Four Questions
In this chapter for a new Fabian Society pamphlet, I propose answers to the four thorny issues facing the funding of adult social care in England
Ministers need to answer four questions about funding the National Care Service: (1) how much money is needed? (2) Where should it come from? (3) How should it be managed to ensure good value? (4) How should it be shared geographically?
So far, Labour has had a decent go at answering the last of these questions. The government’s Fair Funding Review, which took effect this April, aims to equalise the spending power of English councils relative to their populations and levels of need. This financial rebalancing will not be completed within a single parliament, but things will move in the right direction. Now, we need answers to the other three questions.
How much money?
To build a National Care Service, the government needs to make a 10-year financial plan for social care. Today, the taxpayer spends only around £30bn per year on adult social care in England; spending on the NHS is £190bn. Over the next decade, real spending will need to rise by at least another £15bn if we are to address five competing challenges:
Rising needs: demand for local authority services is projected to grow by 24 per cent over the next 10 years. There will be more people in late old age with dementia and acute frailty, and more working-age adults with serious learning disabilities. Even this projection assumes that informal family carers will help the same share of people as they do today. That cannot be assured, as the number of potential carers in mid-life is not growing as fast as the numbers with care needs.
Rising costs: social care is labour intensive, and the key cost pressure is pay. With the national living wage pegged to average earnings, costs in the sector will rise in line with economy-wide pay and GDP. And this is before the social care fair pay agreement, which is likely to lead to a gradual rise in sector pay above the wage floor. The Health Foundation says the combination of rising needs and rising costs require real spending to increase by 3.1 per cent per year until 2035.
Unmet need and prevention: Over the last 20 years there has been an astonishing decline in the percentage of older people receiving publicly-funded care and support. In the early 2000s, around 8 per cent of over-65s were recipients of local authority services; by 2021 the figure had fallen to 3.4 per cent, and it has barely increased since. Some of the decline can be explained by better time-limited rehabilitation and by rising affluence (which means that a smaller percentage of older people are eligible for local authority assistance). But many more older people are also going without support that they require: Age UK calculates that 2 million over-65s have an unmet need for care. In particular, lower-level assistance that prevents or delays the need for more intensive support is frequently unavailable. To start to reverse this shortfall the Health Foundation suggests that real spending on care would need to rise by 3.9 per cent annually until 2035.
Better quality: social care providers often achieve amazing things, and most CQC-regulated services are rated ‘good’ or better. But outcomes for people receiving support and their carers still leave a lot to be desired: only 37 per cent of carers are satisfied with the support they and their loved ones receive. If there were more money in the system, people could be allocated more hours of support or larger direct payments; employers could spend more on workforce pay and development; and providers would be less financially precarious and more able to invest in modern facilities. The government is prioritising the workforce, and has already pledged £500m for the first year of the fair pay agreement. Matching NHS pay scales, however, could cost £2bn.
Affordability: Publicly funded social care is not free (most people receiving support pay charges), and it is not available at all for many people with assets. The system has also become less generous: asset thresholds in the means-test have been frozen since 2010. Successive governments have rejected proposals for charging reforms. Without new rules, spending by individuals with care needs will rise by billions of pounds over the next 10 years. Action to improve affordability is essential. At the very least, means-test thresholds should be increased and all short-term care should be free. Depending on the money available, other reforms should be considered, including state copayments, a reformed means-test or a cap on lifetime liability.
Where should the money come from?
Between 2025/26 and 2028/29 real spending on adult social care will rise by around 3 per cent per year. This is more than most public services are getting, and it is enough to deal with some immediate pressures. But it will not significantly improve the system. And this increase has been achieved only by further distorting the shape of local government finance: the percentage of local authority budgets going to social care is rising once again, and council tax is being increased by an average of 5 per cent each year to foot the bill.
Sooner or later the mounting pressure on councils and council taxpayers will have to be relieved. The present council funding model cannot deliver a genuine step-change in funding for social care to address the five challenges described above. Under a National Care Service, ministers should therefore introduce a ring-fenced funding system for adult care as we have for schools, separate from the rest of local authority finance.
When this happens, we should have a serious debate about new sources of revenue. If council tax is not the right source of extra revenue, what should replace it? In the next parliament, general taxes may need to rise (for the NHS as much as social care). But we should also consider whether the direct beneficiaries of an improved care system should also pay more. That means exploring ways to raise taxes on richer older people in exchange for a better offer from the state.
Some of the difficult options to consider include charging national insurance on earnings after state pension age; an equivalent to national insurance for private pensions in payment; limiting tax-free pension lump sums; properly taxing lifetime gifts; introducing a lifetime cap on payments into ISAs; and creating a proportionate system of property taxes.
It is a political judgment as to whether or not these extra taxes should be earmarked for social care. Whichever route is chosen, visionary political leadership will be required, with ministers levelling with the public frankly on the difficult trade-offs and bad alternatives.
How should the extra money be managed well?
The public will only accept higher spending and higher taxes if they have confidence that the money will deliver results. At the moment, the government does not have a clear plan for securing good value in adult social care. The 2024 Labour manifesto promised national standards to ‘ensure high-quality care and ongoing sustainability, and ensure providers behave responsibly’. But two years later there has been no regulatory reform.
Perhaps such measures are not needed right now. Adult social care is pretty lean and efficient after 15 years of austerity. Local authorities frequently pay less than the sustainable cost of delivering home care or residential provision. Some providers are backed by private equity, but overall operating profits in the independent sector are quite modest and have been falling.
But before ministers inject lots more money into adult social care, they need confidence that it will achieve results and not leak out of the system. At the level of local areas, today’s CQC assessments and light-touch performance monitoring need to evolve into the accountability and improvement framework of a national public service. And, for as long as most care is delivered by the independent sector, a regulatory and commissioning regime is needed for providers that secures quality andviability without excess profits.
Standardised approaches to contracting with large providers, stronger local commissioning capabilities, and national financial regulation modelled on the social housing sector should all be explored.
The promise of the National Care Service remains huge. But now we need a financial reckoning. Creating an adult social care system of which we can be proud will only be achieved if we raise and spend more money, allocate it fairly and use it well.
This article was first published as ‘Four Questions’, a chapter in the new Fabian Society pamphlet Care to Share: Building the National Care Service, edited by Ben Cooper, Iggy Wood and Miles Ward