Social care funding: time to end a national scandal Contents

Chapter 3: Options for reform

88.This chapter considers who should receive publicly-funded social care and how it can be funded sustainably.

Principles for reform

89.The following principles will govern our recommended reforms in this chapter, based on the evidence presented in Chapter 2.

90.Any long-term funding solution for adult social care should:

(a)Put more money into the system through a combination of public and personal funding;

(b)Be simple and easy to understand for those accessing public funding;

(c)Ensure local authorities can afford to provide care to all those whose needs meet the legal eligibility criteria, which must be interpreted fairly and consistently across local authorities;

(d)Quantify and address serious unmet need;

(e)Ensure the level of unpaid carers in the system does not suffer a steep decline and is sustainable;

(f)Better protect individuals from catastrophic costs;

(g)Reduce the disparity between entitlement to help in the National Health Service and the adult social care system, ensuring that entitlement is based on the level of need, not the diagnosis;

(h)Allow local authorities to pay care providers a rate that covers the costs of providing care, without the need for cross-subsidy from self-funders;

(i)Distribute adult social care funding more fairly across local authorities;

(j)Invest in the social care workforce and ensure a more joined up approach to workforce planning with the National Health Service.

Public versus private individual funding

91.How much should individuals be required to pay towards their care costs? Recent proposals have divided roughly into three categories: a “cap and floor” model, where care costs are publicly funded for those whose income and savings fall below a certain point (the “floor”) and after they have already paid a certain amount of care costs (the “cap”), universal provision of some form of free social care, and those who believe that financial products can help people avoid catastrophic costs.

Cap and floor

92.This model was proposed in the 2011 Dilnot Commission. Sir Andrew Dilnot, chair of the Commission, told our inquiry that any system should fund care for “those who cannot provide it themselves” and “let those who can afford to look after themselves do so if they possibly can”, intervening in the market to enable the latter if necessary.120 This model, he argued, “take[s] the catastrophic risk away”.121

93.The Dilnot Commission proposed increasing the upper capital threshold for the means test from £23,250 to £100,000. It proposed a cap of £35,000. In the 2013 Budget the Government broadly accepted both recommendations, proposing an upper capital threshold of £118,000 (slightly less than £100,000 in 2010–11 prices) and a cap of £72,000.122 The cap would cover only the costs of care services; people would pay a contribution towards their living costs while in residential care. The Care Act 2014 made provision for the introduction of a cap by regulations, but no such regulations have been introduced.

94.Sir Andrew Dilnot described the model as “social insurance with a large excess, and the excess is the cap”.123 By limiting the risk for insurers, he argued a cap could help provide a sustainable market for private social care insurance.124 This argument is explored in more detail later in this chapter. The Care and Support Alliance said a cap would “enable people to make earlier, more informed choices about their care, prevent self-rationing on cost grounds, and enable those with the means to save towards care costs to do so.”125

95.Harry Quilter-Pinner thought the cap and floor model was too complicated:

“I am increasingly not convinced that you can sell Dilnot. By the time you have gone into explanations of the detail of it, you will have lost the general public anyway. That is partly why we are advocating free personal care.”126

96.The Health Foundation said a cap would create “winners and losers”: “more people would receive state-funded residential care but fewer would receive funding for domiciliary care.”127 Their 2018 report with the King’s Fund estimated that the number receiving domiciliary care would decrease by roughly a third if the Government’s proposed cap and floor model were introduced, due to the Government’s proposal at the time to include property in the means test for domiciliary care.128

97.The Health and Social Care Secretary said a cap “is not a magic bullet”.129 He raised practical concerns about implementing a cap:

“measuring the cap is difficult, because the proposed cap is on lifetime care costs … Lifetime care costs are extremely hard to measure. Even if you measured care costs after retirement age, notwithstanding the fact that retirement age is moving, to have a cap policy for people who are already in retirement you would have to know how much they had spent on care before the policy was introduced. That is a logistical challenge in the cap policy.”130

In measuring the cap, distinguishing between spending on care which meets basic needs and spending which is discretionary to secure greater comfort or amenity also presents difficulties. Under the Dilnot proposal, local authorities would calculate the spending of individuals in relation to the cap based on what local authorities would have spent on their care, not on what individuals actually spend.131

