Council Funding and Social Care

Alan Johnson Excerpts

Wednesday 22nd February 2017 Westminster Hall

[Alan Johnson (Kingston upon Hull West and Hessle) (Lab)]

It is a great pleasure to conduct this debate under your excellent chairmanship, Mr Bailey, particularly as I hear you are going to Hull on Monday with the Industry and Parliament Trust, which is a great organisation. It shows that you are a man of discernment and great taste, and you will have a good time in the city of culture—and I would not dare to ingratiate myself with you at the start of the debate!

Adult social care in England presents the biggest domestic political challenge of our time, and that includes how to fund it, how to ensure it is more closely integrated with health and how to ensure that the system is sustainable in an ageing society where demand is bound to continue to rise. In the past week alone, while Parliament has been in recess, Age UK has said that the system is moving from crisis to collapse. A report by Oxford University and the London School of Hygiene and Tropical Medicine concluded that problems in adult social care are behind an unprecedented increase in mortality. If we look at the statistics we see that mortality has gone up, but the normal infant mortality measure is not the cause, nor is the mortality rate of babies born after 28 weeks, which is a big factor. However, the adult mortality rate has gone up by 5.7%, and the report says that is due to problems in adult social care in England.

The debate today is about one strand of the enormous challenge, and it is very much focused on the short term: how local authorities will be able to maintain, let alone improve, services over the next few years. In relation to the debate about the long term, I was Health Secretary 10 years ago, and I was heavily engaged in the internal debate within the Brown Government about the need to devise a completely new and substantial stream of funding for adult social care. My right hon. Friend the Member for Leigh (Andy Burnham) became Health Secretary after me. He managed to reach a consensus with the Conservatives and the Liberal Democrats that was disgracefully scuppered by Andrew Lansley during the 2010 general election campaign. That attempt to find new money was disparagingly referred to by the then Conservative Opposition as a “death tax”, complete with pictures of tombstones on their election posters. It may have helped them to dislodge Labour, but it did not help them to solve the problem.

The Dilnot inquiry subsequently made a number of suggestions, including the eminently reasonable one that people like me who are working beyond state pension age should pay national insurance. That was quickly dubbed the “granny tax”. Between the death tax and the granny tax, the national debate on how we find the means to tackle this crisis has rarely managed to rise above the glib and the facile.

I applaud the recent cross-party attempt to convince the Prime Minister of the need to find a new cross-party consensus. Perhaps the Chancellor is even now working on the final details of a great and imaginative scheme that can attract all-party support for a national solution to a huge and growing problem. His autumn statement was an enormous disappointment. While he may mistakenly believe that the biggest crisis he faces is how to defuse the considerable row over business rates, he needs to understand that the interlinked issue of adult social care—interlinked for reasons I will come on to— overshadows everything in his in-tray and in the Cabinet’s in-tray.

It is traditional in debates of this kind for somebody to say that the problems are not all about money. I have no doubt that the Minister is preparing himself to fulfil that role in this debate, but I am afraid that in respect of adult social care, it actually is all about money. According to the Institute for Fiscal Studies, direct funding to local authorities will have fallen by 80% by 2020. I repeat: 80%. Adult social care is not ring-fenced. Some £4.6 billion was slashed from those budgets in the last Parliament, with the result that we spend less on social care now than we did in 2010. Those are House of Commons Library figures obtained yesterday. It is less in cash terms, which is even less in real terms, and all parties agree that the problem is mainly caused by underfunding.

In written evidence submitted to the adult social care inquiry last year, the King’s Fund said that

“the fundamental cause of the problems in adult social care is inadequate funding.”

We can talk about innovative ideas and methods that councils across the country are employing, including my council in Hull—they are doing brilliant things to try to deal with some of the wider issues—but the basic fundamental problem comes down to cash and funding. Indeed, the scale of the problem is such that in evidence to the same inquiry, the chief executive of NHS England, Simon Stevens, said that were any extra money to become available from anywhere it should go not to the NHS—his own organisation, which he was representing—but to social care. That was a remarkable and unprecedented act of self-denial in respect of access to public funds.

Pending the Budget and the outcome of further deliberations by the Government on the issue, the solution that this Administration have pursued with the most vigour is simply to pass the buck to local authorities. Let us for the sake of this debate accept the premise that local authorities are best placed to deal with the issue and that the adult social care precept may be the new funding stream that has proved so elusive. Even if we accept all that, the first point that the Government must surely acknowledge is that the amount raised does not begin to match the scale of the problem. The precept in 2016-17 raised £382 million, which is less than 3% of council spending on adult social care. However, it would have been a very welcome 3% increase, were it not for the fact that implementation of the national living wage cost those same councils an estimated £612 million, wiping out the additional money and leaving councils with a deficit on this issue alone of £230 million.

