progress that we want to make in Scotland.

I am not an expert on the systems that have been put in place or tried for admission avoidance. It is clear that emergency admissions are extremely expensive, so it could be lucrative to target them. Systems that have been used around the country suggest that that is an area in which there may be scope for improvement.

I want to challenge our focus on efficiency and where we can save money. I completely understand why that is the priority in the current context, but the best examples of radical reform of public services often start with the question, “How can we make this a better experience for the users of public services?” rather than with the question, “How can we save money?” If that way of thinking is followed through, it often leads to the development of a much more effective service, which tends to be much more efficient because it does what the user wants. Often, such services are based in the community and involve giving people support and advice and helping them to build up their social networks in the community rather than in an institutional setting. It could be dangerous to focus only on where we can save money and not to look at better and more effective forms of public services from across the UK and around the world that we could learn from, the adoption of which would lead to much more significant savings being made.

Can you give us any examples of such best practice?

An example of best practice as regards accident and emergency admissions is the virtual community wards project that is being trialled in Croydon. Croydon Primary Care Trust looked at the data on where its costs were coming from—that is often an important starting point—and realised that just 5 per cent of patients were the cause of half its costs. It therefore began the virtual community wards experiment, which involves giving people care, management and advice in their own homes. The provision is organised as it would be in a ward, but is based in the community, which is a better setting for many of the patients concerned. It also means that A and E wards tend not to incur those costs.

That was interesting. I want to follow up on the idea of achieving efficiency with regard to costs and efficiency for the service user.

It seems from reports that in Scotland the standard and the cost of care provision vary among local authorities. I invite Professor Hancock and Mr McKechnie to confirm whether that is the case and, if so, why they think that is. The responsibility for providing long-term care tends to be divided. I wonder about that. Unpaid carers have been mentioned. In addition to local authority costs, there is the health authorities’ portion. If we want to get to where we say we want to be, is there a fundamental change that we could make to service delivery that would give a better end result for the user?

Who wishes to take that one?

I am a bit lost on Linda Fabiani’s question. Can you repeat the two halves of it?

Yes. Let us go with the first half. We hear stories to the effect that, across different local authorities and areas in Scotland, there are different standards of care, and that different components are funded or not funded. Would it be better all round if there was some kind of national standard? Is it the case that there are differences? If so, how could we make that better?

I am not an expert on variation in Scotland, but there is certainly variation in England. I have no reason to think that the situation is different here. The question whether Scotland should have a national system or local variation is a difficult one. There was discussion in England, which seems to have faded, about how disability benefits are used and whether that money would be better put into the care system. Some of the argument against that was that disability benefit is a national system with standard rules that everybody knows, which delivers a common entitlement to everyone, with no variation among localities.

One of the problems is that, when we assess people’s care needs, we are not dealing with something that is easily turned into a formula or a formulaic system. We have always had the problem that, on the one hand, people do not want variation—we talk about postcode lotteries—but on the other hand there is a sense in which the people closest to those in need are best able to judge what is needed.

I suppose I am sitting on the fence. I think that there should be some local discretion, although I accept that it is not necessarily a bad thing that two people making a judgment about somebody’s care needs may come to different conclusions. I suppose what probably seems most unfair is when what they pay for those things varies a lot. There may be benefits in having more standardisation in the assessment of what people contribute to their care.

I understand that delivery is split between health boards and local authorities. Of course, unpaid carers also make a contribution that is difficult to assess. Would it be more efficient to have a one-stop shop or service point to deal with delivery, rather than split it among the 32 local authorities and all the health boards?

Dr Harris, do you want to respond to that question?

Yes. I will do so in a broad way by saying that, philosophically, we tend to be quite critical of the idea of national standards because they can inhibit the kind of radical reform of public services and the local variation that are often very important. Users of services may have very different needs and see them in very different ways. National standards and all the apparatus of measurement and management that comes with them can inhibit users in articulating what they feel they need and can inhibit their getting it. Too often, we try to decide on behalf of users of services what they need—albeit that we do so for very understandable reasons—rather than create a bit more freedom in the system for them to be able to articulate and determine what they need.

I would like to hear the customer’s point of view from Mr McKechnie.

