Government resurrects cap on care costs plan four years after ditching it

Limit of £86,000 on care liabilities and more generous means-test will come into force in October 2023, heralding significant increase in volume of annual assessments and reviews

Boris Johnson
Boris Johnson (photo: Prime Minister's Office)

By Mithran Samuel and Thomas Smith (story corrected, 15 September 2021*)

The government has resurrected plans to cap care costs and make the care means-test more generous, four years after ditching them.

The £86,000 cap on care liabilities is the centrepiece of the government’s long-awaited reform of adult social care funding in England, announced today by prime minister Boris Johnson and due to come into force in October 2023. Overall, the plan will deliver £5.4bn extra for adult social care over the next three years, against a current annual annual gross spend on local authority care of £23.1bn as of 2019-20 (source: National Audit Office).

Alongside the cap, the capital limits for care funding will be relaxed so no one whose assets, including their home where applicable, are below £20,000 (up from £14,250, currently) contributes from these, whereas there will be potential state funding available for those with savings of up to £100,000 (up from the current £23,250).

It also includes action to ensure councils pay providers a “fair rate” for care and £500m to support the workforce over the next three years. The government also pledged to publish a white paper setting out a “once in a generation transformation” of adult social care, designed to improve choice, independence and access to care for people needing support, while also enhancing quality.

Resurrection of Dilnot plan

The plan is, in large part, the one the Conservatives had planned to bring in five years ago, based on the work of the 2011 Dilnot Commission set up under the coalition government.

It was legislated for in the Care Act 2014 but has been left on the statute books, unimplemented, ever since, with the government first deferring it until 2020 and then ditching it altogether in 2017, when Theresa May was prime minister. 

At the time, the cap was due to be £72,000, though the increased figure announced today is likely to reflect the impact of inflation since 2016.

The cap policy will, by design, bring many existing self-funders who do not have contact with their local authority into the care system and result in a significant increase in the volume of assessments and reviews carried out annually. This will potentially require a big increase in the social work workforce.

This is because the capped cost does not refer to what a self-funder actually does pay for their own care, but to what their local authority would spend on their care were they meeting their care and support needs (excluding daily living and accommodation costs) in full.

Closing self-funder subsidy

This will need to be calculated through an assessment – creating a so-called ‘independent personal budget’ – and then tracked through annual reviews in a person’s ‘care account’.

Once this reaches £86,000, the person would receive free care and support, excluding daily living and accommodation costs in a care home. The government said that people would only start accumulating funds in their care account from October 2023, meaning care costs before this point would not count.

Currently, self-funders pay significantly greater sums for care than those funded by councils or the NHS (under continuing healthcare).

However, the government said today it would also implement section 18(3) of the Care Act 2014 in full, requiring councils to arrange care in a care home for those self-funders with eligible needs who request that they do so.

This is designed to enable councils to take account of their bulk purchasing power to secure lower rates for self-funders; as a result, the costs paid by self-funders and the state should converge, meaning self-funders’ care accounts should reflect what they actually pay.

This is likely to have a significant impact on providers, many of whom rely on using higher self-funder fees to cross-subsidise the costs of state-funded residents. However, the government said the £5.4bn package included money for councils to move towards paying a “fair rate for care”, suggesting it expects local authorities to increase the fees they pay care homes.

Protection against ‘catastrophic costs’

In his statement to the House of Commons today, Johnson said the cap would  “[protect] people against the catastrophic fear of losing everything to pay for the cost of their care”. He said the increase in the generosity of the care means-test would help “many more people with modest assets”.

The policy paper accompanying the announcement said that:

  • People with over £100,000 in chargeable assets, including their home where specified, would pay for their care in full until they became eligible for free care through the cap or their assets dropped below £100,000. This currently applies to those with over £23,250 in assets (though councils can set a more generous limit for people receiving care outside a care home).
  • Those with between £20,000 and £100,000 in chargeable assets would contribute from their income to their care and also, if required, from their savings, up to a limit of 20% of their chargeable assets per year. This implies the government will retain the current system under which people are charged £1 in so-called tariff income per week for every £250 in capital they have between the lower and upper thresholds.
  • People with less than £20,000 would have to contribute from their income towards their care costs – potentially leaving them with just the £24.90 weekly personal expenses allowance (PEA) in a care home or minimum income guarantee (MIG) at home – but not from their savings.

The current capital thresholds have been in place since 2010-11, meaning their real-terms value has been eroded significantly since then.

The government said that it would also lift, from April 2022, the freeze, since 2015, in the PEA, and the MIG, so that they rise with inflation, which it said would enable people “to keep more of their own income”.

As well as the funding reforms, the government promised a white paper later this year which it said would “commence a once in a generation transformation to adult social care”. This would improve choice, control and independent for those who use services, and ensure high-quality care, “delivered by a skilled and valued workforce” that was “fair and accessible to all”, it said.

This follows longstanding calls for the government to address issues around low pay, inconsistent quality, unmet need and ongoing demographic pressures.

Funding gap

In February this year, think-tank the Health Foundation calculated that, by 2023-24, adult social care would need an extra £1.9bn above current funding estimates to keep pace with increased demand since 2019-20.

It is not clear how far the £5.4bn package will contribute towards tackling these issues. The government said it expected demographic pressures and those relating to the unit cost of care to be met through council tax, the existing adult social care precept (an extra council tax levy dedicated to the service) and local authority efficiencies. However, it said it would ensure local authorities had “sustainable budgets” at the forthcoming spending review, which will set public spending limits for the next three years.

