Regional Pay

Debate between John Pugh and Kelvin Hopkins

Wednesday 20th June 2012 Commons Chamber

[John Pugh (Southport) (LD)]

I thank the hon. Member for Dumfries and Galloway (Mr Brown) for that introduction; I am not used to it.

The battle over regional and local pay is one, frankly, that in the current circumstances the coalition could do without. It would be a battle—a gruelling, energy sapping and pointless battle between and within parties. Even the Labour party is divided on its proposals for regional welfare. Opposition among the Liberal Democrats to the underlying principle and philosophy behind the suggestions is now widespread. We are not against the collection of evidence, but the evidence means that we are against the proposals. Shortly I and a number of colleagues will submit evidence that we hope will convince further. There was no problem recently getting 22 Liberal Democrat Members to sign a letter to The Times opposing regional pay, and of course those numbers were limited because our ministerial colleagues could not be asked to participate.

The politics of the proposal are lethal and divisive. It pits region against region, abandons the principle of equal pay for equal work, and treats the low-paid and local differently from the high-paid and mobile. The economics of it are nonsense, too, being bolstered largely by clichés and prejudice from the usual suspects—the Institute of Directors to name but one.

[Kelvin Hopkins (Luton North) (Lab)]

It is refreshing to hear some common sense from the Liberal Democrats. The hon. Gentleman might be aware that a survey reported by the CBI suggests that 94% of private sector employers are concerned, above all, about markets and consumer demand for their goods and services, and the proposal would reduce consumer demand.

[John Pugh]

That is certainly true, and a lot of UK national firms—building societies, banks and the like—do not have regional pay structures.

No one can dispute that reducing public sector pay in low-wage areas necessarily reduces the money spent, and therefore demand, in those areas. No one can dispute that putting relatively more money into the pockets of public sector workers in high-wage areas increases the money in circulation in those areas, and thus demand. Ultimately, economic division will be cemented in and, frankly, a good reason would be needed for doing that.

Social Care Funding

Debate between John Pugh and Kelvin Hopkins

Thursday 10th November 2011 Westminster Hall

[John Pugh (Southport) (LD)]

I congratulate the hon. Member for Truro and Falmouth (Sarah Newton) on securing this debate and on introducing it so lucidly. I do not know whether any hon. Members, apart from me, attended an event in the House earlier this week called, “Preparing for Old Age”, and organised by Age Concern and the Prudential. As I went in, I picked up various brochures with rather grim titles such as “What to do when somebody dies”, “Paying for care costs”, “Insuring against ill health” and “Coping with dementia”. I looked in vain for something called, “How to have fun in your 90s”, but there seemed to be nothing about that.

We are fortunate to have a Minister to respond to the debate who has a distinguished record in this area, both when in opposition and as a Minister. My reputation in this area has been somewhat more ignominious. I was in Richmond house for the first time when, as leader of the Liberal Democrat group on Sefton council, I was summoned with other party leaders for a dressing down by the then Minister, Lord Boateng, subsequent to a law case that had gone against Sefton, which was not an uncharacteristic event.

We were taken to court by, I believe, Help the Aged, because we took the view that we could resource care needs only according to the resources that the Government had allowed us. We lost the case, and went to Richmond house to explain our side of the story. We were called into a room and waited patiently until the Minister breezed in, gave us a dressing down, told us how tough the Labour party would be with councils henceforward, and sent us on our way. The interesting point is that the press release hit the streets even before we had left the room, so clearly it had been written considerably prior to the event.

Later, when I became leader of the council, I rationed the number of care homes, which were rather more expensive in the public sector than in the private sector, and found that my Labour opponent—he is now the distinguished deputy leader of Liverpool city council—had gone to the press and engineered a photograph showing a 100-year old resident with a placard saying, “Please do not close my home, Councillor Pugh”. Unfortunately, we did close it, because it had been endowed to the local authority and was unsuited for its purpose. It was costing us twice as much to run, as indeed were some private sector homes then.

Only the other day, Sefton council had a judgment against it when the freezing of care home fees was ruled to be unlawful. It is a balanced council with three parties in the cabinet. The managing director of the solicitors who took the case against Sefton council said,

“There is every reason to believe other councils are doing exactly the same as Sefton.”

Sefton responded by saying that the court was merely critical of some elements of the process. Sefton is a borough with the 13th highest proportion of people aged 65. The bulk of its controllable budget—it has many contracted-out services—is taken up by social services. Sefton unexpectedly had £30 million up-front costs to find by way of savings. It is completely unthinkable that that could be done without eliminating other departments and without affecting social services in some way. Funding social care is a difficult problem. That is what I have learnt.

[Kelvin Hopkins]

We hear constantly about the difficulty of funding. The amounts we are talking about are very small in the overall scheme of things. The £1.7 billion for Dilnot would be less than half a penny on the standard rate of tax—that is the equivalent. Free long-term care for all would be 2p on the standard rate, which is what my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) cut the standard rate by before the election. We are not talking about massive amounts. I have spoken to many groups, and if I ask, “What do you prefer—the fear that you could have your house taken away to pay for granny’s care or paying 2p on the standard rate?” time and again they will all say, “2p on the standard rate”.

