UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1583 -i ii

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Health Committee

SOCIAL CARE

TUESDAY 22 November 2011

FRANCES PATTERSON QC, RICHARD PERCIVAL and TIM SPENCER-LANE

JAMES LLOYD, CHRIS HORLICK, NICK STARLING and ANDREA ROZARIO

Evidence heard in Public Questions 245 - 373

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Oral Evidence

Taken before the Health Committee

on Tuesday 22 November 2011

Members present:

Mr Stephen Dorrell (Chair)

Rosie Cooper

Andrew George

Barbara Keeley

Grahame M Morris

Mr Virendra Sharma

Chris Skidmore

David Tredinnick

Valerie Vaz

________________

Examination of Witnesses

Witnesses: Frances Patterson QC, Commissioner for Public law, Law Commission, Richard Percival, Head of the Public Law Team, Law Commission, and Tim Spencer-Lane, Lawyer, Public Law Team, Law Commission, gave evidence.

Q245 Chair: Good morning. Thank you for coming. Judging by our conversation at the premeeting, this is likely to be a very interesting session and I look forward to it. Could you begin by introducing yourselves, please, so we know exactly who we are talking to?

Frances Patterson: Certainly. I am Frances Patterson. I am the Public Law Commissioner for England and Wales. I head up the team which has responsibility for the adult social care project and the report.

Richard Percival: I am Richard Percival. I am the team manager of Frances’ team.

Tim Spencer-Lane: I am Tim SpencerLane. I was the lawyer from the Law Commission assigned to the project.

Q246 Chair: Thank you. I want to begin by standing back from your recommendations and asking about the policy context in which they are made. You make it clear that the role of the Law Commission is to produce recommendations about the legal structure for the delivery of policy determined by somebody else, rather than seek to determine policy yourselves. It seems to me that policy in the field of social care is unclear as to whether we are seeking to deliver a package of personalised care determined by an individual’s circumstances or a cash sum determined by an individual’s circumstances. If policy on that very fundamental point is unclear, how easy did you find it to make a set of recommendations about the legal structure to deliver such an unclear policy?

Frances Patterson: In both the consultation paper and the final report, we make precisely that point. There is a difficulty in drawing a clear boundary between what is policy and what is law reform. We acknowledge it is a difficult area. Having said that, our remit was to provide a legal framework-to distil, if you like, from the current legal landscape, a clear and, we hope, simple and modern framework-that would enable policy directions, whichever direction they may evolve, to lock into. In fact, we say it is "policy neutral". That is how we tried to derive the legal framework. That is not to say we did not have any regard to the policy itself-clearly, we have had to have regard to that-but we have sought to provide a robust framework that will be future proof for a period of time. In direct answer to your question about how easy we found it, it is not the easiest of jobs, but we are quite confident we have come up with a framework that will meet whatever policy direction the Government choose to go in.

Q247 Chair: If, at the beginning, we are unclear whether the result of the policy is to deliver a service or cash, I am unclear how it is possible to write a law which is not clear about that pretty fundamental point. Can I link that to what I think is your proposed definition of social care, "to promote or contribute to the well-being of the individual"? If the language is as wide as that, is that a definition at all or can more or less anything fall within it?

Frances Patterson: No. You have quoted what we regard as the overarching principle for the provision of adult social care. That is supported by seven factors that you can see. Effectively, they provide limits to the extent of social care. Therefore, although there is an objective to make it a wide provision, there are still limits to that. Those factors make it clear that the individual is supposed to be the best judge of their own well-being; that his or her wishes have to be followed where it is practicable to do so-clearly there will be differences if somebody does not have capacity-that their views are taken into account and that they are involved in the assessment process, if that is necessary. There are other factors as well dealing with safeguarding purposes, obviously to safeguard adults from abuse or neglect, and, if there is to be intervention, it is to be the least restrictive possible. Through that series of factors, which support the principle, we have sought to define social care for adults.

Q248 Chair: But is social care a cash sum or a service?

Frances Patterson: We have not gone into whether it should be a cash sum or not. As I have already said, we are interested in providing the legal framework which will set the basis for the delivery of services.

Tim Spencer-Lane: Can I add to that? One of the ways we have sought to deal with that is by providing a power for the Government to introduce a proper system of cash payments, if they wish to do so. That would allow the Government, for example, to set some criteria by which a service user would be entitled to receive a sum of money instead of service provision. It would be left quite open for the Government to decide to implement that sort of system, if they wished to do so.

Part of our thinking was that in Wales, for example, they have decided not to implement a system of cash payments. Therefore, our system had to cover both. We have done that, in that very specific instance, through the provision of an enabling power rather than a legal duty.

Q249 Grahame M Morris: Could you elaborate on that? I appreciate you are setting the legal framework and the underlying principles, but, now that Dilnot has been published in full and everyone has had a chance to reflect on it and look at the implications of the recommendations, is there anything you would modify in your proposals, in the light of Dilnot, that you want to share with the Committee?

Frances Patterson: The short answer to that is no, there is not. As I have said, we were seeking to produce a set of recommendations that were robust. Having reviewed them, as we have had to after the publication of the Dilnot report-although I should make it clear that, in the leadup to that, there was liaison between the two Commissions so we knew what they were going to be recommending and vice versa-we are satisfied that our final recommendations can live independently from or, equally, can marry happily with Dilnot’s proposals. We would not change anything.

Q250 Grahame M Morris: Is there nothing within the Dilnot recommendations that would require modification to fit your recommendations on the framework?

Frances Patterson: No, there is not. There is absolutely nothing.

Q251 Grahame M Morris: They are completely complementary.

Richard Percival: We could go further and say that you could use our structure to "do" Dilnot, as it were. The tools available to the Secretary of State and Welsh Ministers in our structure enable Dilnot to be implemented.

Frances Patterson: But, equally, they do not have to be. In other words, if it was decided not to proceed with Dilnot at this time, or even only in part, our recommendations could proceed as an independent Social Care Reform Bill, dealing only with the legal aspect.

Q252 Valerie Vaz: I want to follow up on that. Obviously, you started this work in 2008.

Frances Patterson: Yes.

Q253 Valerie Vaz: Did you take into account the Health and Social Care Bill?

Frances Patterson: We were able to take the Health and Social Care Bill into account, but only at the latter stages. By the time that was coming towards publication, which was February of this year, our report was either at the printers or almost at the printers. We had reached the very final stages. Having said that, we were aware, again through some informal sharing, of likely proposals within the Health and Social Care Bill. By way of example, in relation to section 117 of the Mental Health Act, in the report we make it clear that we take into account recommendations in the Bill which seek to clarify the responsibility of the health authority. In parallel to that, we have clarified the position with regard to the social services authority. We have been able to use the proposals in the Health and Social Care Bill but, obviously, we were not able to go out to consultation on that part because of the respective time scales.

Q254 Valerie Vaz: Part of it is the Health and Wellbeing Boards. Have you considered those at all in terms of the integration?

Frances Patterson: We have certainly looked at health and wellbeing. As I have already said, the overarching principle of the statute we are recommending is that any decision made should promote or contribute to wellbeing. But I think it is right to say that we have not expressly considered the Boards, have we?

Tim Spencer-Lane: We did not, although we were aware there might have been developments there and we have left it open-ended in our duty to co-operate. The general duty to co-operate, as opposed to the specific duty to co-operate, would apply specifically to a Health and Wellbeing Board. We did not consider that in relation to the discrete duty to co-operate because we felt there may be additional burdens on that sort of board that would not be appropriate. None the less, we did try to cater for them generally.

Q255 Valerie Vaz: In reviewing that, did you have any evidence that co-operation was not taking place? You are enhancing the duty to co-operate, are you not?

Frances Patterson: We are in certain circumstances, yes.

Q256 Valerie Vaz: Did you find evidence that local authorities were not doing that?

Frances Patterson: I am not aware of any empirical evidence.

Tim Spencer-Lane: It is fair to say that there was a common concern from both social workers and their managers that co-operation was not happening on the ground. They were looking to us to provide some sort of solution to that. We can only do a limited amount in terms of ensuring greater co-operation, and build a legal framework which will allow co-operation to happen. But there are a number of factors which will impact on co-operation. It will also be about individual relationships between practitioners and about resources at a local level. All we have done is to strengthen the duties to co-operate and made them clearer about when they apply. At the moment, there is only a specific duty to co-operate in relation to a community care assessment. We have broadened that to include other situations, like a carer’s assessment and safeguarding inquiries. We think it is very important that there should be greater co-operation in those sorts of areas and not only a community care assessment.

Q257 Valerie Vaz: In your informal discussions, and having sight of various things, did you have a look at the Department of Health risk assessment that they were looking at in relation to the Health and Social Care Bill?

Richard Percival: No, we did not.

Frances Patterson: No.

Tim Spencer-Lane: No, we did not.

Q258 Barbara Keeley: Obviously, it has taken three years to get to here and you have stated there is an urgent need for consolidation and simplification of the law, which most people would agree with. What do you see, moving from here, as the urgency or the time frame that you would recommend? Of course, clearly, as to this whole debate there is a worry about things being kicked into the long grass and not moved on.

Frances Patterson: Yes. That is certainly a concern. In terms of time scale, if I may deal with that first, the ideal would be, obviously, for there to be a slot in the next parliamentary Session. That is what we would want to see.

In terms of urgency, the reasons for that we set out in the report. As you say, they are well known and they do seem to be acknowledged. I would add to those by saying this. In terms of the current climate of economic austerity and the problems that that is throwing up, there is increased litigation, in the administrative court in particular, as a result of cuts in care packages. Whatever we can do to simplify that, in terms of the legal framework-which will have the consequential effect, hopefully, of reducing litigation-is important. So I think the urgency which is there has increased.

Q259 Chair: I understand you considered recommending a principle to reduce or remove future need and decided against including that principle.

Frances Patterson: Yes.

Q260 Chair: I am interested to understand why you decided against it. I would have thought that was, in truth, as good a definition as any of what we are seeking to argue in the context of the case for early intervention, greater integration and so forth.

Frances Patterson: Let me deal with that in this way. When we went to consultation, we set out a series of principles for discussion and to elicit views upon them with a view to considering whether they could be distilled with sufficient precision to be principles on the face of the statute. When, after consultation, we considered the responses in relation to the reduction of need, early intervention and prevention, we thought that was of sufficient importance for it to come through as a separate general statutory duty. Therefore, that is what we have recommended is imposed on local authorities. There is a duty to provide advice, information and assistance with a view to market shaping. I certainly do not want any Members of the Committee to think we have weakened in our view that that is not important-far from it-but, in terms of the eventual legal solution, we thought that was the strongest and most effective way of delivering that particular concern.

Q261 Chair: Have I understood this right? It becomes a duty on the local authority, in the whole range of its activities, rather than a duty on the social service provider. Is that the distinction you are drawing, or is it a different distinction?

Frances Patterson: The first point is that it is a duty on the local authority as opposed to on the provider. It may be one and the same person, of course, but it is on the local authority. That is the distinction we have drawn. The importance to be attached to it is recognised through the duty being placed on the local authority across the piece.

Q262 Chair: How is that different from the statutory power around social care commissioning? I accept the correction, but how does that general duty, to intervene to prevent, relate to the statutory framework within which a local authority is expected to commission social care in the context that you describe?

