Social care funding gap

Our estimates of what it would cost to stabilise and improve adult social care in England

The Health Foundation has previously set out priorities for government to fix the crisis in social care. These include:

• stabilising the current system
• improving access to care
• providing social protection against care costs.

This analysis provides revised estimates of what these measures would cost for four scenarios up to 2030/31. It also explores how our estimates have changed over time as the underlying data and context has changed. The data sheet and a technical annex are available to download.

A previous version of this page presenting seven scenarios was published in October 2020.

Additional funding is needed to stabilise the current adult social care system and improve access to care.

In the chart below we set out our updated estimates of the adult social care funding gap up to 2030/31 if no additional action is taken.

It shows the gap 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

• four scenarios with varying levels of ambition for stabilising and sustaining services and improving access.

This is an update of our previously published analysis, most recently before the 2020 government spending review in November 2020. We have taken into account the commitments made in the March 2020 budget and November 2020 spending review, of additional adult social care funding. We have not factored in the additional funding or cost pressures resulting from coronavirus (COVID-19) this year (see Box 2). 

Policy intervention

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
• sectoral wage boards
• standards built into contracts between social care providers and local authorities
• increased reporting by social care providers receiving public funds.

A more detailed discussion of the scenarios and policy interventions which could promote their implementation is available in our recent submissions to the Health and Social Care Select Committee inquiry on social care: funding and workforce. 

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. 

Table 1 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.

Source: Health Foundation analysis of the Dilnot Commission’s report.

Note: These costs 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.

In recent years the Health Foundation has 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.

Our key figures have varied across our analysis, as the assumptions and context have changed. Download the data sheet to view how these key figures have changed over time (Tab 2) and see Box 3 to explore the assumptions that each analysis was based on.

2021 data: interactive spreadsheet

In our 2021 update, we provide an interactive spreadsheet which contains data for the four scenarios, along with our baseline projection. The spreadsheet enables you to adjust two of the key variables in scenarios 2, 3 and 4:  

• the amount in % that we increase care packages by

• the amount more in % that we pay for care.  

This allows you to compare projections and funding gap estimates using different assumptions about increases in adult social care funding. The spreadsheet contains a cover sheet which describes the data and functionality in more detail. 

Why do the figures change?

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

• Our analysis uses 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. 

• We may change the financial year that 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.

• We may make updates to reflect refined modelling assumptions, for example to reflect government policy announcements of additional funding for social care (such as the 2020 Budget and 2020 Spending Review) or other technical assumptions.