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In his first speech as Prime Minister, Boris Johnson promised to ‘fix the crisis in social care once and for all, with a clear plan that we have prepared’. But no plan emerged before COVID-19 hit. And the pandemic has cruelly shown why one is needed: the longstanding political neglect of social care in England has been laid bare for all to see. People who need and provide care deserve a fundamentally better deal.

The government says it agrees. As the country emerged from the first wave of the virus, the Prime Minister restated his commitment to reform the adult social care system in England – saying that the government was now ‘finalising’ its plans to fix the problems that ‘every government has flunked for the last 30 years’. Since then, ministers have repeatedly promised that plans for reform will be published this year. The Queen’s Speech tomorrow seems the obvious place to unveil them.

But it looks as if reform may be ‘flunked’ again, largely as a result of Treasury opposition. Last week, reports emerged that government would be delaying an announcement on social care reform until later this year. (Déjà vu?) Reports suggest that the Prime Minister’s favoured plan for funding reform – a cap on care costs – faces two key objections from the Treasury: that it will cost too much, and that it may disproportionately benefit the wealthy. Do these objections stack up?

First, let’s briefly remind ourselves how we got here.

Protecting against high care costs

The Dilnot Commission was established in 2010 by the coalition government to look at the future of funding of care and support in England. The commission reported in 2011 and its core recommendation was for government to introduce a cap on individuals’ social care spending (alongside a more generous means test for access to publicly funded social care). Under the model, people with sufficient means would pay for their own care up to a lifetime cap, which the commission recommended be set at £35,000 (about £46,000 today). After that, the state pays.

A Dilnot-style cap isn’t a comprehensive programme to reform social care. Far from it. Other policies and funding would be needed from government alongside the cap to boost the quality of social care services, improve terms and conditions for staff, provide better support for unpaid carers, and more. Any reform should also make the means-tested system far more generous – as Dilnot proposed.

But a cap on individual care costs would at least fix one of the social care system’s  big problems: the lack of protection for people and their families against potentially catastrophic care costs. Under today's system, people with assets above £23,250 must pay for their own social care. But how much care people will need and its potential cost is highly uncertain, and not spread evenly across the population. People face a lottery about the care costs they may face in later life. Some will die without needing formal social care, but over 1 in 10 people aged 65 will face lifetime costs well in excess of £100,000. Predicting that in advance isn’t easy.

In other parts of the economy, people are protected against these kinds of risks by forms of insurance – some provided by the private sector, some by the state, some are a choice, others a legal requirement. For example, the NHS provides insurance against the costs of health care, paid for primarily through taxes. But for social care, there is no way for individuals to insure themselves. The private sector sector doesn’t provide comprehensive insurance for social care for a number of reasons. These include the challenges of predicting future care costs, and the problems of ‘adverse selection’ (where people at higher risk than average sign up, increasing premiums) if the insurance isn’t compulsory. This means that the state needs to step in to protect people against social care costs, pooling risks across the population in a way that the current system doesn’t. The absence of this protection in the current system is a glaring gap in our welfare state.

How far the government acts to fill this gap depends on its priorities and values, and how much it is willing to invest. Of course, government could pay for all social care costs if it wanted to (costing upwards of £8bn in 2023/24) – making the funding of social care more like the NHS. But, if it won’t, a Dilnot-style cap would target additional state spending on individuals with the greatest and most expensive social care needs over their lifetime. This would reduce financial uncertainty and help people plan for the future.

These arguments are nothing new. Dilnot’s proposals for a cap on care costs were accepted by government in 2013 and put into legislation in 2014, with cross-party support. But implementation was delayed in July 2015 by the incoming Conservative government, backed by local government arguments that money earmarked for the cap should instead be put into the social care system to close the core services funding gap. Since then, reform has been postponed indefinitely while the underfunding of core services has continued.

Do concerns about affordability and fairness stack up?

This brings us back to today and the Treasury’s two reported concerns about a Dilnot-style model: affordability and fairness. Neither concern stands up to detailed scrutiny.   

First: affordability. There’s no doubt that improving social care requires investment. The current system is a threadbare safety-net with roots in the Poor Law, providing financial assistance to those who can’t pay for their own care, but largely leaving everyone else to fend for themselves. Many people go without the care they need and the burden on unpaid carers – mostly women – is high. Any move away from a system that focuses limited state spending only on the poorest and relies heavily on the unpaid care of friends and families is bound to cost government more. That’s sort of the point. A key objective of reform should be to shift costs from unlucky individuals to the state.