Free at the point of use

98.Harry Quilter-Pinner from the IPPR said there was a “consensus growing behind free personal care”.132 The Policy Exchange, Social Market Foundation, Mencap, UNISON, Independent Age and the King’s Fund all voiced support for providing some form of social care free at the point of use in evidence to our inquiry.133 Warwick Lightfoot from the Policy Exchange said: “You have to move to financing complex long-term care that is consistent with the National Health Service so that it is free at the point of use.”134

99.UNISON said delivering the “vast majority of social care through public funding” would address “glaring inequality around access to care … built into the current care system” and “enable care providers to have greater certainty over their funding streams and therefore plan better for future needs, particularly in terms of workforce.”135 Independent Age said it would encourage older people “to seek help earlier rather than waiting for a point of crisis” and “enable them to live in their own homes for longer”.136 They joined the IPPR in praising the simplicity and clarity of providing care free at the point of need.137

100.The most popular proposal for free social care was “free personal care”. In this model, individuals receive free assistance with essential daily tasks, such as washing, cooking, mobility or dressing. Other needs, such as housework and shopping, would not be included in the entitlement. In Scotland, personal care is defined as help with:138

101.Individuals would also still have to pay for those accommodation and living costs that they would incur regardless of their care needs. In practice, this makes domiciliary personal care free, while residential care still involves paying care homes for the accommodation element.

102.Accommodation costs could still face the same problems on a smaller scale; those requiring long-term care could still face catastrophic accommodation costs. The average stay for older people in care homes is 30 months,139 though some with complex needs could stay for many years. A 2017 study estimated average accommodation costs for older people in residential care were £178 per week.140

103.This could be addressed by means-testing or introducing a cap on accommodation costs. The Dilnot Commission proposed an annual cap on accommodation costs of between £7,000 and £10,000, based on the minimum and median income of those above state retirement age at the time.141 A cap could also be measured in terms of time spent in residential care, with accommodation costs funded publicly for those who have spent more than a certain number of months or years in residential care. In Scotland, accommodation costs are means-tested.

Box 4: Free personal care in Scotland

Since 2002 Scotland has offered free personal care for over 65s. It was extended to the working-age population in April 2019. The Scottish Government defines personal care as including assistance with tasks such as washing, cooking, mobility or dressing. 142 Local authorities do not charge for personal care delivered in a person’s home. Self-funders in care homes are paid £180 per week by local authorities as a contribution towards their personal care, and £80 per week for nursing care.143 The latter is aimed to fund care costs but not accommodation costs.

104.The Kings Fund and Health Foundation 2018 report A fork in the road: next steps for social care funding reform said the introduction of free personal care in Scotland (see Box 4) had “created unexpected levels of increased demand for domiciliary care which we might also expect to occur in England”. They estimated that with free personal care the number of people receiving publicly-funded domiciliary care in England would almost double.144 But the report said the Scottish Government may have saved money overall:

“by supporting older people to live at home, helping to prevent costly hospital admissions, and delaying the need for residential care, the system may have resulted in lower total government expenditure as compared with no policy being in place.”145

105.John Godfrey, Corporate Affairs Director at Legal and General, said that some of the costs of unpaid care might shift to the state if free personal care were introduced, as unpaid carers decided to let the state undertake their caring duties.146 However, Caroline Abrahams said unpaid care might increase:

“If you provide people with a bit more support, they are more inclined to want to care informally. For example, neighbours and friends are often terrified that if they start doing help for someone, they will suddenly be landed with it—they will carry all the responsibility themselves and be left holding the baby, as it were—but if they thought there was better support around them, they would be more inclined to help.”147

106.There may be a deadweight cost to the introduction of free personal care. Unlike a cap and floor model, under free personal care many individuals with neither relatively high care costs nor limited assets would receive public funding. Sir Andrew Dilnot said: “for those who can afford [social care] it should not be free”.148 Dominic Carter, Policy Manager at the Alzheimer’s Society, said he thought this money would be better spent on a “complex care fund” to support individuals who required “that extra bit of help and support”.149

107.Some countries that provide care free at the point of use also struggle to manage demand effectively. Japan caps care home places at 3 per cent of the over-65 population, which has resulted in long waiting times, and reviews the system every three years to ensure funding is keeping pace with demand, often resulting in increased social insurance premiums.150 There have also been reports of long waiting times in Scotland. Age Scotland said in May 2019 that more than 4 in 10 older people with critical or substantial needs wait more than 6 weeks for social care.151 Harry Quilter-Pinner from the IPPR said Scotland’s system “has not been funded properly”.152


108.The Health Foundation and the King’s Fund estimate that introducing free personal care would cost £7 billion. Introducing the cap and floor model proposed during the 2017 general election campaign in 2020/21 would cost £5 billion. 153

