Question for Short Debate
My Lords, I draw attention to my entry in the Lords register. I hope the Government will reflect further on this issue and commend them on bringing forward proposals to address the challenge of funding social care sustainably—something that has been ducked for far too long.
The Intergenerational Fairness Forum, which I am honoured to chair, in 2018-19 held a year-long inquiry that considered sustainable funding for social care and intergenerational fairness. I thank the noble Baronesses, Lady Altmann and Lady Watkins of Tavistock, Baroness Howe of Idlicote and the noble Lords, Lord Howarth of Newport and Lord Willetts, in particular, for the support they gave to that work.
Our inquiry report, Grasping the Nettle: Sustainable Funding for Social Care and Intergenerational Fairness, supported the Dilnot recommendations on a threshold below which people should not have to contribute to their care costs and a £35,000 cap on the total care costs that people should have to pay, which would rise in line with inflation. This lower cap than that planned by the Government would help more people with relatively modest total assets—for example, those whose homes are less valuable.
We recommended that the resources needed to fund social care should be raised by a distinct new, mandatory social care insurance contribution levy at a rate of 1%, which could rise to 2% for those aged 50-plus if additional resources are needed to meet rising care costs.
We also proposed that this new levy should apply only to adults over the age of 40 and that it should then be paid by all adults for as long as they continued to work. We proposed this age threshold because our aim was to develop a system for funding social care that met our test of intergenerational fairness—one in which all generations contribute, no one generation is impacted unduly and costs are not simply left for future generations to bear. Our recommendations would also ensure that the heaviest burden falls on those best placed to contribute.
We recognised that funding free social care through 1% social care insurance contributions on working adults over the age of 40 alone fails to meet the test of intergenerational fairness because the burden for paying for social care would then fall too heavily on these workers, while retired people would contribute little or nothing.
Like the Government, we rejected the use of income tax to fund better social care, because this is the system that has been tried, and has failed, in recent decades. Funding social care through income tax would mean that it continues to be at risk of suffering from rationing as a result of spending restrictions or when social care is not a high political priority in comparison with competing public services or tax cuts. A hypothecated, mandatory system of social care insurance is not exposed to this risk.
Apart from the absence of an age threshold for the Government’s new health and social care levy, my two major concerns about the Government’s proposals are that they will not deliver additional resources to the social care sector quickly enough and that, of the £36 billion that they expect to raise, only £5.4 billion is earmarked for social care. Yet again, the social care sector is playing second fiddle to the NHS, when its need for additional resources is at least as urgent.
Like many others, I also believe that, politically, it may be very difficult in the future for the Government to claw back from the NHS the money raised by their health and social care levy to allocate it to social care. Our recommendations also aimed to ensure that sufficient resources were raised to extend the provision of social care so that more of the people whose needs are currently unmet would be covered. So, in addition to a 1% social care insurance contribution levy, we recommended additional measures that would allow the Government to increase funding for social care significantly in the short term. These recommendations fell into two broad categories: those raising additional funds for the Government, which we wanted to be ring-fenced for social care, and those saving the Government money that we wanted to be redeployed to social care.
We recommended that people working beyond the age of 65 should pay national insurance contributions, albeit at a reduced rate of 6%. We recommended that the Government should replace higher-rate tax relief with a lower flat rate of tax relief. Some experts estimate that, if this were set at the rate of 20%, it could save up to £10 billion a year. We also recommended that the pensions triple lock be replaced by a double lock, whereby it rises in line with average earnings or inflation but not by at least 2.5% every year. We recommended rolling the value of the winter fuel payment up into a higher state pension, which would be taxable, making the system more progressive.
We also wanted the Government to incentivise people to save for their potential care costs—so we recommended that the Government should introduce a care ISA, with an annual contributions limit of £20,000 and a lifetime cap on contributions of £100,000. This would also have the benefit of raising awareness of the importance of saving for care costs—something that too many people fail to consider. To help people whose only savings—apart from their homes, if they own them—are their pensions, we also recommended that the Government should allow tax-free withdrawals from private pensions to fund the costs of care.
