The whole of society will benefit from social care reform

What would a lifetime cap on care costs mean for people in former ‘red wall’ seats?

Social care in England needs fixing. It is underfunded, leaving hundreds of thousands of people without the care they need. Those working in the sector are underpaid and frequently experience poor conditions. And the provider market is financially fragile and struggles to attract the investment needed for innovation. These are all problems that any social care reform plan put forward by the government must address.

But there is also a fundamental problem with the way in which we pay for social care. The current system leaves people exposed to huge and uncertain costs. Residential care costs start at £600 a week and can run into the thousands for those with complex needs. Few people will be able to afford to cover these costs from their pension incomes. Although most people won’t need residential care, more than 10% of those who do will stay for more than 5 years.

Anyone who owns a home, or has more than £23,250 in savings, will need to pay for their own care. This will often mean drawing down on housing wealth until its worth drops below this threshold – at which point the state will start to contribute.

The way we pay for care now is inefficient and unfair

The current social care system is not efficient because, to have any chance of being able to pay for your own care, you need to hold on to your savings for as long as you can. This could prevent you from spending on things that might improve your quality of life now or help delay your need for care. And without knowing how much care we will need, we don’t know how much money we have to save. In other areas of our life we avoid having to save for adverse events by buying insurance – but this is not an option with social care, where there is no private market for insurance products.

The current system is also unfair because people who have the highest care needs – for example, someone needing dementia care for many years – pay the most. This is not like the NHS, where care is always free, regardless of needs or wealth, and it means that someone with dementia is treated very differently to someone with cancer.

A lifetime cap on care costs

The Dilnot Commission was set up by the government in 2010 to come up with a solution to this social care funding problem. It proposed a lifetime cap on care costs of between £25,000 and £50,000 – and extra means-tested support for people with assets of up to £100,000 (rather than the current threshold of £23,250). The government accepted and legislated for the recommendations, but the cap has never been implemented. Despite repeated assurances that it would fix social care, this government, like its predecessors, has failed to act.

So, who would benefit from a cap? In the broadest sense we would all benefit, just as we all benefit from the NHS even if we are healthy, or benefit from insurance even if our house doesn’t burn down. At some stage in our lives most of us will need social care, but we do not know how much care we will need or how long for, or whether we will be among the 1 in 10 people whose care will cost into the hundreds of thousands. A cap would help give us peace of mind, remove some of the uncertainty about the costs we may face, and allow us to spend our savings on things that improve our health and wellbeing.

But different groups will experience the benefits of a cap differently. Currently, people with more modest assets are at greater risk of losing a large share of their wealth. For example, take someone with a house worth £250,000 (the median house price in England) and no other savings, with an income of £200 a week, needing 5 years of residential care costing £650 a week. Currently they would spend £117,000 on care, losing just under half of their wealth. Someone in the same situation but with a house worth £125,000 would spend around £105,000 on care. This is less than in the first case because when their wealth drops below £23,250, the state starts to support them. But they lose over 80% of their wealth.

A cap on lifetime care costs would help in both of these situations, by putting an upper limit on the amount that individuals would ever need to spend on care. With a £50,000 cap in place (and increasing the threshold for state support to £100,000, as the Dilnot Commission recommended), the spend from assets would be reduced to £50,000 in the first case and £42,000 in the second case. Losses for the owner of the £125,000 house would fall from over 83% of wealth to 34% of wealth.

The table below summarises these two cases. The interactive charts also show how a £50,000 cap on total care costs would affect people with different house values and needing care for different lengths of time.

Figure 1

There is also a political dimension to this inequality. We know that people with more modest housing assets are most at risk of losing a large proportion of their wealth. We also know that house values vary by parliamentary constituency. Typically, Labour constituencies have lower median house prices than Conservative constituencies – £190,000 compared with £250,000. But the pattern is very different in areas which the Conservatives gained at (and since) the 2019 General Election – the so-called ‘red wall’ seats. The median house price in these areas is £160,000, compared with £270,000 in the non-‘red wall’ seats, and below that of Labour seats (£190,000). And home ownership is not atypical in these areas, with the median home ownership rate being around 65% (similar to the national average).

Figure 2

What this means is that, as a group, those in red wall seats are more at risk of suffering catastrophic losses from social care costs than those in ‘traditional’ Conservative areas. A cap on social care costs would particularly benefit people living in these red wall constituencies.

A cap on care costs is only one part of fixing social care

A cap on care costs is an important element of social care reform – but much more is needed to fix social care, as the Prime Minister pledged to do. In real terms, social care funding has just about reached 2010/11 levels again – but adjusting for population changes, funding has fallen by 12%. As a result, there have been significant reductions in access and a rise in unmet need.

More funding is needed to improve access as well as to keep up with future demand. Again, this would be of most benefit to people living in more deprived areas, such as some red wall constituencies, where reductions in spend have been greater. Policies and funding are needed to boost the quality of social care services, improve terms and conditions for staff, and provide better support for unpaid carers, among many other things.

The adult social care system in England needs fundamental reform to make it fit for the 21st century. A cap on care costs should be one part of this new system – and would help provide greater financial protection for individuals and families. But a more comprehensive package of reform and investment is also needed to move social care beyond the legacy of the Poor Laws and create a system that genuinely supports people to live with dignity and promotes their wellbeing.