Long term funding of adult social care Contents

1The state of social care

12.The critical state of social care and the very serious consequences for people who receive care, their unpaid carers and their families, as well as the NHS, is well-documented, not least by the Housing, Communities and Local Government (HCLG) Committee in its two reports of March 2017.11 We begin, nevertheless, with a high-level description of the funding challenges facing the sector and their impact, as this provides essential context for the recommendations we make in this report and underlines the urgency of the need to act upon them.

Funding pressures

13.Our witnesses together represented all parts of the social care sector and included charities working on behalf of older people and younger adults, care providers, and local government, as well as academics and representatives of think tanks and the NHS. Their common assessment was that social care was under great strain due to rising demand for services at a time of increasing costs and reductions in social care budgets.12 These factors are discussed in the following paragraphs.

Demand and cost pressures

14.Life expectancy is increasing, the population is ageing and adults with long-term health conditions and disabilities are living longer. While this is an extremely positive development which should be celebrated, it poses a significant challenge for the provision of social care. The National Audit Office (NAO) has estimated that, between 2010–11 and 2016–17, the number of people in need of care aged 65 and over increased by 14.3%.13 Furthermore, there are now 850,000 people with dementia in the UK,14 seven in ten of whom have a co-morbidity.15 And, between 2009–10 and 2013–14, the number of adults with learning disabilities rose by around 20%.16 John Jackson, Co-Lead of the Resources Policy Network at the Association of Directors of Adult Social Care (ADASS), estimated that demographic pressures were costing local authorities “about £400 million a year […] It is £157 million for older people and £243 million for younger adults”.17 It is notable that over half of these additional cost pressures arise from care and support to meet the needs of working age adults.

15.Local authorities have also faced a range of other cost pressures, namely the National Living Wage (NLW), the Apprenticeship Levy and increased National Insurance contributions, as well as growth in the total population of 5% between 2010–11 to 2016–17.18 The NLW, which is being introduced incrementally between 2016 and 2020, has had the most significant impact on local authority social care budgets as care providers require fee uplifts to cover their increased staffing costs. Although giving care workers a much-needed increase in pay, the introduction of the NLW has had a substantial impact on the care sector where wages are typically very low. The Association of Directors of Adult Social Care (ADASS) has calculated that, in 2018–19, the NLW and associated National Minimum Wage implementation will cost councils an additional £466 million.19

Reductions in spending on publicly funded social care

16.The rising demand and cost pressures described above have landed at a time of reducing spending on social care. Since 2010, local authorities have had to cope with a 49.1% real terms reduction in the core grant they receive from central government, which equates to a 28.6% real-terms reduction in their ‘spending power’ (government funding, council tax and retained business rates).20 As the largest area of discretionary spend, comprising over a third (37.8%, £14.8 billion net)21 of their total spending in 2017–18, adult social care budgets have contributed to the savings local authorities have been required to make, with real terms expenditure on adult social care falling by -5.8% from £15.8 billion in 2010–11 to £14.9 billion in 2016–17.22

17.Recently, reductions in spending on social care have slowed as a result of the Government’s decision to provide some additional short-term funding in the form of the adult social care support grant, the adult social care precept and the allocation of funding from the improved Better Care Fund.23 In addition, local authorities have been protecting their social care budgets by spending less on other services, reducing their spending on social care by 3.3% in real terms compared to reductions in spending of 52.8%, 45.6% and 37.1% in real terms on planning and development, housing services, and highways and transport respectively.24

Additional funding for social care, 2016–17 to 2019–20

18.As referred to above, in recognition of the funding pressures on adult social care, the Government has introduced a series of additional short-term funding measures, stated to amount to an additional £9.4 billion funding for adult social care between 2016–17 and 2019–20.25 Although the additional resources have been welcomed, we heard that they were not sufficient to resolve the funding pressures facing social care. The Local Government Association (LGA) said that each of these funding mechanisms had “limitations” and did “not deal with all short-term pressures, let alone address the issue of longer term sustainability”, describing the Government’s response as “short term and incremental in nature”.26 After considering the evidence it heard on the new funding mechanisms, the then Communities and Local Government Committee came to a similar conclusion in its pre-Budget report, highlighting, among other things, the lack of correlation between the amount raised by the precept27 and local need for care and local variation in the amount it could raise.28

