This chapter explores what inequality looks like from the perspective of the capability approach. ‘Sideways’ inequality — that is, inequality between individuals and groups in their risk of experiencing disadvantage — has been central to the capability approach since its inception, and we have tools such as the Equality Measurement Framework with which to systematically assess multidimensional horizontal inequalities. This includes examining differences in outcomes, in how people are treated, and in the autonomy they enjoy. ‘Up and down’ inequality — that is, how people are distributed across the spectrum between advantage and disadvantage, has been much less thoroughly investigated within the capability approach, and there are normative, conceptual and empirical issues to be resolved. In comparison to an exclusive focus on income and other economic resources, analysis of multidimensional vertical inequality is likely to alter who is understood to be most advantaged, how much advantage they have (the degree of stretch), and the extent of concentration of advantage in the distribution as a whole. Finally, inequality ‘along’ the dimension of time has become an important component of research on income inequality, and there are analogous questions about both short- and long-run capability mobility that we are only just beginning to address.

The situation on the eve of the crisis

In 2007/08, just before the financial crash unfolded, spending on adult social care in England had reached £20 billion (in 2014/15 prices) after a period of sustained budget increases under Labour in response to the expanding ageing and working-age disabled populations, and in recognition of the historic under-investment in social care. This was providing services to 1.8 million adults, including some of the most vulnerable people in our society: the oldest of the old, younger physically disabled people, people with mental illness or cognitive impairments, and people with drug and/ or alcohol problems.

Complexity in the financing and provision of social care, especially long-term care, was a widely acknowledged problem. Boundaries between the NHS and local authority services, between residential and community care (including domiciliary or home care), between universal and means-tested entitlements and privately paid care, and between formal services and unpaid care provided by family and friends, combined to produce considerable uncertainty among people in need of care and their families about what services they might receive and how much they would be required to pay. Major commissions and inquiries at a rate of one per decade (Griffiths, 1988; Sutherland, 1999; The King's Fund, 2006) had produced recommendations for reform, but none had been fully implemented, as a result of lack of crossparty support or due to concerns about the cost to the public purse. However, in Scotland, the Sutherland Commission's recommendation to fund personal care costs from direct taxation while retaining meanstesting for housing and living costs was adopted in 2002 for people aged 65 or over.

Meanwhile, the trend away from direct provision by local authorities and increasing use of private and not-for-profit providers was continuing (HSCIC, 2014a, Figures 4.5 and 5.1), as was the increase in the number of people receiving payments from local authorities with which to arrange their own care (‘direct payments’). Between 2000/01 and 2008/09, there had been more than a 10-fold increase in the number of working-age people using direct payments, and an even faster increase among the over-65s (from a much lower base), so that by the end of this period there were more than 86,000 recipients of direct payments in England (HSCIC, 2014a, Annex M).

In June 2007, when Gordon Brown took over from Tony Blair as Labour leader and Prime Minister of the UK, the climate for social policy-making in the UK was decidedly warm. The country was enjoying a sustained period of economic growth, the current budget deficit and public sector net debt were both lower than when Labour came to power, and the electorate was broadly supportive of the government's expansive social spending and the improved public services they had delivered.

Our own assessment of Labour's decade under Blair highlighted a complex and nuanced story, but one which indicated a shift towards a more equal society in several important respects (Hills et al, 2009). Inequality at the very top and the very bottom of the income distribution had continued to rise, as had absolute gaps in wealth and a range of measures of inequality in health outcomes. But there had been notable reductions in child and pensioner poverty, improvements in the relative position of disadvantaged neighbourhoods, narrowing gaps in educational achievement between children from lower-income families and others, and narrowing gaps in employment, education and incomes between some minority ethnic groups and the majority white population. The significant increases in the ‘social wage’ delivered through education and healthcare spending had had a substantial equalising effect. Looking at a range of official Opportunity for all indicators, trends had improved from 1997 compared to the decade before for nearly half of them, although they had deteriorated for a quarter. Where significant policy initiatives had been taken – and many were – we concluded that outcomes had generally moved in the right direction, if not always as rapidly as policy-makers and other observers might have hoped.

The period that followed, until the election of the Conservative government in May 2015, was an extraordinary one in British economic and political history. As has been well documented elsewhere, the global financial crisis that began to unfold in the summer of 2007 and culminated in the banking collapses and bailouts of autumn 2008 plunged the UK, like many other countries, into their worst recession since the 1930s, and punched a large hole in the public finances (see, for example, Gregg et al, 2014; Riley and Chote, 2014).

Welfare provision, finance and choice

The changing role of the state in relation to what may be broadly considered ‘welfare’ is a theme that threads through all of the policy areas considered in this book. In some domains, such as early childhood, involvement of the state has increased significantly over the past two decades, while in others, such as housing, it has shrunk. Moreover, change has taken place along several dimensions – not just in terms of expenditure, but also in relation to forms of provision, the degree of regulatory control and user choice. This complexity means that a straightforward diagnosis of ‘privatisation’ is not helpful or perhaps even meaningful. As Powell and Miller (2013, p 1058) note: ‘The term privatization is multidimensional, and definitions and operationalisations of the term are often implicit, unclear, and conflicting.’ Instead, what we offer in this chapter is an account of some of the changes in policy in relation to the role of the state and their consequences for the distribution of spending – public and private – on welfare activities in the period from the eve of the financial crash to the present day.

To provide a structure for this task, we build on a framework developed by Burchardt, Hills and Propper (1999) and subsequently applied by Smithies (2005), Edmiston (2011) and Hills (2011). The framework comprises three dimensions – provision, finance and decision – each of which may be public or private, and which may occur in any combination (see Figure 10.1). The ‘pure public’ segment is what we might consider to be the archetypal post-war British welfare state – tax-financed, provided by a publicly owned and run organisation, and with little or no choice on the part of the beneficiary about how much or from whom to receive the service. Emergency treatment in an NHS hospital is an example. At the opposite corner, the ‘pure private’ sector is activity undertaken by individuals at their own initiative and purchased in the free market, such as private medical insurance.