Besides the cap and means-test changes, the rises in the PEA and MIG, the move towards councils paying a “fair rate for care” and the implementation costs of the reforms, the government said it would spend £500m over the next three years on the workforce. This would include:

  • Professionalising and developing the care workforce, as well as providing additional support to regulated roles, such as social workers.
  • Funding mental health and wellbeing resources, including to help care staff recover from the pandemic.
  • Taking action to improve recruitment and retention.

It said it would set out further details on the latter in the white paper. The reforms will be funded by a 1.25 percentage point increase in national insurance – which will also be paid, for the first time, by those over 65 who are earning an income – and a similar increase in dividends tax, raising £12bn a year from April 2022 overall.

The money will be restricted by law to be spent on health and social care, with the resource being mainly directed towards the NHS in the first 18 months, until the cap and more generous means-test come into force.

Hospital discharge funding renewed

Separately, the government announced £5.4bn yesterday to support the NHS’s Covid-19 response for the next six months, which includes £478m to support hospital discharge.

This involves a system of ‘discharge to assess’, in which people who leave hospital with potential care and support needs are assessed after discharge and then, where necessary, provided with short-term reablement support, which the £478m will cover.

This follows previous tranches of £1.3bn (March to August 2020), £588m (September 2020 to March 2021) and £594m (April to September 2021).

The approach is designed to speed up discharges but is also seen as a way of promoting more person-centred assessments, in environments where people feel most comfortable, rather than on a hospital ward.

*The story originally wrongly referred to the capital limits for means-testing adult social care – and the proposed changes to them – as applying to residential care specifically, rather than care in all settings. The lower and upper limits (£14,250 and £23,250) currently apply to all forms of care though it is open to local authorities to set higher limits for people who aren’t permanent residents of a care home. The proposed new limits (£20,000 and £100,000) would also apply to all forms of care, though it is not clear if councils would have similar discretion to treat care other than a permanent care home placement more generously. The story has been corrected and we apologise for the error. 

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10 Responses to Government resurrects cap on care costs plan four years after ditching it

  1. Carol September 7, 2021 at 4:56 pm #

    Dilnot, was scrapped because it was to complicated to implement, nothings changed. It will cost the LA more in assessments, staff time etc and demands from ‘self funders’! It will bring LA’s to their knees, as they can’t get or keep social work staff now. Lets hope Boris departs soon and we get someone with a fresh approach and ideas to solve what has been an ongoing problem for many years.

  2. Carlton September 8, 2021 at 10:43 am #

    Cue torrent of tweets and blogs on why the current system is broken but past council provision wasn’t much better so we must be better at ‘listening’ hand wringing paralysis while the whole things collapses into a costly bureaucratic mess. At the expense of the people we are aspring to listen to better. Or the useful establishment distraction on why “assessment” and “vulnerable” are othering and should be incinerated from social work lexicon. Keenly await the shiny alternative ‘co-produced’ thesaurus. And the podcast.

  3. Gavin Thompson September 8, 2021 at 11:30 am #

    Putting aside the issue of where the funding for this proposal comes from (i don’t object to paying more tax / NI if it goes where it’s most needed), there is absolutely no recognition of the desperate state of social care staff shortages and the meltdown the sector is currently going through.
    Tens of thousands of vacancies, recruitment nightmares across the country, a work force on the verge of burning out and yet the only reference to addressing this is to improve training opportunities and introduce greater regulation!!!!
    Boris and his cronies are totally detached from reality and simply do not care one iota for those in greatest need.

  4. Valerie September 8, 2021 at 12:25 pm #

    Improving training opportunities and greater regulation are very much on the approve list of ADASS and BASW.

  5. Sharry September 9, 2021 at 8:17 am #

    Well that 1.25% of my income plus the other 12% NIC, plus 20% income tax! plus around 10% on council tax plus 20% on everything I buy it looks like most of my income ends up back in the government coffers in one way or another. Can’t see me having much left when I go into a care home anyway.

  6. Debby September 9, 2021 at 11:00 pm #

    A bit late for my parents whose money that they worked all their lives for has been swallowed up in providing them care. They have had to pay for people who did not have any assets or savings. I am happy to help these people , but is that right that my parents have had to sacrifice all their hard earned money and savings ….Again, penalised all through life.

  7. Sandra September 10, 2021 at 3:36 pm #

    So increased work for social care and the finance teams in LAs without extra funding from the outset. Discharge to assess is proving a struggle as there are no or very few home carers who again have not been recognised in this shake up. Dire times ahead.
    Far better to give funding to LAs and bring care back in house to reduce safeguarding concerns and truly monitor rehab.

  8. Katie September 11, 2021 at 8:14 am #

    You can throw as much money as you want at the situation but without the work force to implement it, it’s going nowhere. There seems to be no recognition of the current crumbling adult social care system. There are already huge waiting lists for social care assessment and vacancies that no one can fill. There is a national shortage of social workers so creating more demand on a service already in crisis is just a recipe for disaster.

  9. Julie September 11, 2021 at 9:15 am #

    Is this just not another way for the rich to stay rich! Social care is on its knees without all the now self funders coming forward for assessments, how an earth does he expect social care teams to meet this demand. Boris is delusional as are the Conservative government, they have no idea what it is like on the ground.

  10. Craig September 13, 2021 at 9:58 am #

    And yet social workers continue to vote Conservative. I was told just last week that the Prime Minister was a laugh as London Mayor so worth a vote.

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