Andy Burnham’s first Labour Party Conference speech as prime minister was pitched at a high emotional level and showed much of what makes him an effective politician: he comes across as warm, empathetic and sincere in a way that few recent PMs have managed.
By leaning into social care, one of the hardest problems to tackle in British politics, Burnham has also shown a willingness to break with the safety-first approach that Keir Starmer gravitated towards. He has, for now, redefined a significant part of the terms of British political debate. But behind the vision, difficult questions must be asked.
Staking his and his government’s reputation on the creation of a National Care Service is a genuinely high-stakes gamble by Burnham. On paper, it’s a hugely appealing idea: universal social care, free at the point of need like the NHS, will – in the prime minister’s telling – end the need for people to sell homes or run down savings to pay for care, and lead to better pay and conditions for care workers, whom Burnham addressed directly. But making all this work is fraught, which is why governments have failed so consistently to rework our social care system.
On the count of Baroness Casey, who was commissioned by Starmer to lead a review of social care, there have been 22 attempts at reforming the sector since 1997, all to no avail. In recent memory, Theresa May’s 2017 pledge of reform was very effectively branded a “dementia tax” by Jeremy Corbyn’s Labour and played its part in the loss of the Tories’ majority at a snap election they were expected to win decisively. Looking back further, Burnham’s own plan as health secretary under Gordon Brown to socialise the costs of late life care was attacked by the Tories as a “death tax” shortly before Labour crashed out of office in 2010. The political risks here are real.
Social care is also expensive. The Health Foundation charity and think tank estimates that the creation of an NHS-style care system would cost around £18.5bn a year more by 2035, although it would also have knock-on savings for the NHS. A shortage of care contributes to medically fit patients being kept in hospital for longer than necessary, with the King's Fund counting around 13,000 delayed discharges a day in England, occupying almost one in ten hospital beds at a cost of £2.7bn a year.
It is to meet those costs that Burnham made his other big announcement.
The pensions triple lock, introduced in 2011 by the Conservative coalition government, guarantees that the state pension rises each year by whichever is highest: average earnings growth, inflation, or 2.5%. As a result, state pensions have grown reasonably quickly over the past 15 years, particularly relative to earnings and while most other public services have suffered real-terms cuts in funding.
Absurdly, this gets presented as a problem: one of greedy old folk taking money away from the hardworking young. But those young people will one day be old themselves. Securing provision today makes it more likely they will have the same benefits in the future. No matter how old you are, everyone has an incentive to get the pension system working.
And for all the relative protection from austerity, the British state pension remains among the lowest in Europe relative to average earnings. Our pensions system is a mess; a relatively weak basic state provision backed up with a chaotic mixture of public and private schemes. This complexity tends to reproduce (and reinforce) inequalities in the wider system, with better-off pensioners enjoying relatively tax-privileged treatment for their pension incomes, even as one in seven pensioners remain stuck in poverty.
Burnham has proposed removing the automatic link of pension payments to average earnings growth, and replacing it with a guide that the pension will, over time, stay at around a third of average earnings – a level it is expected to reach by 2030/31. This relatively simple tweak – so subtle that, as Burnham explained his plan on stage, it almost sounded like no change at all – produces notional savings that build to around £15bn a year by the end of the 2030s, and £50bn a year by 2050.
I say “notional” deliberately: these savings appear only to the extent that future inflation stays below earnings growth or 2.5%, as the official forecasts assume. But as we economists never tire of pointing out, future inflation is likely to be higher than in the past, and those forecasts are likely to be wrong. The change may save much less, depending on how both inflation and earnings behave over the next few years.
Even if the savings do appear, there are two problems. The first is that this is a cut in expected pensions to pay for social care. That is likely to be somewhat regressive: the winners are those who no longer have to sell a house to pay for care, but those losing out on the pension will include people who do not own their home or never need care.
The second is that it will not be enough. The Institute for Fiscal Studies expects savings to be small in the early years and says the reform should not be expected to fund universal care in the next parliament, while the Office for Budget Responsibility’s analysis of a similar change found no significant savings before 2034. The government’s calculation of the savings appears to be drawn from the very top end of plausible estimates. Something more will be needed; perhaps a return to the original Burnham death tax, or changes to those pensions tax reliefs.
What Burnham has given us is at least a framework for major change, and his willingness to pitch structural reform rather than policy tweaks is commendable. But it is a long way from a workable plan, as the prime minister admits. Amid other budget pressures and sharp rises in the prices of fuel, energy and food expected shortly, how much of Burnham’s vision can be implemented remains an open question.
Chancellor John Healey’s own party conference speech, delivered the day before Burnham’s, gave little reason to think that the government would consider introducing wealth taxes at the Budget on 28 October. Yet without significant and far-reaching reforms centred on the fairer taxation of wealth, Burnham’s soaring rhetoric will soon be brought back to earth with a thump.