We did not recommend that employers should pay insurance contributions for social care because of the potential impact of this on jobs. We also did not recommend complicated new wealth taxes or increases in inheritance tax because we did not want to discourage people from saving for their retirement and possible later-life care costs. We also noted that the OECD estimates that, in 2017, the UK collected the second largest amount of property tax of any OECD country—more than double the average of OECD countries.
I hope that the Government will consider introducing an age threshold for their levy as soon as possible to mitigate the effect on young people. I hope that they will also make it a social care-only insurance contribution levy as soon as possible and that they will supplement their proposals with further measures to broaden the impact of their fundraising and to enable significantly more spending on social care much more quickly than under their current plans. The sector cannot afford to wait. If it does, a package of proposals will emerge for funding social care that better meet the test of inter- generational fairness, making it more politically and financially sustainable so that a change of Government will not see this work undone.
My Lords, I thank the noble Baroness, Lady Greengross, with whom it has been a pleasure to work on this issue in the past, for tabling this Question for Short Debate and for setting forth her constructive proposals.
The failure of successive Governments over many years to reform the social care system has done as much as anything else to bring government and Parliament into disrepute. Now this Government have made a stab at the funding aspect of the problem. But the solution —though we cannot properly call it that—which they have come up with is enough to make one weep. Indeed, it will make many younger, lower-paid workers weep.
Of the various possible ways to raise money for social care, to increase national insurance contributions on their existing basis is the most regressive, unjust and destructive. The cynicism of the Government’s approach is chilling. They did some polling and found that the public think, wrongly, that national insurance pays for the National Health Service. They concluded that they could get away politically with raising national insurance contributions rather than raising income tax, which would have spread the burden fairly. Here the noble Baroness and I may disagree.
Presumably, those polled did not understand that employees’ national insurance contributions kick in at earnings of £184 per week, equivalent to £9,568 per year, far below the £12,570 per year at which income tax starts. Presumably, they also did not understand that national insurance contributions are levied at a higher rate on lower earners and that retired pensioners who are comfortably off do not pay national insurance contributions at all. Therefore, the policy means that miserably paid care workers will be more highly taxed, while affluent retirees will pay no more tax. The Government’s cunning plan is that young workers, struggling on low wages to save for a mortgage, will pay the new levy to enable pensioners who need social care to retain their homes and the bulk of their wealth through the cap on personal care costs of £86,000.
While it is far from certain that more than a derisory part of this national insurance increase will end up improving funding for social care, what we do know is that social care providers, paying higher employers’ national insurance contributions, will find it harder to employ staff and those staff will find it harder to make ends meet. In seeking to ingratiate themselves with elderly homeowners at the cost of the young and low-paid, the Government will not commend themselves to the country. A far cry from one nation conservatism, this politics of division exposes the fatuity of the Prime Minister’s levelling-up rhetoric. The policy drives a wedge between the generations, while it will fail to provide the resources required to address the social care crisis, by increasing the availability of social care to match actual need and developing the social care workforce.
My Lords, I congratulate the noble Baroness, Lady Greengross, on securing this important debate.
We live at a time when the notion of intergenerational fairness is under threat. The accepted post-war norm has been for successive generations to experience better lives than their parents. That is not true anymore for the younger generation, as they are experiencing worse outcomes in terms of pay, job security and housing.
While I welcome the fact that more money is being earmarked for health and social care—although in the first three years it will nearly all go to health rather than to social care—I am disappointed on a number of fronts. First, after so many years of inaction, we were presented with a quickly-hatched and suboptimal solution without the cross-party talks that we had been promised to secure consensus and a long-term sustainable solution. Secondly, the money will come from national insurance rather than through the broader-based and more progressive income tax, thereby hitting low earners and the young hardest. Thirdly, much of the debate has been couched in terms of preventing people from having to sell their houses at a time when so many young people are finding it impossible to get their foot on the first rung of the housing ladder. I have long argued that we should be looking for a solution through the prism of intergenerational fairness in which all generations contribute but no single generation is impacted unfairly. I think that is vital to ensure greater buy-in across the generations.