Q263 Frances Patterson: The general duty is there so that it will, we hope, deliver the objective of prevention and early intervention. It may be that, as part of its general duties, the social services authority does commission various services-they are not mutually exclusive-but one that is the general duty is clearly capable of an independent line. Therefore, it is more the first step-the initiation, if you like. For example, it may be that a service user has only the need for a grab rail. That may not result in any commissioning of services, but it can be dealt with as a result of the provision of advice and assistance about how they go about it.

Chair: I see. Thank you.

Q264 Andrew George: In relation to duties of local authorities, I want to be clear where the Law Commission stood in relation to consistency of both service and assessment and, if you do not mind-and I know this jumps around slightly-also the rights of the service user and their carers to an entitlement of portability as they may move between authorities. What is the most important, in the view of the Law Commission? Is it consistency across local authorities or is it the right of portability in order that service users can expect consistency of service as they move?

Frances Patterson: We have not recommended-because it would not be for us to do so-a nationallyportable assessment. That would be outside our remit. What we have done, we hope, is to make recommendations that will ease the position of somebody, say, who wants to move from Newcastle to Newark. Once they have decided they want to move, they can request an assessment from the receiving authority, as in Newark in that particular example, and they can receive that assessment so they will know the position when they move. As part of helping portability, there will be an enhanced duty of co-operation between Newcastle city council and that of the example, Newark and Sherwood district council. Therefore, you have co-operation between the local authorities and also information so far as the service user is concerned. If the receiving authority does not provide the same care package, they have to set out their reasons why that is the case. It may be perfectly satisfactory because there may be different needs as a result of moving that distance. If it is radically different, obviously, by setting out their reasons, there is a transparent process and the service user can take whatever action is required, including legal, I dare say, if they think it appropriate to do so.

Q265 Andrew George: In that kind of case, where a service user and their carers are content with the assessment of the authority they are currently living in and are uncertain or concerned that the assessment may be less satisfactory in the receiving authority, then at least they have a benchmark against which they can contest the decision of the receiving authority, if indeed their expectations are unfulfilled.

Frances Patterson: Yes, that is right. Also, if they move, for whatever reason, to the receiving authority before an assessment is done, until that assessment is carried out, they would be entitled to have the same care package that they had in their original authority.

Q266 Andrew George: The Law Commission has no view about consistency across the country as a whole with regard to standards of service and standards of assessment. Have I understood you right?

Frances Patterson: Yes, although there are two parts. I said it was beyond our remit to recommend a nationally portable assessment because that is something of a policy decision for Government. We have made a recommendation that the Government provide a framework for eligibility. They are under a duty to do that on our recommendations. In the code of practice-we have recommended a hierarchical process and that is the third level-we have recommended that that includes advice as to eligibility criteria. Therefore, that should be followed by the local authorities, unless there is a very good reason not to do so, and would include the minimum entitlement. That is how we would envisage it working. It is a bit of a twopronged approach.

Tim Spencer-Lane: Can I add to that? You also raised an important point about consistency of assessment, and some of our proposals would ensure greater consistency in terms of the process under which an assessment takes place. For the first time, there would be principles that practitioners would have to follow when they carried out an assessment. They would be things like taking into account the needs of the carer, for example, and taking into account any support being provided elsewhere. There would also be a duty on the social worker, on the face of the statute, to always consult the service user and the carer wherever appropriate and there would be a new right to a care plan, which seems to vary, at the moment, between local authorities. So, as to the actual standard of the assessment, there will be greater consistency, we believe, in terms of the process rather than the outcome.

Q267 Chris Skidmore: That is essentially arguing for the status quo in that there will be a reassessment taking place. You mentioned, obviously, that there would be that initial period when you would have the same level of care being provided. However, if you are someone in desperate need of social care and would like to move between local authorities, there will be a degree of uncertainty at the back of your mind that may prevent you from moving, if you wish to do so, given that the reassessment process will have to take place. Not only is there that uncertainty, which would completely negate the principle of portability anyhow, but there is the simple fact-you mentioned the addedon bonuses, which sound great-that the reassessment process itself is costing social care £2 billion a year. I wondered what you thought of, say, the Henry Spink Foundation’s proposal of a fully portable service which they suggest, in terms of making those savings, would fund its £200 million package in the first place. I know you probably do not want to comment-it is a policy arena-but you can probably see the limitations of this as either maintaining the status quo or being half way there.

Tim Spencer-Lane: You are right in the sense that we are not imposing on the new local authority a burden of always carrying on any assessment that has taken place elsewhere in the country. We are maintaining the status quo in the sense that, if a local authority is expected to pick up the bill for something, they are able to carry out a reassessment. That sounds quite reasonable to us.

Frances Patterson: But, in terms of assessments themselves, part of our proposals are that those will be proportionate to the needs. As a result of that, bringing into play the factors that Tim was talking about, there should be a much simpler process. There may be cost savings, coming back to what you were saying, as a result of that increased simplicity.

Richard Percival: Part of how we are trying to accomplish this policy neutrality, as it were, is by giving the Secretary of State and Welsh Ministers the appropriate powers. That includes an obligation, in fact, to make regulations as to how the assessment process could work. In other words, we are giving the tools to policymakers to create different forms of assessment. We have made recommendations about proportionality and so on.

Q268 Chris Skidmore: That is very important, and I can understand your position of not wanting to get involved in the political side of things and maintaining the legal neutrality. What I cannot understand is why you cannot provide a legal definition of "ordinarily resident." That sounds a very powerful tool which would reach over local authorities who, at the moment, are providing varying definitions of "ordinarily resident." Surely, something you could help with is to provide a legal definition. It seems to me that a simple legal concept of whether someone is resident or not could be provided by lawyers.

Frances Patterson: My understanding of the background to why we have not looked at and produced a new definition of "ordinary residence" is that, in determining the scope of the project, it was ruled out by the Department of Health. That is why we have not gone there. We do deal with the concept, though, as it is now, of "ordinarily resident."

Q269 Chris Skidmore: Do you want to follow up, in detail, that sentence? The Department Health ruled out the fact that you were not allowed to comment.

Frances Patterson: Can you answer, Tim, because I was not involved. I was not a Commissioner.

Tim Spencer-Lane: We had quite detailed negotiations about what was in and what was outside the remit of our review. It was generally agreed that any matters of new policy that would have significant burdens on local authorities would be ruled out of our review. One of those issues was the definition of "ordinary residence."

Q270 Chris Skidmore: In terms of these discussions that you had, in terms of the scope, were they private or published?

Richard Percival: Published. We published a scoping report. Our initial phase of the project was-

Q271 Chris Skidmore: It seems odd if a review is immediately shackled, to start with, that the scope then becomes so narrow you cease to serve your purpose.

Frances Patterson: You can feel us bridling a bit at that somewhat. It comes back, in part, to what the Chairman was saying at the beginning as to the difficult relationship between law reform and policy. It was felt that "ordinarily resident" was a matter of policy definition and, because of that, it was outside the scope of our review.

Q272 Chris Skidmore: The Department told you it was a matter of policy, did they? Or did the lawyers decide that it was a matter of policy?

Richard Percival: The way the relationship between the Law Commission, generally, and Government works is that we conduct our projects completely independently of Government and Ministers. We do not go back to Ministers during the process. However, at the start, the Government are entitled to set the agenda as they wish. Part of the way in which we went about that process in this project was to spend quite a long time preparing a scoping report, which we then presented to Government. Government excised certain things from it, as it were, and we took on board some of the points that Government had made in an open sense, in consulting with them, about what the scope of the paper should say. That is the structure of it. Obviously, you can get that wrong, and you may think we have got that wrong on this particular issue, but that is the way the relationship with Government works.

Q273 Valerie Vaz: You could make recommendations and say, "We recommend there should be a proper definition of ‘ordinarily resident’"-you do not have to take something out of scope-because, clearly, that needs to be done. The uncertainty is huge. I know we have been darting all over the place, but I want to go back to the certainty because there is not certainty when you define someone in those four categories. I would have thought, as with planning policy guidance there is a set of rules-it is not actually statute. You could have come up with some sort of definition the whole country could use. Then the certainty is there. Part of what public law is about is that you should have certainty. That is what the rule of law is. You would have thought, being independent, that you could have come up with a set of guidance or rules which defines those and would probably help in the portability and the certainty.

Frances Patterson: Can I take various strands from that? First, in so far as our recommendations are concerned, we have striven to provide certainty where we can or at least clarity-clarity is possibly a better way of putting it-in terms of guidance. In so far as the code of practice is concerned, we regard that as a very important tool because that will provide statutory guidance as to how the new statute will work in terms of implementation. In that regard, that is more certain than any planning policy guidance because those are simply statements of policy from the Government. They have no statutory force at all. In the new regime that we would like to see as a result of our report, there will be a much more transparent, as well as simpler, process available in social care which will be, I would say, easier to interpret than the position with regard to town and country planning, which was my area of practice before.

Valerie Vaz: Yes, I know that. That is why I raised it.

Chair: Grahame and Barbara both want to come in on portability.

Q274 Grahame M Morris: I want to go back a little from this section, but it is all related to the nature of the assessment. I understand that we are dealing with the big picture here in terms of the framework the Law Commission is recommending, but, as a Member of the Parliament-and colleagues on the Committee will have this too-I am regularly receiving representations about inadequacies of the current system in relation to assessments. One thing in particular is that people are reluctant to apply for an assessment because they think they will be above the local authority threshold. How will your proposals-I am a layman, not a lawyer-help to resolve that issue?

Frances Patterson: We have deliberately set a very low threshold for assessment. Any person who has the appearance of need, which can be met through the provision of services, the local authority is under a duty to assess. They do not have to request it. The local authority is under that statutory duty. That should make it much easier for people to ask to be assessed if they feel they are being overlooked as a result of the local authority failing in its duty. Of course, it can be a carer on their behalf or another member of the family. It is not restricted to the person involved.

Tim Spencer-Lane: In relation to carers, we have gone further in that, at the moment, a carer can only get an assessment if they request it. We have removed that because it was very clear to us that many carers do not identify themselves as being carers. They see themselves as being partners or siblings. It would extend it in relation to carers as well.

Q275 Barbara Keeley: I have a question about carers’ needs. The carer’s rights to assessment came in, mostly, through Private Members’ legislation and then some was incorporated into Government legislation. Your proposal is that their assessment relies on the caredfor person. Admittedly, there is the difference and it would be a duty-a right. In essence, carers do not believe their rights to assessment, or to any service, should come through the caredfor person because that is a reliance most of them do not want. My concern is that there will be a different outcome for carers through what you are proposing, and, in some cases, that would be to their detriment. MPs have tried, over the years, to move on the rights of carers through introducing that Private Members’ legislation. I am a bit worried that what you are proposing is a step backwards from that.

Tim Spencer-Lane: Can I reassure you that it is certainly not a step backwards? There would not be any reliance on the service user having a community care assessment at the same time. It would be the appearance of need in terms of the carer providing care for another person. It would be a very low threshold. It would not require the caredfor person to be assessed or to be receiving services. We were very aware of the Private Members’ legislation that has gone through and we were very keen to retain that position.

Frances Patterson: The other thing I should say is that we had considerable involvement with carers’ organisations during consultation. In terms of the approach-the low threshold Tim has spoken about-they were all supportive.