[Melanie Onn (Great Grimsby) (Lab)]

There are some 850,000 people living with dementia in the UK, and their care is usually more expensive than standard elderly care. We have seen £160 million taken out of adult social care budgets between 2010 and 2016. When it comes to the adult social care precept at the local authority level, does my right hon. Friend agree that it is destined to create a postcode lottery and impact further on the services that people expect to receive in times of great difficulty?

[Alan Johnson]

My hon. Friend is absolutely right about that, and I will talk about the widening inequalities in a second. She was also right to refer to dementia sufferers. Too often in this debate—I am perhaps guilty of this, as well—we deal with dry statistics, percentages and precepts, when at the end of it there are people who are very vulnerable and need care, above all dementia sufferers. We have to tackle that and ensure that the inequality gap does not get wider. I will come on to that in a second.

[Sir Hugo Swire (East Devon) (Con)]

I am following very closely what the right hon. Gentleman is saying and am finding myself in agreement with much of it. In the time left, will he also address the issue of the hidden cost of care? These are the carers who are looking after elderly relations and who have sometimes lost childhoods looking after disabled mothers. A huge army of hidden carers are providing free social care. When we look at the model, we should not forget those people.

[Alan Johnson]

The right hon. Gentleman is absolutely correct about that. I said at the beginning of my remarks that this is a wide debate, but I have chosen to focus on one strand: funding through council tax. I have met not only elderly people caring for similarly elderly people, and not only women trying to care for elderly parents at the same time sometimes as bringing up a child, but, most poignantly, children who care for their parents. They remained hidden to the extent that even schools did not know they had such responsibilities, and there was no obligation on schools to find out, so the right hon. Gentleman is absolutely right that the problem is far reaching. For Government it is a difficult problem to resolve, although I do not doubt their determination to try to resolve it. I am just pointing out that if we were to accept that the way to do it is by local precept on local councils—devolving the issue down to local level—the Government would have to accept that the route they have designed is woefully inadequate.

In addition to the fact that the national living wage costs councils £612 million against the £382 million that the precept at 2% raised last year, a combination of the Care Act 2014, case law in respect of deprivation of liberty safeguards and the proposed Department for Work and Pensions cap on housing benefit—if the Government are unwise enough to go ahead with that, they will create all kinds of problems that will come to councils through adult social care—has created and will create additional unfunded social care costs.

However, as my hon. Friend the Member for Great Grimsby (Melanie Onn) alluded to, the biggest problem with relying on the precept and the retention of business rates—the Government’s other new idea—is that it is grossly unfair and will widen existing inequalities, leaving those with the greatest need less able to raise the extra money that they need. Far from doing something to close the equality gap that the Prime Minister rightly made her mission in her first utterance in that role, it will exacerbate the problem and lead to Government-inflicted inequalities. The King’s Fund points out that the 10 most affluent areas will raise almost two and a half times more from this precept than the 10 most deprived will. If it was more money instead of less, it would be welcome. The fact is that all local authorities, wherever they are in the country, will be worse off overall from cuts to local authority funding, but through the precept and rates retention some will be worse off than others.

Allow me, if I may, Mr Bailey, ahead of your visit to Hull, to be parochial and talk about the city that I represent. Hull has 27% of its population living with a long-term health condition. It is a brilliant city, but not a wealthy one. Not many people have the £25,000 that, according to the Government, allows them—this is another controversial issue—to self-fund. Only 7% of the population is able to self-fund in Hull against the national average of 45%. There is, therefore, a huge and growing demand for adult social care services.

Hull City Council will struggle to produce any meaningful resources from the social care precept because 80% of our housing stock is in the two lowest bands. The net result—this is a neat little comparison—is that in Kingston upon Hull the increase in the precept to 3% will bring in £8.01 per person, but in Kingston upon Thames, which I have nothing against—it is a wonderful place—will raise £15.27 per person. There are even starker anomalies, incidentally, but that is a neat comparison. Kingston upon Hull, which has higher levels of deprivation, a greater need for social care and a lower council tax base, finds itself getting almost half as much as Kingston upon Thames. Because of the Government's failure to properly account for deprivation over the next three years, Kingston upon Thames will have £2.3 million more to spend on adult social care while Hull will have £2.2 million less.

