Tuesday, 26 September 2017

Where next for long-term care?

Deborah Mabbett

The Conservatives expected to win in 2017, and the manifesto was written accordingly. For the small team in Number 10, it was an opportunity to fix policies where there could be internal dissent and backsliding. The House of Lords observes a convention of not opposing policies that are based on clear manifesto commitments by the winning party, and May’s team evidently hoped that dissidents in the Commons could be subjected to a similar discipline. The manifesto was taken as an opportunity to reorient the party towards a new social and egalitarian vision of conservatism in which the instincts of middle England were identified and distinguished from the interests of the cosmopolitan elite.

Apart from the obvious problem of managing a party packed with representatives of the cosmopolitan enemy, the image of middle England was always vulnerable to deconstruction once policy details emerged. General and rhetorical appeals gave way to the calculus of interests, and therein lay a problem for long-term care policy in particular. Middle England may believe itself to be only ‘just about managing’, but it still enjoys or aspires to home ownership. But a goodly share of future long-term care finance will have to come out of housing equity, and the Prime Minister’s advisers took the plunge and said so. In a policy area riddled with complexity, their answer was crystalline in its simplicity: people should pay for their own care unless they could not afford to do so. Housing wealth, released if necessary by Deferred Payment Agreements, would count in what could be afforded, while the means-test threshold that delineates those who can afford care from those who cannot would be raised to £100,000.

Critics were quick to point out that this scheme offered no insurance against the lottery of long-term care costs for anyone but the worst off, for whom the £100,000 threshold provided protection. And long-term care costs really are a lottery: while many people will spend something on care in their old age, a crippling burden of high costs falls on about 10% of the elderly. It seems an ideal case for insurance, especially as the burden is genuinely difficult to predict. Wealth and education do not guard the privileged against dementia: the disease where the costs can be highest and most prolonged.

The argument that there should be insurance against very high costs, and that the state should provide it, was accepted in the Dilnot report. It proposed that there should be a cap on the amount anyone should have to pay towards their own care. The amount up to the cap can be thought of as an insurance ‘excess’. Economic theory (specifically, ‘Arrow’s theorem of the deductible’) suggests that it is efficient to have a certain amount of excess or self-insurance, although, somewhat confusingly, Dilnot thought that the private sector might provide insurance for the capped amount. Beyond that, the public sector would step in, effectively providing the ‘stop loss’ insurance. Thus the idea of a cap on the amount that anyone should have to spend on care became established, having received the imprimatur of economic expertise.

In 2015, the cap on care costs seemed to be a done deal: the Conservative and Liberal Democrat manifestos referred to it as if it was already in force, and Labour indicated that it supported the measure. Thus there was an outcry when the Conservatives did not include a cap in their 2017 proposals. But, as often happens when economic theorems are applied to public policy, the underlying arguments are far from straightforward. Dilnot proposed a cap but gave little guidance on the vexed question of how it should be set. A moment’s reflection tells us that setting the cap will always bring political torment. Set it low, and the state will have to meet the bulk of long-term care costs, which it is already failing to do, so the policy problem will not be solved. Set it high, and more and more people will find their wealth is not protected. Not only will the number of prospective beneficiaries of the cap fall, but also the beneficiary group has an undesirable feature: it consists of wealthy people. The higher the cap, the more it will be that only the wealthiest benefit from it.

In short, the cap is the policy instrument from hell. How did public policy on long-term care get into this predicament? We return to the Dilnot report on ‘Fairer care funding’ and its conception of ‘fairness’. Fairness, for Dilnot, meant finding a way to protect housing capital against care costs. Having to sell your home to pay for care, the report argued, was widely regarded by the public as unfair. The report gave no hint that there are vast inequalities in housing wealth; instead it claimed that ‘everyone’ faces a significant risk from care costs. This is patently untrue. Only those who have assets above the means-test threshold face a financial risk, and the scale of the risk increases with wealth. Estimates contained in the report showed that, if its proposals were adopted, the largest increases in public expenditure on care would accrue to those with the highest incomes, but this failed to ring alarm bells.