Despite the dividend taxation and the application of the new health and care levy to the earnings of working pensioners from April 2023, big intergenerational equity issues remain. Tax rises via national insurance, as we have heard, fall disproportionately on the working-age population. A typical 25 year-old today will pay an extra £12,600 over their working lives from the employee part of the tax rise alone, compared to nothing for most pensioners. Some workers earning under £10,000 a year will be affected, but only those earning £12,750 pay income tax.
The extension of the levy to the earnings of working pensioners is welcome, but only one in six pensioner households have earnings. In contrast, two-thirds have private pension income that is exempted from the levy. A levy focused on earnings leaves other sources of income undertaxed, including a lot of rental income, and the package increases the tax gap between the self-employed and employees, raising the incentive for firms to use self-employed labour rather than employees.
Looking to the future and intergenerational fairness, I still hope it may be possible to move to a fairer system, with the majority of money raised through income tax but with a top-up that comes from the over-40s. I always had considerable sympathy with the recommendation of the Barker commission in 2014 that an additional percentage point of employees’ national insurance contributions for those aged over 40, raising some £2 billion, could be earmarked for adult social care. I very much hope that that will be further considered.
My Lords, the noble Baroness, Lady Greengross, rightly highlights one of the central features of the Government’s proposals—namely, the generational redistribution between poorer workers, who pay for the cap, and the older people who benefit from it. Actually, so far as I can see, in all the commentary the main redistribution that is going on here has not been noticed at all. It is not about generational redistribution; it is redistribution within the generations from the poor to the rich.
I shall try to explain this briefly. Half the recipients of care do not pay for it anyway; they have insufficient assets or income so are not affected by this measure either way. Of the remainder, half will be paying for care in a way that counts towards the cap. However, only costs that are strictly categorised as care count towards the cap—what are called hotel costs they will have to pay themselves—so it will take quite a while to reach that £86,000 cap; three years would probably be a generous estimate. On average, people are in care homes for less than three years, so most older people are not going to benefit from the cap at all. Of the rest, most will not benefit from it for long. Some people live in a care home for 10 years and good luck to them, but that is very unusual; sadly, most people will pass on soon after they reach the £86,000 threshold.
Let us think what this means. It is not these older people, for whom we probably have great deal of sympathy, who will benefit from this. There will not be a rash of cruises around the world or teas at the Ritz that they are going to enjoy: where the money actually ends up is in the pockets of their children, to whom they will bequeath it. The poor have to pay for their own homes; the better-off, because of this cap, will find it much easier to buy bigger, better homes, because they are being saved the cost of Mummy’s care by the Government with this measure. It is redistribution, yes, but it is from the poor to the better-off among the younger generations.
The Tories once described Labour’s plans to pay for care as a “death tax”. Now we have the Tory equivalent: an inheritance subsidy. That is why the case for paying for the cap through a tax on wealth—inheritance tax, capital gains tax, annual wealth tax—rather than through national insurance is so compelling.
My Lords, I thank the noble Baroness, Lady Greengross, for securing this debate.
First, a minute of history. In 1987 the NHS had more than 127,000 acute hospital beds and more than 52,000 geriatric beds. Some 20 years later, geriatric bed numbers had been cut by over 60% and acute beds by 20%. In 2010 the category of “geriatric beds” disappeared altogether. That followed a 1981 White Paper, Growing Older, and a DHSS consultation paper in the same year, Care in the Community, which both planned for transferring patients from hospital settings into the community. That meant handing over the frail elderly to be units of profit for the financial sector. For all the wonderful compassion of horribly underpaid, highly skilled care workers, that is their real status. Many care homes are loaded with unsustainable debt, owned by private equity and reliant on risky financial structures. A 12% return is expected, yet this should be, without the debt, an extremely low-risk financial sector, where a 5% rate of return is considered reasonable.
I look forward to the speech of the noble Lord, Lord Sikka, who I believe will be setting out further detail on this, but I want to look at the question posed by the noble Baroness, Lady Greengross. Where is the intergenerational problem here? We have a system problem: the exploitation of each generation in turn by the financial sector, and the exploitation of the workers whose caring humanity leads them to labour for utterly inadequate wages in poor conditions. The elderly today are being treated as cash cows, and the young are being expected, through national insurance, to pay in, before in their turn being forced into the same dysfunctional, exploitative system.