Hull has, like all local authorities, been battling to protect its services through a vicious series of funding cuts, losing £115 million of core funding with a further £33 million of cuts to face by 2020. It has lost £18 million from its social care budget since 2010, with the need to cut a similar amount over the next three years. Overall, a combination of the financial pressures on Hull City Council, the clinical commissioning group and secondary health care—those are all combined in the interface of how we deal with these problems—means that we have a spiral of decline, as the CCG is unable to support community services and is pulling back funding at the interface of health and social care. That then impacts on the ability of the local authority to respond swiftly and robustly to a sudden and unexpected need for high-cost social care, such as somebody experiencing a stroke and awaiting discharge from hospital.

An increase in delayed discharges places an additional burden on the acute trust, which goes deeper into crisis and has to admit people later and discharge them earlier, often discharging them inappropriately and pushing the burden of funding support for vulnerable people back to the CCG and the local authority. The vicious circle then begins all over again, becoming more and more problematic and presenting even greater risks to individuals.

[Sir Hugo Swire]

On this issue of keeping people in hospital, in some parts of the country the local authority is slow to find them beds because it is then its responsibility financially, but does the right hon. Gentleman not agree that all the evidence shows it is far better to keep people out of hospital, because of muscle wastage and suchlike, and to get them back home as quickly as possible?

[Alan Johnson]

There can be no dispute about that from anywhere. All the evidence says that that is the case. “Bed-blocking” is a terrible term, but it was around when I first came into this place 20 years ago. We thought we had resolved the situation, but it is becoming more and more acute. Keeping people in hospital is a problem because it is not good for the individual, never mind about the effects on healthcare services, the NHS and adult social care. It is not good for the individual to be placed in that situation. I might add that lots of charities and voluntary sector organisations do a great job in helping to deal with that problem. They depend for their existence on a bit of match funding from local authorities, sometimes £10,000 a year, which they are no longer able to get since that has had to be cut because of cuts to local authority funding, so that has had an impact even on the voluntary sector.

In November the Public Accounts Committee concluded that the Department for Communities and Local Government does not have sufficient understanding of the extent to which revenue pressures are affecting local authority finances. That has certainly been our experience in Hull, although we have tried to assist the Secretary of State by highlighting the anomalies that the precept creates. The Secretary of State wrote to the leader of Hull City Council, Steve Brady, on 19 July last year, shortly after he had taken over at DCLG. It was a lovely letter thanking Steve Brady for a letter to his predecessor about devolution in Yorkshire. The leader of Hull City Council’s letter also mentioned the problems being caused by the tax precept for adult social care. The Secretary of State said he understood and wrote:

“ I would be pleased to meet you in due course to discuss this further. My office will be in touch to arrange...a suitable time”

in the coming weeks. Hull City Council waited 13 weeks and then got a response that was not even from the principal private secretary in the Department. A correspondence clerk wrote to say that the Secretary of State no longer had any time in his diary: he was unable to commit to any meeting whatever and unable to commit to the meeting that he himself had suggested, unsolicited, in a letter to the leader of Hull City Council. That is at worst arrogant; at best, discourteous. Perhaps the Minister can suggest to his boss that he clear an hour—even half an hour—in his diary for the commitment that he himself suggested. His failure to do so has led to the suspicion that he is not really interested in gaining the sufficiency of understanding that the PAC alluded to in its report.

The problems in Hull and other cities represented by Members here today remain as acute as they were in July, and the local government funding settlement published late on Monday evening will do nothing to resolve them. The better care fund gives some weighting to local need, but nowhere near enough, with rising demand and reduced funding producing a £30 million funding gap for Hull by 2020, and a further £40 million to come if 100% business rates retention kicks in without some form of adjustment to account for deprivation. Again, places such as Hull with tightly drawn city boundaries—none of the suburbs are part of the Hull City Council area—will do worse from business rates retention than more prosperous areas.

Having failed in our quest to inform the Secretary of State of the effects of his policy on cities such as Hull, the three local MPs wrote to the Chancellor ahead of the autumn statement, seeking his assistance to ensure sufficient funding for adult social care. The reply came from the Minister who is here today, and it was full of reassuring statistics about the money we would be receiving. The only problem is that his figures were wrong by a factor of 45%. The 3% precept will raise around £2.1 million in Hull, not the £3.5 million the Minister claimed. Yes, we will receive £1.46 million from the new adult social care grant, but we will receive a corresponding cut in the new homes bonus of £0.8l million, so that £1.46 million is reduced to £0.65 million. In addition, although it is true that Hull will get £1.88 million from the better care fund, like all local authorities we were hoping to see that money front-loaded, not back-loaded. The £6.5 million we are due to receive in 2018-19 is badly needed now.