I hope that I do not represent the customers totally. There is regional variation, but the reasons for it are quite complex. One of the major challenges is that our older population is not evenly spread throughout Scotland—some areas have high numbers of older adults. For example, areas such as Dumfries and Galloway suffer the double whammy of younger people moving away and people moving there to retire, so those areas have higher levels of older adults, which means that the system comes under more strain. Unfortunately, if councils are charged with ensuring that everyone receives a reasonable standard of care but their budgets are constrained due to higher levels of need, there will be fluctuations in provision. The fluctuations are not massive, but there are differences among areas in Scotland.



Centralisation would also create challenges. Organisations such as the Scottish Commission for the Regulation of Care set standards, but centralising provision too much would, as Dr Harris said, create challenges in how to respond actively to local needs and could remove innovation from the system by putting responsibility too far up the chain. Allowing local authorities to work in partnership with health boards is a mechanism that seems to have worked well in many other situations and is probably the right sort of approach, if we are to develop care to the required level.

The volunteer aspect of care is massive—it cannot be underestimated and is worth billions of pounds. Voluntary provision includes the input of older adults in caring for other older adults, but we also have some very young carers in Scotland. Integrating those carers into the process so that they have a voice will be a challenge, but that will be important if we are to ensure that we have, if not the same standard of care everywhere, at least a level playing field in provision. Those people need to feel that they are supported.

That is indeed an interesting issue, but I want to take a step back a bit. The questioning so far has focused on those economically inactive older people who might be seen as a cost but, given the demographics of a population that is growing older, I want to focus on how we configure matters so that we have increased numbers of economically active older people. For example, I was recently approached by a constituent who works for Borders NHS Board—the Borders area has a very similar demographic profile to that of Dumfries and Galloway—who is being compulsorily retired. She does not want to retire, but she is required to do so. She thinks that that is nonsense, and I tend to agree with her. How should the public sector, which is probably the biggest single employer in many of our constituencies, be configured to reflect the workforce? Should different types or patterns of employment be available, so that older people can continue as employees? Is any work being done on that? Is there any indication of how we might go forward with that?

I have done a lot of research on that issue specifically in Scotland. It presents an opportunity, but we also need to understand how things are changing and developing.

Although Department for Work and Pensions oversight of employment legislation means that what can be done purely at the Scottish end is limited, there has been a large movement, both through legislation and on the part of employers, towards considering the benefits of employing older workers. People’s experience, knowledge and ability are amazingly valuable and should not simply be lost at 65—or whatever age people decide they should retire.

In addition, older adults are beginning to question the whole attitude that people had of looking forward to a great retirement when they would not need to work any more. Financially, that is no longer such a viable choice. For many people, retiring is just not a choice that they want to make. People live longer if they work longer. That may seem counterintuitive, but the busier and more involved people are, the more likely they are to live a healthier—it can be healthier in many ways—and longer life.

A number of things are going on to encourage people to work longer in a positive way—not forcing them to work longer but trying to change the attitudes of employers who see the issue as a double-edged sword. If an employer believes that someone who has worked with them for a long time is no longer productive, they sometimes think that retirement is a simple way to get rid of them—not a negative but a neutral decision. However, people can work much longer. Our working lives are healthier; we are not digging roads or carrying bags of coal so much, but tend to be in more service-centred jobs.

Encouraging people to work longer not only reduces the burden on the public purse but makes people a lot healthier and more able to contribute to society. Unfortunately, all of the legislation comes through the DWP—although it may be possible to do things at the Scottish end to influence that legislation, as well as through other legislative frameworks in Scotland.

14:30

My understanding is that the outgoing United Kingdom Government committed to a review of the default retirement age, which is what you are talking about. It is intellectually hard to see any justification for requiring people to stop working just because they have reached a certain age, especially as in the long run we are increasing the retirement age in recognition of the increasing length of time that people live, the cost of pensions and so on. It seems hard to justify continuing with the current default retirement age legislation.

Like many organisations, we think that we need to start thinking about developing a set of services to help people before they are suddenly retired, whether for health reasons or because they reach a particular age. That is another example of the need to step back and look at what the problem is, because in the longer term we could save significant sums of money if we helped people to retire and prepared them for the transition from full-time work to a more mixed work-life balance. We expect a lot of those services to be based in the community and run by social enterprises, voluntary groups or co-operatives that would help people to prepare for the change rather than it coming, as it does now, as an abrupt change in their life for which they are not prepared.

