Intergenerational Fairness in Government Policy

Lord Filkin Excerpts

Thursday 26th October 2017 Lords Chamber

[Lord Filkin (Non-Afl)]

My Lords, I congratulate the noble Baroness, Lady Smith, on this important debate. I declare two interests. First, I am delighted to be a member of the Intergenerational Commission, chaired by the noble Lord, Lord Willetts. It has been one of the most thoughtful processes I have ever been involved in. Secondly, I chair the Centre for Ageing Better, an independent body promoted by government, committed to trying to make it possible for many more people, young and old, to benefit from their longer lives. That is the focus I will bring to this question on intergenerational fairness: how do we make it possible for more of today’s and tomorrow’s older people to benefit from their longer lives?

Many of us in this House know the benefits of longer lives. We are enjoying them daily. We know that there are great intergenerational benefits from that. So many grandchildren have relationships with their grandparents in ways that were less common 50 years or so ago. That leads to an enormous increase in societal well-being. We know that this process has not stopped. Demographers forecast that 50% of girls born today will live to be aged 100 or more. These are great societal gains and we should celebrate them.

However, they do not come without risks, of which there are a number, but I will focus on just two. The first is income. The noble Lord, Lord Turner, put it graphically and truthfully in his famous report that longer lives mean we have to work longer, save more or both. There are no other options. Contrast that with the Financial Conduct Authority’s significant survey last week of I think about 13,000 non-pensioner adults, of which 31% had no private pension. They were relying on either the state or their spouse. I will leave it to noble Lords to decide which of those is riskier.

Great progress has been made on auto-enrolment, which we should celebrate, but none of us would have thought this was a particularly sensible system, which effectively puts all the responsibility and risk on the individual to save for their own pension, to have foresight and to be able to make sacrifices. It also shunts all the investment and longevity risks. Not many other countries in the world have such a risky platform for later-life income and we should not think for a second that the job of pension reform is done, even though progress has been made, not least by the noble Baroness, Lady Altmann, and many others.

What is to be done about this? I shall say two things quickly. Keeping in the labour market—particularly helping today’s 50 year-olds keep in the labour market—is fundamental. So is increasing the housing supply radically: that does not necessarily mean more owner-occupiers; what we are concerned about is increasing the supply of good-quality housing which enables people in later life not to have the burden of increased housing costs. If today’s 30 and 40 year-olds have to pay high rents in later life, they have to increase their savings yet further, and they will struggle to do so.

The second big issue we need much more debate about is that because there are going to be many more of us, for many reasons, there is going to be a very significant increase in the demand for and the cost of the NHS and social care. We are not just debating about now, we are also debating what is pretty certainly going to happen over 10 years. There are many reasons for NHS cost increases, and I will not go into them, but longer lives is one of them—if you are alive another 10 years you have many more episodes of health treatment. Secondly, many more older people generate more costs. Between 2010 and 2030 there will be 50% more 65 year-olds and 100% more 85 year-olds and they all go into those last years of life at some point, when their cost burden will increase.

The Lancet in April produced an epidemiological report which said that there will be a 25% increase in the number of disabled people in our society in 10 years’ time. That, for planning purposes, is now and we have, therefore, to face up to the increased health and care demand and cost over the next decade. As part of this, we clearly need a proper social care settlement, as was well said by the noble Lord, Lord Turnbull. We cannot fudge this, we have to get the right balance between risk and contribution and between public and private expenditure. Wherever that balance is struck, it will certainly require more public expenditure, either to compensate for caps or to face up to the underfunding of people with moderate needs who are currently going without any social care at all: there will be many more of them over the next decade.

When I talk in private to leading economists and ask for a rough view of what they think the increase in NHS and social care costs will be in 10 years’ time, I get a figure of 2%. That is a very small figure, but a 2% increase in GDP, which is what we are talking about, is equivalent to £1,400 more in taxation for the average family. There is no science in that figure of £1,400, but if we can keep it to less than £1,000, we will be incredibly lucky. This is not the end of civilisation. The issue is that today’s and tomorrow’s younger people have a right and expectation in our society for decent health and social care standards, but we have to recognise that we have to pay for that. No Government, I fear, are going to stand up and say that each family will have to pay £1,000 more tax in 10 years’ time, but we need at least to promote a debate on that and recognise that the funding of that has to have some basic principles. If we are to meet those standards, we have to take account of people’s needs, but also of their means to pay—wealth as well as income—because that is the ignored issue, as the noble Lord, Lord Turnbull, said. We have to take account of both, and age as a filter as to whether you need help or not is an increasingly obsolete measure.

I hope that out of this, and out of our work, we will affirm the fundamental importance of good later life for tomorrow’s older people as well as today’s and face up to some of these significant public policy challenges that are implicit in longer lives and more older people.