The cuts being made to local authority funding are what I would call reckless. Even in this new world of alternative facts, the Government cannot spin draconian cuts into extra funding. Instead of engaging in this kind of smoke-and-mirrors attempt to suggest that all is well, the Minister needs to understand, and then acknowledge, the real funding position for councils such as Hull and other local authorities whose Members are waiting to speak in this debate.

This is not a battle among local authorities; it is a battle by local authorities to achieve a proper understanding by the Government of the crisis they face. The Government must take levels of deprivation and the ability to raise finance from local tax receipts fully into account when considering the future fair funding model for local government. They must set out their plans for the promised land of rates retention in 2020, which may help in the south where, as we have been hearing, rateable values are high, but is a huge issue for local authorities in the north. It would also be handy if the Government sorted out their promised review of rateable values before passing that substantial buck to local authorities, as they plan to do in three years’ time. More urgently, they need to front-load the better care fund, so that services do not collapse before a fairer funding model is in place.

Local authority funding of adult social care on the current basis is unsustainable, but, in the absence of fresh thinking, it is all we have, and the people who rely on adult social care cannot wait any longer for the urgent help they need. The debate can get lost in dry statistics, but in reality it is about the elderly woman who is stuck in a hospital bed because there is no satisfactory provision in her community. It is about the disabled man unable to receive the help he needs to have a bath, the care home that closes and the dementia care that vanishes. It is about many of the things that make our society civilised—things that are diminishing daily, on this Government’s watch.

--- Later in debate ---

[Huw Merriman (Bexhill and Battle) (Con)]

I thank the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson) for giving us the opportunity to discuss, on a cross-party basis, the need for reform and the challenges faced by our local authorities. I hope I can be forgiven for being a little more parochial in the time available to me than my right hon. Friend the Member for East Devon (Sir Hugo Swire) was. I want to talk about our challenges in East Sussex, but I will then touch on what the Government are doing and, ultimately, on the need for reform. That need is not only about looking at government but about encouraging reform and ideas at a local level, because the challenges are local. That is where I will focus the main part of my contribution.

To set the scene, we in East Sussex feel ourselves to be in a challenging situation, because those who make the decisions in London look south, see Surrey on the map—Surrey has already been mentioned—and perhaps think that things cannot be too bad in that direction, so money should go west or north. Further south than Surrey, however, is East Sussex. We are a relatively poor county with poor infrastructure, so our ability to create business opportunities is limited. Understandably, because we are on the south coast, we have also become a haven for retirement.

The Surrey scenario is real for us. It is extraordinary how, when I knock on doors in my constituency and speak to retired people, they tell me their stories about moving further south from Croydon, Caterham or wherever. That is fantastic, and those people add to our diversity, but the proportion of over-65s in my constituency is 28% of the total population, compared with a national average of 17%.

People will work and live in Surrey, perhaps in bigger properties, and then sell and downsize, but they will not pay the same amount of council tax in East Sussex. As they get older and into their advanced years, they will obviously need the services of East Sussex. Under the current model, the working age population of East Sussex largely has to fund those services. I agree with my right hon. Friend the Member for East Devon that there is a need to look at the model that requires us to fund social care locally but the NHS nationally, which does not make any sense at all.

Unfortunately, we also have a relatively poor working age population. I recall that, a year or so ago, I was given figures and told, “Congratulations—your constituency is in the top 10 for wage increases when it comes to the living wage.” That really means that 33% of my constituents are on the living wage and work in poorer areas, which is a challenge. I also make that point about the push for new money, which really means a push towards taxing those who are currently working. How will we get people who are currently working to save for their own good care if we tax them to the nines and they cannot afford to save?

[Alan Johnson]

The hon. Gentleman makes an important point. We need to fund social care from a separate source, not just normal taxation. Two ideas came up. The idea of taking money out of people’s inheritances was labelled the death tax. I made the point that I should be paying national insurance. I am 66 years of age and I am still working. Why did I stop paying national insurance at 65? As Dilnot said, that and other ideas need to be explored. We agree that this is not just an argument about sticking taxes up. We must look for a new funding stream, which has been so elusive.

