Key points

  • This analysis explores what it would cost to fix the crisis in adult social care in England, including stabilising the current system, improving access to care and providing social protection against care costs.
  • Stabilising the current system and improving access to care: our estimates of the adult social care funding gap explore the difference between the funding we estimate councils could have available for adult social care, and four different scenarios for improving services up to 2030/31. The estimates for 2030/31 range from an additional £6.1bn needed to meet future demand to £14.4bn to meet future demand, improve access to care and allow local authorities to pay care providers more to improve the quality of care people receive.
  • Providing social protection against care costs: reform is also needed to protect people against the high costs of care. To address this, additional public spending could be targeted on those who currently face the highest costs. Setting a cap of £48k on the amount people can expect to pay for care over their lifetime – as recommended by the Dilnot Commission – would cost £3.0bn in today’s money by 2023/34.
  • This analysis is part of the REAL Centre’s work to help health and social care leaders and policymakers to look beyond the short term to understand the implications of their funding and resourcing decisions over the next 10-15 years.
 

Introduction

The Health Foundation has previously set out priorities for government to fix the crisis in social care. These include:

  • stabilising the current system
  • improving access to care
  • providing social protection against care costs.

This analysis provides revised estimates of what these measures would cost for four scenarios up to 2030/31. It also explores how our estimates have changed over time as the underlying data and context has changed. The data sheet and a technical annex are available to download.

A previous version of this page presenting seven scenarios was published in October 2020.

 

Our estimates: stabilising the current system and improving access to care

Additional funding is needed to stabilise the current adult social care system and improve access to care.

In the chart below we set out our updated estimates of the adult social care funding gap up to 2030/31 if no additional action is taken.

It shows the gap between:

  • the funding we estimate councils could have available for adult social care services based on current national spending plans, local authority spending patterns and estimates of the revenue-raising power of local government

  • four scenarios with varying levels of ambition for stabilising and sustaining services and improving access.

Box 1: the scenarios in more detail

This scenario is based on: 

  • meeting the expected growth in demand from an ageing population.

In 2030/31 this would cost an additional £6.1bn above our projections of current spending plans on adult social care by local authorities.

This scenario is based on: 

  • meeting the expected growth in demand from an ageing population (see scenario 1)

  • increasing local authority budgets by 10% to increase the amount of care people already receive or to expand care to more people (or both).

In 2030/31 this would cost an additional £8.9bn above our projections of current spending plans on adult social care by local authorities.

This scenario is based on: 

  • meeting the expected growth in demand from an ageing population (see scenario 1) 

  • providing local authorities with additional funding to pay higher costs for adult social care packages. 

The additional funding could allow local authority social care funding to cover higher hourly rates for providing domiciliary care, or higher weekly rates for providing residential and nursing care.*

In 2030/31 this would cost an additional £11.1bn above our projections of current spending plans on adult social care by local authorities.

* These are Health Foundation estimates based on our assessment and understanding of the UK Home Care Association minimum costs of domiciliary care. The cost estimates for residential / nursing care are sourced from the research by Laing and Buisson into the care home market. Under this scenario, funding could be used to increase pay for staff, cover overheads and increase profits for care providers.

This scenario is based on: 

  • meeting the expected growth in demand from an ageing population (see scenario 1)

  • increasing local authority budgets by 10% to increase the amount of care people already receive or to expand care to more people (or both)

  • providing local authorities with additional funding to pay higher costs for care packages (see scenario 3).

In 2030/31 this would cost an additional £14.4bn above our projections of current spending plans on adult social care by local authorities.

This is an update of our previously published analysis, most recently before the 2020 government spending review in November 2020. We have taken into account the commitments made in the March 2020 budget and November 2020 spending review, of additional adult social care funding. We have not factored in the additional funding or cost pressures resulting from coronavirus (COVID-19) this year (see Box 2). 

Box 2

The COVID-19 pandemic has created additional uncertainties around costs that are not accounted for in our estimates. These include: 

  • The impact on future demand for services – the number of people needing services and their level of need: 75% of COVID related deaths in 2020 were among those aged 75 older. Some of those who have been seriously ill and have recovered from COVID-19 have significant health needs which may require social care support.

  • The impact on the number of people eligible for state-funded care: a severe economic downturn could affect the value of people’s assets and pensions, increasing the number who are eligible for state-funded care.

  • The impact on local authority budgets: the government has provided short-term emergency funding to local authorities to deal with COVID-19, but if this short-term funding is insufficient it may reduce the future funding available for social care services. An economic downturn could reduce local authorities’ revenues, and reduce the funding available for services. This may make our ‘baseline’ estimates of the funding available for adult social care services overly optimistic and increase the future funding gap.

Policy intervention

Money alone is not sufficient and needs to be accompanied by wider reform. This is because, in the current system, any increased funding for local authorities does not automatically lead to increased funding for adult social care services or increased pay for staff. Local authorities fund adult social care from within their overall budget and there are competing demands from other local services under pressure. The adult social care provider market is fragmented, and the workforce is dependent on employers passing on any additional funding in the form of higher wages. 