Dilnot also advanced a more prosaic defence of the cap, evaluated against the alternative of universal social insurance. Requiring a private contribution would restrain the cost to the public sector. Public schemes, Dilnot noted, tend to be, or become, underfunded. But the cap was really a limited gesture towards solving the problem of public underfunding. While dismissing a general insurance scheme, the Dilnot proposal envisaged the maintenance of public insurance beyond the cap. There was no discussion of the structure of this insurance: implicitly it was assumed that it would be the familiar British kind, whereby the premiums are collected through general taxation. This approach to insurance has many admirable features. Without the capped excess, it is the basis of the NHS: we pay in according to our income and use the services according to our needs. It is in a way a ‘double’ insurance, providing protection against health care costs and against having a low income. The Dilnot report is not to be faulted for planning on the continuation and augmentation of this insurance, but the report was silent on how that money might be found. That, apparently, was a problem for politicians to solve.

There is plenty of discussion in the report on how households could ensure that they could pay the capped amount: suitable private insurance products might be developed, or provision might be linked to pensions or savings plans. A private model was not seen as viable for the whole amount of care costs: private long-term care insurance has failed to get established anywhere. But insurance for a capped amount would be possible, as the cap would remove uncertainty about the potential cost of care. Thus Dilnot proposed a sort of ‘public-private partnership’ but, as so often with these wizard schemes, the government would have to find more money, and spend it on relatively wealthy recipients, in order to fulfil its role as partner.

In the face of Dilnot’s deafening silence about how to raise more public money, Labour and the Liberal Democrats ventured forth with their proposals. The Lib Dems proposed a 1p rise in income tax and the eventual introduction of a hypothecated health and care tax. In 2015, Labour proposed instead to create a new source of revenue, based on wealth rather than income, aiming particularly at those who have enjoyed large windfall capital gains from their home ownership. But this proposal came under intense criticism and was evidently deemed a vote loser, because in 2017 the party hedged its bets, keeping a wealth tax on the agenda but saying it would seek a cross-party consensus on how to raise the necessary revenue.

In proposing that a significant contribution to long-term care costs would have to come out of (a tax on) housing wealth, Labour tacitly challenged Dilnot’s peculiar definition of fairness, which is that housing wealth should be protected. Labour’s challenge is different to that posed by the Conservatives’ 2017 manifesto proposal, which failed to address the problem that some unlucky people would lose the capital in their homes, and have nothing to pass on to their children. A wealth tax would mean that the risk would be pooled: everyone with housing wealth would pay something, and they would all have a little less to pass on to their children.

Given that Labour’s proposal for a wealth tax in 2015 fell heavily on its face, it seems to be time for a bit of lateral thinking. The party is right to insist that new sources of revenue need to be opened up: in particular, that some sort of charge on wealth is needed if public services are to be sustained without an undue burden on the working age generation. The problem with the care proposal in the Conservatives’ 2017 manifesto was that it was a charge on an unlucky few, rather than a general levy on all those facing the risk of losing housing wealth. The solution to this problem is not to design the whole system of long-term care finance around the protection of housing wealth, as Dilnot did. The missing item in the Conservative manifesto was not the cap, but an insurance scheme for those who want to protect their equity in their homes.

The logic of housing equity insurance is quite simple. The main beneficiaries of the expansion of public long-term care provision are those with something to lose: the equity in their homes. Who do we want to tax to fund long-term care? Wealthy people: meaning, by and large, people with substantial equity in their homes. These dots can be joined up. If the problem with the Conservatives’ proposal was that unlucky people would lose their equity, the solution is to offer protection against that risk with housing equity insurance. Such a scheme is not difficult to devise, and it could have the useful feature that, since the insurance is of housing equity rather than care itself, those with more valuable houses to protect should pay a higher premium. The scheme can be voluntary: those who don’t believe in inherited wealth can reap a reward for their enlightened views.

