Social care: something's got to give

Those who called for more social care funding in last week’s Budget may well be feeling damned with faint hope. There was an injection of cash, but well short of the estimates of what is needed for those who rely on publicly funded social care and the poorly paid workforce who care for them.

The government might also be feeling a bit frustrated—the succession of announcements on social care from the 2015 Spending Review onwards amount to a pretty generous funding increase compared to other public services. In the Budget, the Chancellor announced £2bn extra over the next three years, with £1bn available for 2017-18. Funding for social care is now projected to increase by around 2 per cent a year in real terms between 2015/16 and 2019/20—twice the rate of growth in NHS funding.

The problem is that the gap left by six years of cuts to local government funding yawns very wide: an estimated 400,000 fewer people now get publicly funded social care than in 2009-10. On top of that, there are people who still receive some social care, but not enough to meet all of their needs. For these people, a more generous service might include longer or more frequent visits.

Meanwhile, pressures on the system are rising very fast. Health Foundation analysis, drawing on LSE research, suggests funding pressures of over 5 per cent a year in real terms between now and 2020.  Between 2015 and 2020 the population aged 65 and over in England will increase by almost a million. This is on top of the extra million pensioners in the first five years of this decade. But it’s not just older people who need social care. Social care is vital for people aged between 18 and 64 with learning difficulties and physical health problems. Medical advances mean more babies born prematurely are surviving, but often with life-long health problems. For young disabled adults, expectations for an independent, quality life are rightly increasing. The average cost for younger adults is high and numbers are growing.

Some of the Chancellor’s £2bn will legitimately be soaked up by providers of social care. For many years, as local authorities have been forced to cut fees, providers have been attempting to maintain services on dwindling budgets. The UK Home Care Association, which represents the thousands of mostly small businesses which provide carers in peoples’ homes, found that some local authorities were paying as little as £10 per hour for home care, with an average of £14.66 per hour in England. They calculate that a minimum hourly rate for home care should be £16.75, to comply with the National Living Wage, assuming a profit margin of 3 per cent: modest by anyone’s standards. The introduction of the National Living Wage, which gave care workers a much needed pay increase, has only added to the cost pressures facing providers and local authorities.

This extra £2bn will provide some relief from the growing pressures but it is not going to bring about a new dawn for social care users and their families. The Health Foundation estimates there will still be a funding gap of almost £3bn in 2019/20. Much, therefore, hangs on the Chancellor’s announcement of a review of social care. What then are the prospects for this Green Paper on the options for sustainable social care funding? While there is no doubt that a review is needed, past experience is not promising. There have been at least four commissions or inquiries into social care funding in the past 20 years: Sutherland, Wanless, Dilnot and Barker. There may be universal agreement that social care has a problem, but there is little consensus on solutions. With very limited public understanding of the current system it will be all too easy to frighten people with the prospect of new taxes or tax rises.

The social care system has two eligibility tests: the “needs” test asks if the problem is severe enough to qualify for assistance, and the “means” test asks whether people can and should pay for it themselves. Both need to be thought about.

Most importantly, the Green Paper must focus on meeting the needs of people on low incomes.  Since the 1999 Royal Commission’s recommendation for free personal care was rejected, social care policy has been underpinned by the assumption that it will be funded through a mixed economy of individual and public contributions. The challenge has been balancing the two, and finding a source of individual contributions that is acceptable—people do not like using their housing assets to fund social care. All reviews of social care have looked at the options for people saving to provide for their own care or some form of insurance. For people on low incomes both of these are largely irrelevant. This is most obvious for younger adults who have never had the opportunity to earn enough to provide for care needs. But, despite rising pension incomes, many older people still rely on the state pension and are on low incomes. For those on low incomes, the hard truth is that there is no real alternative to public funding. How much are we prepared to pay to ensure dignity and quality of life? How far do we leave people to fall back on friends and family, or fend for themselves?

The Green Paper also needs to consider how funding for social care fits with other spending on older people. Social care is a small part of public funding for older people. Pensions and benefits are much larger. Pensions have been protected by the “triple lock.” Targeted benefits such as Disability Living Allowance and Attendance Allowance provide billions of pounds to many of the same people, but with different eligibility criteria and no real scope for people to combine funding streams into integrated packages of care and support. Changing this will be hard. While many, understandably, fear any change to benefits may result in cuts, the current mix of services and financial support is not working well for older people with high needs.

The second problem is whether to protect everyone from the catastrophically expensive risk of extended years of social care. The Dilnot review found that one in 10 people will have care needs with a lifetime cost of over £100,000. Andrew Dilnot proposed public funding for costs above a cap to remove the risk of unlimited cost and the loss of assets. Although a cap in care costs is enshrined in legislation in the 2014 Care Act, it has been kicked into the long grass.

All past reviews have agreed that public funding will need to increase and the Office for Budget Responsibility projects social care spending rising as a share of national wealth. But where should that funding come from? This is where economics collides with politics. The row over the so-called “death tax” in 2010 casts a long shadow: an apparent consensus to work across party lines melted in the heat of an election.

Some will look to Japan, which introduced compulsory social insurance payments from the age of 40. In the UK context the equivalent would be to increase National Insurance and charge it beyond retirement. But the anger from within the ranks of the Chancellor’s own party about his decision to increase National Insurance Contributions in the Budget does not bode well for an Autumn White Paper containing new tax options.