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Can we plug the gaps in social care funding?

Author: ICAEW Insights

Published: 27 Oct 2021

Adult social care spending needs to increase significantly to meet the needs of our ageing population. But how do we pay for it, asks Simon Bottery, senior fellow in Social Care at The King’s Fund.

The financial strain on health and social care has become starkly apparent over the past 18 months, but it certainly isn’t a new issue. According to the IFS, UK spending on healthcare needs to rise by an average of 3.3% a year over the next 15 years just to maintain NHS provision at current levels. To make improvements, spending must increase by 4%.

Likewise, social care funding needs to increase by 3.9% a year to meet the needs of an ageing population and an increasing number of younger adults living with disabilities. If any social care reforms come about in response to its myriad issues, social care spending would have to increase at a faster rate. Somehow, the government needs to bring more funding into health and social care, but there is no easy answer to the problem.

Simon Bottery is senior fellow in Social Care at The King’s Fund, an organisation that advocates to improve health and social care in England. The current system has been only available to those with the very highest needs and the lowest means. This should be broadened out to provide more people access to publicly funded social care.

Health and social care levy a ‘promising but limited move’

The government is attempting to address some of the myriad issues at stake with the health and social care levy, which involves a 1.25% increase in National Insurance Contributions. £5.4bn of the £36bn this will raise over three years will go into social care. It also pays for an extension of the means test to include more people and puts a cap on how much people will spend on social care. It is a promising but limited move, says Bottery.

“You could extend the means test further. It will bring something like 75,000 people into the publicly funded system as we understand it. That's good. But compare that with the 840,000 that are currently benefiting. You can see that it's not a huge leap forward. 

“The cap, we understand, will benefit an additional 75,000 people – a total of 150,000 people will benefit from the measures. Again, we think those things are positive, but they're quite limited in terms of what they do. There's really very little money in the rest of the package to support the pressing needs within the system at the moment.” 

Local authorities underfunded and ‘essentially rationing care’

There is also nothing in the provision for local authorities, Bottery says. Local authorities have lacked funds for some time, leading them to essentially rationing care. Unless local authorities feel secure about the income streams, that is likely to continue. “Until we see the results of the Spending Review and the leeway that local authorities are likely to have in terms of spending, I think you have to worry that there's still not enough money simply to fund the current system, even if we're making it slightly more generous.”

The Department of Health and Social Care has allowed local authorities to create the adult social care systems they want in their areas within existing national guidelines on eligibility. During COVID, the Department realised that it had hardly any levers over what was happening at a local level. One of the measures in the new Integration Bill is to give the department more oversight over what local authorities do when it comes to commissioning adult social care.

“Although we haven't seen the details of that, that's a measure of the government taking back a degree of control over what happens at a local level,” says Bottery. “If I was a local authority, I'd probably be quite focused on that.” 

The King’s Fund’s view is that decisions on adult social care spending are best made at a local level. However, the way funds are spent by authorities varies wildly. “Although some of that variation is probably warranted, due to different demographics and population sizes, there is also an element related to the culture and the approach that individual local authorities take. Some degree of further oversight on things like commissioning seems to me to be a reasonable measure.”

Additional provisions needed to plug the gap

With the new levy barely covering the funding needed to provide the health and social care services the UK population needs, additional provisions are needed to plug the gap. An extra social insurance levy has been discussed as a possible alternative; many European countries use some kind of social insurance that is similar to the National Insurance levy, in that it is paid by employers as well as the employees. The money goes into a ring-fenced managed fund, which is used to support the social care needs of individuals as and when they develop.

“In some ways, it's like National Insurance or tax, albeit that spending is more independent under Social Insurance models than under the system the government's talking about,” says Bottery. “The advantage of that, and it's a massive advantage, is that the money does get raised.”

The other option is some kind of private, voluntary social insurance, which does not work, Bottery explains. When those kinds of insurance products were available in England, hardly anyone bought them.

“From the point of view of the Treasury, it would be a really neat solution. It would get the expenditure off the government balance sheet and onto the individual balance sheet. But of course, it just doesn't work, people don't buy it. So there's a fundamental problem with expecting private insurance to do the job.”

Where private insurance could come in is to cover the cap level of social care costs. That idea was mooted when a cap was first discussed in 2016. “There is a possibility that you may see, if not new products, then perhaps extensions of existing ones such as equity release or immediate need annuities to cover the level of the cap that people know they will be responsible for, but we don't think that's a requirement for a cap to work.”

More work should be done to find overlaps between the health and social care system and other provisions such as benefits, in order to put more prevention measures in place to reduce the pressure on the health and social care system. Connections such as this are often overlooked, Bottery explains. For example, Attendance Allowance is very closely related to health and social care. 

“One of the concerns I've had for a long time is that there's very little coordination. If I'm a local authority, I don't actually know which people in my area are receiving Attendance Allowance. If I wanted to do prevention work, I would start with people who had a limited degree of disability and are receiving Attendance Allowance. But I don't have that data.”

We want a society where people stay healthy and well for as long as possible, says Bottery. It's the right thing for communities and individuals. While we cannot prove that there is a financial benefit to this, it’s expected that it would make a difference. “So let's start with that vision of people living long, healthy, independent lives for as long as possible. Put the investment into that, whether or not we can demonstrate its returns.”

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