[Huw Merriman]

I absolutely agree. As my right hon. Friend the Member for East Devon mentioned, we should look not just at reform of social care in isolation but at all the other related parts. We should ask ourselves whether we are overspending in certain parts, whether we can recycle in other areas, and whether people need to make fairer contributions, particularly as they get older. We could also throw into that pot contributions by retired people who have no issue at all with their income and have paid for their assets, yet are still entitled to free bus passes and other universal benefits. This is not Government policy, but I can say it because I am a Back Bencher: perhaps the time has come to look again at whether we can afford that when we cannot afford to look after people in social care.

--- Later in debate ---

[Mr Jones]

No, I will make some more progress and deal with these points before I give way to the hon. Gentleman.

The right hon. Member for Kingston upon Hull West and Hessle also had concerns about the varying council tax bases across the country, which is an extremely pertinent point. That is why we have profiled the improved better care fund’s distribution—which is £105 million this year, £825 million the following year and £1.5 billion the year after that—based on an area’s ability to raise additional funding through council tax. I hope he is reassured by that. Taking into account his point about the short term, we have put in place the additional adult social care support grant of £240 million this year to give additional support to local authorities, bearing in mind that the improved better care fund is back-loaded, as the right hon. Gentleman said.

The right hon. Gentleman made another point about Hull and the implementation of 100% business rates retention. An assertion was made and, I think, a figure put on the amount that would be available to Hull under that system. At the moment, no allocations have been made and no baseline funding has been set. We have been clear throughout the process of setting 100% of business rates retention that we would take into account a local area’s ability to raise business rates. We certainly recognise that redistribution will need to be part of the new system, to ensure that just because one area does not raise as much in business rates as another it is not left behind.

The right hon. Gentleman also mentioned the difference in funding between Kingston upon Hull and Kingston upon Thames. I will deal with that issue head-on, because for 2017-18, putting together the potential 3% increase under the adult social care precept, the adult social care support grant and the improved better care fund, Kingston upon Hull will actually get £6.86 million from those sources, while Kingston upon Thames will get only £4.88 million from the same sources. I hope that deals with some of his concerns about how funding is being distributed.

My right hon. Friend the Member for East Devon (Sir Hugo Swire) almost said that my presence at this debate was an outdated model—I hope that Mrs Jones does not take the same view in due course—but I know he did not mean it personally. He made some important points, including about unpaid carers. The Department of Health is leading on the development of a new national carers strategy that focuses on raising awareness of caring and on helping carers to ensure that they have the right support. He also mentioned the business rates retention system and the additional £12.5 billion of business rates that will go to local authorities. We have been clear from the outset of that process that that will be fiscally neutral, with additional responsibilities therefore going to local government in that sense. We are in the process of determining what those additional responsibilities will be, and we are consulting on a number of things at the moment. However, we have ruled out devolving attendance allowance to local authorities.

The hon. Member for Kingston upon Hull North (Diana Johnson) mentioned skills in the care sector, which is an extremely important point. The Department for Health is doing a significant amount of work to try to improve skills in that regard, and I think the national living wage will also help. The hon. Lady also mentioned a particular incident in her constituency relating to the national living wage. We are absolutely clear that the national living wage should be paid to people working for whatever company on the basis of the hours that they work. If there is any abuse going on, I encourage the hon. Lady to contact Her Majesty’s Revenue and Customs.

The hon. Lady also mentioned the allocation of funding in relation to deprived areas. I hope it reassures her that the average spending power per dwelling for the 10 most deprived local authorities is around 21% more than for the 10 least deprived local authority areas this year.

[Alan Johnson]

Will the Minister give way?

[Mr Jones]

I will, but I do not want to eat into the right hon. Gentleman’s time to wind up the debate.

[Alan Johnson]

He already is, so just in case I lose my two minutes, I have a question for the Minister. He has a letter from the chief executive of Hull City Council, Matt Jukes. I have mentioned the disgraceful behaviour of the Secretary of State not committing himself to a meeting that he himself had suggested. Will the Minister commit to having that meeting, at which we can look at the latest round of figures? The first ones were not too good; we will have a stab at this one. That is the short-term problem, but will the Minister also say something about the long-term issue, which my hon. Friend the Member for Oldham West and Royton (Jim McMahon) raised from the Labour Front Bench, and which Government Members have also raised? This must surely be a short-term issue, with a vision of something better for the longer term.

[Mr Jones]

I will have that meeting to deal with the points that the right hon. Gentleman mentioned. I say finally that the Prime Minister was absolutely clear last week about the need to find a long-term, sustainable solution to this. The Cabinet Office is driving that work across Government, with my and other relevant Departments, to find that sustainable solution. Local authorities have a duty to care for our most vulnerable people, but we also have a moral duty—

Motion lapsed (Standing Order No. 10(6)).