Mind the Cap: choices & consequences for financing social care

social care

The government has announced its plans for social care reforms – but do they go far enough to address the issues endemic to social care?

Reforming social care – particularly with regards to financing it – has been a major challenge for successive governments over the past decades. Despite widespread acknowledgment of the need to reform the system, it remains in flux. In 2019, Prime Minister Boris Johnson pledged in his maiden speech that he was going to “fix social care”. Following the Covid-19 pandemic, the government has put forward clear proposals for reform – including addressing financing issues by increasing National Insurance contributions by 1.25 per cent to establish a new ‘Health and Social Care Levy’.

To discuss the financing challenges in social care, Public Policy Projects (PPP) hosted a roundtable with senior stakeholders in the sector as part of its “The Future of Social Care” report series in January 2022.

Lack of funding a chronic issue

The new social care reforms were broadly welcomed by participants, although many also expressed concern that the reforms do not go far enough to comprehensively address the depth of the issues in the sector.

“We simply don’t spend enough money on it.”

Lack of funding was, by far, the most recurrent theme of the discussion, with one attendee citing lack of adequate funding as the root cause of current market distortions in the first place.

He argued that “we simply don’t spend enough money on it. Every year, the Budget comes around, and when the social care system continues to be completely on its knees, the Treasury simply adds an extra billion pounds. This is immature. If we have to put an extra billion pounds into social care every year, then let’s say ‘over the next five years, we are going to put an extra billion pounds every year into social care’ so that care providers can plan. And then we don’t have the ludicrous chaos that we have at the moment, there is a barrier to planning there. We have to spend more on social care – and this is not just about older people, it’s about working-age adults as well.”

Where’s the money?

Speaking on the same issue, another attendee referenced historical funding in the care sector and highlighted how insufficient funding has led to an unsustainable market. He illustrated how social care expenditure over the last decade has increased since 2015-16, peaking at record levels in 2021 – largely due to the extra money that went into the system due to Covid-19. Roughly half of spending is on working-age adults and the other half is on older people. Money is indeed coming into the sector, but the question is: where exactly has the money been spent, and is it anywhere close to what is needed?

“The money coming into the system has not been spent on improving access and bringing more people into the system/”

Addressing the first question, the same attendee said, “the money coming into the system has not been spent on improving access and bringing more people into the system.” Consequently, eligibility for care has continued to tighten and has not risen in line with inflation, thereby excluding more people from the publicly funded system.

If that money hasn’t gone on improving access for more people, where has it gone? The answer seems to be on the average fees that local authorities pay for care homes. Indeed, there has been, in real terms, a 4 per cent increase in what local authorities pay for working-age adults and a 17 per cent increase in what they pay for older people’s care. “I don’t think you could argue that the extra money has gone on improvements in quality. Quality measures have stayed static over this period and Care Quality Commission (CQC) ratings have nudged up. Satisfaction ratings of publicly funded clients have also stayed pretty much the same. It seems much more likely that [the extra money] is going to fund home care and care home fees,” the same participant added.

Risk pooling a welcome step

“The private sector will never provide pooling of this catastrophic risk.”

A move by the government that was particularly welcomed by attendees was the notion of risk pooling social insurance. Rather than facing a potentially very uncertain risk profile, everybody effectively pays the same amount and is then covered against those risks. “That is undoubtedly what we should do.” said one attendee. “Social care is the only big risk that we all face where neither the state nor the private sector provides risk pooling. The private sector will never provide pooling of this catastrophic risk, it must be done by the state.” According to him, taking away the catastrophic risks gives us a chance of getting a market that will work not just for individuals, but for providers as well.

Overall, there was widespread agreement that although the new proposed legislation is a step in the right direction, more needs to be done to properly address the chronic financing issues in the sector. Yet, it’s equally important that any money that comes into the system is allocated wisely. Achieve this, and the many other issues in the care sector such as workforce and market fragility, can then be addressed.

This write-up forms one part of the wider Public Policy Projects Social Care Policy Programme. Drawing together key stakeholders from across the private sector, PPP intends to lead the debate on social care reform, to scrutinise and discuss the Government’s plans as they are delivered. Led by the Rt Hon Damien Green, the network continues to convene regularly for high-level strategic roundtable discussions in order to gather intelligence, insight and experience to deliver its recommendations through the publication of four reports.

1. Integrating Health & Social Care: A National Care Service

2. Mind the Cap: choices & consequences for financing social care

3. The Social Care Workforce: Averting a Crisis

4. A Care System for the Future: Digital Opportunities and the Arrival of Caretech

If you are interested in learning more about this significant programme of work, get involved in our work and partner with Public Policy Projects, please reach out to carl.hogkinson@publicpolicyprojects.com