A considerable amount of the evidence that we heard from earlier panels of witnesses said that we should focus spend on the younger end of the age spectrum and not make cuts there. I would welcome this panel’s views on that, given what Mr McKechnie said about 18 per cent of the population being under 15 and heading towards 34 per cent of the population being over 50. Is it just a case of doing the simple maths and saying that 18 per cent of our spend should be on the younger element and 34 per cent should be on the older element?

I should probably go first. No, there is no question but that we must invest in young people. That investment is really important, although there may be some aspects that we can look at again. The immediate economic impact of younger people is modest—young workers tend to be lower skilled—but their skills and experience will build over time, and we must invest in them.

We must not miss out the middle group—the people who are already in work and are trying to upskill. It is really important to give them more opportunities. Obviously, there is still a need to invest in people as they reach “the end of their working life”—the period when they are in full-time employment, perhaps moving into volunteering or part-time employment as they try to stage their retirement. Perhaps we could take a wider view of some of the issues.

I used to chair the board of one of the largest colleges in Scotland. There are just over 40 colleges in Scotland and 25 or 26 higher education institutions, for a population of 5 million. We might need to look at that. Even if they are important and have lots of specialist skills, can we really justify having 66 high-level institutions, given the size of our population? It is a tough question to ask because there are a lot of vested interests in those organisations and the sectors that they serve, but there is certainly room for some mergers, or to recraft that side of things.

We have a lower number of young people, more and more of whom are accessing universities or colleges. That is a great thing, but it is partly driven by the fact that the options for young people in other areas are limited. We do not have the employment options that we used to have that enabled people to develop trades skills, because those skills are changing. A larger number of people are going to university, but they are being trained for jobs that do not really exist. They do not need university degrees to do the jobs that they will get at the end of their courses.

There is a trade-off. We want a first-class economy with first-class minds and a highly skilled and trained workforce that attracts investment, but on the other side, we have to be realistic and say that we do not need everybody to have those skills. There are wonderful things that people can do without having to go to university or college. I am like a turkey voting for Christmas.

There are two sides to the matter: whom we spend public money on; and who pays for that—or where we raise the revenue to pay for it. One reason why the Westminster Government did not initially opt for a policy of free personal care is that if it was financed from general taxation, the burden would fall predominantly on younger people, some of whom have low incomes and not much in the way of assets.

People who retire now will have better pensions and more wealth than the people who come behind them, because they have benefited from good final salary pension schemes, which are now much less prevalent. We have to ask which groups in society have the resources to pay for public services as well as asking who needs them. There is an argument for tapping into the resources of people in the older generation who have resources at a time when the generation of younger people, coming up behind them, are having a tougher time than the older generation did at the equivalent time in their life.

The question relates back to the issue of efficiency. Broadly, the more we spend on a public service, the better it will be. Clearly, spending much more on services is not an option that is open to us now, which is why we need to rethink some of our fundamental assumptions about services, particularly from the point of view of users. We need to think about the real purpose of services, about what users really want, and about whether there are more effective ways of meeting those needs. That is not the same as asking whether we should spend a bit more or a bit less on services. The question is far more fundamental than that.

We can take better approaches in the early years, but we can also take better approaches to services for older people and that help people to prepare for being older. We need to look at both of those things and not rule one out because, for understandable reasons, we want to protect education or care for people at either end of life.

That mention of education brings me neatly to my next question, which is about universal provision.

Mr McKechnie talked about individual learning accounts and about people going to university when they are in their late 50s and so on. That would be great, I suppose. You never know—I might even think about it myself. However, there has been a big question about universal benefits. We have had a couple of papers on that, and Professor Hancock alluded to it. I am interested in the witnesses’ views on whether universal provision can be continued. We have free personal care and free transport and we are heading towards having free prescriptions. The national travel concession scheme will cost £194 million in the current financial year, which is a lot of money. I heard what was said about it enabling people to move about, but is it time to reconsider it?

Who would you like to answer that?

You just fire away because you started.

I would not want you to go away thinking that I am in favour of means testing to the hilt—there are considerable disadvantages to means testing whether for social security benefits or other things, because it puts people off claiming what they could be entitled to. However, if we must focus spending where it is likely to be needed most or can be of most benefit, we have to start thinking about it. As I indicated before, there are some people who receive benefits who can afford to pay the costs of transport, care and so on. We have to ask if that is the best use of resources.

