How are we going to fund social care?

The Coronavirus pandemic has highlighted, more than ever, the importance of funding social care. Local authorities are concerned about meeting their statutory duties, paying care workers a fair wage and ensuring a stable care market in their current budget constraints. Responding to the Coronavirus pandemic has placed additional cost pressures on social care, placing further strain on budgets and increasing the risks of unmet need and providers pulling out of already fragile care markets.

Debates surrounding social care funding and commitments to address it are not new. A number of commissions, consultations, white papers, and green papers have been developed over the years exploring options and making recommendations. It was a key topic of debate in the 2019 General Election and the government made a commitment that one priority for their first 100 days was ‘beginning cross party talks to find an enduring solution to the challenge of social care’. However, a solution to social care funding has yet to materialise. While policy responsibility is devolved, arguably the ability to respond adequately lies with Westminster and decisions made there will have implications for Welsh Government.

Debates around funding social care are complex and centre on three interlinked questions; what should individuals be entitled to, how should additional funding for social care be raised and how should the funding flow.


What should individuals be entitled to?

There is still low public awareness of what social care is and what it costs, with many assuming social care is free in the same way health care is. In the current system, in England and Wales, entitlement to social care is based on a means test, with those who can afford to expected to pay towards their care. Social care is a devolved issue and entitlement to care varies; free personal care is available to adults in Scotland, and in Wales, people can keep up to £50,000 of their savings or other capital, without using this to pay for residential care, compared to £23,250 in England. Wales also has a cap for the amount a person will pay for care in their home.

In 2011 the Dilnot Commission proposed changes to make the current means tested system more generous, and called for a £35,000 cap on care costs. This would aim to address individuals having to pay large sums of money for their care. Others, such as the Institute for Public Policy Research have argued for a ‘free at the point of need’ model for social care, aligned with the model of free healthcare. This would be more expensive but would increase access to free care and would remove the disparity between and barriers to integration of our health and care systems.


How should additional funding for social care be raised?

Experts agree that additional funding for social care is required to ensure quality social care is available to those who need it. Wales has an ageing population and increasing numbers of people with ongoing care and support needs, which poses real challenges in ensuring a sustainable system of care. Research from the Health Foundation in 2016 estimates fully funding adult social care pressures in Wales would require £2.3 billion by 2030/31, compared with £1.3 billion in 2015/16. The First Minister has committed to designing a system which will meet current and future social care needs, and has established an Inter-Ministerial Group to examine options for paying for social care in Wales. The Holtham Report explores utilising new taxation powers in Wales to introduce a social care tax levy. Our work on the tax base in Wales highlighted that revenue created from the introduction of new taxes is likely to be modest.

The introduction of a social care tax to raise additional revenue has been debated in Westminster, where MP’s have called for the introduction of a ‘Social Care Premium’. Some argue that funds raised through tax should be ringfenced or hypothecated, but this poses a number of challenges, not least the potential uncertainties as any intake will rise and fall with the economy. Research suggests that there is public support for a collective approach to funding social care that is fair and matches how NHS funding is raised.

Others have argued for insurance-based systems similar to our approach to pensions. International examples of social insurance schemes are often cited as examples of success including Japan and Germany. In Germany, for example, they operate a national mandatory ‘risk-pooling’ social insurance scheme. In Japan, their system has been described as ‘part social insurance, part taxation and part co-payment’, and is financed through a combination of a payroll tax for people aged over 40, pensioner contributions and general taxation. The evidence suggests they have stimulated the social care market, increased choice and pooled risk. They also provide a relatively stable and flexible income, although the funding mixes are complex. However, population pressures and costs are still rising, there are workforce shortages and there is heavy reliance on informal carers. Moreover, reform was lengthy and difficult in both countries, despite strong political and social consensus supporting the social insurance philosophy.


How should the funding flow?

The Coronavirus pandemic has highlighted the fragility of the social care system, as well as the disparity between social care and the health care system and the need for a sustainable funding solution. Emergency funding has been put in place, recognising the increased costs providers are facing in responding to the crisis, such as covering staff absence and supplying personal protective equipment. But social care was under strain before the pandemic and a long-term solution is needed that recognises the gap between our health and social care systems. Calls have been made for greater alignment between funding for health and social care, for example by the Barker Commission in 2014 which proposed a single health and social care system with a ring-fenced budget.

These are tough questions, but a challenge this important – for Wales as well as Westminster – requires robust and detailed answers. This was an urgent priority before the Coronavirus pandemic and the crisis only makes it more so.