109.The Rt Hon Damian Green MP proposed a “Universal Care Entitlement” in a recent report written with the Centre for Policy Studies.154 The entitlement, which he describes as “copying the state pension,” would “guarantee a decent level of care in both homecare and residential settings, and basic accommodation costs if residential care is needed” subject to the same needs test as currently. Individuals could purchase a “Care Supplement” financial product provided privately, which would insure them for a higher level of care, including “larger rooms, better food, more trips, additional entertainment and so on.”155

110.Damian Green’s report estimated that a Universal Care Entitlement for England would cost £2.5 billion. This was based on extrapolating the cost of the Scottish system. He described this as “a fairly rough and ready figure” which local authorities and care providers he had spoken to would find “satisfactory to get them to a reasonable baseline”.156 The Pensions Policy Institute estimated that introducing free personal care only for older people would cost £3.9 billion.157

Private insurance

111.Some witnesses suggested the private sector could help individuals fund their own care by offering insurance products. These could take the form of traditional insurance paid regularly through the individual’s life or a one-off payment at retirement age. Products were mostly aimed at care for older people rather than those of working-age. The Rt Hon Sir Steve Webb, Director of Policy at Royal London Group and a former Pensions Minister, said the new ability to withdraw pensions pots as cash created new possibilities:

“In the past, people would retire with a stream of income … Increasingly in the future they will retire with a pot of money … In the past two years, 200,000 people have transferred from final salary pensions into pots of money, averaging £200,000 … When I am 60, 65, that sort of age, I would pay a chunk of that pot to make sure that my kids got the family home.”158

112.The Health and Social Care Secretary told us:

“I am quite attracted to the idea that the state might back an insurer to cause this market to come into effect, in a similar way to what we did with pensions.”159

113.Other witnesses said that both demand and supply of products were too low to create a sustainable market for care insurance. John Godfrey said the market had “limited scope for growth”160 and Dr Jonathan Cylus, Research Fellow at the European Observatory on Health Systems and Policies and London School of Economics Health department, said only two countries had significant voluntary private insurance sectors.161

Demand for insurance products

114.Rob Yuille from the Association of British Insurers said: “on the demand side, it is not really a risk that people like to think about.”162 John Godfrey said:

“Most people find it difficult enough to save for retirement. We all expect to grow old. The expectation of growing old and sick is harder to envisage. Therefore, it is harder to sell those products.”163

115.Sir Steve Webb disagreed that there were insurmountable demand problems:

“People do not want to think about care, but they do want to think about insuring the family home—a lump sum at retirement out of a pension pot that buys an insurance that says that when you are 85 or whatever the policy pays for your care and the kids get the home.”164

116.He suggested adding a tax advantage, to allow the premium to go untaxed from the pension pot to the insurer in the same manner as an immediate needs care annuity. In this way, the Government could make a contribution to the costs of care gradually:

“There is no asking the Treasury for a big bundle on day one, but it gives the financial adviser a reason to say to the client, “Actually, you can take money and the Government will pay 20 per cent or whatever of it”.”165

117.The Association of British Insurers said the Government should lead an “awareness campaign for social care” to help the public understand their potential future social care costs.166 The Health and Social Care Secretary agreed that a lack of understanding was “a big challenge both to making progress in the policy … and to the substantive rollout of it.”167 However Bupa, a health insurer and care provider who have previously offered long-term care insurance products, said “financial products are unlikely to be viable in the short term” regardless of efforts to increase public understanding:168

“behaviour research shows that even if people are better informed about how the social care system works, the choices they may face and the costs they may incur, they see products and services which are specifically marketed towards ‘the elderly’ negatively and are reluctant to invest.”169

Supply of insurance products

118.Rob Yuille said long-term uncertainty made offering care insurance unattractive for providers:

“Just as there is uncertainty for the individual, there is uncertainty for the provider as well in terms of the risk and what the state will offer … It is expensive to hold capital against such a long-term risk, and the provider will be uncertain about what the state offers.”170

119.John Godfrey added that voluntary insurance encourages “adverse selection”:

“the only people who want to buy it are those who think they are going to use it. So it is a bit different from pet cover or mobile phone cover or those types of things.”171

120.Kathryn Petrie said the introduction of a cap on care costs, as recommended by the Dilnot Commission, could encourage more providers to offer products:

