An additional £8bn funding is needed to help the existing social care system recover

4 min read26 October 2021

On 7th September, the government announced a new health and social care levy. This will increase National Insurance contributions and raise around £10bn a year – £30bn over the next three years.

This is a substantial amount. It’s around 7 per cent of what we spend on healthcare per year, or around half of what we spend on adult social care.

If this were purely a social care levy it would go a long way towards fixing social care, at least for the next three years. But, because of the funding needed to clear the NHS backlog and deal with other health-related Covid-19 pressures, the government’s plan is that of the £30bn, only £5.4bn, or £1.8bn a year - less than a fifth of the levy - will go to social care. This money will not go towards stabilising and helping the existing system to recover, but fund a cap on care costs, workforce training and tackling unfairness in the fees self-funders currently have to pay for care.

If funding falls short there will be persistent workforce shortages, high rates of turnover and recruitment difficulties

Let’s look at each of these in turn. First the cap – a crucial part of creating a fairer system which protects everyone against catastrophic costs. It will typically take more than three years for people to hit a lifetime cap on care costs of £86,000. So over the period to 2024/25, the costs of the cap will be minimal; based on the 2015 Impact Assessment it could be around a total of £2bn over the three years. From 2025/26, as people start to hit the cap, the annual costs will rise substantially.

Second is fees. If the cap is actually going to limit people’s care costs to £86,000, self-funders need to be able to buy care at the rates that councils pay, rather than the higher prices they currently pay for the same care. To this end, those paying privately will be able to ask their council to organise their care and to pay the council rates. Faced with lower revenue, care providers will likely raise the fees they charge councils. Councils will need extra funding for this, though we can’t tell exactly how much the government has assumed this will be.

And third, the workforce. £500m of the £5.4bn will go to professionalising and developing the workforce, counselling and peer-to-peer coaching. For the 1.5 million care workers this amounts to a little over £100 per person per year. The funding will not cover any improvement in pay or conditions.

So, although £1.8bn a year would be a 10 per cent hike in the amount currently spent on social care, very little, if any will go to helping the existing system recover.

In the Health Foundation’s latest analysis of funding needs, we estimate an extra £8bn would be needed in 2022/23 to recover the system, following a decade in which social care funding has barely risen in real terms. £8bn would pay for a 10 per cent increase in the number of care packages, making some dent in the unmet need, and a fairer price for care, including higher wages and better conditions for staff.

If funding falls short in the spending review on Wednesday, of the £8bn needed, there will be persistent workforce shortages, high rates of turnover and recruitment difficulties. Care homes may close, causing distress for residents and their families. And there will be high levels of unmet need.

But beyond that, for the cap to work as intended, it needs to be built on a properly funded state system. In order to start metering towards the cap, those paying privately for their care need to pass their local authority’s needs test. Needs tests are now so stringent that many self-funders may not start metering even though they are paying for care. This could lead to a backlash and mean that the cap creates another political headache.

The government has been bold in its reform of social care and the announcement of a cap. But if it is to fix social care once and for all, it must use the spending review to invest in the existing system too.

Charles Tallack is the Assistant Director at the Health Foundation's REAL Centre.

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