[Skip to content]

Sign up for our daily newsletter
The Actuary The magazine of the Institute & Faculty of Actuaries

Q&A: On my agenda: Andrew Dilnot

Deepak Jobanputra and Sarah Bennett talk to Andrew Dilnot, chair of the Dilnot Commission, about the UK social care system, statistics, celebrating increased longevity and why he is not particularly wedded to the Dilnot Commission proposals


Curriculum vitae
Andrew Dilnot is the principal of St Hugh’s College, Oxford University. He was the chairman of the Commission on the Funding of Care and Support, whose report was published in July 2011.
He is a former director of the Institute for Fiscal Studies and has served on a number of parliamentary committees, looking at social and long-term care issues.
He is an Honorary Fellow of St John’s College Oxford; Queen Mary, University of London; the Swansea Institute of Higher Education; and the Institute and Faculty of Actuaries.
Most recently, he was appointed as chairman of the UK Statistics Authority.

“Three-quarters of us will need some form of care as we get older. For many, this brings fear.”
Our society in the UK is ageing. What are the implications for social policy?
Everyone talks about the “burden of ageing”. I see the fact that people are living longer as a matter for celebration. The alternative is the burden of being dead. We would rather be alive than dead! We tend to think that needing care is a disaster, but people can have many fruitful years in this situation.

What are the main issues the UK system faces in formulating solutions for social care?
Three-quarters of us will need some form of care as we get older. For many, this brings fear and uncertainty, because there is no way to protect against the risk of high costs. Providing some certainty will enable people to prepare for the future. It is also bizarre that the issue doesn’t grab huge media interest.

How have changing demographics exacerbated the situation?
The structure of the population has completely changed. In 1901, there were 61,000 people aged 85-plus. Now there are 1.5 million, representing an increase of 25 times. There have also been radical changes in the geographic location of the population.

What about the belief that “the state will provide”?
There is a misconception that, because health is covered by the NHS, social care will be too. People are shocked to discover that social care is not covered, except for the indigent. People expect the state to provide and are irritated that they don’t receive the care they need. It’s also an issue we’d rather not think about as it is seen as a precursor to death. We need to find ways to talk about such issues without fear. GPs and independent financial advisers (IFAs) have a joint role to play here.

What insight can actuaries bring?
Actuaries will appreciate that the risk distribution of social care/long-term care lends itself to risk pooling. The absence of risk pooling represents a huge welfare loss for society as a whole and creates terror as individuals are forced to self-fund. The government and the private sector can step in to create risk-funding mechanisms to alleviate key pressures that are building up.

Actuaries appreciate that there is a need for risk pooling, so why has long-term care insurance failed in the UK?
We have a huge supply-side problem. It is not feasible for insurance companies to take the real tail-end risk for 50 years or more. There is a strong argument for state intervention. Unlike an insurance contract, a promise from government can change. Where there is enormous uncertainty over the future, it is easier for the government to offer the risk pool. Moving the cap up would be problematic, but not a catastrophe, because tail risk is still covered and this is what matters most. Inevitably, insurance products will pop up to fit alongside and on top of the government promise.

What about the level of the cap and the proposed increase in the means-testing threshold?
Critics have argued that the Dilnot Commission proposals protect the inheritances of the wealthy. I argue that, in the same way as the NHS covers healthcare needs without depleting wealth, the tail-end of social care should be covered by the state without necessarily depleting wealth. A higher cap for the very wealthy is a possibility. The fear of losing everything leads to society doing nothing. A cap can help provide a mechanism to address this.

What shocked or surprised you during your research for the Fairer Care Funding report?
First, the sheer scale of the problem – for example, three-quarters of us will need social care of some form in our older age. Second, nowhere in the world is there a good regime of delivering social care. Interestingly, Australia recently developed similar proposals to the UK completely independently of the commission. Third, I was interested to learn that arthritis is one of the main conditions leading to care needs.

Do you have any expectations with regard to the upcoming white paper on social care reform?
I have not been involved in drafting the white paper or the progress report on funding that will be published alongside it. The coalition government, when it came to power, boldly stated that: “We understand the urgency of reforming the system of social care to provide much more control to individuals and their carers and to ease the cost burden that they and their families face”. I expect we will find out in the white paper how the government is going to do that. We tried very hard to find what we thought would be the most effective way of doing this. If someone came up with a better way, I would be delighted. Either the reforms proposed by the Dilnot Commission or a more effective reform will be announced. I will be disappointed if nothing happens or if something is announced that isn’t really as significant as the government suggested.

