Finding solutions to the care crisis

By Adam Roberts | 30 May 2017

The adult social care system in England is in a financial crisis, following a 9% fall in public spending between 2009/10 and 2014/15 in real terms. This has had a real impact on people’s lives, with 400,000 fewer people receiving care over this period. Manifestos from each of the main parties make promises on social care, but how far do these go towards fixing the problem?

The Government committed new funding for social care in the 2015 Spending Review and in the March Budget. Health Foundation analysis suggests these increases will enable funding for social care to rise by an average of 2.8% a year above inflation over the next few years. But with costs rising close to 5.5% a year, partly due to the new living wage, this still leaves a funding gap of £2.1bn by 2019/20, in today’s prices.

The pressures on social care will continue to grow. LSE and Kent University research estimates a 40% increase in the number of older people needing local authority funded residential care between 2010 and 2030, and a 70% increase for home care. So any short-term injection of cash must be accompanied by a longer-term, more fundamental solution. The promise before the election of a green paper on this was welcome.

Solving the crisis will not be easy. The last 20 years have seen multiple reviews, but a lack of political will to implement a solution. Social care has been repeatedly overshadowed by concerns about the NHS.

Yet surprisingly social care has become a key election issue. Perhaps social care’s moment has arrived, whatever the result on 8 June.

The solution requires immediate investment to stabilise the system and address concerns by the Care Quality Commission on the over-reliance on informal care, and stability of providers following the erosion of fees received from local authorities. It also requires a new model with a revised means-test threshold, and a cap to protect against catastrophic costs, building on proposals by the Dilnot Commission, enshrined in the 2014 Care Act. Fundamentally this will need a commitment to find a long-term funding stream that ensures all vulnerable adults have access to the public support they need to live with dignity and independence, fulfilling the vision of the 2014 Care Act.

Labour and the Liberal Democrats both offer immediate investment, around an extra £2bn a year by 2021/22. This appears close to our estimate of a £2.1bn funding gap in 2019/20, but demographic and cost pressures will continue to rise. So while the extra funding is welcome, it is still likely to fall short of rising need. Office for Budget Responsibilities analysis of the long-term pressures suggests net public funding would need to rise from around £17bn in 2015/16 to £22bn in 2021/22 (in current prices) before accounting for any Dilnot-style reform or the additional cost of the national living wage.

The Conservatives’ offer is complex with changes to the funding model. They have committed to increase the means test threshold from £23,250 to £100,000, but other factors, such as the size of a spending cap and crucially the additional increase in public spending, will be worked through in the green paper, to which they have recommitted. All three main political parties now seem to support a cap on care costs, with Labour offering to lay the ground work for an NHS-style national care system, but detail is limited and there will be much to work through after the election.

The costing for the 2014 care act suggest that introducing a cap and raising the means test threshold would initially increase public spending by around £300m, rising to closer to £2bn over a five-year period as more people reach the cap. It is not clear where funding for this investment will come from.

The manifestos provide clues to potential funding sources, but none on the scale needed. The Liberal Democrats propose that part of their 1p in the pound increase in income tax would go towards social care.

For Labour, funding would come from a series of tax measures including on income and corporation taxes.

The Conservatives’ plan to extend means testing for home care to include housing assets, as they do for residential care, and introduce means testing for the winter fuel payment. Including housing assets would substantially reduce the number of people who received public funding for home care, with savings estimated at above £1bn. The rationale in the manifesto for this is that those who can, should contribute to the costs of their care, rather than imposing a tax burden on younger generations. Particularly the ‘many older people [who] have built considerable property assets due to rising property prices’.

What is clear from the three manifestos is that social care will be a priority for whoever wins the next election – it seems that some sort of cap on care costs and a higher means tested threshold will be part of the new settlement. However, it is not clear how to fund the substantial annual growth in cost pressures, and secure a provider sector that is at a tipping point.

A challenge this complex is not something that can be solved in a hurried manifesto process ahead of a snap election. It requires time, careful thinking and public engagement to provide a sustainable system that meets the needs of our most vulnerable.

Adam Roberts is head of economics at think-tank The Health Foundation

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