The funding gap

19.Many organisations say that, even taking into account the additional funding, there is a ‘funding gap’ in adult social care resulting from an accumulation over the years of the demand, cost and funding pressures detailed above. We were presented with estimates of the funding gap: Simon Bottery, Senior Fellow in Social Care at The King’s Fund, said that his organisation, together with the Health Foundation and the Nuffield Trust, had estimated it at £2.5 billion by 2019–20,29 while Sarah Pickup, Deputy Chief Executive of the LGA, said that her organisation had estimated a £2.2 billion gap by 2019–20, £1.3 billion of which was needed to stabilise the care provider market.30 In addition, the Competition and Markets Authority (CMA) has estimated that the care home market across the UK (therefore excluding domiciliary care) is underfunded by around £0.9 to £1.1 billion a year.31 It is notable that analysis by the NAO of the estimates submitted to the HCLG Committee during its 2017 adult social care inquiry found that, accounting for differences in the bases of calculation, these three estimates were consistent.32 Both our witnesses emphasised that their organisation’s estimates were based on maintaining current levels of care.33 Sarah Pickup explained that the LGA’s estimate “address[es] the very basic issues of demographic growth, inflation, the national living wage and the provider market stability—the basics of keeping the same care going” and did not include unmet need, investment in prevention and early intervention or the cost pressures arising from the ruling on sleep-ins, which we discuss in more detail in paragraph 27.34

20.The recent additional funding commitments for adult social care, although welcome, are short-term, ad hoc and do not represent a sustainable solution for the long term. Authoritative sources in the social care sector say that, despite the additional funding, there will be a funding gap of £2.2–£2.5 billion in 2019–20. Before further reform of the system can be contemplated, the funding gap must be closed. Upfront funding will also be needed for transformation issues. The issue of backdated pay for sleep-ins also presents an immediate risk to organisations’ financial stability and must be addressed urgently.

The impact of the funding pressures

21.The funding pressures have had serious consequences for all parts of the social care system and particularly people who need care and support. These consequences are well-documented: Sir Andrew Dilnot, Chairman of the 2011 Commission on the Funding of Care and Support, told us that the system had been under great strain for many years and that it was consequently now at risk of “fairly significant disaster”.35

Unmet and under-met need

22.As a result of funding pressures, local authorities are providing care and support to fewer people and concentrating it on those with the highest levels of need. Despite rising need for care, the number of people receiving publicly funded care fell by 400,000 between 2009–10 and 2016–17 and it is estimated that 1.2 million older people may now have unmet care needs.36 People in receipt of care are finding that their needs are ‘under met’—Anna Bird, Executive Director of Policy and Research at Scope, told us that working age adults were seeing their care “restricted to the basics of personal care” rather than receiving care which promoted their independence and enabled them to live as full a life as possible.37

Increasing reliance on unpaid carers

23.Rising levels of unmet and under-met need have led to unpaid carers stepping into the breach, and providing an estimated £132 billion worth of care each year.38 Since 2001, the number of people providing 20–49 hours of care a week has increased by 43%.39 It is not certain that the number of unpaid carers will keep pace with the need for support.40 Dominic Carter, Senior Policy Manager at the Alzheimer’s Society, said that three in five unpaid carers had told his organisation that their health was failing as a result of their care-giving.41 Although the Care Act 2014 entitles carers to an assessment of their own needs for support and to have those needs met, lack of funding has made it extremely difficult for local authorities to fulfil those duties.42 Financial support to carers is available through the benefits systems: Carers Allowance is £64.60 per week for providing at least 35 hours care to some in receipt of certain disability benefits. The Government has recently launched the Carers Action Plan 2018–20. This sets out a cross-government programme of targeted work to be carried out over the next two years, including work on employment and financial support.43

