Oxygen Finance

The social care conundrum

During the dog days of his Government, Gordon Brown announced a plan to part fund a national social care service from the estates of the deceased.

The proposal was denounced as a “death tax”. When the Conservatives suggested, in their election manifesto, a different way of taking assets into account when assessing individual contributions to social care costs, that was branded a “dementia tax”.

Now, new proposals in a report by the Centre for Policy Studies, which include a potential increase in National Insurance payments, are also under attack. Critics say the funds generated would not be sufficient to fill the funding gap and Labour shadow chancellor John McDonnell claims the plans would “punish older people with a tax on getting old”.

Given this response, it’s no wonder that politicians shy away from reforming the system for adult social care in England. Robert Colvile, director of the Centre for Policy Studies, acknowledges that the issue is ‘politically toxic’. But with decades of commissions, inquiries and thinktank analysis, we’re no further forward. And the Government seems to be kicking its Green Paper on the issue (first promised last March), further down the road.

But with almost 5,000 new requests for adult social care every day, the problem isn’t going to go away. There’s a mountain of evidence that points to demographic pressures on adult social care increasing further in the longer-term. And there is a widespread consensus that social care funding needs to be put on a more secure and sustainable long-term basis. The devil, as always, is in the detail of how this actually gets delivered.

Meanwhile, there is a growing concern that the care provider market is becoming increasingly precarious, as resources available to Local Authorities continue to shrink. In a budget survey by the Association of Directors of Adult Social Services (ADASS) last year, nearly three quarters of directors reported that care providers in their area were facing financial difficulties. In the first half of last year, 48 councils experienced at least one provider ceasing trading in the homecare market, and 58 councils experienced at least one provider ceasing trading in either residential or nursing care. During that same time, 44 councils had contracts handed back by home care providers and 17 councils had contracts handed back from care home providers.

However, this picture of care providers under severe financial pressure becomes more complex when analysis of company ownership of many care homes is considered. A recent report by the Competition and Markets Authority warned that some providers “may be carrying unsustainable levels of debt, and therefore may be at risk of financial distress”. And the impact of large-scale provider failure was felt in 2011 when Southern Cross, the largest independent care home operator in the country, collapsed threatening the care of 17,000 people in 750 homes. In that event, Local Authorities ending up picking up the tab, given its overall responsibility for safeguarding care.

Many providers have understandably responded to these financial pressures by focussing on ‘self-funders’. These are people who pay for their own care. But it is an open secret that self-funders generally cross-subsidise local authority residents, who receive broadly the same care and accommodation at a lower price.

Providers have also been struggling to recruit and retain staff. The care sector as a whole has a vacancy rate of almost 5% (which is nearly double the economy average). Migrant workers play a large role in the social care workforce and the impact of Brexit is still unknown. The introduction of the National Living Wage has also increased cost pressures for providers.

The sector needs greater certainty over future funding levels. Last year, the Public Accounts Committee looked at the interface between health and social care. It criticised the Government for lacking “an effective overall strategy or plan to achieve its long-held aim to integrate these two sectors”. It also floated the idea of a 10-year plan for social care, reflecting a similar deal for the NHS. The National Audit Office has also more broadly highlighted the risks associated with the lack of a long-term funding plan for local authorities.

Tackling these funding issues would certainly help the situation. But the bigger issue revolves around the extent to which responsibility for funding care falls to the individual or the state. Whilst the general public seem pretty clear that NHS services are (generally) free at the point of delivery, understanding of who pays for social care is much less clear. If responsibility falls mainly to the state then changes will need to be made to the taxation, pension and benefits systems. There may be a need for some form of mandatory insurance or tax levied beyond a certain age. If the individual needs to pay more for their direct care provision, then name calling around ‘death taxes’ and ‘dementia tax’ will need to stop. Meanwhile, Age UK estimate that 54,000 people have died waiting for care packages since the Government’s Green Paper was promised first last March. It really is a life and death issue.

Author: John Betts

John has 19 years’ experience in local government finance, including eight years as a Section 151 Officer.

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