I saw some debate that insurance might fill this gap, but why do we not insure all generations, and all of our futures, as we do with a still inadequate and inequitable but basic state pension, by providing free social care to all who need it, funded—in another term, insured—by all of us through general, fair, progressive taxation; far more progressive taxation than we have now? That is society taking responsibility for all its members, sharing the responsibility for all who need care.
The Green Party calls for national insurance to be replaced with a single, unified income tax to reduce loopholes and raise £24 billion to fund social care. All income, including rental and investment income, would be taxed at the same rate, and this, of course, would remove the unjust loophole whereby earnings above £50,000 are charged only at the 2% national insurance rate. As with medicine, so with care: there should be no place for the profit motive in its provision.
My Lords, I draw attention to my interests as outlined in the register, particularly as chair of Look Ahead, a housing association that works with vulnerable and homeless people. I congratulate the noble Baroness, Lady Greengross, on securing the debate and on her excellent introduction. Together with other noble Lords, I am committed to ensuring that social care is put on a secure financial footing to protect vulnerable people who rely on these essential services.
Many have argued that the younger members of our society should not be expected to contribute towards the extra funds to be raised through the addition to NICs. I think this is partly because the Government’s presentation has dwelt on the funding challenges of older people when they experience the need for social care associated with frailty and dementia. However, a high proportion of social care budgets is spent on supporting younger people with long-term conditions, including, for example, multiple sclerosis, acquired brain injury and significant mental health and learning difficulties. Can the Minister explain how the proposed levy will be associated and allocated to improve the lives of these sections of society?
Crisis recently published an excellent report Home for All: the Case for Scaling Up Housing First in England. Rapid access to stable housing for young people, including care leavers and those already homeless, is demonstrably cost effective. Will the issue of housing for young people be a priority, together with developing supported-living housing for those over 65 years of age, which in turn can promote independence and reduce or delay the need for help with the activities of living?
Many young people cannot save the deposit to purchase a home, and access to social-rent accommodation is in very short supply, yet the future direction appears to be to enable older people to keep the value in their home if in need of significant social care, while, as other noble Lords have said, younger people are having difficulty getting on the housing ladder. The younger generations will become increasingly frustrated with making significant financial contributions towards health and social care, while also, in the case of recent graduates, paying student loan contributions, if they cannot see that their needs are taken into account in the provision of health and social care service development.
Can the Minister explain how intergenerational fairness in the provision of services will be made explicit in the strategy to fund social care from 2023? I believe we have time to resolve these issues before the full allocation of the levy goes to social care.
My Lords, I first thank the noble Baroness, Lady Greengross, for initiating this important debate, albeit within the constraints of a three-minute speaking time limit. The noble Baroness has an unparalleled record of work and thought leadership on behalf of people in retirement. The report from the Intergenerational Fairness Forum, to which she has drawn our attention, is supported by distinguished Members of this House. It is an important contribution to the urgent debate we need to have about social care. It provides a helpful analysis of the problems we face. But—noble Lords may have sensed that my remarks were heading towards a “but”—I am afraid that, for all its virtues, I do not share the report’s conclusions. This includes, but is not limited to, the proposals on the triple lock.
Others will talk about how to address the problem of social care specifically. My basic problem arises from the more general issue of the way the question is being framed. It is widely understood that the way you frame arguments is crucial, and whenever I see the word “intergenerational” I become concerned. How policies will affect different generations is of course a valid field of study, but framing the question in terms of generations presupposes that that is the answer, and I have to say that I profoundly disagree. I do not believe that there is a divergence of interests between young and old and that they are in any way in conflict. I have mentioned this before. As I said in Grand Committee in January in a debate on the report from the former Intergenerational Fairness and Provision Committee:
“The problems we do face are real enough, but they are political in nature and looking at them within a framework of intergenerational fairness does not help in any way in finding a solution.”—[Official Report, 25/1/21; col. GC 138.]