Q276 Barbara Keeley: What did you estimate were the resource implications of moving to that different basis of assessment? Of course, apart from assessments not happening because people are outside the system and they are not judged to have needs, there are resource implications for local authorities in undertaking a high level of assessment. It is only about 20% or 25% currently. Did you consider the resource implications of what you are proposing?

Frances Patterson: We have looked at the impact assessment. I am looking at Richard because he is the impact assessment guru.

Richard Percival: We were subject to competing factors in respect of this. One of the key points made against what was seen as a significant extension of carers’ rights was that it would indeed result in a higher impact on a local authority’s assessment bill, as it were. We concluded that this would not be the case. The reason is that what we were proposing was very close to the statutory guidance on how to assess for carers, which goes further than the law, in practice, and the message we were receiving, by and large, from social workers when we consulted was that they were not using the higher thresholds we were sweeping away to refuse carers’ assessments. For instance, the "substantial and regular care" test, as it is at the moment, where there is a limiting factor on when an assessment is required, is something social workers were telling us they simply were not using. Therefore, we felt it was defensible, in the impact assessment, to say that we thought this would be a neutral change because of the way in which practice had developed around the country. There is no very concrete information on this. We came across no substantial and robust empirical studies of the way in which carers’ assessments were conducted across the country, so I am not going to claim that this is anything more than a bit of a guesstimate. But that is what we felt was defensible to put in the impact assessment.

Q277 Chair: There is quite a lot of, at the very least, anecdotal evidence, is there not, of carers and indeed caredfor people who are not being assessed, who, on any normal view, should be assessed? Extending assessments in the way that you are advocating must, therefore, have a resource implication, surely.

Tim Spencer-Lane: It depends what the reason for nonassessment is. If the reason for nonassessment is the higher legal threshold, then what you say is clearly true. If, however, the reason for nonassessment is lack of knowledge-in the social worker or in the carer-difficulties with accessing social services and so on, then it is not obvious it would make a difference.

Q278 Chair: If there is a level of activity and we are recognising that there needs, in the assessment process, to be a higher level of activity, how is that possible without a resource implication?

Richard Percival: What I am suggesting is that a change in the legal test for when an assessment is due will not have a significant impact on the number of assessments done because the higher threshold is not stopping assessments being done.

Q279 Chair: You are saying that a change in the law would not impact on the level of assessments. It would merely recognise current reality.

Richard Percival: Yes, exactly. I would agree that we are going out on a bit of a limb in thinking that is the right approach. Obviously, we were concerned not to put forward a misleading suggestion in the impact assessment. At the same time, we thought horror stories that it would cost enormous amounts more to go down this route were certainly exaggerated. We did not want to have a situation in which it was being said we were opening floodgates of expenditure which we simply did not think were there.

Q280 Chair: It is possibly an example of the distinction between the legal framework and the policy delivery.

Richard Percival: Absolutely.

Q281 David Tredinnick: I want to ask some questions about integration, please. What grounds are there for the inclusion of a principle of integrated or seamless care and support with health and other services within the principles underpinning your proposals?

Frances Patterson: So that I understand the question, do you mean a supplementary factor? Is that what you are looking for?

David Tredinnick: Yes.

Frances Patterson: We have looked at the issue of integration of health and social care but not, in that part, by looking at the principles. We looked there, as I have said, about how decisions relate to the individual. You are raising a broader issue. We have looked at it through the duties of co-operation, both a general duty and an enhanced duty in certain circumstances, in particular with safeguarding-using the safeguarding part as an example there. One of the recommendations is that there should be statutory safeguarding boards and there are to be certain definite members. We have recommended that social services, obviously, take the lead, then it is to be the police and the national health service. For the first time, that will be put on a statutory footing. That, in conjunction with the various duties of general and enhanced co-operation, will, we hope, lead to and engender a climate of greater integration. We could not go further than that because our terms of reference were for a social care statute. We are not able to step outside that particular box. What we have hoped to do is, by more clearly delineating what is social care, to make it clear for all users of the system-and whether it is the lawyer, the service user or the carer does not really matter-where the boundaries are to make the existing system much more efficient in terms of its operation.

Q282 David Tredinnick: You are focusing on improving the existing system, as I understand it. You are nodding.

Frances Patterson: In that regard, yes.

Q283 David Tredinnick: I gather you were not able to formally review the legal framework relating to the NHS. Do you think there is a need to review the law relating to both health and social care in the round, as it were? Do you think you need a fresh look at it?

Frances Patterson: We acknowledge there may be advantages in doing that in the round, but it is important to be realistic. We are trying to take a step in the right direction, and what we are doing does not ultimately preclude a review in the round, if it is thought appropriate to do so. But it is not part of our remit at the moment.

Q284 David Tredinnick: In an earlier question from Valerie Vaz, you touched on the scope of your work and the Health and Social Care Bill. You said you were not able to make a lot of use of the deliberations of the Bill because of the timing. However, you must have looked at some aspects of this Bill because it is the biggest thing going through Parliament in health care and social care. I challenge you on this. I do not see, even if the timings were a bit out, that you can say you did not look at it. I imagine you must have done in private, did you not?

Frances Patterson: We did. If you understood my previous answer to say that we did not-

David Tredinnick: Maybe I misunderstood it.

Frances Patterson: -then I apologise for that. I thought it was clear. The point about timing is a matter of fact. We were coming up to finalising our report before the Bill was published. What I did say was that we were aware of its contents in so far as it impinged on what we were dealing with because those had been shared informally. Indeed, there is express reference to the Health and Social Care Bill within the final report in certain areas. One is the area of integration-the point you have made-between health and social care and the other, in particular, is that dealing with section 117 of the Mental Health Act. We certainly were aware of it, and I would not want anyone to think we were not.

Q285 David Tredinnick: I put it to you that this Bill was widely trailed. We knew it was coming. It would have been possible to have had quite a detailed briefing behind the scenes. Surely it would have been better to delay your report until you had had a sight of it because your report, in a sense, was out of date before it even hit the ground.

Tim Spencer-Lane: What do you think is out of date?

Frances Patterson: I do not think it is out of date. I think it is very much up to the moment.

Q286 David Tredinnick: One of the key aspects of your work is the consideration of where we are going with health and social care. I am putting it to you that to have finalised your report, without giving the Bill due consideration, was possibly an error.

Frances Patterson: I do not accept that, I am afraid, and the Commission certainly does not hold that view. What we have tried to do is to take on board developments which are continually happening as reports get finalised. That is a fact of life and we have done that, in so far as we were able to, with the Health and Social Care Bill. Those parts that have impinged or were likely to impinge on our recommendations we have taken on board in the final report. Therefore, as I can only repeat, I do not accept that what we have done is out of date at all. We have sought to produce a framework that will and is able to live with the Health and Social Care Bill in so far as we knew it at the time of publication.

David Tredinnick: My colleagues want to come in, through you, Chairman.

Q287 Valerie Vaz: Do you need time to revisit that or maybe put in a supplementary report, given the mass of amendments that have been going through both the House of Commons and the Lords-and it is not over yet?

Frances Patterson: No. I am aware of that. That was my point about things constantly evolving. It is impossible to draw a firm line.

Q288 Valerie Vaz: So maybe you should flag up a supplementary report at the end, whenever that will be.

Frances Patterson: One of the things I should perhaps mention is that we were asked to accelerate our report-

Q289 Valerie Vaz: By whom?

Frances Patterson: -to report in May-

Q290 Valerie Vaz: By whom? I am sorry.

Frances Patterson: I will come back to that point-so that there was a small window before Dilnot reported in July to enable consideration of our proposals and then how the Dilnot report would marry together.

You asked "By whom?" We were asked by the Department of Health to accelerate the report, so we did that.

Q291 Barbara Keeley: Could I add this? Take the issue of integration. The health side of the structure is completely altering, all the old structures are moving, commissioning is new and even the status and role of the Health and Wellbeing Boards has changed. It seems to me that you cannot be satisfied your work is complete when the other side of the integration picture has completely changed. It has changed while it has been in this House, let alone where it might end up when it comes out of the Lords. It would seem to me that you need the opportunity to revisit and perhaps add an addendum to your report that covers the difference. How can you have predicted where that legislation was going when you produced your report?

Richard Percival: We have a degree of scepticism about whether all the changes, which are enormous, happening on the health side in fact impact on the social care side in the sense that-

Q292 Barbara Keeley: They do in terms of relationships-integration.

Richard Percival: I was going to go on to say this. Hearing the message that you are giving us, it may that be we do need to reconsider those elements. To be honest, they are relatively small elements of our report-not the central thrust-but it may be necessary for us to consider whether there are tricks we potentially missed, as it were, because of the changes that have happened. Exactly how, formally, we would do that, I am not quite sure. But it does make sense for us to revisit it, or at least to do an initial scoping exercise, to see if there is any necessity for us to revisit certain of the structures we have dealt with.

Q293 Grahame M Morris: It was a valid question my colleague asked, at the start of the session, about whether you had sight of the risk assessment the Department of Health had carried out. Perhaps you should have done, even on the basis of it being a working document, because of the implications for social care. Did you ask to see it?

Richard Percival: Personally, I do not think we were aware of it, were we?

Tim Spencer-Lane: We were not aware of it.

Q294 Chair: Can I ask a related question? You said, in answer to David Tredinnick, that the work you were doing was defining social care more closely-by implication, defining it in distinction from healthcare because it defines a different concept. Yet the policy direction, well before the Health and Social Care Bill, is in the direction of greater integration of health and social care and recognising, in terms of the service delivery for the individual, the less that distinction is recognised the more it is likely to meet their individual needs. When you were working up the definition of "social care," from a legal point of view, in distinction from health care, did you feel that was helpful or were you asking yourselves whether this is the law working in a different direction from policy and probably good practice?

Frances Patterson: We felt it was helpful to have a legal definition, in the way I described earlier on in the session, and we did not see that as incompatible with the policy direction. Indeed, our view is that, through the definitions and the purposes being clearer as a result of our report, it should make the existing direction of travel, so far as policy is concerned, easier in terms of implementation. I do not see them as being incompatible or, indeed, that there is any tension there. If anything, our contribution should ease that tension.

Q295 Chair: I do not understand. If you are seeking to deliver an integrated service in a doctor’s surgery where you want the community health team, the social care team and the primary care team all to be delivering one service, how do you help the delivery of one service by saying to them, "Here are two clear definitions of different things you are doing"?

Tim Spencer-Lane: There are two issues I would like to raise in relation to that. The first is that our framework would allow that direction of policy. If the Government decided that all social care were to be based in health care settings, our framework could apply to that.

The second issue is that we decided, quite early on in the report, that it would not be possible to define adult social care. We could only define its purpose, which is what the well-being principle aims to do. A lot of what adult social care currently provides is what other organisations do not provide-health services that are not provided by the NHS or housing services that are not provided by housing. In that sense, it was important for us to keep a very dynamic definition of the purposes of adult social care that did not exclude those sorts of matters at the margins.

Q296 Chair: That is quite helpful. What you are defining is a result rather than a service, with the implication that the obligation is to fill in the gaps other people are not providing.

Tim Spencer-Lane: Exactly, yes.

Frances Patterson: That is right.

Q297 David Tredinnick: Thank you very much. I have one other question about enforcement. How would you propose the enforcement of your proposed duty to co-operate, given that the NHS and local government have, in fact, been under a duty of collaboration since 1974?