Dilnot’s proposals were designed with affordability in mind. The commission made its recommendations as austerity was being ushered in, fully aware that there wouldn’t be an appetite for massive new public spending. It thought hard about how to target any increases in public spending as effectively as possible, focusing additional government spending on ensuring those with the greatest needs and highest costs would be protected (alongside a more generous means-tested system—lifting the asset threshold from £23,250 to £100,000). The cost of introducing a Dilnot-style cap – with lifetime costs capped at £46,000 before the state pays – would be around £3.1bn a year by 2023/24. That sounds a lot, but let’s put it in context. 

This level of spending is equivalent to around:

  • £2 per household per week – about the same amount as households spend on insuring their home contents
  • a week’s NHS funding, or 2% of the annual NHS budget
  • 0.2% of GDP, or the national income produced in 14 hours.

In addition to the cap, investment is needed to improve access to social care services, pay care workers decent wages and support providers to deliver high quality care. This requires wider reform and would cost the more considerable sum of £8.6bn in 2023/24 – bringing the total to around £12bn. But even this sum would still represent about a month’s NHS funding, or 0.6% of GDP. At £8.30 per household per week, this would be £3 a week less than average spending on car insurance.

How affordable is social care reform?

A cap on social care costs would protect people and their families against potentially catastrophic care costs. A cap of £46k would cost around £3.1bn a year in 2023/24. 

Investment is also needed to improve access to social care services, pay care workers decent wages and support providers to deliver high quality care. This requires wider reform and would cost around £8.6bn a year in 2023/24. 

This sounds like a lot of money, but let’s put it in context.

£3.1bn for a cap on social care costs is 2% of the annual NHS budget. It would fund the NHS for 7 days. 

£8.6bn to invest in the current social care system is 6% of the NHS budget.  

Together, the £12bn needed would fund the NHS for a month. 

Compared to GDP, it’s even smaller. 

The social care cap works out at 0.2% of GDP – equivalent to the national income produced in 14 hours. 

Other investment for social care works out at 0.4% of GDP. 

To put that in perspective, the cap on social care costs would cost the equivalent of £2.14 per household per week. 

Other investment for social care would cost the equivalent of £5.95 per household per week – around half of average spending on vehicle insurance.

But affordability shouldn’t be the only factor determining reform. The Treasury’s job is not just to look at costs. It is to ensure the economy functions effectively, that markets work and that public spending is focused on services the market can’t provide. As guardians of our economic wellbeing, that means it should also consider the benefits of government spending to individuals and society.

Now let’s take the second concern: that a capped cost model is regressive. The basic argument seems to be that much of the extra spending would go to those who are wealthier. This is is true and would be for any reform that extends coverage beyond the very poorest. But this doesn’t make the Dilnot reforms regressive overall – nor is it a useful way of looking at the proposals. By the same logic, the creation of the NHS would have looked regressive because it is a universal system, looking after the wealthy and poor alike.

Focusing only on where the extra spending comes from misses the point. Whatever additional money is spent by government – £3.1bn for a cap or otherwise – it will need to come from somewhere. And there are plenty of ways of raising it. If raised by income tax, that money would overwhelmingly come from the richest members of society – a third of income-tax revenue comes from the richest 1%. If government felt that the money should be raised from older people, this could be done through dedicated additional national insurance rates for different ages. Or, if the argument is that older people with significant housing wealth should contribute more to the costs of social care, it could be raised through inheritance tax or other forms of wealth tax.

How progressive the net system will be depends on how the money is raised as well as spent. It also depends on the other policies and investment introduced by government to support social care services, such as expanding and improving the means-tested system and boosting care workers’ pay. And – of course – government should be looking at how tax and spending affects inequalities in the round. Plenty of other policies could (and should) be pursed by government to improve equity.

The adult social care system in England needs fundamental reform to make it fit for the 21st century. A cap on care costs should be one part of this new system – and would help provide greater protection for people and their families against care costs. But a more comprehensive package of reform and investment is also needed to move social care beyond the legacy of the Poor Law and create a system that genuinely supports people to live with dignity and promotes their wellbeing – not just protects people from harm. This should include policies to improve pay and conditions for social care staff, address unmet need for care, improve quality of services, and more.

Making this happen will require additional government investment. But reforming social care is not unaffordable. If it chooses to, the government can afford to provide fairer and more generous care and support for vulnerable people in society. The arguments are clear and logical, the question is political will.

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