The government’s social care announcements will fall short of solving the funding crisis for local government and might even make it worse, writes Adrian Jenkins. All now depends on the spending review.
When Boris Johnson became prime minister, he announced that he would “fix the crisis in social care once and for all”. He had a “clear plan … to give every older person the dignity and security they deserve”. Two years later, the plan has been announced and it is clearly focussed on protecting “parents and grandparents from the fear of having to sell [their] home to pay for the costs of care”. Social care itself remains very much in crisis.
Even the announcement to raise £36bn over three years through a health and social care levy will do nothing to address the social care funding crisis. The overwhelming bulk of the additional income will be for the NHS. Only £5.4bn will be applied to social care, and this will be used to reduce the payments that social care users have to make rather than investing in the social care service itself.
Social care clients will have to pay a maximum of £86,000 towards their care costs over their lifetime (payments for accommodation will be additional), and the asset thresholds will be increased (the asset limit has been lifted from £23,250 to £100,000, with a taper rate between £20,000 and £100,000).
Balloon
If we look at the NHS first, it will receive £25bn over 3 years, of which £10bn is to manage (and reduce) the elective backlog. Waiting lists have increased enormously during the pandemic and it is a political imperative that these do not balloon out of control. Currently five million people are on an NHS waiting list—but the secretary of state for health has claimed that the number could rise to 13 million.
More money is clearly required by the NHS but this has been achieved at the expense of other public services, in particular social care.
Spending on the NHS has risen from 27% of public spending in 1999-00 to as much as 44% by 2024-25. And the risk for local government—as for the rest of the public sector, to varying degrees—is that there is no growth left after the NHS has taken its share. The NHS is so effective at making its case for more funding that other services are crowded out.
It is claimed by ministers, although not convincingly, that the additional revenues from the new levy will be transferred to social care after three years. Many adjectives have been used to describe why this is unlikely, but let us just say that there are not many local authority directors of finance who are budgeting on a big increase in funding from the levy in 2025-26.
In fact, the NHS is likely to come back asking for even more in three years’ time. The Health Foundation has estimated that the cost of clearing the waiting list backlog over this parliament is actually £17bn, rather that the £10bn in the NHS settlement. There is a very real prospect that the waiting list will be longer in three years’ time than it is now with the NHS needing even more money.
What is perplexing, though, is why ministers have been so adamant that the levy will transfer to social care. They cannot give any details of how much social care will receive or make a cast-iron guarantee that it will. Is it that they cannot bring themselves to admit that the NHS has an insatiable appetite for more funding? Are they embarrassed that they have given in so easily to the NHS? Is it that they know social care needs more funding but the politics of the NHS requires that it has to be funded in full?
Whatever the explanation, it is an odd choice as a hill for ministers to die on when everyone knows the NHS will continue to spend the money in 2025-26.
Review
Of course, ministers are not able to give us the full story about funding for social care until after the spending review on 27 October 2021. This is when the chancellor will announce how much funding each service will receive in 2022-25.
The signs in last week’s announcement were not good. There was a very strong suggestion that local authorities will have to fund growth in demand and unit costs with increases in council tax, adult social care precept, and further efficiencies.
What is more likely, though, is that there will be some real-terms growth in social care grants, and that this will be supplemented by further precept increases. The NHS needs social care to perform well and to have the capacity to take patients when they are ready to leave hospital.
Now, we must not get ahead of ourselves, this is strictly a supporting role, but one that is essential if the NHS is going to deliver effectively.
Within the £5.4bn funding package, £500m will be used for workforce reform, and the remaining £4.9bn will fund the social care reforms.
Given that the reforms only start in October 2023, this sum has to be spread over 18 months, which suggests an annual cost of about £3.2bn. We have no idea whether this will be sufficient to fully fund the new cap and asset thresholds. More worryingly, the government will also be requiring rates paid by self-funders and the local authority itself. Self-funders currently subsidise local authority rates and so harmonisation will place potentially huge financial pressures on local authorities and care providers. Does the £3.2bn include funding for rate harmonisation?
A further financial risk for local authorities is how the additional funding is going to be distributed between authorities. No information has been shared with councils about the way this will be done and will no doubt take a while to emerge. Local authority finance directors will remain in the dark for some time yet about the financial impact of the reforms.
Last week’s social care announcements have certainly not solved the funding crisis for local government and might even have made it worse. The reforms make sense from the point of view of social care clients, for whom the cost of care can be high and random. But for councils, the reforms have opened up a new set of risks with concerns that authorities will be left paying for the shortfall in funding for the reforms. All is not yet lost, but the spending review will need to give social care reasonable real-terms increases in funding and, even then, local government will be well behind the NHS in the queue for more funding.
Adrian Jenkins leads the funding advisory service at Pixel Financial Management.
Photo: Number 10, Flickr.
Photo by Danie Franco on Unsplash
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