[John Pugh]

We all accept that, whatever it may amount to in the round, it is hard for local authorities to meet their care costs within current budget constraints. It is hard for NHS hospitals that suffer because of people who should not be staying there, who they recognise ought to be in care, but it is sometimes cheaper to keep them in the hospital rather than anywhere else, which is not in the hospital’s interest. It is hard for families who have the job of fulfilling caring responsibilities, which can conflict with employment, and it is difficult if they live at some distance from their elderly relatives, as they tend to these days. It is particularly hard for the individuals in need of care and who have increasing costs set against diminishing resources. It will not get any easier for the reasons hon. Members have already rehearsed: an extension of what we might term our declining years; the demographic bulge that we have all spoken about; many carers are taking up their responsibilities at an age at which they are not in, let us say, the first flush of youth; and in terms of social policy we are discovering that neither community nor personalised care are cheap options.

Nevertheless, society has made some significant achievements. Since the great Liberal Government of the early 20th century, the state has underwritten the fundamental problems that used to afflict old age—poverty and infirmity—by providing a safety net. When that reform was introduced, there was the presupposition that families would continue to accept responsibility for elderly members—they usually did—and that people would also look out for themselves to some extent. The old age pension was a mechanism to ensure that they could do that, and people had the opportunity to take still more precautions via provident societies and so on.

However, we have moved on and today we have two central problems. I do not think I have heard other problems apart from these. The fundamental problem that has been cropping up in this debate is that, assuming the system meets basic needs, which I guess it does at the moment, there is the capacity of those needs to become so severe that they can wipe out people’s inheritance, and many people regard that as not in the order of things and not how things should be. There is the other problem, which has not been touched on to the same extent, but I get it in my constituency: a sense of injustice about what might be called the free-rider problem. People have told me that they have saved for their old age, and as a result they feel that they have been penalised, because people who have made no effort to save, or who have blown the money prior to reaching an age when they might need it, get the benefits that the savers are to some extent denied. Those two problems seem to linger around the system.

--- Later in debate ---

[John Pugh]

The hon. Gentleman has usefully illustrated my point. We can argue that the state does not have a duty to preserve a family’s inheritance, notwithstanding the valiant defence of inherited wealth from the hon. Member for Luton North (Kelvin Hopkins). In normal circumstances, that is an unusual stance for him to take.

[Kelvin Hopkins]

I was defending the small amounts of inherited wealth for relatively poor people, not the vast amounts inherited by very wealthy people. I would substantially reduce the threshold for inheritance tax, but my party would not agree.

[John Pugh]

We might dispute the borderline between the wealthy people who do not deserve it and the not so wealthy who do, but we have a system in this country, unlike in Germany, where the family has no legal obligation, and we ought to be alert to that. We have already heard in the debate about how some families, in seeking to preserve their inheritance, actually support their elderly relatives, which sometimes is a laudable and desirable outcome. On the free-rider problem, we can argue that, in allowing a reasonable level of retained capital prior to benefits, there is a reward for people if they show a degree of providence. Those who have more than that and therefore do not benefit to the same extent might regard themselves as not simply provident but fortunate.

I am not certain that Dilnot fully addresses the problem. It is too dramatic to say that people have the choice of dying or destitution, or dying before destitution or whatever. Realistically, the option that most people fear is the reduction of their resources to the level that they become solely dependent on the generosity of the state. It seems to me that that is what Dilnot seeks to avoid or prevent. It attempts to deal with the problem that Members have spoken about, which is the total wipeout of a life’s accumulated family resources. The issue is whether Dilnot’s proposals to cap people’s costs have produced a scheme that is both affordable and socially just. It can be argued whether, if someone is vastly wealthy, the cap ought to apply to the same extent.

Whether Dilnot is affordable is not a question that is easy to answer. Does it depend on front-end costs being picked up by adequate and affordable insurance schemes? It depends on the insurers being willing to offer such products. I have spoken to insurers who would prefer to offer annuities or suchlike arrangements, and who question whether they will be in the market to provide the products that Dilnot requires. The other issue is what counts as front-end costs, because we exempt things such as hotel costs. It may be some appreciable time before people get to Dilnot’s benchmark of £35,000, or, if they take out insurance, premiums may be higher than we currently imagine. Asking whether Dilnot is affordable is like asking how long a piece of string is. As the hon. Member for Stourbridge (Margot James) illuminated in her speech, it depends on where we set the lines.

Certainly, what is more affordable to Government is likely to be less attractive to individuals and their families, or might be more problematic for insurers. However, the one thing that we all accept, if we ever redesign Dilnot, is that there is a genuine need for cross-party consensus to work out what blend of insurance risk Government and individuals can support.

That is another point we must consider, and perhaps we have not quite got there yet. I understand the cynicism about what the Treasury may or may not be prepared to do, but before it works out what it can afford, we need a degree of consensus concerning what the state’s role should be on this issue. We need to know not only about the state’s detailed implementation of the policy, but what the purpose of the state is in this business. We must look at how we intervene, and at how we wish to intervene.