The issue is very political. In the end, it comes down to whether we prefer the benefits of universalism over some of the disadvantages of means testing and whether, as a country, we are prepared to pay for it through our taxes. The Scottish Government does not have as much power to raise revenue as the Westminster Government does. On the other hand, we are not Scandinavia and we do not, on the whole, vote for Governments that promise to raise taxes.

How does that fit with the £300 billion in extra costs that you said we would face by the year 2030?

It does not fit well with that, and I do not know how those costs are going to be met.

Do you care to offer any thoughts on which components of care should be paid for by those who can afford it?

Care homes in Scotland and England already charge people for so-called hotel costs. There is a debate to be had about the split between the care component and the hotel costs of care homes. People are used to paying for housing and their everyday living expenses, so it seems quite reasonable to charge for those. Care at home is trickier. If I understand the position correctly, Scotland has free personal care at home but other kinds of domestic help are charged. One of the difficulties with that is that although some people might feel that the most important thing for them is personal care, some people with equivalent needs might prefer to have some domestic help and do the personal care tasks themselves. Who are we to tell them otherwise? Perhaps the way to do it is to say that people are entitled to a certain sum of money towards whatever care they need at home, and they can choose how to spend it. That is how personal budgets would work.

It is reasonable to ask people to pay for things that they would pay for whether or not they had care needs. The question then is how much of the rest we pay for them irrespective of their means. Ultimately, that is a political judgment.

Mr McKechnie?

From our experience of the older adults learning programme at the university, I think that anything that is free is not necessarily perceived as being valued. There is a benefit to charging people for something; they value something that has a cost associated with it. If you are given a gold bracelet free of charge, you do not value it in quite the same way as you would if the person who gave it to you told you that they had to pay £2,000 for it.

14:45

Yes, but is that the same thing as a free bus pass?

Well, it is still referred to as the penny ticket by various people. The bus pass has a low cost per head in Scotland and it is highly valued, in that it gives people a lot of freedom. There would be a cost involved in taking a portion of that back—it would be like the dog licence issue, when the cost of collection was greater than the cost of the licence. I am not sure about that.

Free personal care is a big issue and breaking down the costs would be a challenge. Once a door has been opened and people feel entitled to a particular benefit, it is hard to take that entitlement back. A political choice is involved. I would say that most older adults value the policy in a particular way, even if they are not aware of the actual costs, so a requirement to make a contribution would not necessarily be a negative thing in every case. However, the case for introducing such a requirement must be made carefully, so that people understand it.

Do you have a view, Dr Harris?

The issue must be addressed on a case-by-case basis. There is a real danger in applying a general approach to very different types of service and forms of provision and assuming that the outcome will be the same.

I go back to the point about the fundamental purpose of services. There is an opportunity—or rather, a need—to think about what we want public services to do and about how, during the next 10 to 20 years, we move towards what many people are calling a new welfare settlement, which might have assumptions that are different from the assumptions in the welfare settlement of the past 50 or so years. More co-payments and charging might be part of that.

It should also be about how services, provision and entitlements can build on people’s capabilities rather than assumptions about people’s particular needs. It is also important to remember that people do not necessarily take up their entitlement to universal benefits, so there is not necessarily an actual cost.

I am interested in what you said about a new welfare settlement. There is evidence that large numbers of older people do not claim all the benefits to which they are entitled, often because of the bureaucracy that is involved, and I guess sometimes because they do not need the money. In the new economic times that we are entering, uptake might be much greater, because people might feel that they need the money. Do the witnesses have any idea of the budgetary implications of everybody taking up all the benefits to which they are entitled?

I do not have statistics on that. There is significant under take-up of benefits and suchlike, for a variety of reasons—bureaucracy is a major one. It is surprising how many older adults would rather that the money went to young people in some way. There is massive intergenerational exchange, whereby money is passed from older adults to their children and grandchildren. There is an attitude of self-sacrifice and a willingness not to take money that people think might somehow reach children and young people.

I know pensioners who use the winter fuel allowance to pay for Christmas presents for their grandchildren, because they do not need it for their heating.

Professor Hancock looks as if she has a number for us.