Frances Patterson: They have. What is new is the enhanced duty of co-operation in certain circumstances, coupled with the duty on the relevant authority-whoever that is-to give reasons, even if they choose not to do so. To that extent, it is new and it will give added weight to the general duty which has been around for some time, as you say. As a result of a redefinition, we would hope that it would have added force. Should it be that the reasons given are perverse, there are certain legal consequences as a result of that.

Richard Percival: Can I add to that? We originally proposed, in our scoping paper, that complaint resolution should be part of the project. That includes, obviously, consideration of whether there should ultimately be a community care tribunal or something along those lines. You mentioned the Henry Spink Foundation earlier. That was one of the proposals they made originally to us about the scope of the proposals. We recommended that that should be the case, and that was one area the Department of Health took out of our study. Therefore, we necessarily rely on ordinary public law forms of enforcement for the structure that we have come up with.

Q298 Chris Skidmore: If written reasons were given for refusal, as to those written reasons, there would be a process of appeal in place.

Richard Percival: Judicial review.

Frances Patterson: The next level is judicial review. We have not proposed any other legal process through our report, but you would have the traditional judicial review right of challenge.

Q299 Rosie Cooper: I would like to ask three quick questions, but make a comment first. I find it interesting, if not illuminating, that you feel the Health and Social Care Bill did not impact on your work significantly thus far, especially as the Department of Health have almost sold the impact and the integration as the raison d’être for the Health and Social Care Bill-the fact that we are going to rely on that integration. I would suggest that it feeds into the views of those of us who think we are being sold a pup currently.

I will go back to questioning. Do you consider that the failure to include a right of assessment allows local authorities off the hook, especially when a person’s needs have escalated or individuals request an assessment? In going back to your answers earlier, the truth is that, however you dress it up, the reality is that, when a person goes from one local authority, the people who make that assessment do so in the light of what their authority will allow to happen. Therefore, you are getting drastically different results all over the country, and it is not right. I do not see much here that gets to the core of that.

Frances Patterson: I dealt with the issue of portability earlier. Obviously, if the service user knows what the assessment is going to be in the receiving authority and they do not like it, they have the choice not to move. That is one solution.

Q300 Barbara Keeley: Could I stop you there? How do they know that? How do they know, before making a decision to move, what the assessment will be in the receiving authority? They do not know that.

Frances Patterson: Under our proposals they can request an assessment from the receiving authority when they have a clear decision that they are going to move. They do not have to made the move.

Richard Percival: We have extended the right.

Frances Patterson: We have extended the right in that regard.

Q301 Rosie Cooper: I hear what you are saying, but, in terms of time scale and in terms of the people affected, this is another mountain to climb. Are the local authority supposed to carry this assessment out in a set time-a month or weeks? How long do they have to do it? If it is for ever, you might not be able to hold the accommodation and you might not be able to make the decision. Anyway, we are moving off the subject. Could you answer that, but come back to the core of the question I asked?

Frances Patterson: All right. So far as time scale is concerned, which is what you are asking, that is something we have recommended should be in regulations the Government would set. They would be able to include, within there, a specific time scale, if it were thought appropriate to do so, for people who were relocating to a different area. We do not imagine it would go on indefinitely. The precise time scale would be a matter for the Government to determine.

Richard Percival: We are trying to attack one of the big issues for disabled people-they came to us and said it was a big issue-which is the delay in assessment when moving to a different area. There is a suspicion that social services authorities use the delay to save money, particularly on people with high needs: you simply do not assess for a longish period. The way to incentivise the receiving local authority to assess is to allow for the continuation of their existing care package before they assess, which is what we have proposed and which is quite a radical move.

Q302 Rosie Cooper: This is becoming like an Edam cheese. If I assess early and assess that you are not going to get what you are getting in your current authority, my suggestion to you is you do not come because you are going to get less so stay where you are because you are going to cost me too much. It does not really cure the problem, does it?

Richard Percival: The law can only do so much in these kinds of areas. A lot of what we can talk about here is political decision-making and a lot of it is about resources. We can do what we can to make systems work as best they possibly can.

Q303 Rosie Cooper: But we should not pretend. This is what is so sad about all those people out there who are relying on us to come up with a solution. If we cannot come up with a solution, we should be honest. This is like another fudge or another hurdle that carers and people have to get over. Yes, I hear what you are saying, but it does not help. If I am a highcost patient and you are going to reassess me as getting less service than I am getting now, I am not going to be able to move.

Richard Percival: You are challenging us to do something that is absolutely not our job. You cannot expect us to tell the Government to produce extra money for disabled people. What we can do is make it transparent, reduce the transaction costs and make the processes work for disabled people. That is why the organisations of disabled people, which we engage with very closely, have all supported our proposals, accepting that it does not do all that they want.

Q304 Rosie Cooper: Obviously, I am unhappy with where we are, but we are not going to cure that. Can we go back to whether the failure to include a right to assessment will let local authorities off the hook?

Frances Patterson: I do not understand the question because, as I have already said, the local authority is under a duty to assess where there is an appearance of need. That is a very low threshold. A person can also request an assessment. They are not let off the hook, however one approaches it.

Q305 Chair: Can I come in there, Rosie? Going back to this point about the un-assessed-the people who could be helped but are not helped because they do not know-do you regard that, essentially, simply as a policy management issue rather than a legal issue?

Frances Patterson: We have dealt with that by the duty to provide advice, assistance and information, which I have already dealt with. The provision of universal services is a duty, on the local authority, to everyone. That is, we hope, to shape the market in a way which will improve the situation for people who do not know what they may be entitled to. It may be they do not want to go so far as an assessment. They may be able to meet their requirements through a phone call, picking up a leaflet or going on the internet. That may be sufficient. That is how that would be met.

Q306 Rosie Cooper: I am a carer. My father is 86 years old and was born deaf. He is profoundly deaf and has never had hearing at any point. He would not have a clue; he would not be able to access any of the things you have described. What would happen to him?

Frances Patterson: But, as the carer, you would. If you were not sure what to do, you could either go on the internet of your local authority or pick up the phone and speak to them.

Q307 Rosie Cooper: My dad is lucky he has me. What happens if he does not?

Richard Percival: The vast majority of disabled people are referred to social services, very frequently, by either carers or medical services. That is what happens in practice. We cannot put a line in a statute that says, "Every disabled person shall know, by force of law, everything that is available." All we can do is produce the existing tools to try and reach people and to encourage social workers to use those tools.

Q308 Rosie Cooper: We all agree there is a huge amount of unmet need, as you have described. How would you measure that unmet need? How would we ever get a feel for what it is? If a local authority knows, should they record that? How would you address that unmet need? Need is need.

Richard Percival: Yes. The law is there to provide a modality for those needs to be met and we hope we have come up with a very much improved one. But we, as a Law Commission, cannot say to the Government, "You need to double or triple the amount spent on adult social care," whatever we as individuals might feel. That is for you, as policymakers and politicians. That is not for us, as lawyers and law reformers.

Q309 Rosie Cooper: Is it for you to construct an Edam cheese behind which the policymakers can hide?

Richard Percival: I do not quite understand the Edam cheese.

Q310 Valerie Vaz: But it is your job, is it not, to say where the law is failing?

Frances Patterson: In essence, yes. We have done that.

Richard Percival: Yes. We have absolutely said that. We have come up with proposals which we think improve the way the law does the job the law is there to do. That is not to make the decisions which you, as politicians, need to take.

Q311 Barbara Keeley: Are there not different trends, though? When you started this work we were not in the world of localism and there still were elements of ring-fencing around social care, things like respite care for carers. Carers’ breaks given to PCTs were supposed to be ring-fenced. Is not the difficulty with this whole portability issue-portable assessments-that you cannot do that with localism and no ring-fencing? You cannot do it because the decision is entirely with the local authority. At least it would be honest, as Rosie Cooper is saying, to admit that you cannot do it in a world where decisions are entirely made by local authorities and none of the funding is ring-fenced. You have no say whatsoever in what services are provided. My local authority provides to moderate levels of eligibility. Some local authorities provide only critical. Clearly, that is an enormous difference.

Frances Patterson: It is.

Q312 Barbara Keeley: This whole issue about portable assessments becomes a joke when one authority is providing to moderate levels of eligibility and another only to critical. Clearly, nobody is going to move between those authorities.

Richard Percival: The answer is that you should direct that to the Secretary of State and tell him that the eligibility framework, which we require to be made in regulations, should be national eligibility criteria. That is an argument for national eligibility criteria, which may be a perfectly good argument, and it is an argument you can pursue using our structure. That is the best we can do.

Q313 Rosie Cooper: Should minimum levels of service be specified as well then?

Frances Patterson: We have said the code of practice should include guidance as to what there should be by way of minimum levels of service. That is there. That would be in the code of practice which will be part of the statutory guidance.

Richard Percival: The law provides at the moment, essentially, a low minimum through human rights considerations. That is a matter, properly, for the law. We are saying that that should be made clear and explicit. Above that level-

Q314 Barbara Keeley: To achieve that, people have been going to litigation, as Frances Patterson said at the start. How many cases-

Richard Percival: I am not saying it is a very high level.

Barbara Keeley: It is meaningless, in a general sense, if you have to go to court to get your service rights matched to your human rights, is it not? Surely we do not have a system where we expect people to do that.

Rosie Cooper: And with legal aid disappearing out of the door.

Chair: That is how rights, in the ultimate, are enforced, of course. I think we have run out of time, unless any Member of the Committee wants to pursue this.

Q315 Valerie Vaz: I have a quick question. There is a legal definition of "domicile," is there not?

Frances Patterson: Yes, in different statutes there are.

Q316 Valerie Vaz: So it is possible to define "ordinarily resident."

Frances Patterson: We certainly have not said it is impossible to come up with a legal definition. What we have said is that it is outside our terms of reference.

Q317 Valerie Vaz: No. What you said was the Department of Health asked you not to put that in.

Frances Patterson: Yes, but-

Chair: We do not need to go back. It is clear what was said.

Valerie Vaz: All I am saying is it is there, available. You can lob it back at them.

Q318 Chris Skidmore: The code of practice you propose, which has specified how local authorities should set out their eligibility criteria, is voluntary. It cannot be enforced in any way.

Tim Spencer-Lane: To be clear, the eligibility criteria would be set in regulations. One of the things we were very unhappy about was that, currently, eligibility criteria, which is, arguably, one of the most important features of adult social care, is left to guidance. We recommended that that should be elevated to regulations.

Q319 Chris Skidmore: Would you still retain the existing four bands?

Frances Patterson: That is a policy decision.

Q320 Chris Skidmore: I know it is, yes. The code of practice that specifies how local authorities should set the criteria, which is different from the criteria being statutory, how would that operate legally?

Frances Patterson: Do you mean the procedures by which local authorities set the criteria?

Q321 Chris Skidmore: Yes. I can understand you saying you have set the statutory minimum about the eligibility criteria and what they are, but then how would the code of practice operate, which you also suggest? Who would run the code of practice?

Frances Patterson: The code of practice we are recommending is a statutory one. It will go out to consultation and then it will be laid before Parliament by way of a negative resolution procedure.

Chair: Thank you very much indeed. That was an interesting session. Thank you.