Policy interventions would therefore be required to ensure any additional funding achieves its objectives. For example, to increase the pay of social care workers, policies for consideration could include:

  • a specific social care minimum wage
  • sectoral wage boards
  • standards built into contracts between social care providers and local authorities
  • increased reporting by social care providers receiving public funds.

A more detailed discussion of the scenarios and policy interventions which could promote their implementation is available in our recent submissions to the Health and Social Care Select Committee inquiry on social care: funding and workforce

 

Our estimates: providing social protection against care costs

Reform is also needed to protect people against the high costs of care. 

While some older people will live the rest of their lives without needing social care, a significant minority – those with intense care needs extending over many years – may face hundreds of thousands of pounds in costs. This creates uncertainty and anxiety and makes it very difficult for people to plan ahead. 

One approach to addressing this is to target additional public spending on those who currently face the highest costs by setting a cap on the amount they can expect to pay for care over their lifetime. Once an individual’s lifetime spend reaches the cap, their future care costs would be paid by the state. This is essentially the approach proposed by the Dilnot Commission in 2011 and it has the advantage of already being on the statute books, so could be easily activated by the government. 

Table 1 below sets out cost estimates for different levels of the cap. The lower the cap, the greater the protection for individuals but the greater the cost to government. A cap of £46,000, as recommended by Dilnot (in today’s money), would mean that an older person entering a care home would pay for the first 2 years of their stay, with the state paying after that. This would cost around £3.1bn in 2023/24.

Table 1: Estimates of the costs for different levels of the cap

Cap level Cost in 2023/24
£0 £7.8bn
£25k £4.5bn
£46k £3.0bn
£78k £2.0bn

Source: Health Foundation analysis of the Dilnot Commission’s report.

Note: These costs assume increasing the upper capital threshold from £23,250 to £125,000, and that an individual in residential care would contribute up to £13,000 per year to their general living costs. They do not include the extra costs needed to improve quality and access. It is assumed a cap is fully implemented now. In practice, there would be a lag in implementation and costs would be low until a significant number of people reach the cap.

 

Key figures explained

In recent years the Health Foundation has carried out analysis of the challenges facing the social care sector, the funding needed to stabilise and improve access to the service and the cost of different policy options, such as providing everyone with free personal care.

Our key figures have varied across our analysis, as the assumptions and context have changed. Download the data sheet to view how these key figures have changed over time (Tab 2) and see Box 3 to explore the assumptions that each analysis was based on.

2021 data: interactive spreadsheet

In our 2021 update, we provide an interactive spreadsheet which contains data for the four scenarios, along with our baseline projection. The spreadsheet enables you to adjust two of the key variables in scenarios 2, 3 and 4:  

  • the amount in % that we increase care packages by

  • the amount more in % that we pay for care.  

This allows you to compare projections and funding gap estimates using different assumptions about increases in adult social care funding. The spreadsheet contains a cover sheet which describes the data and functionality in more detail. 

Box 3: key assumptions

This analysis builds on the analysis we produced in 2020. It uses similar assumptions to the General Election 2019 update. 

In addition: 

  • it reflects the commitment to extend additional funding made available at Spending Review 2020 to the end of this parliament 

  • it does not account for any one-off funding provided to deal with the COVID-19 pandemic or any additional costs that may result in the medium or short-term 

  • it does not make any assumptions about efficiency savings in any scenario. 

This analysis uses similar assumptions to the August 2019 publication, except that:

  • it also reflects the Spending Review 2019 which made policy announcements with implications for local authority budgets in 2020/21
  • the base year was changed from 2017/18 to 2018/19 to reflect updated NHS Digital data published in October 2019 on local authority spending on social care.

  • Meeting future demand – equates to the funding required to match the PSSRU estimates of projected demand growth 2017/18
  • Matching NHS pay increases – equates to the funding required for the adult social care sector to match for its staff the NHS Long term plan commitments to pay settlement
  • Returning to 2010/11 levels of service and matching NHS pay – projects forward the level of demand from 2010/11 and includes the above pay increases.

  • Uses the Personal Social Services Research Unit’s (PSSRU) projection of demand for adult social care
  • Our estimate of local authorities’ core spending power assumes they continue to spend the same proportion of their total funding on social care
  • Assumes councils raise maximum social care precept
  • Free personal care costs based on the model of free personal care in Scotland.

Why do the figures change?

The figures have changed for a number of reasons, including:

  • Our analysis uses the most recent financial year to calculate estimates in the most up to date real-terms prices.

  • The base or first year of the analysis changes when new data on social care spending is published by NHS Digital. This provides updated information on how much local authorities are actually spending on social care and can change our estimates of what may happen in the future. 

  • We may change the financial year that we use to estimate the gap to provide relevant analysis at the time. A fork in the road examined longer term financial pressure on adult social care by comparing the estimated gap in funding in 2020/21 to 2030/31. The General Election 2019 analysis looked at a short time horizon, based how long a new government was expected to be in place following the election.

  • We may make updates to reflect refined modelling assumptions, for example to reflect government policy announcements of additional funding for social care (such as the 2020 Budget and 2020 Spending Review) or other technical assumptions.

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