Social care funding: options for reform

Andy Burnham has said that reforming social care will be one of his priorities as Prime Minister. Good: at its best, social care can improve people’s lives, but the social care system in England is broken and in desperate need of reform and investment. The list of policy problems facing the sector is long. But the lack of state protection for people against care costs in England is a glaring gap in our welfare state. 

Burnham has said he wants a social care system to operate on similar principles to the NHS. But what might this look like and how much might it cost? We summarise the problem with the current funding system and look at three broad options for fixing it.

The problem with the current system

Social care provides vital support to older and disabled people. But many people go without the care they need, spend their savings to pay for it or rely on unpaid support from friends and family. This is because access to state-funded care in England is heavily means- and needs-tested. Only the very poorest people with the highest needs receive government support. Some face eye-watering costs and some end up selling their homes. Care needs are highly uncertain and many people don’t realise that social care isn’t free until they need it.

Elsewhere in the economy, people are protected against these kinds of risks by different forms of insurance. For example, government insures people against the costs of health care through the NHS, paid for mainly by taxes. Risks are pooled across the population, so people don’t face unaffordable bills when they get sick. But this kind of insurance doesn’t exist for social care – and only a small number of people receive protection in our highly targeted safety-net system. England is an outlier internationally in restricting access to any publicly funded care based on people’s individual assets and income.

Other countries take a mix of approaches to providing protection for people against social care costs – some offering more comprehensive long-term care services funded primarily through taxes (such as Sweden), others with dedicated social insurance schemes covering most or some care costs (such as Germany) and others relying on cash allowances for people with care needs (such as Italy).

Three options for reform

Burnham has a mix of options for reforming social care funding in England, based on political choices about public spending and the balance of responsibility between individuals and the state. 

Here, we summarise three options for reform and what they might mean for government spending (see the graphic below). Our estimates only provide a high-level picture – and the cost of each approach would vary depending on the detail of the state’s ‘offer’, such as the level of care needs covered and type of support included. More on these options, what they might include and various policy considerations can be found in our more detailed analysis of the reform options. This includes the data and methods used to construct the estimates, which we have simply updated here to reflect 2026/27 prices, as well as their limitations.

1. Free personal care

One approach is for the state to pay for a basic level of social care for everyone, regardless of wealth. For example, in Scotland, the state provides free personal care to people in their own homes – such as help with eating, bathing and using the toilet – and contributes towards personal care costs for people in care homes, as well as an additional payment for people who require nursing care. Other social care is still subject to means testing, so many people pay for services such as help with shopping and cleaning, social support activities and employing personal assistants outside the home. People also still need to contribute towards living costs if they need residential care.

We estimate that introducing a Scottish-style system of free personal and nursing care for people aged 65 years and older in England could cost around £6.5bn extra in 2026/27 – imagining this was the first full year of the policy being implemented – rising to around £7.5bn by 2035/36. In Scotland, the policy was introduced for people older than 65 years in 2002 and extended to all adults younger than 65 years in 2019.

For many, this would be an improvement on the current system. It would mean a more equal and universal system – at least for the care needs covered – and could mean more clarity on the state's ‘offer’. A drawback to this kind of approach is that some individuals with persistent and severe care needs – for example, a person with dementia needing high intensity care for several years – would still face high costs. And everyone would still face some uncertainty about future spending, given only ‘basic’ care needs would be covered by government.

2. A ‘cap’ on care costs

An alternative approach is to introduce a limit on the amount people with eligible needs pay towards their social care over their lifetime – protecting those with high care needs against the risk of potentially catastrophic costs. Under a capped cost model, people with sufficient means pay for their own social care costs up to a defined limit – a ‘cap’. After that, the state pays.

This kind of model was proposed by the Dilnot Commission – an independent government review – in 2011, and caps on costs are used in various other countries too. The previous Conservative government planned to introduce a version of this model – capping people’s social care costs at £86,000 and raising the ‘floor’ for means-tested support from £23,250 to £100,000 (for both residential and domiciliary care). But the cap was never implemented – postponed by the Conservatives before being scrapped by Starmer’s Labour government.

Based on previous government estimates, we estimate that introducing this most recent version of the cap and floor model in England could cost around £0.5bn extra in 2026/27 – imagining that this year was the first full year that the policy was implemented – rising to around £4bn by 2035/36. Changes to the policy could make it more progressive – for instance, by ensuring means-tested social care support counts for an individual’s progress towards the cap. Policymakers could also adapt the design of the cap to make the policy cheaper – for instance, by raising the upper capital limit to £100,000 only for those in residential care, as the Dilnot Commission originally recommended.

Rather than offering everyone a basic level of social care support, like in Scotland, this kind of approach instead targets additional government spending towards people with the greatest care needs. It would also give people more certainty about future care costs, making it easier to plan ahead. But many people would still need to pay for care up to the cap, especially if it was set at a level as high as £86,000. And a capped cost model for social care funding can be difficult to understand.

More pragmatically, an important advantage of this model is that it is already legislated for in the Care Act 2014. It could also be adapted by different governments over the long term, based on political priorities and public spending plans. For example, the cap could be progressively lowered over time to provide greater protection against social care costs. Lowering the cap to £0 for all social care costs would effectively create a universal and comprehensive model, more like the NHS.

3. Universal and comprehensive social care

A final option is to create a universal and comprehensive social care system, with government covering all care and support costs. Under this kind of model people would access social care services free at the point of use, regardless of individual wealth, like the NHS. Government would need to make choices about what should be included in the state’s offer – for example, the level of social care needs covered and the types of support to be funded. But this option is likely to require considerably more funding than the other options described. 

If the state covered the costs of everyone currently receiving adult social care services in England, we estimate that this could cost around £18.5bn extra in 2035/36. This is a broad estimate only. For example, it assumes that everyone who currently funds their own care would be eligible for publicly funded care and does not include likely additional costs of people with unmet care needs, who come forward because of the policy change. 

Combining approaches

Each approach has benefits and drawbacks, but all would be an improvement on the current system. They could also be pursued in combination. For example, something like the Scottish-style model could be used to provide a basic universal social care offer, while a version of the cap could protect people against catastrophic care costs, alongside raising the means-tested threshold to offer more support to those with lower wealth. A more comprehensive NHS-style model could be a long-term goal, with generosity increasing in stages. Other countries combine a mix of approaches, rooted in different judgements about the right balance of responsibility between individuals and the state. Our polling suggests most people in England want a system where the state shoulders more of the costs.

Political choices

Successive governments have promised and then failed to reform our broken social care system. We’ve sketched out the potential costs of three high-level options for funding reform to help inform debate. We haven’t covered the other policy questions that would need to be considered to implement the changes, like how it would be organised, its relationship with other services like the NHS or the role of central and local government in delivering it. 

Policymakers have choices about how to raise the money to pay for reform. Increases in taxation would most likely be needed over the long term. Options include increasing general taxation, taxing wealth (for example, changing council tax or taxes on people’s estates), taxing or redirecting spend on older people who are more likely to need care (such as extending National Insurance contributions beyond retirement age) and more. 

Whichever funding reform option the government chooses, additional public investment will be needed. Any move away from the kind of system we have now, which leaves many people without the care they need and relies heavily on the unpaid work of friends and families, is bound to cost government more. But the cost of continued inaction to people and their families is substantial. 

Hiba Sameen and Jack Elliot contributed the updated cost estimates to this blog, which are based on our previous analysis of the reform options. Thanks also to the co-authors of the original analysis, including Hiba Sameen, George Stevenson and Charles Tallack.