Where I think there is a divergence of interests is between rich and poor. I believe that the inequalities that permeate our society are based not on one’s age but on the wide and—if I might use the word—immoral inequalities of wealth and income. Until we recognise this, we will continue to struggle with issues of social justice, not least in the field of social care.
My Lords, I am very happy to follow that intervention. I recognise its accuracy and pointedness, but I cannot feel—yet anyway —that this is an either/or, although certainly the question of poverty runs through our society and needs to be addressed radically. However, “intergenerational” clearly means a lot more to me than it does to the noble Lord who preceded me. It raises a lot of questions that demand to be answered. I am most grateful for the report from the committee, which I found very helpful. I hope that the Minister can reassure all of us that it has been taken into consideration by the Government in reaching their conclusions.
Knowing that experts in this field were speaking in this debate, I decided to do something a little different. I had a little seminar with two young people, aged about 20, who are not far from entering the jobs market and are quite intelligent. They wanted to discuss how they face the future that is being posited by these rises in national insurance to pay for social care. Of course, I was the third participant in that seminar—the baby boomer, locked up three times in a prison cell and enjoying benefits that seem to be unchallengeable.
It was interesting that the two young men, Tim and Oliver, picked on a sentence that said, “We would argue that fully funded free social care through income tax or national insurance contributions in the near future, before a fund to help pay for it has been established, fails to meet the test of intergenerational fairness because the burden for paying for social care would then fall only on the working-age population, while retired people would contribute nothing.” A little later, another sentence they picked up on was: “We would argue that older people should also make a contribution to the cost of social care”—of course, we must all agree with this.
From other sources, they plucked out comments like: the proposals currently before us would lead to
“the breakdown of families and deter companies from hiring new staff and increasing wages”.
That source also quoted another leading figure as saying that the proposals would worsen social care by making private providers pay more national insurance. Finally, there was a newspaper editorial that said:
“Coming after a year of lockdown, with its catastrophic economic and psychological impact, to inflict yet more pain on the public is senseless and intolerable.
It said that the NHS has an intolerable backlog to clear and that
“We were … promised a once-in-a-generation fix of social care, but the sum earmarked … is paltry”.
Before the Minister comes to the conclusion that this is another rant from the Labour Party Benches, I will say that this was in fact from the Tory chair of the Local Government Association. This is the first time in my entire life that I have quoted from an editorial in the Daily Telegraph—from last Sunday. I hope that the Minister will answer these points seriously.
My Lords, I thank the noble Baroness, Lady Greengross, for this debate. Nearly 50% of social care expenditure is on working-age adults in this country, and every one of us is just one event away from the need for social care—so it is an issue not just for the elderly but for the whole society. With 18.4 million individuals on an annual income of less than £12,500 and median gross household savings in this country of only £11,000, hypothecated taxes, a higher basic rate of national insurance for the masses or insurance for the benefit of the rich property owners is not really the answer.
The best legacy that we can give future generations is a system in which social care is free at the point of delivery. Governments have bailed out banks, provided £895 billion of quantitative easing to speculators, thrown billions at contracts for cronies and continue to give billions in subsidies to railway, gas, oil and other companies. The Government can surely find resources to improve people’s welfare, too.
If the Government want to think in old-fashioned ways of tax and spend, they still have plenty of options without increasing the basic rate of income tax or national insurance contributions for the masses. Redistribution, as earlier speakers mentioned, is the key. Here are some things that the Government could do.
By taxing capital gains at the same marginal rates of tax as earned income, some £17 billion in tax, plus another £8 billion in national insurance, can be raised. Taxing dividends as earned income can raise £5 billion plus nearly £600 million in national insurance. By abolishing the current regime of tax reliefs on pension contributions, which mainly benefits the 40% and 45% taxpayers, and instead giving all pension savers a flat rate of 20% relief, another £10 billion can be raised. Currently, 12% national insurance is levied on earned income below £50,284, and only 2% is levied above that—a highly regressive practice. An additional £14 billion a year can be raised by extending the 12% rate to all income. However, the Government do not wish to inconvenience their rich friends.
