Without the distraction of leaving, ministers could get on with fixing social care, universal credit and further educationby Paul Wallace / January 18, 2019 / Leave a comment
Imagine for a moment that Brexit does not happen after all. Quite apart from the economic and strategic virtues of remaining in the EU, the government could focus on the real problems facing the country. Ministers have been ducking crucial decisions in their all-consuming preoccupation with Brexit. The blight is especially notable in social policy where there are three overriding priorities for action.
First, sort out a new system of financing adult social care in England, which has become desperately underfunded as well as unfair. This long delayed reform is vital not just for the many elderly individuals who rely upon such support but for the NHS. Lack of social care causes bed-blocking as hospitals cannot discharge vulnerable patients. Like a referred pain, cuts in the budgets of local authorities responsible for social care hurt the health service as well.
A solution must include the cap on lifetime care costs first recommended by the Dilnot Commission in 2011 (and controversially missing from Theresa May’s election manifesto of May 2017, leading her proposal to be dubbed a “dementia tax”). This would address the inequity in the current means-tested system, which can leave some people who require lengthy care in residential homes facing frightening bills. At present there is no viable way to insure against this risk in the private market because of the many uncertainties about potential costs. And by the time most people recognise the need for protection they have become risks for any insurer to shun rather than to accept.
The cap will provide a form of catastrophe insurance for those requiring prolonged expensive care. Such an approach will retain some private contribution for those who can afford it, limiting the cost to the taxpayer. Even so, the state’s contribution will rise over and above increases already needed to rectify the long squeeze on funding. That extra cost should be met if possible by higher taxes on the better-off retired rather than the working population.
As ministers take one step forward with a long overdue plan for social care they should take one step back and scrap universal credit. The usual trope is to describe this brainchild of Iain Duncan Smith (surely a warning) as a good idea in principle but poorly implemented in practice. That is far too generous. From the outset universal credit has been a bad idea, a drastic simplification of six means-tested working-age benefits to sharpen work incentives that was bound to go wrong big-time.
Essentially what the reform does is to merge two quite different forms of support for poorer people (and on top of that housing benefit). One is the traditional range of benefits for those who are out of work, whether temporarily or for longer. The other is the help provided to poor working people, especially those with children, through tax credits, which ballooned while Gordon Brown was at the Treasury. By seeking to merge these intrinsically different forms of support, the government has created a problem that won’t go away however much Amber Rudd, the latest minister to be handed this nettle, may try to neutralise its sting.
That sting is the system of monthly assessment and payment, which is built in to the design of universal credit in order to mirror the world of work. But people who are out of work need money straightaway. That’s why their benefits are paid fortnightly. Payment a month in arrears is too long for this group. Those who are in work and receiving a top-up through universal credit should be better able to cope with monthly payment (even though in practice many will be paid by their employer more frequently). However, this group will experience hardship if their pay fluctuates a lot. If they do well in one month at work then the benefit will be reduced the following one, which may turn out to be a bad month at work. This does not occur with tax credits, which are assessed and adjusted on an annual basis with some disregard for any overpayments arising from increases in income.
As cases of financial hardship—attested in increased rent arrears and greater use of food banks as the new system has been rolled out—pile up, the government should accept that universal credit is inherently unfeasible for people whose finances are so fragile. In practice it will do little to improve overall work incentives. Instead of postponing the completion of this misconceived project, Rudd should junk it. Retaining a diversity of benefits (which can be better aligned) reflects the fact that those receiving them are also diverse in their needs, a more important mirror than universal credit’s misguided attempt to replicate the experience of jobs.
What holds back poorer working-age people is not the design of the benefit system but a lack of skills, which condemns them to low pay in the first place. That’s why a third priority is to give vocational colleges and the 16-18-year-olds and older adults that they teach the break they deserve.
Universities have been pampered over the past decade thanks to serendipity funding from student loans, much of which will never be repaid, an inconvenient truth until now conveniently overlooked in government accounting. In contrast, further education, which relies much more heavily on conventional public financing, has been starved of money. The number of learners aged 19 or over in the sector in England fell by almost a third between 2010 and 2016. That is an indictment of policy since the number should be rising as adults reskill themselves. Vocational colleges also need more resources for their 16-18-year-olds, who are typically more disadvantaged than their counterparts in schools and sixth-form colleges.
Making a success of vocational education is not for the faint hearted. The merits and defects of previous vintages of policy hardly matter given the incessant ferment in the sector, as ministers come and go and strategies chop and change. What is needed is an iron will to raise the status of further education, so that it is no longer the perennial cinderella at the ball. Ministers must above all create a stable and durable framework and financing for vocational education that provides broad, transferable skills.
If abandoning Brexit does give ministers a chance to carry out their real jobs they would do well to ponder the lessons from all three policies. Social care illustrates the vice of procrastination. Universal credit demonstrates the peril of embarking upon an over-ambitious and ill-considered project. Vocational education highlights the scourge of impatience and constant tinkering.
But these three lessons will count for little as long as Brexit dominates the political stage. Staying in the EU will help reform since the economy will be stronger and the tax base bigger. But above all abandoning Brexit will remove a gigantic distraction to good government.