“If you changed the system to reduce the catastrophic risk and said that there was an insurance market that would cover people up to X, and that was where the state would step in to take the catastrophic risk, there would be potential to start working around that. Actuaries can do great things.”172

121.Sir Andrew Dilnot said insurers could offer two different kinds of products. One would insure individuals for any costs incurred up to the cap. The other, larger, market would be for those who wanted a higher quality of care than the state could provide.173

122.The Association of British Insurers said:

“our sector is agnostic about a cap. In itself, a cap will not create a market, nor is the absence of a cap what is limiting a market, as this is due to the many other factors in addition to a cap, such as awareness of an individual’s personal liability for meeting care costs, and the options for helping individuals meet those costs.”174

123.They added that a cap could reduce demand by making the system more complicated:

“Unless carefully designed, a cap on total care costs has the potential to add complexity to the care funding landscape, reduce consumer understanding of the extent of their responsibility to fund their own care, and therefore would not prompt people to make their own provision to pay for care. Any cap must therefore be designed with the need to ensure simplicity and understanding as a high priority.”175


124.Auto-enrolment of individuals in long-term care insurance schemes has been suggested as a way to boost demand. The Health and Social Care Secretary told the Committee he was “attracted to auto-enrolment because it has worked so well in pensions.”176 The Association of British Insurers (ABI) said in written evidence: “the success of automatic enrolment [in pensions] has shown the potential of soft-compelling individuals to save, and given this, it is sensible that the Government explores compulsion”.177

125.However, Rob Yuille from the ABI questioned the analogy with pensions when he met with the Committee:

“ who is automatically enrolling into what, and can they opt out? With pensions it is very clear, and there is a long-standing relationship between employers and pensions. That is not the case with long-term care in this country. Pension saving will be right for most people but not for everyone, so it would seem sensible for there to be an opt-out system. If there was an opt-out system here, that would create moral hazard issues around what the state provides for people who have opted out.”178

126.Daniela Silcock, Head of Policy Research at the Pensions Policy Institute, said that more money “coming out of their pay cheque” could encourage people on lower incomes to opt out of any such scheme.179 Sir Steve Webb said he would opt out:

“I am baffled as to how auto-enrolment would work in this context. If there was soft compulsion and if I am 30 years old and could opt out of something that might pay something in 55 years’ time, I would opt out like a shot. You would be mad not to, because the policy will change 15 times before you get there.”180

127.The Government has two categories of challenge: how to fund the system to ensure adequate quality and access; and how to make people’s entitlement to public funding fairer. Notwithstanding the latter, which is discussed in our subsequent conclusions, the Government must increase funding to restore levels of quality and access to those observed in 2009/10. This should be its top priority.

128.As most previous inquiries have concluded, the costs of long-term care should not fall solely on the shoulders of individuals and families or on the state. We support a partnership approach, in which the costs of care are shared between individuals and the taxpayer.

129.Free personal care is fair, better aligned with NHS entitlement than the current system and easier to implement than alternative proposals. It may be more expensive than some alternatives, but it could reduce demand for residential care and health care in the long-run by encouraging users to seek domiciliary care early.

130.Free personal care is a partnership approach because it covers only some of the costs of social care. Personal care means essential help with basic activities of daily living, such as washing and bathing, dressing, continence, mobility and help with eating and drinking. It does not include other areas where support might be needed, such as assistance with housework, laundry or shopping.

131.Under free personal care individuals would therefore only receive funding for support with these basic activities of daily living, based on the minimum threshold of eligible needs as defined by the Care Act. Accommodation and living costs, which everyone incurs irrespective of their care needs, would continue to be met by the individual.

132.The Government should introduce a basic entitlement to publicly funded personal care for individuals with substantial and critical levels of need. Accommodation costs and the costs of other help and support should still be incurred by the individual. The Health Foundation and the King’s Fund estimate this would cost £7 billion if introduced in 2020/21.

133.Free personal care must be funded properly, otherwise it will result in longer waiting times or restrictions in eligibility criteria. Funding should be reviewed each year to ensure local authorities can afford to meet demand.

134.Some people who need long-term care for many years, particularly in residential and nursing homes, might still face catastrophic accommodation costs.

135.The Government should retain a means test for accommodation costs. To avoid catastrophic accommodation costs, the Government should also explore a cap.

136.No country relies primarily on private insurance to fund adult social care costs. In the current system, establishing a market for long term social care insurance in England would be difficult, even with a cap on lifetime social care costs or accommodation costs or an auto-enrolment scheme. Private insurance cannot provide the amount of funding required by the social care system, not least because roughly half of public social care funding is currently spent on people who are working-age.

