Social care spending needs 3.9% hike to ease pressures

Social care will need an extra £8 billion a year of funding by 2033-34 if the current system is to be maintained, according to economic experts.

A joint report by the Institute of Fiscal Studies (IFS) and the Health Foundation estimated that spending is likely to have to rise by 3.9% a year over the next 15 years to meet the needs of an ageing population and an increasing number of younger adults living with disabilities.

Report authors also suggested that a centralised adult social care funding system could help to curb “considerable variation” in social care spending across different areas.

Since 2009-10, local authorities have faced sizeable cuts in funding from central government, forcing many councils to tighten their eligibility criteria and concentrate care on those with the highest needs.

The report found that these cuts were likely to have increased levels of unmet need and caused greater reliance on informal care from friends and family.

It added that reduced funds could have also led to “deterioration in the quality of care” and a reduction in the fees paid to care homes for state-funded residents.

Funding solutions

Financial experts have estimated that the current funding system would require an increase in funding of 0.4% of GDP within 15 years to deal with pressures on the system and close the predicted £8 billion funding gap.

Given the scale of the funding challenge facing health and social care, extra resources would likely be raised through increased tax revenue, the report said. In real terms, this means that families could face the prospect of paying an extra £280 a year towards social care.

Paul Johnson, director of IFS and an author of the report, said the government was facing “one of the biggest choices in a generation.”

“If we are to have a health and social care system which meets our needs and aspirations, we will have to pay a lot more for it over the next 15 years.”

“This time we won’t be able to rely on cutting spending elsewhere – we will have to pay more in tax. But it is a choice: higher taxes and a health and social care system which meets our expectations and improves over time, or taxes at current levels and a more constrained health service delivering less than we have become accustomed to,” he said.

No guarantees

In addition to discussing the amount of funding required to maintain the existing social care system, the report highlighted a need to review how funding would be structured in the future.

It found that increasing the grants paid to local authorities “would not guarantee” extra spending on services as councils currently decide how much of their revenues are spent on services.

The current system was said to have led to “considerable variation in social care spending” across different areas as the report suggested a “fully centralise[d]” adult social care funding system could help to curb differences in spending.

The think tank warned the government it risked a situation where funding does not “keep pace with rising pressures”.

Stick or twist

Ben Zaranko, one of the report authors and research economist at the IFS, told Community Care some of the problems could be addressed through additional funding within the existing system.

“Increasing the fees paid by local authorities to care home providers might help place the sector on a more sustainable footing and reduce the need for cross-subsidisation. That would require additional funding, but it could be provided within the existing system,” he said.

Yet, he indicated that other issues, such as insurance, could benefit from reform, he said: “Currently, people are unable to protect themselves against extremely high care costs, and the government doesn’t step in to pool everybody’s risks in the way it does with the NHS.”

“If the government decides to implement social care reform, any package that increases the generosity of the state’s offer would require extra funding, and the government would need to find that money from somewhere,” he said.