Does government really understand the urgency?
These sorts of changes at one level creep up slowly. We don’t think about getting old and needing care very much. I spent 20 years working at the Institute for Fiscal Studies (IFS) looking at taxation, public spending, poverty, social security benefits and pensions. The subject matter was always of great public interest. But social care does not attract the same amount of attention. I think this is changing. The whole community has been very supportive of the commission. There will be some level of anger if nothing happens. Cross-party talks are still going on. What happens over the next year or so will be political to an extent because it involves spending trade-offs.

What do you see as the role of informal carers going forward?
There are 1.5 million registered carers in the UK and 6 million informal carers, with a variety of attitudes towards the latter. Most care is provided by spouses/partners. After reforms are implemented, we will still be heavily reliant on informal carers. Demographic changes will increase requirements for carers in general and I see informal carers covering low and moderate care. Critical or substantial care is likely to necessitate a more formal care setting. We are going to need professional help. All parts of the political spectrum agree that we want a world where people can take care of themselves. The state should only step in when really necessary.

Could pensions be used as a long-term care pot if they were well funded?

It is natural to use retirement savings to fund long-term care. The risks of needing long-term care are negatively correlated with the risk of living longer. Disability-linked annuities (DLAs) offer a hedge. This starts to look more like a pension than health insurance if the DLA needs to cover only the first slice of costs. It was disappointing that the Treasury deemed DLAs unacceptable in the early 1990s. Government needs to state very clearly that it is acceptable for long-term care to be covered via pension schemes.

Is this an opportunity to create a tax that would cover the cost of care for the younger generation?
By and large, I have steered clear of this issue. One four-hundredth of public spending is needed to fund the tail-end risk. This solution could be funded via an increase in general tax, a reduction in public spending or a dedicated tax. Public finance is under pressure, but not enough to be a constraint.

How can we entrench a culture of early intervention?

It would be advantageous to have various trigger points to help people think about their needs. Our culture does not grasp this issue; fear paralyses people from doing anything. Early interventions minimise the probability of needing care and needing the NHS, for example, after a fall. More handrails and chairlifts will prevent higher care needs and higher costs further down the line.

What timeline do you envisage for changes to be implemented?

We could see some change very quickly. We could prioritise people on the brink of needing care, who are most fearful. If a cap is announced, the fear will disappear and we would see changes in their behaviour. The earliest we would see changes being implemented is probably 2014. In terms of the provider market, there are so many different providers that there is scope for rapid change.
If you had a magic wand, what would you change?
I would like to see the lack of risk pooling addressed. Second, I would like to adjust the means test threshold, as the current system encourages cheating. For example assets are transferred or hidden to access state funding for social care. Lastly, I’d like to see the lack of portability addressed.

What could actuaries do differently?
Actuaries should talk to people about social-care funding in simple terms. We should find ways to engage stakeholders. Statistics are at the bottom of everything. We are not always good at communicating statistics in a simple way.

What could insurers do differently?
I would like to see insurance companies coming up with ideas that could work with a future system involving a partnership between the community, the state and the private sector. The Dilnot Commission proposals represent one way of doing that, but, if actuaries and insurance companies could propose a more effective solution that still achieved the goal of pooling risk for the whole population, I would be delighted.

You've been very kind to insurers, but surely one could argue that they should be taking this risk already?

We could be critical of the insurance industry, but the uncertainty is so great. Long-term care insurance has not really worked anywhere in the world. I would like to see insurers approach government and engage meaningfully to find solutions.

Please tell us more about your new role at the UK Statistics Authority.
UKSA is four years old and effectively ensures that statistics are independent of government. As the chairman, I am Crown-appointed and I report directly to Parliament. My remit is first as a regulator and second as a champion for statistics. There is an astonishing richness of data available to our society.

What is the most exciting place that you have travelled to recently?
I have been involved in setting up a Chinese Study Centre and have been travelling frequently to Hong Kong and China, which has been a great experience.

How do you maintain a work-life balance given your various high-profile roles?
It’s not as bad as it sounds! I enjoy spending time with my lovely wife and two grown-up daughters. We live in Oxford but we also have a house in Northumberland, where I enjoy gardening.

Do you read The Actuary magazine?
Yes, in fact I have a copy of the latest edition in my office. It’s one of the few publications my PA allows me to keep!


Please enter your comments below
Fill out the all the boxes and click the 'Submit comments' button to make a comment on this page
*Comments are added to the bottom of the page. They are moderated and will not be published until approved by The Actuary team. They may be edited.