137.The analogy between social care, national insurance and the state pension is weak. Most people will expect to need a pension, while the proportion needing care is unknown and may be even further away in time than retirement.

138.A market for private care insurance may be more likely to develop in a system where personal care costs are funded by the state. Products might emerge offering individuals the ability to insure against accommodation costs, other care needs or to access more expensive private care provision.

Options for public funding

139.As discussed in Chapter 2, the King’s Fund and Health Foundation estimated that to return levels of quality and access observed in adult social care to 2009/10 levels the Government would need to spend £8 billion.181 In addition, to implement our recommendations above by 2020/21, the Government would require £7 billion (estimated by the King’s Fund and the Health Foundation as the cost of introducing free personal care).182

140.There are two main options for raising this money: funding through general taxation or funding through a hypothecated tax, which ties the funds raised to the provision of social care.

Hypothecated versus general taxation

141.Several witnesses suggested some form of hypothecated taxation, whether through a new tax on income, a ring-fenced increase in national insurance contributions or a mandatory social insurance system. A common argument for hypothecation is that it could increase public support for a tax rise. The House of Commons Health and Social Care and Housing, Communities and Local Government Committees concluded:

“People are generally willing to contribute more to pay for social care if they can be assured that the money will be spent on this purpose. ‘Earmarking’ taxation can help to give confidence and accountability over spending.”183

142.Involve, who ran a citizen’s assembly for the joint Commons Committees report noted above, said the assembly felt hypothecation would “create clarity and assurance about how the money would be spent.”184 Scope said disabled people they had consulted ahead as part of their written evidence submission expressed support for hypothecated taxation.185

143.The Nuffield Trust said a mandatory social insurance system “offers a high degree of transparency and clarity to citizens as it is clear where their contributions are going.”186 But they noted that Germany and Japan, where such systems have been successful (see Box 5 below):

“built on the social insurance mechanisms they already had established for health. England has no precedent of health insurance so adopting such a system … may not be so readily accepted by the population.”187

144.Dr Jonathan Cylus said that even mandatory long-term care insurance systems abroad usually receive “substantial resources” from general taxation.188 He called mandatory insurance the “least resilient source of funding for social care”:

“… contributions fall as people age and increasingly leave the labour force; at a population level, relying on mandatory contributions will mean fewer resources for social care in the future, requiring new funding sources or transfers from general tax revenues … Periods of high unemployment or slowdowns in wage growth will also adversely affect the ability to generate revenues from mandatory contributions (as well as taxes to a lesser extent). This may lead to budget deficits that need to be addressed by using funds from previous surplus years, taking on debt or drawing funds from general taxation. If poorly administered, this may mean that expenditures will fluctuate with the peaks and troughs of the economy … “189

The Nuffield Trust said however that Japan’s system (see Box 5), which blends hypothecated and general taxation, “offers a degree of flexiblity”.190

145.Sir Andrew Dilnot, Warwick Lightfoot and Harry Quilter-Pinner all suggested that funds be raised primarily from general taxation. Kathryn Petrie also recommended it for working-age care.191 David Phillips, Associate Director at the Institute for Fiscal Studies, suggested general taxation or a “set of broader tax increases” in order to “spread the burden across different groups and tax bases.”192

146.Harry Quilter-Pinner argued that the issue of fairness of taxation should be “disaggregated” from the issue of funding social care: “We would not look at Trident and say that we could not go ahead with a decision until we work out how we solve wealth taxation, and we should not do the same for social care.”193 Sir Andrew Dilnot suggested that the question of how to raise funds was not uniquely difficult:

“I have heard members of political parties on both the left and the right describe this as an incredibly difficult problem, and my response is that it is not a terribly difficult problem. There are huge amounts of money involved in the healthcare system, in pensions, in education—the amounts of money involved here are much smaller”.194

Box 5: Mandatory social insurance in Germany and Japan

In Germany, any individual in work or receiving a pension contributes to a fund throughout their adult lives. The current rate is 3.05 per cent of income. Employed people over the age of 23 without children pay an additional 0.25 per cent.

While in work, the individual pays for 50 per cent of the contribution and their employer covers the additional 50 per cent. Once retired, they pay the full premium themselves. Those who are self-employed are expected to pay the full premium.