Those proposals redistribute income and wealth by removing anomalies and tax perks for the few. They do not impose higher taxes on the young or most workers. There are no shortages of resources for free universal social care; there is only a shortage of political will to improve social welfare.
My Lords, I declare my interests as a vice-president of the Local Government Association and a vice-chair of the All-Party Parliamentary Group on Adult Social Care. The quality of contributions from around the House demonstrates that this is a complex issue.
I agree with the IFF, the Resolution Foundation and my noble friend Lady Tyler that using national insurance is not equitable to those coming behind us baby boomers. That is why, on these Benches, we believe that income tax should be the mechanism, despite what the IFF says, given the combination that many people who retire after their retirement date pay tax up to that point, while many pensioners pay income tax because of the level of their private pensions, while the poorest pensioners do not. That is also progressive, as well as more generationally fair in terms of raising income.
By way of illustration, I want to make two brief comments about those affected badly by these proposals. The first is children who need to access social care and their families. If we think that the funding adult of social care is in crisis, social care provision for disabled children is much worse, with exhausted parents having to pick up the care 24/7. Can I ask the Minister, not for the first time, what plans there are to remedy that situation as a matter of urgency as such provision is excluded from these proposals?
My second point relates to those who care for our vulnerable elderly—the wonderful care home and domiciliary staff who will also be badly affected by the levy proposals. The 2020 Skills for Care workforce survey states that their average age is 44, average pay is £8.50 per hour and over a quarter are on zero-hours contracts. Worse, some are about to see £20 per week disappear from their universal credit at a time when energy and food bills have substantially increased in recent months. Now, they will also have to pay the increased national insurance contribution.
Worse, it appears that, unlike the NHS, social care providers will not get extra budget to cover the increased employer national insurance contributions, which means that there will be less funding available to increase the basic rate of pay of staff or spend on staff development and training.
However, the final unfairness for our younger staff and older people using social care is that it appears that, after the NHS has taken the bulk of the levy funding, virtually all the remaining levy will go towards the funding structures—as the noble Lord, Lord Lipsey, outlined—and not into care homes, meaning that funding for the essential front line of social care service just will not happen.
My Lords, I congratulate the noble Baroness, Lady Greengross, on securing this debate and on her timely reminder of the intergenerational fairness report on social care funding, which she so ably chaired.
This is the first, brief, opportunity we have had since the usual hyperbole and razzmatazz of the Prime Minister’s announcement last week to begin the step-by-step, detailed debate and analysis about what is actually in the proposals and their impact across the generations on the elderly, on working-age people, on younger people with disabilities and their families and on carers.
Reality is fast setting in, as noble Lords’ wide-ranging and thoughtful contributions in this debate have shown. After the way it was treated during the pandemic, the hope and expectation must surely have been for social care to have been an up-front and equal partner in any future health and social care funding plan, but it certainly is not in what the Government have set out.
The funding allocated to social care from the health and social care levy over the next three years amounts to only £1 in every £6 of the total £36 billion raised. Figures from the Institute of Fiscal Studies clearly show that this is nowhere near enough to offset the £8 billion of cuts in per capita spending over the last decade. Local councils, social services leaders and providers are deeply concerned that the NHS will continue to absorb and swallow up the vast majority of the proceeds from the new tax, and there is no extra funding to deal with the crisis in social care now; a number of noble Lords pointed that out. As the National Care Forum put it:
“This is a recovery plan for the NHS … The funding pot being talked about for social care is not sufficient to even address the issues of today.”
Although we do not agree with the intergenerational report’s overall recommendations on funding, many of its findings nevertheless resonate with Labour’s key concerns about the impact that the Government’s proposals will have. Many of those concerns have been underlined today by noble Lords, particularly the noble Lords, Lord Howarth, Lord Davies and Lord Griffiths, and the noble Baroness, Lady Tyler.
We have made it clear that the plan is wrong on so many fronts. First, the national insurance increase will disproportionately affect younger and lower-income workers. It does nothing to tackle the chronic workforce shortages, which are getting worse by the day, and will mean care workers ending up £1,130 worse off as a result of this increase and the £20 cut in universal credit, which many rely on.
