Care in crisis:
causes and solutions
Care and support in later life has reached financial breaking point.
• Out of 2 million older people in England with care-related needs, 800,000 receive
no formal support from public or private sector agencies. With spending cuts
underway the figure is likely to pass one million between 2012 and 2014.
• Since 2004, net spending on older people’s social care has risen by just 0.1 per
cent per year in real terms, a total of £43 million, while real spending on the NHS
has risen by £25 billion.
• Spending cuts are projected to reduce spending on older peoples’ care by £300
million over 4 years (using optimistic assumptions). Real spending on older
people’s care will be £250 million lower in 2014 than in 2004. Over the same
period the number of people over 85 has risen by two-thirds (630,000 people).
• In 2005 half of councils provided support to people assessed as having ‘moderate’
needs, but in 2011 the figure has fallen to 18%.1 As a result the number of people
receiving local authority funded care at home has been slashed from 489,000 in
2004 to 299,000 in 2009.
• Public sector commissioners are underpaying for older peoples’ care homes, with
a cumulative shortfall of half a billion pounds. Age UK estimates that the average
shortfall per resident is £60 per week, rising to £120 per week in South East
England. As a result, many care homes are demanding that older people and their
relatives ‘top up’ their care fees with additional private money, a real injustice as
families are forced to subsidise the State’s statutory duties.
• There are huge local discrepancies in the local quantity and quality of care for
older people. The highest spending local authority (Tower Hamlets) spends five
times as much as much per older resident as the lowest spending (Cornwall).
• An independent review of age discrimination found that younger service users are
allocated an average of £78 a week per person, compared to £53 a week per older
Care in crisis:
causes and solutions
Age UK has ten principles for reform:
1. A guarantee of sufficient quality and quantity of care for low income older people
is Age UK’s highest priority
2. A non-means-tested entitlement for everyone with care needs regardless of
income, for example a limited liability cap to protect against very high costs
3. New financial products to meet the remaining costs of care for middle to high
income older people, such as private insurance
4. Payments to support the additional costs of disability continue to be available on
a non means-tested basis as a national, legal entitlement
5. A national legal entitlement to support, in order to end the current post-code
6. Adequate funding for advice, assessment and support to arrange services
7. An end to age discrimination in the provision of care and support
8. A system which supports rather than penalises families and carers
9. Alignment with the NHS and other local government services such as housing
10. A flexible system which gives users control and permits different types of care
services to develop
Reform cannot be achieved without billions of pounds of new money:
• Today taxpayers spend 0.5% of GDP on care for older people in England. If we
merely maintain this level we will cause misery and danger for hundreds of
thousands of frail older people.
• In Age UK’s view we need to spend 0.9% of GDP on care in later life by the mid
2020s to deliver good quality care for people while maintaining a means tested. As
a start an extra two to three billion pounds per year is needed from 2015.
• If there is appetite for a public system that also helps mid and high income groups
then spending may need to rise to around 1.1% of GDP. The costs of establishing
a limited liability cap, which covers one third of remaining care costs, after meanstesting,
would be in excess of two billion pounds in 2015.
Once the deficit is closed the Government has two options for finding the required
• The Treasury could declare ‘the money will be found’ and allocate funds from the
overall pot of general taxation at a later date. There would need to be explicit
guarantees that sufficient funding would be available otherwise the proposals will
lack credibility when they are put before Parliament.
• Ministers could specify new sources of revenue to support the reforms now. This
could be a package of several taxes or charges that strike a fair balance between
generations and income groups.