Both older and working-age individuals receive a basic level of publicly-funded provision. Overall, care insurance covers 58 per cent of the average costs of care, with individuals expected to cover remaining costs, such as accommodation, themselves. Individuals are encouraged to take out private insurance for this purpose.

In Japan, those over the age of 40 are required to pay for state care insurance, with 50 per cent of the contribution covered by the employer and the other 50 per cent met by the employee. Premiums vary, but are typically an additional one per cent on top of health care insurance premiums. Over-65s are required to make contributions which are deducted from their pension.

Like Germany, the system offers only a basic level of care. Individuals pay direct co-payments of 10 per cent of care costs, which are means tested and capped at £75 per month for lower earners. Residential care home places are capped at 3 per cent of the over-65 population.

Overall, half of the funds for Japan’s social care system come from the mandatory insurance system, and the other half from general taxation.

Source: Written evidence from RAND Europe and PSSRU (SOC0072), Nuffield Trust (SOC0031) and (SOC0062), Centre for Policy on Ageing (SOC0032) and Q 30 (John Godfrey)

Intergenerational fairness

147.Some witnesses suggested finding the money from funding that has already been allocated to older people, either by reducing existing benefits or tax advantages or introducing age-specific taxation. Kathryn Petrie argued that without discriminating according to age, working-age people would be disproportionately burdened:

“If we increased income taxes to pay for a free social care system, it would fall predominantly on those of working age, because they pay the majority of income tax. The older population pay income tax, but the median amount they pay is not significantly large. It falls on those of working age. Is that distributionally fair and is it generationally fair? We would say no.”195

148.Sir Andrew Dilnot suggested making those above pension age pay national insurance contributions.196 Their current exemption was “quite wrong” and a “major distortion in the tax system”.197 The Treasury told us in answer to a written question that removing the exemption completely could raise £1.1 billion.198 Alongside increases in taxation, the King’s Fund supported this and a range of recommendations by the Barker Commission (listed in Box 6) aimed at asking “older generations, who would gain most from the reforms, and wealthier people” to make “a more significant contribution”.199 The House of Lords Intergenerational Fairness and Provision Committee recommended a similar removal of benefits aimed at older generations, including restrictions to free bus passes, free television licenses, and the winter fuel payment.200

Box 6: Recommendations from the Barker Commission for raising additional funding for social care, including money that could be raised

  • Restricting winter fuel payments and free TV licences for those over 75 to the least affluent in this age group (£1.4 billion)201
  • Ending the existing exemption from 12 per cent employees’ national insurance contributions for those who work past state pension age, requiring them to pay 6 per cent instead (£475 million)
  • Significantly reducing exemptions from NHS prescription charges (£1 billion)
  • An additional percentage point of employees’ national insurance contribution for those aged over 40 (£2 billion)
  • An increase to 3 per cent in the additional rate of national insurance for those above the upper earnings limit, timed to match extensions of free social care (£800 million)
  • A comprehensive review of wealth taxation to include possible reforms to inheritance tax, a wealth transfer tax and changes to capital gains and property taxation.

Source: Commission on the Future of Health and Social Care in England, A new settlement for health and social care (4 September 2014): [accessed 26 June 2019]

149.The joint Health and Social Care and Housing, Communities and Local Government Committees report recommended establishing a “Social Care Premium”, an “additional earmarked contribution” to social care which is paid only by those aged over 40 (including those aged over 65).202 This received support from the citizens’ assembly which informed that inquiry.203

150.This recommendation has also surfaced as an increase to national insurance contributions. The Barker Commission recommended an increase of one per cent in employee’s National Insurance contributions for those aged over 40 (see Box 6). Damian Green recommended a one per cent increase to national insurance contributions for those over 50 “as a last resort” in his report with the Centre for Policy Studies.204

National versus local responsibility

151.As well as finding new funding sources, the system needs to distribute the funding more equally to local authorities. We heard evidence on proposals to centralise the funding of social care. Sir Andrew Dilnot described the problem:

“We should recognise that there is an element of pure chance here. Why is this a local authority financial responsibility? Because it was left there in 1948, because in 1948 it was tiny. When we took almost everything else into the centre, we left this bit—which is a kind of hangover from the Poor Law, really—with local authorities. I think that is a historical accident. One question we should ask going forward is: should financial revenue-raising responsibility for this stay at local level?”205

152.David Phillips said the question rested on “who you think has better knowledge about what local people want and need” and whether central government’s assessment of needs around the country was accurate.206 Natasha Curry, Senior Fellow at the Nuffield Trust, said funding should be centralised:

“the funding piece has to sit at the national level if we are to have true risk pooling, but local authorities can still have autonomy to administer the system and to do the linking with the NHS. There is a precedent in other countries, where they have a clear national framework for funding, eligibility and benefits, but it is administered at a local level. That gives the local authority the autonomy to shape services according to need.”207

153.Essex County Council called for “a funding distribution formula that accurately reflects the level of need in each area.”208 Sarah Pickup said a “funding formula” could remove inequalities without resorting to a national system:

“You can deal with distribution issues if you can get a good, fair funding formula in place … It does not mean that you need to have a national system; historically, we kept all business rates and council tax in local areas and had government grant, which was used to redistribute. It did not mean that services were not organised and delivered locally.”209

154.The Health and Social Care Secretary said the Government was not considering centralising the funding of adult social care:

“we are not looking at changing the 1948 settlement in which it was decided that the NHS would be a national body and social care would be funded by local authorities … It is true that an awful lot of taxes are paid to the national Exchequer and then redistributed out, but not entirely. In fact, we have moved slightly in the other direction with the introduction of the social care precept, but that itself has an equalisation formula on top.”210

155.Some witnesses said social care funding should reflect the fact that older generations are more likely to benefit from it in the short term. Employees above the state pension age currently pay no national insurance on their earnings, but their employers do. We recommend that those above the state pension age should no longer be exempt from employees’ national insurance. They should pay the same rate as other age groups. This could raise more than £1 billion.

156.Social care funding should not be reliant on locally raised revenue which has little connection to local demand for social care.

157.The additional funding needed for adult social care should be provided as a government grant, distributed directly to local authorities according to an appropriate national funding formula which takes into account differences between local authorities in demand for care and ability to raise funds from local taxation.

158.We do not support the introduction of a hypothecated tax or a mandatory social insurance system. While some witnesses said that this could help the public trust that extra taxation will be spent on social care, hypothecation could leave the amount of funding available more sensitive to the performance of the economy.

159.Funding social care should be approached in the same way as any other funding pressure. We recommend that social care is funded largely from general taxation.

160.The Government should adopt a staged approach to providing the additional funding recommended by this report. It should immediately invest £8 billion in adult social care, which is the amount the Health Foundation and the King’s Fund estimate will be required to restore quality and access to 2009/10 levels, funded nationally and distributed according to a fair funding formula. It should then introduce free personal care over the next five years. Free personal care should be available universally by 2025/26.

120 Q 1 (Sir Andrew Dilnot)

121 Q5 (Sir Andrew Dilnot)

123 Q6 (Sir Andrew Dilnot)

124 Ibid.

125 Written evidence from Care and Support Alliance (SOC0028)

126 Q 19 (Harry Quilter-Pinner)

127 Written evidence from the Health Foundation (SOC0047)

128 Assuming a cap of £75,000 and a floor of £100,000. The King’s Fund, A fork in the road: Next steps for social care funding reform (May 2018):–05/A-fork-in-the-road-next-steps-for-social-care-funding-reform-May-2018.pdf [accessed 23 May 2019]

129 Q 102 (Matt Hancock MP)

130 Q 103 (Matt Hancock MP)

131 Commission on Funding of Care and Support, Fairer Care Funding (July 2011): [accessed 26 June 2019]

132 Q 23 (Harry Quilter-Pinner). Personal care is defined by the CQC as supporting people with things like washing, bathing or cleaning themselves, getting dressed or going to the toilet. Care Quality Commission, Personal care (5 February 2019): [accessed 16 May 2019]

133 Q 15 (Kathryn Petrie), Q 44 (Kari Gerstheimer); written evidence from UNISON (SOC0069), Independent Age (SOC0034) and The King’s Fund (SOC0057). The King’s Fund wrote that the Barker Commission measures should be pursued as a means to make social care free at the point of use in the long-term.