The cap will do nothing for a third of the users and half the budget for social care, which is for working-age adults with disabilities, as a number of noble Lords— including the noble Baronesses, Lady Watkins and Lady Brinton, and the noble Lord, Lord Sikka—pointed out. The press stories of young disabled people having to stay in bed or sitting in a chair all day because their care hours and the other services they depend on stopped during the pandemic and still have not restarted are heartbreaking. Further, the cap will not kick in until 2023 and does not cover all costs. People will still need to sell their homes to fund their care and many people in care will never hit the cap, as the noble Lord, Lord Lipsey, pointed out.
Moreover, there is no commitment to addressing the urgent needs of the 1.5 million older people who are denied personal care for help with washing, dressing, toileting and other basic needs to help them to stay in their homes and be part of their local communities. Labour’s key principle of “home first” must form a key part of the plan for sustainable funding. We have made it clear that the social care plan must be fair across generations, and that those who can most afford it must be asked to contribute more. It must deal with both the immediate and long-term funding needs, and give social care the parity with the NHS that it both deserves and needs.
My Lords, I say very sincerely that this was a powerful debate, very worthy of this Chamber. I congratulate the noble Baroness, Lady Greengross, for securing it and thank her for her thoughtful comments and the well-argued case she put before the House today. The noble Baroness brings an enormous wealth of experience on this subject. I pay tribute to her contribution to the House of Lords Intergenerational Fairness and Provision Committee, to which a number of noble Lords referred; to her role as a former commissioner of the Equality and Human Rights Commission; to her previous role as director-general for Age Concern England; and to her current role as chief executive of the International Longevity Centre.
I also thank the noble Baroness for the work she has done with the Intergenerational Fairness Forum, in publishing its report on sustainable funding for social care and intergenerational fairness. This report is informed, thought-provoking and extremely influential. There were a series of insightful points in that report with which I completely agree. First, funding social care is a problem not just for those who need it, but for all of us. Secondly, there should be greater integration between health and social care services, as I have said from this Dispatch Box many times over the last 18 months. Thirdly, catastrophic care costs should be capped, with increased risk pooling across society. Fourthly, those who are able to contribute towards their care costs should continue to, even in retirement. The steps that we have taken following the announcement last week, in the Health and Care Bill, show our commitment to exactly those principles. We are in complete agreement about the need for generational fairness. I will say a few words of context about that.
The future of adult social care is at the heart of this debate. Our country’s adult social care system has never been under the pressure it is today, as the noble Baroness rightly pointed out. The coronavirus pandemic posed unprecedented challenges to the sector and only strengthened the case for urgent reform. That is why, earlier this month, the Prime Minister took the bold step of publishing Build Back Better: Our Plan for Health and Social Care. The reforms presented will make a real difference to the front line of adult social care, and they include care users and—as many noble Lords, including the noble Baroness, Lady Tyler, rightly pointed out—the dedicated care workforce, who have been so brilliant during this pandemic.
Underpinning these reforms is a vital injection of funding over the next three years. This will end wholly unpredictable care costs and include at least £500 million to support the adult social care workforce. It also includes funding to enable all local authorities to move towards paying providers a fair rate for care, which should drive up the quality of adult social care services, improve workforce conditions and increase investment.
I remind the noble Baroness, Lady Bennett, who gave a powerful case for a completely alternative approach, that the current system, while not perfect, has a high level of satisfaction among those who use it. We do not think the moment is right to abandon the benefits of the market economy or that that would improve satisfaction rates. Let me set out how the reforms I have described will benefit future generations.
Of the two principal pillars of our reforms, the first is a cap on care costs, funded by the health and social care levy. This means that, for the first time, everyone will be protected from unlimited care costs. People who have done the right thing and saved for their old age have previously been hit hard by the roulette wheel of health and social care needs. That means that one in seven faces care costs of over £100,000. It is right that society provides a backstop against that. Introducing a cap means that they can keep more of their savings in assets, so people can leave some of their savings to their loved ones. I remind noble Lords, including the noble Baroness, Lady Brinton, who made a point on this, that this often includes many who provide unpaid care and fear for the loss of these assets.