Care and support in old age has reached financial crisis. For years society has
tolerated a care system that has gone from bad to worse, for lack of money. This is in
spite of the dedication, professionalism and innovation of tens of thousands of people
working in social care. Recent well-intentioned reforms have been an insufficient
response to the deep-seated problems our care system faces, because they have
been unable to tackle the underlying financial crisis. Radical funding solutions cannot
now be avoided, and they will not be cheap. But although politicians from all parties
acknowledge the problem there is as yet insufficient commitment to comprehensive
The starting point for this paper is a simple statistic: in the six years before the present
financial troubles, public spending on older people’s care increased by just £43 million
after inflation (a real terms increase of 0.1% per year). At the same time the number of
people aged over 85 who are most likely to need care increased by 23%, while costs
in the care sector continued to outstrip inflation as well.2
This has created huge pressures in the publicly-supported care system: tighter
eligibility requirements; variability in support across the country; inadequate help for
people living in their own homes; under-funded care homes; and the sidelining of
‘upstream’ preventative spending, despite councils’ best endeavours. All this has hit
low income groups the most. But councils have also responded by reducing the help
they offer mid and high income groups, or by charging them more, and private
spending on care has been unable to fill the gap. As a result levels of unmet need are
rising and families are being forced to take on a greater burden. This comes on top of
long-term grievances regarding a means-tested system which asks homeowners to
meet almost all the costs of a care home. The result is a lottery. Some people never
need to use care services and pay nothing while others lose almost their entire life
savings; and in between too many people are put of using support services they
The pity is that this funding crisis has come at a time when councils are making
genuine attempts to transform how they deliver services. For more than a decade
many local authorities have been taking successful steps to reduce the number of
people living in care homes by providing better support in people’s own homes. More
recently, growing emphasis has been placed on more personalised services, including
increased uptake of Direct Payments, preventative support and improved information
and advice. This reform agenda is laudable, and in a different financial climate could
be delivering significant improvements in care. But with insufficient funding, the results
have been patchy, with many authorities simply lacking sufficient funds to provide
adequate personal budgets or invest in prevention at the same time as they withdraw
existing services. The reform agenda of recent years has been well-intentioned, but its
ambitions have been stymied by the current funding climate.
This leaves two funding challenges for future reforms to resolve. First we need a new
publicly-funded system for people with low incomes that adequately meets everyone’s
essential needs, while also going with the grain of personal control, flexibility and
innovation. Achieving this objective will require a new ‘architecture’ to equip the care
system to offer everyone transparent, equitable cash-linked entitlements. But
redistributing existing resources will not be enough. Adequately meeting needs will
also take two to three billion pounds of new money for older people alone.
Second, for middle and high income groups, we need to create a fairer mixed
economy of care and support. The support on offer from the state today is both
irrational and inadequate; and people are unable to insure themselves privately
against the risk of needing care or to put in place other financial plans. We do not
believe the state should pay the full costs of care for mid and high income groups, but
it should make a new offer which gives people certainty, encourages people to take up
support, and limits the risk of very high costs. The lens for judging this new offer
should be whether it enables people on mid incomes to access good quality care and
support at a price they can afford and which people feel is fair.
The process of reform of course involves trade-offs. At the margins it may be possible
to spend a little more on one of these two challenges, and a little less on the other. But
essentially out first challenge must take priority over the second. Society has a moral
responsibility to adequately fund care for people with low incomes and to provide help
to everyone to access the care they need, even if some pay for it themselves. Once
this is achieved, we can go further and find ways to co-fund mid and high income
groups, to help people of all backgrounds share the costs of care.
Each of these challenges will cost in the region of £2 billion to solve, and that is for
older people alone. By the mid-2020s we may need to double the share of GDP spent
on publicly funded care. An increase on this scale may seem dramatic, but it would
mean only a 4% rise in total public spending on older people. It is not money that will
be easily found, but if we do not accept it is needed, politicians will continue to fail the
most vulnerable older people, leaving care needs unmet and huge financial burdens
for a small unlucky minority.
Brave decisions will be needed to raise money on this scale. It is open to the
Government to simply commit to spending what is needed, once the deficit has been
closed in 2015, without specifying where the money will come from. Alternatively, it
could set out a package of taxes or charges to explicitly link its care ‘offer’ to sources
of revenue which are seen to be fair and linked to each generation’s ability to pay.
Now is the time for our political leaders to grasp the nettle and resolve this deep and
worsening crisis. In recent years there has been growing, cross-party, acceptance that
the care system needs reform. But the state of public finances and the current
controversy over the future of the NHS mean that care risks being sidelined again.
Politicians of all parties must sign up to radical reform, and a new financial deal, if we
are to avoid frail and disabled people suffering acute hardship and danger.
3. The funding crisis today
As a society we are spending a grossly inadequate amount on care and support, from
public and private sources combined. Our public provision is so thread-bare that it
frequently fails to meet the needs of those with low incomes it is principally designed to
serve. Many older people and their families also pay large amounts for care from their
own pocket – often more than they feel is fair or they can reasonably afford. But even
added together, private and public spending falls far short of the amount of care and
support people in later life need. The result is that too many people are going without
the support they need, while a huge and growing burden is being placed on families
and carers, many of whom feel unable to cope.