I can dig out a few numbers. Some time ago, I did work on the take-up of means-tested benefits by older people, with my colleague Steve Pudney, who is at the University of Essex. Two main points came out of that. First, it tends to be the smaller amounts that people do not take up. If people are entitled to large amounts, which by definition means that they have relatively low incomes, they are much more likely to claim. However, that is not the whole story. The second point is about the delivery system and the information that is available to people. When we look at the patterns of the combinations of benefits that people take up, we find that people who receive pension credit, or income support as it was in the old days, are likely also to claim their entitlement to the other two main means-tested benefits, which are housing benefit and council tax benefit. That is to do with the way in which the system works.

Conversely, we find that people who claim council tax benefit are less likely to claim the pension credit, or income support as it was, to which they are entitled. That is sometimes referred to as reverse passporting. If someone claims pension credit, they are automatically told that they are likely to be entitled to housing benefit and council tax benefit, but it does not work the other way round. At least, it used not to, and I do not think that things have moved very far. That is partly to do with whether the DWP trusts the information that local authorities hold about people’s entitlement to council tax benefit and housing benefit.

We did some work recently to estimate the take-up of attendance allowance, which is not means tested. That is much harder to work out, but we submitted some evidence to the House of Commons Health Select Committee’s inquiry into social care in which we stated our view that as many as 30 per cent of people who are entitled to attendance allowance are not claiming it.

To return to David Whitton’s first point about costs, the latest DWP statistics on the proportion of benefit entitlement that is claimed—what it calls the expenditure basis of take-up—show that the take-up of pension credit is estimated to be between 70 and 78 per cent. In other words, the pension credit bill could be 20 per cent higher, or more, if more people took up their entitlement. With council tax benefit, the take-up of which is much lower, the bill could be as much as 40 to 50 per cent higher if people took up their entitlement. The figure for housing benefit is lower. I should say that all the figures that I am quoting relate to pensioners. In general, there is a higher take-up of housing benefit, but even in that case the bill could be 10 to 15 per cent higher if everybody took up their entitlement.

David Whitton is right to point to a bigger issue. As we come out of an economic recession, there is a danger that we will move into a social recession. The time when the costs of the economic recession begin to feed through into greater demand on public services—we know that there is a time lag in the effects on ill health, mental health, worklessness, family breakdown, offending behaviour and so on—is the very time when we will begin to cut services because of the broader public finances. That means that we need to think quickly about some different models of service provision. That cannot happen overnight, but we need to try to deal with some of those costs imaginatively in the short term as well as in the long term.

So is your idea that we would roll up all the benefits into a single payment to make it more efficient? When someone reached a certain age, they would get the payment. They would not have to make a claim and it would be an allowance rather than a benefit.

There are a couple of reasons why that could seem attractive. First, it could give the individual greater flexibility to allocate some of the money in different ways. Secondly, we have seen that the more budgets are pooled in that way, the more it gives different providers of services, assistance and support opportunities to combine services in imaginative ways. For example, we know that silos have been a problem in public services. Different services or departments are responsible for different things, so they have their own performance measures and so on. They might deliver the services very well within those boundaries, but they are not always very flexible and do not have much incentive to find ways of combining services in more efficient ways. That kind of mechanism could help with that problem.

Finally—this may seem a daft question—is there any evidence to suggest that people retire to Scotland because we have free personal care and the rest of the country does not?

I do not have any evidence for that.

A slightly different take on the question might be to consider whether the evidence suggests that the demand increased as a result of having free personal care. As I understand it, demand for residential care did not change very much, but demand for care at home increased. That does not surprise me, because I do not think that many people were queuing up to go into care homes just for the fun of it, but there were probably a lot of people who could usefully benefit from a bit of extra help at home.

Is the model that we should aim for, then, one that looks after people at home as much as possible rather than in residential homes, care homes or hospitals? Should we focus more resource on such community-based care—if I may describe it like that—and less on the rest?

I am not particularly suggesting that as a model, but older people tend to say that they want to stay at home. One can understand that. We need to be a little bit careful because not much work has been done on those on the margins who might be able to stay at home but might need to move into residential care. I suspect that many people do not want to contemplate a time when they will be unable to live in their own home. That said, I am sure that there is a lot of merit in targeting money at providing care for people in their own home.

Are there any particular types of people who are most disadvantaged by the current long-term care regime in the UK?

An issue that is perhaps made worse by the current legislation, under which free personal care is available to those at home but not to those in residential settings, is that local authorities potentially have an incentive to place people in residential care because that will be cheaper than providing care in the person’s home. For that reason, we are in a rather peculiar position at the moment.