Secondly, those who have limited or no savings will be protected by a much more generous means test. They and their loved ones will have the certainty of support when it is needed, and everyone will have more of their assets fully protected. I am very proud to be part of this, especially as the reforms this Government are bringing forward will increase the number of older adults receiving some state support by roughly two-thirds, up from about half at the moment.
The Intergenerational Fairness Forum report recommended a review of DPAs—deferred payment agreements—and the introduction of new equity release schemes. DPAs complement the reforms well, and I agree that equity release is a clear mechanism for protecting people from selling their homes within their lifetime. There are issues within the current system, including narrow eligibility criteria and low take-up, but I assure the noble Baroness, Lady Greengross, and the noble Lord, Lord Griffiths, that as part of the announcement last week we are committed to working with partners to review the existing scheme in order to provide more flexibility for people to defer their care payments. I would very much welcome and hugely appreciate the noble Baroness’s insights into this area to inform that review.
These measures, which are being fully funded by a new, UK-wide health and social care levy, mean that we are not passing on the costs to future generations or increasing the public debt. I remind the noble Lord, Lord Davies, that by using national insurance contributions we are also ensuring that business contributes; it is not left just to the individual. It is progressive, in that those earning more will pay more, and has a clear UK-wide approach, meaning that everybody pays the same, wherever they live in the UK. Crucially, I remind noble Lords that we are tackling intergenerational fairness by extending the levy to all those over state pension age from April 2023, ensuring that individuals of all ages play their part.
I remind the noble Lord, Lord Howarth, that the new levy is not just for social care. It will fund the full range of health priorities and support people of all ages. New spending on the NHS will not just benefit older individuals, with recent evidence suggesting that more than half of NHS spending goes to people in households below retirement age. In adult social care, currently more than half of all public spending goes towards under-65s. Working-age people will also benefit from limits on what they will have to pay if ever they need care later in life. It is entirely consistent with the contributory principle for national insurance, whereby working-age employees pay NICs, which gives them access to contributory benefits when out of work, including the state pension.
I say to the noble Baroness, Lady Watkins, that we know there is no one-size-fits-all approach to the social care system. I acknowledge that in 2019-20 we had more than 250,000 younger adults and more than 375,000 older adults receiving state support. These reforms will provide support to people of all ages. Younger and older adults will benefit from the same cap on care costs. Once they reach it, they will no longer pay for their personal care from their income or any assets. This will provide certainty and reassurance, help people plan for their future and ensure that more people are able to pass on more to their loved ones.
Finally, I assure noble Lords that this Government completely recognise the real need for intergenerational fairness, the subject at the heart of this debate. I will try to persuade the noble Lord, Lord Lipsey, who spoke with such characteristic learning on this subject, that we are making changes to that effect in many areas of policy. First, the Government’s new Environment Bill, which has taken up a lot of noble Lords’ time this week, looks to the future, focusing on creating a new governance framework for the environment, setting a new direction for resources and waste management, improving air quality, securing our water services, enhancing green spaces, updating laws on chemical use, and so on. Secondly, the Government are committed to strengthening their management of the public sector’s assets and liabilities to the benefit of future generations. Thirdly, our Kickstart scheme provides funding to employers to create jobs for 16 to 24 year-olds on universal credit.
I remind the noble Baroness, Lady Tyler, that we are working hard to drive up provision of affordable housing, and the new mortgage guarantee scheme launched in April will help increase the supply of 5% deposit mortgages for creditworthy households. We will support lenders to offer products through a government-backed guarantee on new 95% mortgages until 31 December 2022. These are some of the ways this Government are ensuring that we are building back better for future generations.
I reassure the noble Baronesses, Lady Wheeler and Lady Brinton, that we have made a bold step on the journey to reform, which will make a real difference to a great many people of all ages and backgrounds, including care users and the adult social care workforce, who have worked so brilliantly through the pandemic. I reassure the noble Baroness, Lady Greengross, and the noble Lord, Lord Griffiths, that we will work with partners in the development of these policies.
I thank the noble Baroness, Lady Greengross, who has been such an advocate for this important issue and secured such an interesting debate today. I thank all noble Lords who have taken part.