No doubt this idea has snags that I have not thought of. But it has one great merit, which is to tackle the underlying politics of the long-term care debate. There are good arguments for turning to housing wealth to provide funding for care, but as the debate is currently structured, housing wealth seems untouchable. The cap has become firmly lodged in the policy debate even though it is fundamentally iniquitous. If the argument could be reframed, a solution is possible.

Some years ago, David Runciman dissected the politics of inheritance tax reduction in the US [1]. He pointed out that the wealthiest people, who would benefit the most, had proved skilful in finding frames and slogans which deceived the middle classes into thinking that their interests lay with the rich. Progressive politics has to learn to play this game too. ‘Tax breaks for rich murderers’ was Runciman’s suggestion for pushing back against the ‘death tax’. Unfortunately, some well-meaning people were suckered into talking about the ‘dementia tax’ at the last election, and these things are difficult to row back on. ‘Caps for rich home-owners’ does not have the same ring to it, but that is the policy we seem to be locked into now.


[1] Runciman, D (2005) 'Tax Breaks for Rich Murderers', London Review of Books Vol. 27 No. 11, 2 June.

Wednesday, 13 September 2017

Proscribing National Action: considering the impact of banning the British far-right group

Chris Allen

Chris Allen
Following the news that West Midlands Police have arrested five serving members of the British army on suspicion of being members of the proscribed neo-Nazi group National Action, we should consider the extent to which the British Government’s approach to banning extremist groups has been successful.

Over the past two decades, the British Government has adopted a range of different legislative and policy measures in trying to address extremism and radicalisation, one of which is proscription. While the majority of those banned have typically adhered to extreme Islamist ideologies, those adhering to extreme far-right ideologies have begun to increasingly concern politicians and others alike. In this respect, the arrests will be far from surprising for some.

Prior to proscription under the Terrorism Act 2000 in December 2016, little was known about National Action. While those such as Britain First and the English Defence League (EDL) had courted media attention and thereby public and political reach, National Action was growing in confidence and numbers. Most concerning, however, was that as Hope Not Hate noted, its supporters were becoming increasingly provocative, ever more erratic and wholly unpredictable to the extent that its greatest threat was physical rather than political. There were also very real concerns about the group’s link with Thomas Mair, the convicted murderer of the former Labour Member of Parliament for Batley and Spen, Jo Cox. At his trial, he spoke only to say was “Death to traitors, freedom for Britain”, a slogan that featured prominently on the group’s now defunct official website.

On the decision to proscribe, Amber Rudd, the Home Secretary, said that National Action “is a racist, Antisemitic and homophobic organisation which stirs up hatred, glorifies violence and promotes a vile ideology. It has absolutely no place in a Britain that works for everyone” before adding that it was “concerned in terrorism”. In doing so, it was the first time in British history that membership of a far-right group had been outlawed. Consequently, it became a criminal offence to be a member of the group, to invite support for it or help organise any meetings. Likewise also to wear clothing or insignia linked to the group or carry symbols. It would appear to be the former upon which the recent arrests have been made.

As before, little is known about National Action. Prior to proscription, it self-identified as Britain’s premier Nationalist Socialist street movement. Its founders – Alex Davies and Ben Raymond – were originally members of the youth wing of the now largely defunct British National Party (BNP). Having become acquainted via social media they agreed that a newly revitalised nationalist youth movement was now necessary in Britain. Recognising the need to be different and distinct from existing groups and movements, the two began to demarcate between ‘good’ forms of nationalism – including the British Democratic Party and Blood & Honour – and ‘bad’ – for instance, the BNP and EDL. From this process emerged the impetus for National Action. Publishing a manifesto in 2012, the group was formed the following year and quickly began to orchestrate direct action campaigns that largely targeted university campuses and mobilising supporters to demonstrate in city centres.

