Ready for Ageing? - Select Committee on Public Service and Demographic Change Contents

Annex 10: Funding pressures on health and social care (see paragraphs 21 to 23 of the report)

185.  Demographic projections suggest that a substantial increase in demand is about to hit the healthcare system, adding to other long-term cost pressures (see Annex 9). This great increase in demand will naturally create a great increase in cost.

186.  The Nuffield Trust has recently estimated that under the current healthcare system, if the real-terms funding freeze for the NHS is extended to 2021/22, if no productivity gains are made and if rates of hospital utilisation by people with chronic conditions and the rising cost of providing healthcare continues, then by 2021/22 the NHS in England will see a funding shortfall of £54 billion for the NHS as a whole.[266] If the English NHS achieves unprecedented productivity gains of 4% a year in every year from 2010/11 to 2014/15 but no further, they predicted that this funding gap would be reduced to a potential shortfall of £34 billion. For comparison, the total budget for the English NHS in 2010/11 was £107 billion. Yet continuing this rate of unprecedented productivity growth for a whole decade would be very difficult. Many of the 'savings' so far achieved are the result of a wage and salary cap that would be difficult to sustain for a decade. Even a constant real terms budget would be difficult to sustain into the next spending round, as it would result in heavy cuts to other departmental budgets.[267]

187.  If the current healthcare system did not change and the large NHS funding gaps for 2021/22 estimated by the Nuffield Trust materialised, this would have particularly serious consequences for older people, as the biggest consumers of NHS spending.[268] The NHS will have to be transformed, in service delivery terms, in order to deal with changing needs more efficiently; this transformation should help with the predicted funding shortfall.

188.  There is already a crisis in social care funding. The Dilnot Commission concluded in July 2011 that the current English social care system is inadequately funded and that "People are not receiving the care and support that they need and the quality of services is likely to suffer as a result". The Dilnot Commission calculated that demand had outstripped expenditure by around 9% over the previous four years in England.[269] The Nuffield Trust cited estimates which suggested that even without reform, spending on social care would have to rise from £14.6 billion in 2010/11 to £23 billion by 2025/26.[270] The Trust has calculated that with the number of people in England with moderate or severe disabilities projected to increase by 32% by 2022, public expenditure on social care and continuing healthcare for older people will have to rise to £12.7 billion in real terms (an increase of 37% from £9.3 billion in 2010), to keep pace with expected demographic and unit cost pressures.[271]

189.  Recent cuts to social care budgets have intensified an underlying mismatch between funding and demand, so that a growing number of people on low incomes are no longer eligible for state support.[272] The Local Government Association (LGA), Association of Directors of Adult Social Services (ADASS) and Society of Local Authority Chief Executives (SOLACE) told us that, following the capping of council tax, councils have managed demand by tightening eligibility thresholds and raising income via increasing fees and charges. Eighty-five per cent of English councils are now implementing a threshold at 'substantial' or 'critical' needs, resulting in a growing level of unmet need, with people unable to access support until their needs reach crisis point.[273] Many older people with moderate needs are therefore already suffering, and the situation is likely to continue to worsen without significant real terms increases in funding.[274] The result is further strains on public spending, as well as personal suffering: we heard from Lord Warner, Commissioner, Commission on Funding of Care and Support (Dilnot Commission) that the NHS and social care are now in a very clear symbiotic relationship: "if you tighten the screws on the funding of social care, you put an extra load and burden on the NHS".[275]

190.  Cuts to social care budgets are also driving down what local authorities pay private providers. Evidence suggests that the level of local authority funding is in many cases already below what residence in a care home costs. This means that "within a home, you often have private patients subsidising local authority-paid people".[276] This is a hidden tax on those who are funding their own care.

191.  There should be a sharing of responsibility for social care between individuals and the state, although on a basis that is less worrying for older people, as the Dilnot Commission proposed (see Annex 11). But there are many people who do not have families who can provide care, or the money to buy it, but who cannot cope without care—and this situation is likely to worsen considerably with greatly increasing numbers needing such care in the coming years. If the neglect of social care continues and these people are not properly supported in the community, they will end up with more severe needs or will suffer crises and go into hospital, which is likely to be contrary to their wishes, not in their best interests, and more expensive.[277]

266   Nuffield Trust, A decade of austerity? The funding pressures facing the NHS from 2010/11 to 2021/22, December 2012.  Back

267   Nuffield Trust, A decade of austerity? The funding pressures facing the NHS from 2010/11 to 2021/22, December 2012.  Back

268   Department of Health, Resource Allocation: Weighted Capitation Formula Seventh Edition, 2011. Back

269  Fairer Care Funding - The Report of the Commission on Funding of Care and Support, July 2011. Back

270   Nuffield Trust, Reforming social care: options for funding, May 2012. Back

271   Nuffield Trust, Care for older people - Projected expenditure to 2022 on social care and continuing health care for England's older population, December 2012. Back

272   Nuffield Trust, Reforming social care: options for funding, May 2012. Back

273   LGA/ADASS/SOLACE; Alzheimer's Society; Age Cymru. Back


275   Q 588 Back

276   Q 573 (Tony Watts, Independent Chair, South West Forum on Ageing); Q 573; Q 422 (William Laing, Laing & Buisson (Consultancy) Ltd). Back

277   LGA/ADASS/SOLACE; Q 457; Q 75 (John Kennedy, Chief Executive, Joseph Rowntree Housing Trust); Q 588; Nuffield Trust, Reforming social care: options for funding, May 2012. Back

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