Examination of Witnesses

Witnesses: James Lloyd, Director, Strategic Society Centre, Chris Horlick, Managing Director of Care, Partnership Assurance, Nick Starling, Director of General Insurance and Health, Association of British Insurers, and Andrea Rozario, Director General, SHIP Equity Release, gave evidence.

Q322 Chair: Good morning. Thank you for joining us this morning. Could I begin by asking each of the new panel of witnesses to introduce themselves, please?

James Lloyd: My name is James Lloyd. I am the Director of a nonpartisan public policy think-tank called the Strategic Society Centre.

Chris Horlick: My name is Chris Horlick. I am the Managing Director of the care division of Partnership Assurance. We are the largest longterm care insurer in the UK.

Andrea Rozario: My name is Andrea Rozario. I am the Director General for SHIP Equity Release, which is the trade association that looks after the equity release industry.

Nick Starling: My name is Nick Starling. I am Director of General Insurance and Health at the Association of British Insurers which represents the UK insurance industry.

Q323 Chair: I will, if I may, jump straight into the middle at the beginning of this session. This is obviously a session primarily about the financing of social care, in particular in the context of the Dilnot report. As I understand what Dilnot is recommending, the central proposition is that if the public sector restructures the entitlement to public sector support, in particular, by introducing a cap on individual liability, that will make it easier for the private sector-the financial services industry-to create a range of products which will enable the citizen to contribute more revenue to the provision of social care than the private sector does now. In other words, the public sector puts some money on the table and that mobilises additional private sector resource to improve the funding of social care. The fundamental question of this session is, it seems to me: is that proposition true? Could I start with Mr Lloyd?

James Lloyd: There are two points of clarification. It is vitally important to understand the detailed nature of the model the Dilnot Commission has proposed and the nature of the liability. It has been referred to widely as a "cap on costs". This will cap how much people will have to pay. More specifically, it is a cap on exclusion from meanstested support. A local authority under the "capped cost" model would undertake a needs assessment, as it does now, and allocate a financial amount to somebody reflecting their need and the amount of informal care in the home that they receive. If they are below the means-test threshold, then, as now, they would be entitled to local authority support. If-this is the crucial innovation-they are above the threshold, the local authority will record the amount they would have received, but for the fact that they were above the threshold. This amount will be recorded on a weekly basis-"metered" in the language of the capped cost model-and when that notional amount totals £35,000, they are reassessed on a meansblind basis. More accurately, it would be described as a cap on exclusion from the meanstested support model rather than a cap on costs. That distinction has been lost on an awful lot of people in this wider policy debate. It has crucial implications, of course, for the user of financial products and the experience of people in that model or under such a system.

My second point of clarification is the Commission is very specific, in volume 2 of its final report, that it does not expect a prefunded insurance market to grow in response to its recommendations or in response to the capped-cost model. It talks about different sorts of financial products, but in terms of prefunded insurance, which is one of the key financial products people have often talked about in relation to longterm care and the potential for such a market, it is very specific in saying it does not expect that market to develop to any significant degree in response to the capped-cost model.

Chair: Before we go on to the other witnesses, that leaves open and does not answer-although it gives us two important bits of evidence, I accept-the central question which is whether, in your view, from other financial services products, if not prepaid insurance, a Dilnottype structure would unlock new private funding into this sector.

James Lloyd: On unlocking new private funding into the sector, in terms of the use of financial products, the only products you are talking about are prefunded insurance and disabilitylinked annuities, which are a type of annuity with a kind of prefunded insurance embedded within it-that is, it pays out a higher income when somebody experiences a certain level of disability.

I concur with the Commission that there will not be any significant growth in prefunded insurance following the implementation of the capped-cost model. I would also argue that there would not be any growth in the use of disabilitylinked annuities. At the moment, such products are not available-neither are prefunded insurances, frankly-but I would not expect disabilitylinked annuities to experience any significant level of growth in the context of the capped-cost model. Certainly, even if you adopt fairly optimistic assumptions about the use of prefunded insurance and disabilitylinked annuities, the amounts of new money that would be brought into the system are measurable in the low hundreds of millions, in the context of a public spending gap up to 2025 across social care and disability benefits of the order of £12 billion. In the context of the cost pressures on the current system and the effects of rising demand, we are talking about tiny amounts of money that will be brought into the system.

Q324 Chair: I think that is a "no". Can we move promptly along each member of the panel in turn, please?

Chris Horlick: I agree with James. It is probably a "no" that new money will be brought into the system. There is a lot of private money already in the system, and our contention is that that could be better spent. It could be better spent if people understood the fact that social care as we know it is not free at the point of need: it is not part of the NHS, it has never been free, and it is unlikely ever to be free. That is the start of the debate. Until there can be some clarity for the public out there-Dilnot identifies that 75% of us will, at 65-plus years old, need social care of some sort, but we have no idea that we may have to pay for it-there is no rationale for anybody to bother to save, invest or do anything to deal with the problem.

An insurance product-I am bound to say, because we sell it-does exist that caps the costs for the individual, but it exists from the point of need. It is designed, in return for a single premium, to cover care costs for life. In terms of its attractiveness to the market, although it is a small market, I would contend it is a small market because nobody knows about it. When people do know about it, the uptake, in spite of the fact that it is quite a large-premium product, is very high. Of people who are presented with a quote, 30% will buy one of these things, so it would appear to be quite attractive to people. It does what it says on the tin and it starts paying from day one. There are products out there. I do not think the Dilnot model in any way would attract fresh money in. The question is, "Would the private money be spent differently?" There is some potential for that to happen.

Chair: We will come back to that.

Andrea Rozario: On whether a fixed-cost model will allow innovation in products, there is a possibility that could well help. It is certainly a starter, but there is still a need for more clarity about what the proposals would mean to individuals. As for equity release, there is clearly an argument that if people could release the equity tied up in their properties, that would bring new money into the system. The Pensions Policy Institute estimated that there is currently about £250 billion that could be released immediately. Our market at the moment is just under £1 billion a year, with about 20,000 transactions. A very small amount of that goes to pay for care.

The reason for that is that people have certain views on equity release, but they are also not necessarily aware of how the products have changed, the safeguards that are available today and the fact that they could use it to help pay for domiciliary care and even, potentially, longterm care. There is a lack of information for the consumer to be able to make any choices. The products could certainly develop and evolve if we had more certainty about state benefits and the impact of equity release on state benefits, as well as about the longterm care market.

Nick Starling: Chair, it seems a little while since you asked the question so I am trying to remember exactly how it was framed. My answer is yes. What we have always said is that, leaving aside the details of what the Dilnot Commission said, if you are absolutely clear what the expectations are of the state and of the individual, which gives the individual the chance to plan for the future, that is exactly where financial services products-in particular, insurance-come in. If I know that I have to find X and the state has to find Y, I can start thinking about that X. The answer is therefore yes. There is lots of detail in Dilnot to go through, but it is a good basis for going forward.

Chair: I am, in a sense, relieved that the mood improved as we went along the panel. If the answer is that there is no new money out of Dilnot, it seems to me we are facing a virtually impossible bind. If I may summarise what the Committee has heard, there are two witnesses who have different sorts of financial products that could help if people knew about them, but they do not, and from the Association of British Insurers we hear that there are possibly other products that other people may develop. However, given the state of public finances, the existence of a huge gap and the knowledge that that gap is going to increase, it seems to me the challenge to the financial services industry must be to develop a structure with the Government that allows us to give-with greater confidence, frankly, than we have heard in the answers so far-the answer yes to the question I posed.

Q325 Rosie Cooper: Mr Starling, could you give us more details of how you think that will happen and what those products are?

Nick Starling: I can give a general idea because, at the moment, there is a working group with the Department of Health, which is cochaired by us and the Department of Health-

Rosie Cooper: The Department of Health. Here we go again.

Nick Starling: -about what those sorts of products might be. First of all, you have to think about who those products are aimed at. You are talking about three generations here. You have the people who have the immediate need at this moment, who are probably 85-plus. You have people who are retired and have done all their saving; they probably have assets, in a pension and a house, and they are-I love using this word in public-decumulating. In other words, they have done all their saving and that is what they then have to do. Then you have people who are in work. If you work backwards off that, almost certainly the best advice for people in work is to have a pension. If you are saving well for your pension then, when it comes to care, needs are much more likely to be taken care of.

We have already heard about immediate needs annuities, which can work with the Dilnot system as well. There are other possibilities in critical illness and life policies which could convert when the needs arise. There are topup policies, which top up in terms of the care provision. There are possible deferred payment policies which would pay on death; disabilitylinked annuities, which have been mentioned; and various forms of savings products. There are possibilities of products out there. The key is that if people know what they have to aim for at different stages of their life, there is a chance for that sort of development.

Finally, I agree with Mr Lloyd that it is unlikely you will find prefunded products developing. It is difficult enough to get people to save sufficient for their pensions without thinking of saving for a product which they may not need for 40 or 50 years.

Q326 Rosie Cooper: Mr Starling, please do not be offended by what I am about to say. Can we find someone who thinks this will work who is not attached to or does not have connections with the Department of Health and who can give us an independent "yes"? Is it possible we could find someone?

Let me go back. You are the only member of the panel who believes Dilnot’s proposals will lead to a prefunded health insurance market. Is that right?

Nick Starling: No. I do not think there will be prefunded products. That is unlikely. I speak on behalf of the insurance industry, but I bring independence in the sense that, except for the immediate needs annuities which Mr Horlick provides, there are no products out there. I am not grinding a particular axe about particular forms of products. I am saying that, in a sense, we have a chance to think in quite an open way, unencumbered by a whole forest of products already out there. In that sense, the thinking we have been doing on this is independent.

Q327 Rosie Cooper: Could I ask the panel whether you believe the failure of the longterm care insurance market in the UK has been demand or supply failure?

Chris Horlick: I will have a go at that. A lot of people argue that there has been market failure in longterm care insurance. I do not agree with that because there is no market. Until people understand-sadly, I come back to the same point-that there is a chance they may well have to pay for their care themselves, they will not even consider planning for it financially. That needs to be step one. Thereafter, a lot of other things need to happen-far better information and advice, particularly delivered by local authorities who appear to be the gatekeepers for those things to happen, and so on and so forth. That needs to be the start of everything.

Q328 Barbara Keeley: I want to come back on the point you made earlier. There is a question for most members of the panel as to how on earth we are going to get this debate going. Chris Horlick said it is a small market for products because no one knows about it yet. As Dilnot has pointed out, 75% of us are going to need social care once we are over 65, yet Dilnot also pointed out that people do not think about it, do not want to think about it and, if they did think about it, they would rather spend the money on something else. We have had even more of a squeeze since the Commission put those thoughts together.

I could say to you that we as MPs are not under a huge amount of pressure to have a debate on this. There are debates about social care, but they are quite illattended compared with debates on things like football governance and local radio; those subjects are important to people, but social care is going to be important to everybody. How on earth are we as politicians, and you as providers, going to get a debate going on this? It seems to me that nothing is going to change while people do not know about it, are not thinking about it and are not planning for it.

Chris Horlick: I am not quite sure why your postbags are not full, but, if they are not, they are not. A piece of research we carried out identified that there were 29 million Google searches in a single 12month period on "How do I pay my care fees?" As a result, we have built a website to address that. Age UK gets 2 million calls a year from people wanting help with care issues, how they fund their care and so on. I do not know why it is not coming here.

