Key points

  • The Health Foundation has previously set out priorities for government to fix the crisis in social care. These include stabilising and sustaining the current system, improving access to care and providing social protection against care costs.
  • This update provides revised estimates of what these measures would cost. It also explores how our estimates have changed over time, as the underlying data changes.

Stabilising the current system and improving access to care

    Additional funding is needed to stabilise the current social care system and improve access to care. In the above chart we set out our updated estimates of the adult social care funding gap towards the end of this parliament if no action is taken. This is the gap in 2023/24 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 – and four different scenarios with varying levels of ambition for stabilising and sustaining services and improving access:

    • Meet the expected growth in demand from an ageing population – the scenario where the additional funding provided keeps up with increases in demand from an ageing population. This would cost around £2.1bn.
    • Increase pay – in addition to meeting future demand, providing additional funding to increase the pay of the adult social care workforce. This should improve retention and recruitment, as such helping to address the vacancy rate which has risen from around 5.5% to 7.8% over the last 6 years, equivalent to 122,000 vacant posts at any one time. This would cost around £3.9bn.
    • Recover peak spending levelsreturning spending (relative to demand) to the peak levels seen in 2010/11. This would cost around £10.0bn.
    • Recover peak spending levels and increase pay – in addition to returning to peak spending levels, providing additional funding to increase pay. This would cost around £12.2bn.

    This is an update of our previously published analysis, most recently before the 2019 General Election, which provides estimates in 2020/21 prices. We have taken into account the commitments made in the March 2020 budget, of additional adult social care funding. We have not factored in the additional funding or cost pressures resulting from COVID-19 this year (see Box 1).

    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; standards built into contracts between social care providers and local authorities; or increased reporting by social care providers receiving public funds.

      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 servicesthe number of people needing services and their level of need. 75% of excess deaths have been among those aged 75 and older. Some of those who have been seriously ill and have recovered from COVID-19 have significant health needs requiring social care.
      • 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.

      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.

      The table 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 £8.0bn
      £25,000 £4.6bn
      £46,000 £3.1bn
      £78,000 £2.1bn

       

      Note: These costs are based on calculations done using figures from the Dilnot Commission’s report and 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.  

      Social care funding: our key figures explained

      In 2018, 2019 and 2020, the Health Foundation 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.

      The table shows the different analysis we have produced and explains why these have changed over time.

       

      A fork in the road: next steps for social care funding reform 

      May 2018

      What should be done to fix the crisis in social care?

      August 2019

      General election 2019

      November 2019

      2020 update

       

       

      Gap in social funding calculated up to 2020/21

      Uses 2018/19 prices and 2016/17 as a base year

      Gap in social funding calculated up to 2023/24

      Uses 2019/20 prices and 2017/18 as a base year

       

      Gap in social funding calculated up to 2023/24

      Uses 2019/20 prices and 2018/19 as a base year

      Gap in social funding calculated up to 2023/24

      Uses 2020/21 prices and 2018/19 as a base year

      Additional funding needed to:

       
      Meet future demand £1.5bn £2.7bn £2.4bn £2.1bn
      Meet future demand and increase pay n/a £4.4bn £4.1bn £3.9bn
      Recover peak spending levels – return to 2009/10 spending (the highest total spending) £8bn n/a n/a n/a
      Recover peak spending levels – return to 2010/11 levels of spending (the highest in per capita terms)  n/a n/a n/a £10.0bn
      Recover peak spending levels and increase pay  n/a £12.5bn £12.2bn £12.2bn

      Bring in free personal care, along the lines of the Scottish model**

      £7bn £5bn £5bn n/a

      Bring in a cap on social care costs***

      £5bn

      Based on a cap of £75,000 and a floor of £100,000.
      £2.1bn
      Based on a cap of £78,000 and an upper capital limit of £100,000 for residential care only.

      £3.1bn
      Based on a cap of £46,000 and an upper capital limit of £125,000 for residential care only.

      Notes

      * Further analysis after A fork in the road showed that 2010/11 represented the peak of social care spending per capita. This was then used in subsequent publications as the reference year for returning social care to previous levels of service.

      ** In A fork in the road, we estimated that the cost of bringing in free personal care would be £6bn. This was based on the model in Scotland. Estimated costs of free personal care reduced from £6bn to £5bn. Between A fork in the road and What can be done to fix the crisis in social care? we re-assessed the likely services that would be covered by free personal care and the likely per person costs. We thought these should be lower and therefore cost estimates were reduced.

      *** The Dilnot Commission suggested a cap on social care costs of £35,000 in 2011. The government accepted a cap of £72,000 in 2016. The £46,000 and £78,000 caps are the 2020/21 equivalents of these. 

      Box 2: Key assumptions

      • 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. 

      • 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.

      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.

      This analysis used similar assumptions to the General Election 2019 update. In addition:

      • It reflects the commitment to extend additional funding made available at Spending Review 2019 to the end of this parliament.

      Why do the figures change?

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

      • Using 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.
      • Changes to the financial year 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.
      • Updates to reflect refined modelling assumptions, ie government policy announcements of additional funding for social care (such as the 2019 Spending Round and Budget 2020) or other technical assumptions.

       

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