134 Q 22 (Warwick Lightfoot)

135 Written evidence from UNISON (SOC0069)

136 Written evidence from Independent Age (SOC0034)

137 Q19 (Harry Quilter-Pinner)

138 Scottish Government, ‘Free Personal and Nursing Care’: [accessed 26 June 2019]

139 Independent Age, ‘Cost of average length of stay in a residential care home is equivalent to 26 years’ worth of family holidays’ (26 October 2017): [accessed 26 June 2019]

140 Personal Social Services Research Unit, Unit Costs of Health and Social Care 2017: [accessed 26 June 2019]

141 Commission on Funding of Care and Support, Fairer Care Funding (July 2011): [accessed 26 June 2019]

142 Scottish Government, ‘Free Personal and Nursing Care’: [accessed 26 June 2019]

143 Written evidence from the Scottish Government (SOC0074)

144 The King’s Fund and the Health Foundation, A fork in the road: Next steps for social care funding reform (May 2018):–05/A-fork-in-the-road-next-steps-for-social-care-funding-reform-May-2018.pdf [accessed 26 June 2019]

145 Ibid.

146 Q 36 (John Godfrey)

147 Q 55 (Caroline Abrahams)

148 Q 3 (Sir Andrew Dilnot) He did however argue that social care for working-age adults below a certain age should be free because they would not have had a chance to prepare for the possibility of needing social care.

149 Q 45 (Dominic Carter)

150 Written evidence from The Nuffield Trust (SOC0031)

151 Age Scotland, ‘43% waiting too long for social care’, (28 May 2019): [accessed 26 June 2019]

152 Q 15 (Harry Quilter-Pinner)

153 Written evidence from the Health Foundation (SOC0047)

154 Damian Green MP and Centre for Policy Studies, Fixing the Care Crisis (29 April 2019): [accessed 26 June 2019]

155 Ibid.

156 Q 104 (Damian Green MP)

157 Care and State Pension Reform, Interactions between state pension and long-term care reforms: a summary of further findings (December 2018): [accessed 26 June 2019]

158 Q 37 (Sir Steve Webb)

159 Q 95 (Matt Hancock MP)

160 Q 24 (John Godfrey)

161 Written evidence from Dr Jonathan Cylus (SOC0071)

162 Q 25 (Rob Yuille)

163 Q 24 (John Godfrey)

164 Q 37 (Sir Steve Webb)

165 Q 37 (Sir Steve Webb)

166 Written evidence from the Association of British Insurers (SOC0054)

167 Q 95 (Matt Hancock MP)

168 Written evidence from Bupa (SOC0066)

169 Ibid.

170 Q 25 (Rob Yuille)

171 Q 26 (John Godfrey)

172 Q 20 (Kathryn Petrie)

173 Q 3 (Sir Andrew Dilnot)

174 Written evidence from the Association of British Insurers (SOC0054)

175 Ibid.

176 Q 96 (Matt Hancock MP)

177 Written evidence from the Association of British Insurers (SOC0054)

178 28 (Rob Yuille)

179 Q 37 (Daniela Silcock)

180 39 (Sir Steve Webb)

181 Written evidence from the Health Foundation (SOC0047)

182 Written evidence from the Health Foundation (SOC0047)

183 Health and Social Care and Housing, Communities and Local Government Committees, Long-term funding of adult social care (First Joint Report, Session 2017–19, HC 768)

184 Written evidence from Involve (SOC0035)

185 Written evidence from Scope (SOC0008)

186 Written evidence from The Nuffield Trust (SOC0031)

187 Ibid.

188 Written evidence from Dr Jonathan Cylus (SOC0071)

189 Ibid.

190 Written evidence from The Nuffield Trust (SOC0031)

191 Q 3 (Sir Andrew Dilnot) and Q 16 (Harry Quilter-Pinner, Kathryn Petrie, Warwick Lightfoot)

192 Q 64 (David Phillips)

193 Q 16 (Harry Quilter-Pinner)

194 Q 4 (Sir Andrew Dilnot)

195 Q 16 (Kathryn Petrie)

196 Q 3  (Sir Andrew Dilnot)

197 Ibid.

198 Written Answer HL15920, Session 2017–19

199 Written evidence from The King’s Fund (SOC0057)

200 Select Committee on Intergenerational Fairness and Provision, Tackling intergenerational unfairness (Report of Session 2017–19, HL Paper 329)

201 Estimate made before responsibility for funding free licenses was passed from central government to the BBC.

202 Health and Social Care and Housing, Communities and Local Government Committees, Long-term funding of adult social care (First Joint Report, Session 2017–19, HC 768)

203 Written evidence from Involve (SOC0035)

204 Damian Green MP and Centre for Policy Studies, Fixing the Care Crisis (29 April 2019): [accessed 26 June 2019]

205 7 (Sir Andrew Dilnot)

206 Q 62 (David Phillips)

207 Q 7 (Natasha Curry)

208 Written evidence from Essex County Council (SOC0025)

209 Q 61 (Sarah Pickup)

210 Q 92 (Matt Hancock MP)

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