Snap Analysis 8 September, 2021

Reform Analysis: The Government's plans for health and social care

Credit where credit is due: we finally have a Government willing to take on the social care question.

Reform has long argued against using general taxation to fund social care – it’s intergenerationally unfair and unsustainable given demographic trends – but there is no doubt that social care needs more money, and the Government is seeking to raise it; boldly breaking a manifesto pledge in the process. We’ve also argued that those who can afford to pay for their care should do so, including by using the equity from their home, which at least for some people, despite the PM’s Downing Street promise, will remain the case (small vindication for Theresa May).

However, sadly, today’s plan falls well short of a fair and sustainable settlement. Just £5.4 billion in total of the levy – expected to raise in the region of £12 billion a year – will go to social care over the first three years. That’s peanuts in the context of the funding shortfall. And come 2025-26, who really thinks the NHS’s budget will be reduced in favour of social care?

To provide the human context, Age UK estimates that 1.5 million people have unmet care needs, either receiving no care at all, or too little. That’s right now, and demand is only going to soar with the proportion of over-85s in the population expected to triple by 2066. For the new tax to be a “sustainable” solution, it will have to increase considerably, and be levied on a diminishing proportion of working-age people.

Briefly, on the intergenerational point, it’s clearly welcome that the levy will be applied to working pensioners from 2023, but just 12% of pensioners work. Some will contribute via the dividend tax hike, but let’s be under no illusions, the lion’s share of the cost is hitting working age families.

There are other inequities in the proposed ‘solution’: those needing residential care will have their property included in the means test while those receiving domiciliary care won’t; and extremely wealthy pensioners, for example those with multi-million-pound houses, could still end up receiving hefty taxpayer subsidies.

And there remain huge unanswered questions about the system itself. We’ll have to wait for the long promised White Paper to hear how the Government proposes to improve the quality and delivery of care, secure the sustainability of the sector, and boost the workforce (higher pay being the obvious issue).

Numbers you need to know...

£86,000 – the new cap on care costs

£20,000 – the asset threshold below which the Government will fully cover the cost of an individual’s care

£100,000 – the asset ceiling above which an individual will receive no support for their care costs

£12 billion – the amount raised annually by the increase in employee and employer NICs and the dividend tax

£8+ billion – the amount allocated to tackling the NHS backlog across three years

£5.4 billion – the amount earmarked in total for adult social care over the next three years


How it will play out...

Key Questions…


Will people have to sell their home?

For people with assets needing residential care this is a very real prospect. Your first £20,000 is protected, the next £80,000 up to £100,000 will require some personal contribution towards care costs, and if you have £100,000 or more you won’t receive any taxpayer subsidy up to a cap of £86,000.

BUT: if you remain living in your home, and receive domiciliary care, your property is excluded from the means test. Which makes no sense at all given the Government has also committed to extending Deferred Payment Agreements which, as their name indicates, allows people to defer paying their care costs through an equity release scheme offered by local authorities. Detail on how this will be done are… light.

Hidden in the small print...

It appears, based on the case study of ‘Yusuf’ provided in today’s plan, that ‘hotel costs’ – the non-personal care-related costs of living in a care home – are not covered by the cap. These could be pretty hefty, particularly as some people spend years in a care home, and so require self-funding well above the £86,000 cap. Previous reform proposals, such as the Dilnot package, suggested a separate cap be applied to 'hotel costs' but it is not clear whether this will be a feature of today’s plans.

How will costs be measured and audited?

If a cap is to be applied, tariffs have to be set and expenditure monitored. That means establishing what a fair market rate for different types of provision is, and having processes in place to audit that expenditure. Proposals for how the costs of care will be measured and accounted for are light on detail.

The major change proposed today relates to self-funders, who will now be able to ask their local authority to arrange care for them to reduce their costs. It’s estimated that self-funders pay, on average, around 40% more for their residential care than local authorities. Ending the massive subsidisation of care by self-funders is welcome, but any significant drop in revenue risks the viability of an already shaky sector. And if less money is going in, it’s hard to see how care worker wages will rise.

Will this do anything to resolve issues related to unmet care and care quality?

The proposals do not set out plans to change the needs-based eligibility requirements for social care. Most local authorities only offer free care to those with substantial needs, leaving approximately 1.5 million people with under or unmet care needs.

New measures to professionalise and develop the workforce through additional training, certification, and wellbeing support (£500 million has been allocated) may go some way to improving quality. Commitments to provide additional support for the UK’s 5.4 million unpaid carers, increase investment in supported housing, and improve access to information for service users are also welcome… but vague. And the elephant in the room remains the need to recruit many thousands more care workers. We await more detail in the *again* promised White Paper for adult social care later this year.