Q329 Chair: Can I be more precise? Why is it not coming to you as an industry? If people are worried to the tune of your numbers of millions about "How am I going to pay this bill?", you could argue it is a sign that people are thinking a bit for themselves. They are not instinctively going to their MPs, they are going to Google. Why does the industry not respond to it?

Andrea Rozario: I think people generally feel that the state is going to pay for their costs.

Q330 Chair: No, they do not. They do not come and see us and say, "You are failing us." They go to Google. Behind Google, the industry is not responding.

Chris Horlick: I think that is a fair comment. Ten or 15 years ago, longterm care insurance was going to be the next great big insurance market and five or six players came in to it on a prefunded basis. Bit by bit, they have all left. We were the last prefunded longterm care insurer, and I withdrew the product in the summer of last year. Why? Because nobody buys it. Why keep a product going that nobody is going to buy? It is pointless.

There are insurances that do the job. The problem is that people do not know about them. A large number of people go to websites, as we have seen, and we have built one to start to address that need. We also have a campaign underway with care homes, with domiciliary care providers and, particularly, with local authorities. It seems to me there is a real opportunity for local authorities to serve their citizens better and to save themselves some money by referring selffunders who present to someone who might be able to help them, rather than sending them away with an almost useless leaflet. The clue is in the question. If you are a selffunder, you might need help with your funding. Some independent financial advice at that point might be useful. We are currently working with about 20 local authorities-who in general, I have to say, are pretty appalling at looking after selffunders-trying to improve the process they go through to deliver to them.

Q331 Chair: Can I be clear about the thought process that lies behind the question? We are where we are. The question the Committee is interested in is: what policy levers are available to ensure that this recognised demand on the part of selffunders-because they go to Google-is met more effectively than it is at the moment?

Nick Starling: I was going to start with a slightly more personal answer to that question. The short, blunt answer is that a lot of us do not realise there is an issue until our parents get to a certain age. There is more background here which is that, in general, we are an underprotected society. I promise you, Chair, I will not do any sort of vox pop, but I imagine most people in this room know to protect their house against flood or fire. Nevertheless, a lot of people do not protect themselves against critical illness, which is all around us and we should know it happens, or take out life insurance and so forth-

Q332 Rosie Cooper: Not with the record critical illness insurance has. Good Lord. I could not recommend that to anybody.

Nick Starling: I am sorry to hear you say that. It has been transformed in recent years by things the industry has done and it is literally a life saver for many people-

Rosie Cooper: Not many.

Nick Starling: -but we are an underprotected society.

Q333 Chair: Shall we stick to social care?

Nick Starling: The thing beyond that, which is to get people to focus on things which seem to be several years ahead, is even a step further. At the risk of people saying "This is not a good example," let us take the debate on pensions. In the last few years-it is not there yet-there has been much more awareness of the need for pensions. The win in this is, first of all, to arrive at a consensus, if it can move beyond a party political issue where everyone grasps the need to act, as happened with pensions. The analogy between the Turner Commission on pensions and the Dilnot Commission on longterm care is a good one. That is the way you start to build awareness and consensus and a realisation among people about how they need to meet their own needs. I cannot promise an answer at the click of a finger, but that is a way forward that I can see being mapped out.

Q334 Chris Skidmore: What about the idea of compulsory insurance?

Nick Starling: Compulsory insurance carries all sorts of difficulties with it, not least that you have to underwrite absolutely everybody. What do you do to people who refuse to buy the insurance and so forth? There are ways in which you can encourage and make it advantageous to people to do so-we call it soft compulsion-but compulsory systems run into a whole series of issues of enforcement and participation.

Q335 Chris Skidmore: Another side I see to Dilnot and from when constituents come to me is that people with houses or within that bracket say, "I will spend it all," because once they are underneath the £23,000 total resources limit, they get it for free.

Nick Starling: You then start to lose your choice about where you might end up, if you are in a residential setting, for example.

Q336 Chris Skidmore: It is a huge issue nationally. I think in Merseyside 80% of people are under that £23,000 limit and only 20% in Surrey are, so there are these divides between local authorities. I do not know what you do about it.

Rosie Cooper: The way it is divided is different across the piece.

Chris Skidmore: The alternative at the moment, or the current incentive, is to spend it all and get free social care.

Chris Horlick: There is a range of perverse incentives in the social care structure.

James Lloyd: In response to that point, for as long as there is a meanstested system there will be perverse incentives and some households will try to game the system. There is very little reliable data as to what extent that occurs. It is very much a grey area in the current system that we do not know enough about.

Returning to the question about prefunded insurance and demand and supply theories, it would be useful to put this in the context that no country in the world has a properly functioning prefunded longterm care insurance market. In France, which is held up as the international leader, the takeup rate is 15%, but the products have very low premiums and so provide a very low level of cover; they could, more accurately, be described as topup insurance. In the US, it has, in many ways, been a complete disaster: enormous amounts of money have been spent on trying to incentivise insurance through things like tax incentives and various other structures, but it has been a complete failure. At the policy level, there is recognition that it is not working and, in recent years, they have looked at something called the CLASS Act, which the Committee might want to look at after this meeting.

Q337 Chair: What is that concept?

James Lloyd: The CLASS Act-let me get this correct-refers to the Community Living Assistance Services and Supports scheme or Act, which was a policy idea for employers to enrol people automatically into some sort of lowlevel, longterm care insurance, but I do not claim to be an expert on it. I understand that the direction of policy has now moved away from that in the US. Nevertheless, it is very interesting that in the US they have explored this in great detail.

The key point is that the UK is not unique in experiencing major barriers to the growth of a prefunded insurance market. It is not some sort of UK issue. The UK is not the exception. The UK is absolutely abiding by the experience overseas. There is a huge range of demand and supplyside barriers, particularly on the demand side, and we in the UK are confronted by our own unique barriers. I should say that in England we confront our own unique barriers, such as the operation of free personal care in Scotland. This rather confuses the people who, for example, live in Cumbria: the idea that they should have to take responsibility for their care costs when they could move 20 miles up the road and get it all for free.

Chris Horlick: Except they do not.

James Lloyd: That is a separate point. There is notionally the operation of free personal care in Scotland. I find it quite astounding that, in the year 2011, we are still discussing prefunded insurance in the context of longterm care. I can only assume it is because of naiveté or ideology people still think that, somehow, there is going to be this growth in the prefunded insurance market. Even a company like Partnership, which has experience of providing those products, is absolutely clear that it does not happen.

I also want to reiterate, to give some fairness and credence to the Dilnot Commission, my original point. The objectives of the capped-cost model set out in the Dilnot Commission are to give people peace of mind. It is an argument that the state should cover the catastrophic costs of care: that that is the correct role of the state. It is about the state playing the role that only it can provide because insurers cannot provide cover against catastrophic costs. It is also about, hopefully, the state providing some peace of mind to individuals. Those are the objectives of the capped-cost model. The objectives are not to see the growth of a large prefunded insurance market.

Q338 Chair: Can you not argue that covering catastrophic loss is exactly what insurers do in every other marketplace?

James Lloyd: They do it in every other market, but for a whole range of reasons, which are well understood, certainly in the insurance industry, it is extremely difficult for insurers to offer a prefunded insurance market with unlimited liability.

Q339 Grahame M Morris: This is a very interesting point. Mr Horlick said that social care is not part of the NHS, it is not free, it never has been free at the point of need and he cannot see it ever happening. You developed that when you made the reference to Scotland. For the life of me, I cannot understand the difference between a shared risk-pool in general NI contributions into health and funding, through a general risk-pool, a national social care service. If the argument is about prefunded health insurance schemes, what better way to do it than in a compulsory way through the state? You can convince me that I am wrong.

James Lloyd: I certainly would not attempt to convince you that you are wrong. The key issues with free personal care, as a model of funding social care in England, have been affordability in the face of the demographics and the rise in demand as well as an awareness that, if this was to be funded out of general taxation and switched on like a light, it would be a massive new entitlement to the baby boomer cohort, particularly. The burden of paying for that would fall on the younger cohort, so proposals, certainly up until the election, started to explore how you could implement some sort of free personal care, or something close to free personal care, where the cost of paying for that as an entitlement would fall more on the people who would benefit immediately than the young cohort. I believe that is why the previous Government started to explore some sort of inheritance tax model.

Q340 Grahame M Morris: Mr Starling broke down the client group-if that is the right term-into three categories. I am intrigued why so few of the 29 million people searching on Google opt for the prepaid insurance model. Is that because most of them fall in the second two categories that Mr Starling had identified that have immediate care needs now-or their parents do-rather than younger inwork people, or do they decide that equity release is a more favourable option?

James Lloyd: As previous speakers have said, nobody thinks about it until they have reached the point of crisis-the point of need. It is not clear that there is any policy intervention which would be that effective in getting people of working age-for example, people in this room-to think about the risk of needing care and to write a cheque for a substantial sum on purchasing insurance. Therefore, it is likely that any financial products will always be at the point of need.

There are equity release products. Those are, effectively, another way of people spending down their wealth. It is a way of decumulating your wealth. There are also immediate needs annuities. Among the 120,000 selffunders in residential care in England, 45,000 have an actuarial interest in purchasing an immediate needs annuity-that is, they have sufficient wealth such that it makes sense for them to buy one and protect themselves against longevity risk-but of that 45,000, only 7,000 currently do so. Arguably, it would be in the interests of public policy to boost that takeup, but in the context of longterm care funding in the system, you are still talking about a potential market of 45,000 out of 1 million older people in England who have care needs in different contexts and environments and the question is how we fund that.

Nick Starling: I will be very brief. The first answer is-

Grahame M Morris: I have written down that word "decumulation."

Nick Starling: I love using it. The answer to the first question about a national social care model is essentially a political one, and is about spending as much as anything else. I want to very quickly address the point about catastrophic risk. In fact, we did not argue either way with Dilnot. We said, "You need to be clear what the state needs to provide and what the individual needs to provide." In fact, the products out there, which Mr Horlick provides, are the ones which deal with the longterm catastrophic end. The key thing is defining what people need to do and giving them information about how they might tackle it. That seems to us the important thing.

Chris Horlick: It is important to understand that the catastrophic tail risk that we cover is absolutely all of it, but it is from the point of need. It is not for someone who is aged 40 with no social care needs at all, and they start paying in advance for it. It is absolutely at age 80 to 85 when someone is in receipt of care and they want to offload their longevity risk. "Could I afford this if I lived for eight years or 10 years?"

Q341 Chair: That is the immediate needs annuity.

Chris Horlick: That is the immediate needs, yes.

James Lloyd: To put it in context, when somebody has care needs it is much easier for an insurance company to estimate how long they are going to live and, on that basis, the price of an immediate needs annuity. What is much harder is for an insurance company to come into a room like this, where everybody is, largely speaking, fit and well, and estimate how many people will experience care needs. It is the difference between a longevity risk, which is what Chris provides protection against, and a disability risk, which is the uncertainty regarding what proportion of the population will experience certain levels of disability.

Andrea Rozario: There is the recognition that we need different types of products for different generations. Clearly, children coming out of school now do not have a real grasp on the finances and the life choices they will have to make in the future. If we had the facility to educate them, giving them a level of responsibility and ownership for looking after themselves which would lead to them protecting themselves more, that would clearly increase the demand. The issue we have right now is with the current ageing population and what they are going to do to cover their costs of care. There is clearly an inequality in terms of wealth among the generations. The younger generations do not have the amount of housing wealth the older generations have.

