It's time to be honest about social care funding

For 23 years, governments from both sides have reduced the real value of the winter allowance year after year. In 2000 it was set at £200. It has remained at that level until this year, a reduction in its real value by almost half. During all that time I have not heard a peep of complaint. At the same time, pensioners' incomes have risen twice as fast as those of those in work. Nevertheless, the decision to stop this payment permanently has sparked outrage.

Our social care system has been a mess for at least three decades. Tens of thousands of people have had to give up their savings, even their homes, to pay for the huge and uninsurable costs of their care. Politicians of all stripes have bemoaned this fact. We have had promises, royal commissions and review after review. Finally, the Dilnot Commission's proposals to cap the costs paid by the needy seemed to have been accepted by all.

That's true, it seemed so, but the Conservatives never actually made the change. And that policy was actually the biggest casualty of Rachel Reeves' July statement, although Wes Streeting, now Health and Social Care Secretary, said just weeks before the election that Labour had no plans to move away from it. That represents a huge policy U-turn, beside which the winter fuel payment policy becomes meaningless.

There is currently an election for opposition leader in which all the candidates say they want to keep taxes low and reduce the size of the state. As far as I can tell, none of them have a credible answer as to how they plan to achieve this, which is perhaps not surprising given the obviously shocking state of many of our public services. All, however, loudly condemn the cuts to heating allowances. All were part of a government that raised taxes and spending and expanded the size of the welfare state. All want to increase defence spending, cuts to which have been pretty much the only reliable source of funding for other services for decades.

The new Prime Minister welcomes a report on the dismal state of the NHS which makes it crystal clear that a large part of the problem is due to a lack of investment in buildings, machinery and technology, a shortcoming that will cost tens of billions of pounds to fix. At the same time, in the same speech, he repeats the absurd promise that he will not raise taxes on “working people”. There are no taxes that do not affect working people. And if by working people he means those on average wages, then their direct tax burdens are already lower than they have been for the past 50 years.

A Scottish finance minister is blaming Westminster-imposed austerity for budget cuts, even though her country benefits enormously from the Barnett formula, which provides for far higher spending north of the border than south of it. What we in England wouldn't give for the higher welfare, free higher education and higher public sector salaries that her government can offer the people of Scotland, thanks to this formula, for only slightly higher taxes.

A government ushering in a new era of honesty and transparency in public finances pretends it had no idea before the election that the public finances were unsustainable. Then it hammers home the message of an unexpected £22 billion “black hole”, much of which it knew about and had control over. And part of it – what happened to the so-called Treasury Reserve – it simply refuses to explain. There is now speculation that, rather than tackling some of the challenges head-on, it will resort to redefining the debt rules, something the Chancellor of the Exchequer seemed to have ruled out before the election.

Last week the Office for Budget Responsibility threw a huge stone into this maelstrom of denial, obfuscation and evasion. Whatever the details of the budget holes we are now arguing about, the public finances are not sustainable in the long term. You don't have to take the exact figures too seriously – we are not going to end up with debts approaching 300 per cent of national income – to see the urgency.

In the coming decades, we will spend more on health and pensions. A lot more. We will lose about £30 billion in fuel duty revenue. We will spend billions on tackling climate change. We will no longer be able to plunder the defence budget to fund all of this.

This is the reality that was voiced in the run-up to the October budget, which featured tax adjustments here and definitional changes there. Even if we are on track to meet the current extremely loose fiscal target of debt falling in five years, our public finances will not be sustainable without serious welfare cuts or tax increases.

So we will have to make choices. Cutting winter heating subsidies is a tiny decision. Of course it was ridiculous for a minister to claim that this was a decision necessary to avoid immediate financial ruin, but it is the duty of those who do not like this to say what they would propose instead.

Not expanding the size of the welfare state to cover the cost of social care is a bigger decision. It is a decision that our welfare state should not do exactly what it was created to do, which is to provide social insurance to protect people from risks they cannot insure themselves. But that would cost more, and if we are not prepared to pay for it, perhaps it is time to accept the consequences. If, to our collective shame, we will never muster the political will to fund social care for some of our most vulnerable citizens, as is becoming increasingly obvious, then it is much less cruel to simply say so.

This article first appeared in The times and is reproduced here with kind permission.