The workforce

24.The social care workforce is similarly challenged; pay is low, sick pay and pensions are not universal, and vacancy (7.7%) and turnover rates (33.8%) are high—including among nurses working in social care (9% and 32.1% respectively)44—leading to a reliance on agency staff.45 Zero hours contracts are also prevalent: UNISON estimates that there are more than 300,000 social care workers employed on zero hours contracts across the UK.46 We heard of a lack of investment in training and development for care workers,47 which was particularly stark when compared to equivalent spending in the NHS,48 and of insufficient recognition and status being afforded to their work.49 A stable and skilled workforce is essential to the provision of quality care and keeping pace with demand for social care in the coming years—an estimated 500,000 more care workers are needed by 2030.50


25.The quality of care provided is also suffering. We heard it described as “extremely patchy”,51 “variable”52 and that the care given to people with dementia was often lower quality.53 We note that, overall, the quality of services is good: as at 2 March 2018, over three-quarters (79%, 17,045) were rated Good, and 2% (483) Outstanding.54 However, in its written submission, the Care Quality Commission (CQC), the provider quality regulator, also said “there is too much poor care: 2% (348) of services are rated as Inadequate, and 18% (3,799) as Requires Improvement”. They went on to say that, although more services were improving than deteriorating, some were “struggling” to do so which they said “point[ed] to a fragility in the sector that needs to be addressed”.55 Caroline Abrahams, Charity Director at Age UK, explained how the challenges in the workforce affected quality: “lack of continuity, never seeing the same person twice […] rushed visits—maybe quarter of an hour rushing in and out—with no time to establish a proper relationship, let alone real communication”.56

Care providers under pressure

26.The funding pressures have flowed through to care providers, who are reliant on local authorities for around 65% of their income.57 In recent years, local authorities have provided only small yearly fee uplifts58 and, although the introduction of the NLW drove an increase in fees in 2017–18 and 2018–19 of between 3% and 5%,59 they are still below the benchmark costs of care.60 The Competition and Markets Authority (CMA) has estimated that fees were on average as much as 10% below total cost, equating to “around a £200 to £300 million shortfall in funding across the UK”.61

27.Care providers are therefore having to absorb the costs of estate maintenance and modernisation, as well as those arising from their responsibilities as employers, which include the Apprenticeship Levy, statutory holiday and pensions and the costs of staff recruitment, training and development.62 Furthermore, they now face the risk of having to make backdated payments for underpayment of six years’ worth of sleep-in shifts, estimated by Mencap to amount to £400 million for the learning disability sector alone.63 In consequence, the sector is under extreme pressure, evidenced by the fact that 66% of councils surveyed by ADASS in 2018 had experienced provider failure, which has a serious impact on the many thousands of individuals in their care.64 The CQC said that, in 2016, the sector was “approaching a tipping point” and that, in 2017, it “remained precarious”.65

28.Reduced local authority fees have required care providers to top them up or ‘cross-subsidise’ them with the fees of people who pay for their own care. Douglas Cooper, Project Lead at the CMA, said that his organisation had found that the difference in the fees paid by self-funders and local authority funded clients could be “very large—for large operators around 41%”.66 This has led to providers becoming increasingly focused on the self-funder market,67 resulting in a reduction in services in less well-off areas.68 It is notable that, with a lower means test threshold set at £14,250, self-funders are often not wealthy individuals; as John Jackson of ADASS observed “Even quite poor people pay an awful lot for their care”.69

A fragile care market

29.Increasing demand combined with provider failure, workforce shortages, deteriorating quality and reliance on self-funders have undermined the stability of the care market. We heard that funding pressures had led to local authorities taking a short-term approach to market shaping and commissioning, and that some commissioning practices—such as reverse auctions—“deliberately drive down the price of care”.70 Douglas Cooper of the CMA said that often local authorities’ market shaping plans did not give providers the information they needed to plan ahead and make investments.71 In addition, we heard that, given the current funding situation, investors were reluctant to invest in care homes for local authority funded residents.72 We note that, for the reasons described in paragraph 26, care providers have very little funding to invest in their own assets and expand their service.


30.The combination of rising demand and costs in the face of reductions in funding has placed the social care system under very great and unsustainable strain. In its present state, the system is not fit to respond to the demographic trends of the future. Of greatest concern, is the fact that the very people the system is there to support get only the care they need to survive, rather than the care they need to live full and independent lives.After successive attempts at reform, and in the context of an unrelenting increase in demographic pressures, the social care Green Paper must be the catalyst for achieving a fair, long-term and sustainable settlement.