One of your questions could well be, "Why don’t more people turn to equity release to pay for looking after themselves?" There are lots of different reasons. There is a lack of access to unbiased information. It is difficult to get access to advice on equity release because you cannot get it on the high street. We need to be able to create a conducive environment for providers to want to operate in this market, so that there is an increase in products available for the consumer. That will drive competition and reduce the costs, and so on, and will also bring more innovation to the market, but the issues that hold the market back span right across the board, from regulation right through to misinformation and ignorance, with people not understanding how the products have already evolved and the safeguards that are in place. That is a constant struggle for the industry. If people were more aware of how equity release could have a positive impact on their lives, they would be more likely to seek out advice and take the products.

Q342 David Tredinnick: I worked in the advertising industry for a few years and I am astonished to hear that there are products out there of which there is no awareness. It is a terrible situation to be in. That seems to me to be about 50% of the problem. The other 50% is the development of new products post-Dilnot and things like that. I am making a statement more than asking a question, but you might like to comment on it.

The other point, so there is no confusion about this, is that people come to MPs’ surgeries-I am sure my colleagues will support me in this-to deal with immediate problems, things that have happened to them or are going to happen in the immediate future, disasters and catastrophes. That is when they come to us. When nobody else will help them, we are the last port of call. It is our most valuable function as individual Members of Parliament. They do not come and say, "I need insurance to sort out a problem 20 or 30 years ahead." I should think out of 100,000 cases, at least, I have never had one that has asked for that.

Andrea Rozario: They probably would not.

Q343 David Tredinnick: I am making the point because it is part of the conversation. The real question is: how can we be in a situation where the industry has products that nobody is buying? Who is your advertising agency? Somebody should be fired.

James Lloyd: You are identifying a symptom of a demandside barrier to prefunded insurance products and those are well catalogued in policy studies and academic studies. It is not, in a sense, related to Andrea and SHIP and equity release because that is a pointof-need product. The key question for the Government and for the Committee is, in the context of both rising demand in the current system and the gap, can we as a country, England, and as policymakers see a boost in prefunded insurance that will address the gap going forward and help us cope with the rise in demand? I think the universal consensus is no.

Q344 Chair: Can we stop tilting at this straw man in that case? What we appear to have been told is that that is not a solution, but there is in many cases-not in every case, as every individual case is different-a fairly obvious potential private sector solution sat in a mixture of equity release and immediate needs insurance. How do you raise the premium to pay the immediate needs insurance? Equity release for many households-not all, but many-is a relevant solution. Why does that not run as a familiar, stagecentre solution?

Chris Horlick: For a variety of reasons. Neither product is well known among the public at large, whether they are at the point of need or not. I absolutely accept that that is something the industry needs to address. If we want to sell more of these things, we need to tell more people about them. Where do people go when they are at the point of need or where does their power of attorney or family go? They go to a relatively small number of places. It may well be their local authority and social services, their GP or a care home, or they may have a domiciliary care provider-a geriatric ward or a hospital discharge unit or something like that. There are relatively few places.

Q345 Chair: The Law Commission said in the previous evidence session that it thinks there should be easier access to assessment. Should this be part of the assessment process?

Chris Horlick: In a way, it is. There is the care needs assessment which, as we know, many local authorities are failing to do. They lead with the financial assessment or the means test. The reason they do that is because, if someone is then deemed a selffunder, they can not have to do the means test, even though there is a duty to do so. They send them on their way. I absolutely support what I think is section 6 of the Law Commission reforms-the bit about advice, information and assistance to all those in receipt of social care, not only those the state is funding. In my view, that duty should be extended-again, the clue is in the term, "selffunder"-to a referral to properly qualified independent financial advice. Some local authorities are starting to do that. We are hopeful that many more will. We are helping them put together panels of properlyqualified IFAs who can help people. Whether they sell our product, an investment bond or any other sort of product is neither here nor there.

Q346 Chair: What is the view of the ABI on this rather crude solution that appears to volunteer itself, partly because of the witnesses we have in front of us?

N ick Starling: I was going to support what Mr Tredinnick said. We in the ABI get lots of letters from MPs, and I am struggling to think of a single one about longterm care. They are mostly about young drivers or floods. In a sense, that is an answer to the question in that there is public awareness about things which are all around them-we all know that floods happen and so forth. There is a series of issues about raising awareness.

On to the general awareness that this is an issue, I talked earlier about the way the debate on pensions has moved on, and that could be a model. As Chris said, there is an absolute need for proper formal advice. That means, for a start, people need to be directed towards that proper advice and you need to think about those giving the message-who people listen to and where they get their advice from. With the best will in the world, people may not necessarily listen to an insurance company selling products, but they will listen to an organisation like Age UK. There is not a single answer to this awareness issue. It is a mixture of real professional advice and trustworthy knowledge and people who know that advice is out there so that individuals can be directed towards it. That is some of it, plus the general awareness. You cannot produce the equivalent of a flood for longterm care, or at least I do not think you can. You can do what you can to make people aware of the sorts of decisions they have to make ultimately.

Q347 Rosie Cooper: The Chairman outlined the situation as we see it. Have any of the panel done any modelling of the market for prefunded insurance, equity release or anything like that in the light of the question: "Should Dilnot’s proposals be fully implemented?" We have had the "no’s" to the "yes" but have you done any modelling? Do you know for sure?

Chris Horlick: We have certainly modelled the potential takeup for immediate needs annuities pre- and post-Dilnot. As James has identified, the market could be-about 4% of selffunders take the product-45% pre-Dilnot. It would be more postDilnot, because the average premium would reduce due to the state making a contribution. Depending on the level of the cap, which would depend on the level of the state contribution and so on, in general, premium would reduce and therefore the uptake would be greater.

Q348 Valerie Vaz: What is the likely cost of that, do you know?

Chris Horlick: The average cost this year is £100,000, but the important thing is the context of that. Everyone normally sucks their breath and says, "Wow. That is a hell of lot of money." It is, of course, a hell of a lot of money. It has to be set in the context of most people’s-or the average-home equity in the country across the board, which is £169,000. You need to set it in the context of that because most people are selling a home to fund this premium. Of course, a typical cost of a private care home in the south of England is easily £50,000, or maybe a lot more than that.

Q349 Chair: What would be the cost post-Dilnot roughly?

Chris Horlick: That depends on the level of the cap and, of course, every case is individually underwritten. It would depend entirely on the presenting conditions. It is hard to say but we know that-

Q350 Chair: Can we skip the rest of the exemptions?

Chris Horlick: It would come down. It might be 5%, it might be 10%.

Q351 Chair: That is all?

Chris Horlick: Yes. That is because in reality Dilnot, for selffunders going into a residential setting, provides very little cap. This is badly misunderstood. It provides a cap subject to the local authority rate. The rate Dilnot used in the modelling-or the PSSI used for them-was £550 a week. The actual rate across the country is more like £500 a week. If you are talking about a care home that costs £1000 a week, you not only have to pay the £10,000, in weekly terms about £195 a week to cover the hotel costs, but you have to pay the £500 above the local authority threshold as well; and of course you have to pay the first £35,000, under the Dilnot cap model, of the bit in between. You are two and a half years in before you get anything from the state. That is why the reduction of premium is not huge.

Q352 Barbara Keeley: We are back again to a big part of the difficulty being that people do not know about it. Even where they have read the Dilnot Commission proposals, they do not understand how that will operate. They think perhaps they will get something out of it that they will not. Yet, in terms of answers we have had from the panel, this lack of understanding then relies on links from local authorities who are under substantial budget pressures. They are not likely to be spending more on leaflets or information to the public than they were in the past. In fact, they are being discouraged by the communities, the local governments and the Secretary of State from spending money. They have made them cut back on newsletters, so whatever they were doing before, they are likely to have less money and are being discouraged from doing it now. Then there is Age UK. The whole front end for knowledge and understanding of the situation and the future is shrinking in terms of resources to do anything about it. All of those involved in wanting this to develop in a different way are going to have to engage in changing that situation. If everything that is unsatisfactory and not understood about this has been bad, it is getting worse because you are relying on a front end that has fewer resources to deal with it in both the voluntary sector and local authorities.

Can we come back to some of the points about what Dilnot is recommending-the £35,000 cap, if you like? James Lloyd talked about gaming earlier and people saying that they have greater care needs than they have. There is also the issue that there is no incentive in terms of carers providing informal care themselves. Could you comment on that? The vast proportion of care is provided by family carers, unpaid carers. What Dilnot is recommending does not help them because their contribution will not be included in the £35,000. Is that a reason to say some of that should be revisited? I have two reasons. One we have just heard, that people will not be getting out of it what they think they will be getting if the care costs are more than the local authority level. Secondly, there is the unfairness to carers in that their contribution is not recognised at all. Should it be?

James Lloyd: They are two very good points. It is worth restating, obviously, that across the country the vast majority of social care is provided by family and kin, particularly in domiciliary care, by definition. Currently, local authority needs assessments do take account of informal care. If a local authority assessor goes in and looks at your needs, but decides that all of your needs are taken care of by your family, then, at present, you would not receive any support. Under the capped-cost model, equally, you would not be allocated any notional support. Your meter would not go up. This produces, potentially, some outcomes which, as you imply, may need revisiting.

It is conceivable that a 75 yearold man could provide roundtheclock care to his 75 yearold wife for 10 years and then die, having saved, effectively, the state or the local authority hundreds of thousand of pounds in residential or domiciliary care fees, but at the point the wife then goes into residential care, the local authority would say, "Okay, we will start your meter now." Providing, in effect, financial support to the state and to the system with informal care and keeping care costs down is not taken account of in the way that people’s meter increases and the speed with which people reach that £35,000 cap. It is reasonable to anticipate that some households might feel that is a little unfair. It might be something the DH would want to revisit-potentially granting local authorities the power, on a casebycase basis, to assess individual cases and perhaps give people £15,000 at their discretion if, for example, they think that, "Yes, as a family or a partner, you have provided years and years of informal care." In terms of providing recognition of informal care within the capped-cost model there is, potentially, something there to go back to.

Your second question was about gaming. It is worth stating that, within the current system, there are arguably incentives for family members to understate their ability to provide care in order to try and get more out of their local authority. To what extent that happens, we do not know. What we know is that, frequently, carers do not get carers’ assessments and that many carers provide roundtheclock care.

Q353 Barbara Keeley: But they will.

James Lloyd: They could potentially, yes. It is worth observing that, under the capped-cost model, it could be that the incentives to game the local authority needs assessment would be substantially increased. For example, if somebody is at home and receives informal care from their family member, the local authority might come along and say, "Despite fairly substantial levels of disability, we do not assess you as having any need because all your needs are taken care of by the family member." Following the assessment, it might be that the family will say, "That is rather unfair." They will go online, look at some forums and discover that, "If we say we can no longer provide informal care, we will then start getting our notional amount and our meter will start increasing." They will then request a new assessment and, therefore, understate their ability to provide informal care.