Its ideology was unequivocally traditionalist and sought to offer Britain’s youth an authentic interpretation of Nazism. In doing so it broke with a number of recent trends evident within the British far-right milieu. This would appear to have been a deliberate ploy, decrying other far-right and neo-Nazi groups as being cowards for being populist in preference to traditionalist. As such, National Action’s ideology was one that included overt expressions of ultra-nationalism, racism, Antisemitism, disablism, homophobia, anti-liberalism and anti-capitalism among others. In doing so, it routinely expressed both an admiration and glorification of Hitler and what it believed were the great achievements of the Third Reich. It argued that such was needed to ‘save’ Britain, ‘our’ race and ‘our’ generation. As part of this, it aspired to establishing a ‘white homeland’ in Britain.

It was clear that National Action knew that it was likely to be banned. As such, it used its now defunct website to deny that it was in any way extremist. Citing the legislation, it argued that an extremist organisation was required to use or encourage illegal violence or terrorism to achieve its goals. Countering this, the group asserted that it was instead radical rather than extreme, adding that to achieve its goal of establishing a white Britain it could only do so through state power and so it was – and always would be – fully complicit with the state’s institutions, including the police, army and intelligence services. While so, there was always an underpinning threat of violence in much of what National Action said and did. This was evident in how it regularly spoke about the need for its members to prepare for ‘self-defence’; likewise for them to undergo combat training. But most overt was its bold statement that as a group, it was “not afraid to swing the bat at the enemy”.

While banning was as unprecedented as it was unsurprising, a lack of clarity remains about the specific and long term impact of doing so; something that is given further emphasis in the wake of the recent arrests. Given these were intelligence-led, it would seem that the mere act of banning has not countered the group’s extremist ideology, stopped the group from functioning or prevented its members from being active. On one level this too is unsurprising in that many of the groups banned under the same legislation have continued to operate by instantly regrouping albeit with the mere adoption of a different name. That is how easy it is to circumnavigate the legislation. A good illustration of this is the Islamist group Al-Muhajiroun which was banned in 2005. Between the initial ban in 2005 and 2014 when the last ban was imposed, the group, its members and its Islamist-inspired extreme ideology continued to function via groups named the Saved Sect, Call to Submission, Islam4UK, Islamic Path, London School of Sharia and Need4Khilafah. Given that it was recently claimed that affiliates to Al-Muhajiroun were linked with over half of all Islamist-inspired terror in the UK, the frailties and weaknesses of banning become apparent.

What would appear to be different here is that National Action and its members have apparently continued to use its name. At the moment, it is unclear why this might be so: could it be that the group were unconcerned with the ban or was it that they did not believe that they would be arrested? At this stage it would be wrong to speculate. Nonetheless, irrespective of whether the group and its members had chosen to continue to use the name its ideology would not have been destroyed on the basis of the ban alone. Also of grave concern is the prospect of National Action – and possibly other far-right and neo-Nazi groups – actively seeking to recruit servicemen to their rank and file. Again, while it would be wrong to speculate about this now it was alleged earlier this year that something similar was happening in the United States via the 4Chan website. It will be interesting to see how the situation develops.

You can read the full article here.

Tuesday, 5 September 2017

UK International Development Policy post Brexit?

Simon Lightfoot, Emma Mawdsley and Balázs Szent-Iványi

Simon Lightfoot
Theresa May’s announcement prior to the election that the “0.7% commitment remains and will remain” has appeared to head off the likelihood that a future Conservative government will repeal the 2015 International Development Act in the next Parliament. This is the Act that legally requires the UK to spend 0.7% of its GNI on Official Development Assistance. Her statement ended speculation that the target was at risk. In his 2016 Autumn Statement the Chancellor Phillip Hammond had said that “We will keep our promise to the world’s poorest through our overseas aid budget….But as we look ahead to the next Parliament, we will need to ensure we tackle the challenges of rising longevity and fiscal sustainability. And so the government will review public spending priorities and other commitments for the next Parliament in light of the evolving fiscal position at the next Spending Review.

This appeared to suggest the law could be re-examined.

