We have made enormous progress in improving healthcare and tackling illness, which is helping us to live longer. Equally, we're making significant improvement in the provision of social care, taking forward the approach set out in the Social Services and Well-being (Wales) Act 2014. The nature of social care in Wales today seeks to be co-productive, based on what matters to people, by promoting prevention and early intervention. Whilst social care is changing and improving, the challenges of an ageing population are inescapable. That is why we are committed, as a Government, to developing new funding models to support the future costs of social care. This commitment is at the heart of the work of the Government's inter-ministerial group on paying for social care, which I will now chair, taking over the work of my colleague Huw Irranca-Davies, and I should say that that was ably done and it leaves us in a good place.

Professor Holtham's report, which this debate centres on today, has been key to informing our early thinking. More broadly, the report is serving as a catalyst to refocus the wider debate around paying for care, and this, of course, includes direct engagement with our partners in local government. A social care levy is the approach that Professor Holtham has suggested, and his advice requires careful consideration alongside all other options, including insurance-based models. This approach may soon be considered in the context of the long-promised UK Government Green Paper on social care and potential proposals for a UK-wide system of paying for care.

Before I return to Professor Holtham's report itself, I want to say a few words about social care and the vital work that our social services do today to keep vulnerable adults and children safe, to help people to remain independent and to live fulfilled lives and to improve their well-being outcomes. The decade of austerity that we are living through and our diminishing resources mean that local authorities are facing pressures across all aspects of social services provision. The Welsh Government budget in 2019, the day-to-day revenue spending, will be 7 per cent lower, or £1.2 billion lower in real terms, than in 2010-11 on a like-for-like basis. Despite that challenging environment, spending in Wales on social care for older people has been protected in relation to our overall budget. There was a 13 per cent increase in cash terms in social care funding between 2010-11 and 2017-18—almost three times the rate of increase in the Welsh Government's overall budget. Wales has a higher proportion of older people than England, but, even allowing for that, spending per person over the age of 65 in 2017-18 was 23 per cent higher in Wales than in England—up from around 8 per cent higher in 2010-11. It should not, therefore, be a surprise that we will not support the first Conservative amendment that tries to shift blame away from Tory austerity. We will, however, support the second amendment.

The final budget for 2018-19, which we will debate next week in this Assembly, includes a further £7 million to raise the capital limit for residential care to £50,000 from this April. From April, people will be able to keep more of their hard-earned savings before having to contribute towards the cost of their care. This is the most generous threshold of any country within the United Kingdom. This Welsh Labour-led Government promised Wales that we would more than double the capital limit in this Assembly term, and we have done just that.

Official population forecasts add further impetus to the debate about how we pay for care. The forecast suggests a rapidly ageing population over the next 10 to 15 years that would increase demand upon our services for older people and place pressures on already stretched budgets. The population of over 75s in Wales is likely to increase by more than 40 per cent by 2030 and by more than 70 per cent by 2040. And the number of people living to be over 85 is projected to more than double by 2040, and that, of course, is something to celebrate, but is also something to plan for. It is against these forecasts and the anticipated increase in demand for social care that Professor Holtham proposed a levy on income to help pay for care. The proceeds from the levy would help fund the immediate costs of care for older people, with the remainder being placed in a ring-fenced fund and invested to help cover expected increases in the demand for care for future generations.

Our key objective in bringing this debate today is to invite Members' views on Professor Holtham's model and, in particular, to explore the four fundamental questions that Professor Holtham raises in his report. Firstly, he asks whether the social care levy should be earmarked or hypothecated to meet the social care costs. Now, hypothecation can, of course, reduce overall budget flexibility, but his report suggests that proceeds should be ring-fenced to help increase public acceptability of a new tax. Secondly, Professor Holtham asks whether the social care levy model should be based on the contributory principle: so, should a record of payments into the scheme be required to enjoy the benefits? Such a system could create higher administrative costs, but he also concludes, though, that the system should be of the collective type, where benefits are offered unrelated to the scale of a person's contributions. Next, he considers how fairness to those on different incomes and age cohorts could be assured. With Professor Holtham's model, the levy rates would vary between 1 and 3 per cent. They'd be higher for older people initially, as they would pay in for shorter periods, and that would enable an element of intergenerational fairness, but such a system would come with administrative cost.

Finally, he asks: should the scheme be pay-as-you-go, or should revenues be paid into a fund and invested to meet future demands? Professor Holtham makes the case for a funded approach. An initial age-related tax with rates of 1 to 3 per cent, declining over time to 1 per cent, could potentially support a 20 per cent increase in care spending per person for older people and accommodate the forecasted effects of ageing to at least 2040, but this is only possible with adequate investment returns and if collection and administration costs are kept reasonable. 

These are, of course, all important questions. As Professor Holtham himself explained both to the Finance Committee and to the inter-ministerial group on paying for social care, his assessment is based on a number of assumptions that we will need to properly consider and to take a view to inform our policy formulation. 

I really do welcome the views of Members about all the possible models of paying for social care in the future, as well as those fundamental questions posed by Professor Holtham in relation to a social care levy. I hope that today will be the start of a more informed debate between parties, not just within the Chamber, but outside it, and, indeed, potentially within other committees of the Assembly. We will need maturity and commitment across political parties to deliver on this challenging but unavoidable agenda. We will look to make progress, with a clear and focused plan to take this work forward. There are no easy answers to the challenge of paying for care, as the delayed UK Government Green Paper shows, but, together, I'm confident that here in Wales we can develop an approach tailored to our needs and fit for purpose now and in the future.