The final questions will come from Jeremy Purvis.

Professor Hancock makes an interesting point, which probably also apples to where people die. Perhaps due to the cost profile, many people die in hospital even though they would prefer to die at home if a suitable care package or palliative care was available.

I have a broad question on the panel’s perspective on the budget going forward. In evidence to our committee, some have argued for an approach that would protect particular budget lines, such as the line for the health service, which primarily provides the services that we have talked about today. However, the Chartered Institute of Public Finance and Accountancy submission argues against such an approach, as does the recent Institute for Fiscal Studies briefing on the manifestos of the main UK parties. If the health budget line continues to receive either real-terms growth or an uplift in line with inflation, there would be an impact on everything else, including the local authority services that provide a key component of care. What are the panel’s thoughts on whether we should protect a particular budget line, such as the health budget line? Would that be a good thing, or would it have negative impacts on other services?

Obviously, that is one of the more challenging political questions, so I am glad that I do not need to make the decision. Making the case for the health service being so different that the health budget is more important than, say, the education or transport and infrastructure budgets would be a challenge. Each of those things has a part to play. The NHS employs something like 10 per cent of the workforce in Scotland, so cuts there would have a dramatic impact in other areas, which brings us back to the question whether cuts lead to genuine cost savings. However, it is probably difficult to justify an approach that leaves health, alone of all parts of the budget, unscathed.

15:00

Does anyone else want to respond?

It is a decision for the politicians. As a mere academic, I will not comment.

Does another mere academic want to add anything?

If we are coming from the perspective that we are trying to reform services to make them much more effective and therefore more efficient, it is dangerous to appear to take any service out of consideration and imply that it should remain unchanged—I do not think that anyone means to imply that. The NHS itself has said that it needs to save between £15 billion and £20 billion over the next few years merely to cope with the demographic change that we have been talking about.

I can understand why, from a public policy maker’s perspective, one might want to prioritise certain areas of spending. However, if that is done in a certain way it could prove unhelpful in improving services in the longer term. If possible, it would be preferable to take something like a zero-based budgeting approach, which involves thinking about the purpose of services and changing demands and expectations, so that we can then think about what resources are needed over the longer term.

David Whitton has what he assures me is a short, final question.

It is on a point of clarification. Professor Hancock, you talked about the differences between residential care and care at home and mentioned that some local authorities prefer the cheaper approach. Is that UK-wide or were you talking about England?

I was talking about a system in which there is no free personal care for people in residential homes but there is help for people at home.

Therefore, what you described is happening outwith Scotland.

The issue might arise in Scotland if people needed intensive care at home, the cost of which exceeded the free personal care element of residential care. That might bring people up against the same, rather perverse incentive.

Do the witnesses want to make final comments?

The majority of older adults will enjoy good health for most of their lives. The extensive costs kick in in the final two or three years of life. We should regard longer life as a real benefit. We want to encourage people to be healthy, to work longer and to enjoy their lives; we should not just think about the cost implications of that.

People sometimes get the impression that they are a burden on society, when that is not the case. A healthy 75-year-old can make a tremendous contribution to their community and does not need to be a cost in any way. At some point we will all be a cost on our society, because we get ill towards the end of our lives—some of us get ill for a long portion of our lives, which is unfortunate but might not be at all related to age.

My final comment is on the issue of universal versus means-tested provision. If we have a universal system and a fixed budget, we must find some way to ration. In such a system, only the eligibility criteria can be used to ration, in the context of care, people who need lower levels of care might lose out. In a system in which there is a degree of means testing and user contribution, there is another tool in the armoury, which can be manipulated. That might be seen as an advantage.

I thank the committee for the opportunity to give evidence. You are asking difficult but necessary questions. In the submissions that you have received from diverse organisations, the need for more preventive approaches seems to have come up again and again. We talked about that shift in approach.

I urge the committee not to lose sight of that as it thinks about the shorter-term demands of the public finances. If we lose focus on the longer-term transformation of services that we need, we will be in a worse position in five or 10 years’ time, when we will—I hope—have dealt with the public debt but will have, in essence, unchanged services that are not well suited to the future.

The committee is well aware of the importance of the matter.

I thank all the witnesses for their expert and insightful comments, which are much appreciated and will greatly help the committee in its work.

15:05 Meeting suspended.

15:10 On resuming—