31.The pressures on social care have also spilled over to the NHS, manifesting themselves chiefly in the form of delayed transfers of care out of hospital and emergency admissions to hospital. These particular pressures, and the interdependencies between the health and social care systems and other services, are discussed in chapter four. Meanwhile the box below discusses the challenges faced by individuals in navigating the system of social care.

The challenges faced by the individual: navigating the system

In the preceding paragraphs, we discussed the challenges facing the social care system as a whole. In this text box, we consider the challenges people and families experience in their dealings with the system. They will usually encounter a range of difficult issues, including testing their eligibility for publicly funded social care or continuing health care; the assessment process; care options and choosing a provider; and the costs of care and how to pay for it. From the point of view of the individual, we heard the system described as “almost impossible to navigate”,73 “incredibly complicated”74 and “bewilder[ing]”.75 This was very much reflected in our focus group discussions with care users, relatives and care home staff at New Deanery Care Home in Braintree. One attendee said to us that finding his way around the system on his wife’s behalf was like “having a jigsaw puzzle with no picture on the box”.

People often approach the social care system at a disadvantage. Unless they have experience of a family member or friend receiving care, they are likely to have little knowledge of how it works. They may be coming to it reluctantly, not wanting to admit they need care and disinclined to seek out advice and information.76 They are unlikely to have planned how to meet their care costs, possibly thinking, like many, that social care is free at the point of use.77 When confronted with the complexities of the system—often at crisis point after a sudden illness or the loss of a family carer—and the realisation that they are likely to have to pay for care, people are bewildered.78 Staff at the New Deanery Care Home told us that “one of the biggest issues is lack of knowledge […] People come to us not knowing about anything—what they’re looking for, who to speak to”. The Citizens’ Assembly members held the view that the system was “too complex, confusing and misunderstood”.

However, at the point when it is most needed, advice and information can be difficult to obtain. Local authorities should be the first port of call and they are required to establish and maintain an information and advice service.79 However, the reality is that the support available varies and is difficult to access.80 Although there is good advice available online, the quantity of it and the number of sources can be overwhelming even for people who are adept at using the internet,81 and many older people are not regular internet users.82

Entry to the publicly funded system is determined by two tests—a process we heard described as a “labyrinth”.83 The needs test determines a person’s eligibility for care by their ability to perform certain tasks, identifying them as eligible where their needs have a “significant impact on wellbeing”. As their resources have reduced, local authorities have cut back the number of people to whom they provide care by stricter interpretation of the eligibility criteria.84

The second test (the ‘means test’) assesses a person’s ability to pay for their own care via income, savings or other assets. The means test and its three thresholds are complex.85 And the different rules which apply to residential and domiciliary care, which in the former case require a person’s housing assets to be taken into account but not in the latter, cause confusion and a sense of unfairness. Alongside this, the means tests thresholds for other related services are different which further complicates matters; for example, the means test for the Disabled Facilities Grant takes savings of over £6,000 into account, while eligibility for Continuing Healthcare is based solely on primary health needs. In addition, the threshold levels of the social care means test have not been revised since they were set in 2010–11 and are estimated to be 12% lower in 2018/19 in real terms,86 which is perceived to be a source of unfairness.

Once it has been established that a person has care needs, there is little help on offer for them or their family in choosing care. People receiving publicly funded care may have access to a social worker who can advise them on their options and help them find a care home. However, one focus group attendee said that, when seeking help from social services for her mother, she encountered “barrier after barrier”, was “shocked at the lack of help” and was “passed from pillar to post”. Self-funders must usually research care options and make decisions themselves. Many of the residents and relatives at the Braintree focus group fell into this category—one of whom said, “There was no assistance, no guidance about where to go. I just got in my car and went to look”. People who have their care paid for by a combination of public funding and top-up payments also encounter difficulties. Independent Age said that they regularly heard from families “experiencing issues with top-up fees, such as a lack of council involvement, little clarity around who should be paying and questions over value for money”.87