My overall point would be that these are very detailed features of how the model might work in practice, and they deserve to be explored in detail. Unfortunately, there is no real evidence of how the current system works, let alone how it would work under the capped-cost model and how carers would respond. It points to the need to pilot the capped-cost model, maybe giving specific funding to some local authorities to implement the capped-cost model now to see what happens: to see how they manage it, how the social workers manage it and how families respond.

Nick Starling: May I make a quick observation?

Q354 David Tredinnick: My immediate reaction is, yes, what a great idea. Let us trial it and see what happens because there seems to be a lot of uncertainty here about the outcomes-a particular level of uncertainty.

Nick Starling: My observation was going to be-and I suppose it links to that-that no one is expecting overnight change on this. It is a very long process. The one observation I would make is that most people want to be cared for in their own homes. That is pretty much the case. They want to be cared for by family members. Obviously, there may be problems about people gaming the system and we need to make sure that checks are in place and one of the things that private sector products can do is help support them do that. It is not axiomatic that the only private sector product is all about shoving someone in residential care. At the risk of being misinterpreted, insurers will want to minimise their payouts. If they can do that by looking after someone at home-supporting them at home-that could be a desirable outcome.

Q355 Valerie Vaz: Can I take you back to the question-I do not think Andrea Rozario and Nick Starling got a chance to answer it-about the work that was done in terms of the products that are available and the likely takeup of the products for social care? Have you done any work on that?

Andrea Rozario: You mean the financial modelling. Individual members, such as Partnership, may well have done some financial modelling. As an industry, we do not have the budget to do the financial modelling required at this moment. There is probably a slight reluctance because we would need more clarity before we were able to do that.

Q356 Valerie Vaz: But Dilnot has been around for a while. People know that Dilnot is going to happen. You did not know what the conclusions were, but you must have some idea-

Andrea Rozario: But we do not know whether Dilnot-

Q357 Valerie Vaz: Presumably, when you are talking to the Department of Health you are saying, "Yes, we can provide the products. This will be the takeup and this will be the cost attached." Are you able to provide that information for them?

Andrea Rozario: No. While we know that Dilnot has obviously come out with his recommendations, we do not know that they are going to be accepted and taken up. There is an awful lot of investment that needs to be done and there are concerns over whether that investment is going to pay off, if you like, because there are still not enough concrete guidelines for us to be able to come up with some modelling or to be able to invest in that modelling.

Q358 Valerie Vaz: Mr Horlick has done it, has he not?

Chris Horlick: Not on behalf of equity release products. We have done it on behalf-

Q359 Valerie Vaz: No, but you have done your own.

Chris Horlick: Yes, we have. We think there is the potential for equity release to increase, and indeed the Chairman’s suggestion, that equity release could be used to fund an annuity to cap the costs of care, happens today for people receiving care in their own home.

Q360 Valerie Vaz: My point was a general one about the products available.

Nick Starling: The ABI has not done any modelling. I know that people sometimes roll their eyes when I mention a working group, but there is a fairly intense amount of work going on with the Department of Health, at the moment, and the ABI, which is trying to land on what sort of products might arise. We think that is the point where you start doing modelling. It can be an iterative process, if you like, but Dilnot sketched an absolutely huge canvas. To try and do any sort of modelling on that huge canvas is a bit of a challenge. Focusing it down on the sorts of products which might emerge and saying, "Let us do some modelling on that and let us do some research with possible customers on that to see how people react to it," is for the future.

Q361 Chris Skidmore: I want to follow up on the equity release schemes. If Dilnot goes ahead and then suggests that the localauthority-provided deferred payment schemes become the norm, what would be the point of an equity release scheme? Would anyone take them out? Surely it would be the death knell of those?

Andrea Rozario: It would not be the death knell. As it stands at the moment, the taking out of equity release for longterm or domiciliary care is a small part of the market. We see that market growing. There is real potential for the market to grow as people become more aware of the fact that they can use their equity and their housing wealth to help pay for their care and offer them more choices. If the deferred payment scheme came into operation and was affordable for the individual local authorities to be able to supply that across the board, which is questionable-there is far more likely to be a partnership to be able to provide a deferred payment option, but if that was to happen-it would not be the death knell for equity release.

Q362 Chris Skidmore: Given that equity release is so dependent on the housing market-and obviously, as we have seen over recent years, there is huge variation with housing costs still rising in London or decreasing in the northeast, for instance-and we know, for probably the next 10 to 20 years that the housing bubble has burst, how will equity release work in the future?

Andrea Rozario: For those in the right age group, they have already amassed their housing wealth over the last 10 or 15 years. It has already been proven, from research from the PPI, that the biggest asset they hold is their property. Even if property prices decrease, it is still going to represent a large amount of their assets.

Q363 Chris Skidmore: Is it not, therefore, true that equity release is, essentially, a concept for the baby boomers and, beyond that, we do not know what is going to happen? Equity release, being a oneoff phenomenon, we do not know how that will cascade down through the wealth of the generations beyond that?

Andrea Rozario: Yes, clearly. That is my argument as to why we need different products for different generations. The younger generations, which may not have the benefit of high house price inflation in the years to come, may have to have different options and products to cater for their longer-term needs. But those in the age group now of 65 and above have the housing wealth, on the whole, and they are the ones that are going to have the need right now.

Q364 Chris Skidmore: In terms of the future generation beyond the baby boomers, do you have any assessment of what impact equity release taking place now would have on the future housing market? Have any studies been done?

Andrea Rozario: No, I am afraid not-not that I am aware of. Individual members may have done that, but I am afraid I am not aware of it.

Q365 Rosie Cooper: I am quite depressed by where we are-almost. I hear from the panel a clear lack of confidence all round that Dilnot will be implemented, whatever the cap. The surety is not there and the modelling has not been done. Again, there is a belief that parts of it-for example, equity release-will increase, but you have not done the modelling there. We have not explored the products to the nth degree. I almost go back to where we started. The costs are great. In middle England they are talking about protecting their inheritance. What we are really now talking about is liberating your cash while you breathe so that there will not be anything left for you to leave anyway.

We start with selffunders. Does Dilnot meet the best needs of selffunders? How are they going to get the financial information? If the Chairman will allow me, I would like to offer you a reason why we, as MPs, do not get a full postbag about this. It is partially because, as you say, people believe that somebody else is going to pay for it. I think, having had three members of my family die in the last year, that the system exhausts everybody involved. The local authorities and all those people stick you on a stupid merrygoround and do not tell you clearly about continuing care and all of that. It is a complete joke. We had the lawyers in here before, but I did not say too much because I was likely to explode. It is a complete merrygoround, so, by the time you get to the end, you are almost accepting. The family and everybody else are completely drained and you moan like heck. If you do lose your house, you may then want to go and moan at an MP, but that is the thin end of a very great wedge. People are exhausted with this. I was hoping that I could get some feeling from the panel of real clues-not that there would be an absolute cureall here-as to how we are going to make a breakthrough.

Andrea Rozario: The only way we are going to make a breakthrough is this. One of the things we have been lobbying for is a working group between industry and Government. We want to converse, to be able to understand the market better and to be able to provide products and advice that are right for the customers. We appreciate that, at the moment, it is an awful journey for anybody, looking for advice and information, on where to go to get help for care costs and how you can look after your own family to ensure they are getting the best possible results all round, both financially and from a care perspective. But there are all sorts of barriers to the industry as well, one of which is the lack of a conducive environment to make providers want to operate in this market, and for advisers as well.

Q366 Rosie Cooper: What is a "conducive environment"?

Andrea Rozario: In terms of the environment, we have obstacles to overcome to be able to produce products for the customers. There are all sorts of different obstacles that stop providers entering into this market. One of those obstacles is misinformation. For instance, the media will often portray equity release in a negative way. The regulator will refer to equity release with negative terminology, if you like, and this impacts on people’s-

Q367 Rosie Cooper: You would not suggest, with equity release, that it has had anything other than a negative view. I have not looked at a current model so I would not dare to have an opinion but, in the past, it has had a really poor reputation.

Andrea Rozario: Absolutely, but that is the crux of it. It is in the past. We have been operating for 20 years as a trade association and we came together to put in a code of conduct. That code of conduct cleaned up the market dramatically. We now have very, very few complaints. In fact, you can measure that with the Financial Ombudsman scheme. The numbers of complaints that come to equity release compared to other areas of financial services are very low. We have put in certain criteria. However, those criteria are not necessarily recognised, the safeguards have not been recognised and the innovation in the product design has not been recognised. People’s perceptions are still negative and we consistently have to fight that negativity to be able to give people confidence.

Q368 Rosie Cooper: But is it not that, in the normal market, you ought to be doing more?

Andrea Rozario: We are trying.

Q369 Chair: We are now running out of time. Mr Starling and Mr Lloyd want to come in.

Nick Starling: I want to end up more optimistically.

Q370 Chair: Could I ask you this? Andrea Rozario has said we need a working group between the industry and the Department. I thought that is what you said, at one point, existed. Could we be clear whether that work is going on between the industry and the Department?

Nick Starling: Yes, it is.

Andrea Rozario: There is a working group between the Department of Health and industry, which we are also part of, along with the ABI. What we need is one Government Department to take ownership of equity release and perhaps longterm care products because the difficulty that we have is often, when we are dealing with different Government Departments, nobody has ownership of equity release. While there is a working group ongoing at the moment, we would want to see that continue, not just be-

Q371 Rosie Cooper: If you are part of that industry working group, why can you not make it a topic?

Andrea Rozario: It is part of the topic, but this industry group has probably only been operational since the report came out. We are talking about the past few weeks.

Q372 Rosie Cooper: How many times has it met?

Nick Starling: It is meeting a lot. I have someone in my team working virtually full time on it. This comes back to what I was saying about being optimistic. In brief, we thought the Dilnot report was a fantastic piece of work. It got to the bottom of a lot of the issues and has produced a fantastic piece of analysis.

Q373 Rosie Cooper: Which nobody understands. That is the point everybody has been making. Nobody understands it.

Nick Starling: Some of it needs unpacking, but we are promised a White Paper from Government in April. It is not a seasonal promise. It is April. There is a huge amount of work going on, so there is reason to think that there is a lot of commitment out there to making something work. We do feel in quite an optimistic frame of mind. We are certainly in a much better position than we were, say, four or five years ago when this debate really started.

James Lloyd: I have an observation. I would not want the Committee to focus too much time and attention on equity release as a single product. It is basically a way of people spending down their wealth. If the capped-cost model was implemented, the state would provide some cap on how much you might need to spend your wealth down. In the absence of the capped-cost model, equity release is just a way of saying, "You will pay for your care. If you burn your way through £150,000 worth of housing equity, using equity release, you are still paying for your care and you are using your house to do so." You, as MPs, will still get complaining letters from people who may have sold their home to pay for their care, used a local authority deferred payment scheme to pay for their care or indeed used equity release as a way of paying for care. This is not new money being brought into the system. It is different ways that people can spend down their wealth. It takes you back to the issue of risk-pooling and the need for greater risk-pooling in the funding of longterm care. If that cannot be done by private sector insurance and different forms of prefunded insurance, such as prefunded insurance and disabilitylinked annuities, then you are looking at other forms of prefunded risk-pooling, as my colleague here referred to, which is effectively via the state-via taxation, via statesponsored insurance and other mechanisms.

Chair: Are there any other points? No. Thank you very much. Thank you for your evidence.

Prepared 28th November 2011