Emma Mawdsley
May’s statement has been interpreted by some as a brave move given that the 0.7% commitment, and the decision to ring fence the spending from austerity, is very unpopular within certain sections of the Conservative Party and the British media. Aid spending is an interesting element of government spending as it is money spent ‘beyond the water’s edge’. The Brexit decision emboldened these critics of UK aid, who believe they have the support of a majority of the British people to cut the aid budget, with this majority being made up of a similar demographic to those who voted Brexit, as noted in this report for the European Parliament.

Indeed the Scottish Conservative leader, Ruth Davidson, said that commitment to the target requires “moral courage.” In the current election campaign, we saw aid pledges being used as counterpoint to spending pledges made by the political parties. For example, the plan by the Liberal Democrats to raise income tax by 1p to pay for the NHS was contrasted by journalists to their commitment to the 0.7% target, with the implication being cut aid to keep taxes low.

Balázs Szent-Iványi
However, the focus on the amount does not tell the whole story. The Prime Minister highlighted that “what we need to do, though, is to look at how that money will be spent and make sure that we are able to spend that money in the most effective way”. As DfID is one of the most transparent government departments we are able to get a good insight into how government priorities influence its work.

The 2015 Treasury Policy Paper “UK aid: tackling global challenges in the national interest” highlights the importance of national interest in aid spending.

Part of the national interest narrative is reflected in shifts in the ODA in the budget away from DfID to other departments, with a quarter of the aid budget (£3.5 billion) being spent outside DfID in 2016. We also see increased use of cross-government funds, such as the Prosperity Fund and Conflict, Stability and Security Fund (CSSF). Consequently we can identify an increased focus on security and the private sector,

While poverty reduction programmes and goals certainly remain important, much of the new energy and investment of the Conservative aid strategy has been in stimulating trade and private sector-led development. In a recent PQ paper, we argued that there is a clear narrative that Brexit will accelerate the trend to utilise aid to secure trade deals, given the need for the UK to re-focus its foreign and trade policy away from the EU.

There is also an option to increase the volume of aid devoted to business investment. This would fit with the proposal from DfID to increase the support the government can give to CDC, the UK development finance institution from £1.5bn to £6bn.

Given the amount of pressure the government faces to maintain 0.7 percent GNI aid spending, some changes in how that aid is used are inevitable. The focus on fragile states in the DfID strategy inevitably links development and security more closely. However, that does not mean security should replace poverty reduction as the focus of UK aid nor should aid include military spending. The changing nature of aid modalities towards technical assistance may mean that the private sector is best placed to provide the knowledge. However, that should not mean the private sector is always the best partner. Supporting refugees is important but diverting aid to fund the cost of hosting these refugees or reclassifying these costs as aid will weaken UK aid.

The 2017 Conservative Manifesto reinforced the view that what the UK classes as aid is likely to change post election. It states that whilst they will maintain the 0.7% commitment, they will work with like-minded countries to change the aid rules. The next line is telling; ‘If that does not work, we will change the law to allow us to use a better definition of development spending, while continuing to meet our 0.7 per cent target’.

Brexit puts increased focus on the UK’s ability to promote its soft power globally and DfID has considerable experience in the area. DfID is a well-respected government department both within the UK and internationally. DfID should therefore not be restricted in carrying out its core work, to reduce poverty, by growing pressure to act in the UK’s national interest. Clearly an aid policy which is supported by the British people and works for the UK is politically expedient but the UK has a proud record on aid and it is vital that nothing should negatively impact upon this record at this crucial time in British foreign policy.


Simon Lightfoot is Senior Lecturer in European Politics at the University of Leeds.

Emma Mawdsley is Reader in Human Geography and Fellow of Newnham College, University of Cambridge.

Balázs Szent-Iványi is Lecturer in Politics & International Relations / Deputy Director Aston Centre for Europe, Aston University.

An earlier version of this blog was first published by the Policy Space.
You can read the full PQ article here.