NHS Continuing Healthcare (CHC) operates alongside the social care system, adding an additional layer of complexity. CHC, which is arranged and funded by the NHS, provides health and social care to people with significant ongoing health needs, including those at the end of their lives or with long-term conditions, such as dementia. The two-stage assessment process, delays to decision-making and subsequent three-stage appeal process, as well as the significant financial implications for those who are not eligible, means CHC is a source of anxiety and distress for families.88 The situation is exacerbated if a person’s needs fluctuate, meaning they can move between receiving free CHC and having to fund their own social care. One focus group attendee whose wife received CHC at the end of her life, described a “gulf between what’s NHS and what’s not—the untold riches of CHC versus means tested social care”.

11 Housing Communities and Local Government (HCLG) Committee, Adult social care: a pre-Budget report, Eighth Report of Session 2016–17 (March 2017); HCLG Committee, Adult social care, Ninth Report of Session 2016–17, HC 1103 (March 2017)

13 National Audit Office, Financial sustainability of local authorities 2018 (March 2018)

14 Alzheimer’s Society (FSC0158)

15 Q2

16 Learning Disabilities Observatory, People with Learning Disabilities in England 2015, Public Health England (2016)

18 National Audit Office, Financial sustainability of local authorities 2018 (March 2018)

19 Association of Directors of Adult Social Care, Budget Survey 2018 (June 2018)

20 National Audit Office, Financial sustainability of local authorities 2018 (March 2018)

21 Association of Directors of Adult Social Care, Budget Survey 2018 (June 2018)

22 House of Commons Library Briefing, Adult Social Care Funding (England) (February 2017)

23 As announced in the 2017–18 Local Government Finance Settlement and in the Spring Budget 2017

24 National Audit Office, Financial sustainability of local authorities 2018 (March 2018)

25 HC Deb 25 November 2015 cc1363–1364

26 The Local Government Association (FSC0049)

27 The adult social care precept allowed councils to raise council tax by 2% and later 3% in 2017–18 and 2018–19.

28 HCLG Committee, Adult social care: a pre-Budget report, Eighth Report of Session 2016–17 (March 2017)

31 CMA (FSC0172)

33 Q39 [Simon Bottery], Q106 [Sarah Pickup]

36 The King’s Fund (FSC0174)

37 Q2

38 Carers UK (FSC0143)

39 Carers UK (FSC0143)

41 Q2

42 Carers Trust (FSC0069)

43 Department of Health and Social Care, Carers Action Plan 2018 to 2020: Supporting carers today, (June 2018)

44 Skills for Care, Open Access NMDS-SC Dashboards (accessed June 2018)

46 UNISON (FSC0096)

50 Skills for Care (FSC0164)

51 Q2

53 Q2

54 Care Quality Commission (CQC) (FSC0171)

55 Care Quality Commission (CQC) (FSC0171)

56 Q2

57 National Audit Office, The adult social care workforce in England, (February 2018)

58 Lifeways (FSC0131)

59 Association of Directors of Adult Social Care, Budget Survey 2018 (June 2018)

60 National Audit Office, The adult social care workforce in England,( February 2018)

61 CMA (FSC0172)

62 Lifeways (FSC0131)

64 Association of Directors of Adult Social Care, Budget Survey 2018 (June 2018)

65 Care Quality Commission (CQC) (FSC0171)

66 Q66. See also Q2 [Caroline Abrahams]

67 Buckinghamshire County Council (FSC0070)

70 MHA (FSC0114)

72 CMA (FSC0172)

76 CMA (FSC0172)

79 Section 4, Care Act 2014

82 Office for National Statistics, Internet users, UK: 2018 (May 2018)

84 SIGOMA (FSC0050), Learning Disability England (FSC0064)

85 If a person has assets over £23,250, they are assessed as being able to meet the full cost of their care but if they are below £14,250, they are not required to make a contribution. Those with capital between these two limits are required to make a contribution of £1 per week for every £250 of capital.

86 The Health Foundation and The King’s Fund, Social care funding options: How much and where from? (May 2018)

87 Independent Age (FSC0165)

88 National Audit Office, Investigation into NHS continuing healthcare funding (July 2017)

Published: 27 June 2018