Tens of thousands of dedicated people work in social care and the sector has made
concerted efforts to transform services in recent years, with the mantra of
independence, early intervention and personalised support embraced across the
country. But these efforts have been set against a grim backdrop. In this section we
flesh out the nature of the current funding crisis, analysing the different elements of our
failing care system and how they interact. Even ‘standstill’ spending on care is
inadequate to address the failings of today’s system and to cope with rising costs and
the growing number of people in late old age who will need support. But this is just a
snapshot; in four years time we will be spending even less public money on care, as
spending cuts take effect. Without a radical new funding system the situation will grow
Unmet need: The missing million
Social care in England is totally failing to meet the volume of need experienced among
disabled people aged over 65. Today, out of 2 million older people in England with
care-related needs, 800,000 receive no formal support from public or private sector
agencies. In five years time the situation will be worse still. Even before the spending
cuts it was predicted that in 2016 one million older people, out of the 2.3 million who
will have care needs, will receive no support.3 Now the spending cuts could bring this
grim milestone forward to between 2012 and 2014; by then 100-150,000 fewer older
people are expected to be using care services than if budgets had risen in line with
need.4 We fear this suffering will take place in silence, with few older people asking for
extra help or making a fuss.
A public system starved of cash...
Over the last six years publicly funded social care for older people has been
systematically starved of cash. Since 2004/05 net spending on older people’s care has
risen by just 0.1% each year in real terms, a total of around £40 million. Over the same
period the number of people aged over 85, who are most likely to need care, has
increased by 230,000 (4% each year). By comparison NHS spending increased by
around £25 billion (5% each year) over the last five years.5
While this has happened the attention of policy makers and the social care profession
has been elsewhere. There has been unprecedented debate on the future of care –
both its long-term funding and the ‘transformation’ of council provision today. But in the
mean time local authority spending decisions have changed the ‘facts on the ground’
with a significant deterioration in services for older people. All this comes before the
spending cuts which are projected to reduce spending on older people’s care by at
least £300 million over four years.
Net spending on older people’s social care in England
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Net spending £6,850,000 £7,438,000 £7,683,000 £7,680,000 £7,421,000 £7,384,000
Real increase 6% 9% 3% 0% -3% 0%
outturn outturn outturn outturn outturn outturn
Year 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Net spending £7,633,000 £7,482,000 £7,407,000 £7,333,000 £7,260,000 £7,187,000
Real increase 3% -2% -1% -1% -1% -1%
outturn budget projection projection projection projection
2010 prices; Outturn: Personal social care expenditure and unit costs 2009/10, NHS Information Centre
Budget: Revenue Account Budget (revised) 2010/11, Department for Communities and Local
Government; Projection: -1% real terms assumes government projections for local government
spending and £2 billion top-up for social care passed on in full. Early indications suggest these are
optimistic; Inflation index: RPI
...with ever tougher eligibility rules
The most visible effect of this starving of resources has been a large reduction in
eligibility for publicly funded social care. Since 2003 councils have used a four-point
scale for assessing whether disabled people should be eligible for support (with needs
ranging from so-called ‘low’ to ‘moderate’, ‘substantial’ and ‘critical’). In 2005/06 half of
councils provided support to people assessed as having ‘moderate’ needs, but in
2011/12 the figure has fallen to 18%.6 The impact has been a decline of 39% in the
number of older people receiving local authority funded care at home, from 489,000 a
year in 2005/6 to 299,000 in 2009-10.7 During the same period the number of people
aged over 85 increased by 17%.8 In fairness, until 2008/09, the total volume of home
care provided continued to rise, as councils increased spending on people with very
high needs, at the same time as they reduced the number of people receiving
services. Now not even this is true. In the most recent year the total hours of support
purchased by local authorities for older people fell from 2 million to 1.85 million.9
…variable levels of support across the country
It is often said we have 152 social care systems in England. Variations in eligibility
criteria are but one example of the huge discrepancies in the quantity and quality of
support offered to older people by different local authorities. The highest spending
local authority (Tower Hamlets) spends five times as much per older resident as the
lowest spending (Cornwall). Some of these differences are due to variation in
underlying need, but even when this is controlled for, by looking at spending per older
person receiving benefits, spending is still almost 3½ times higher in Camden than
Cornwall. Age UK supports diversity in the design of services to meet different local
needs, but such major variations in spending cannot be explained in this way.
...services undermining dignity, independence and equality
For those older people who are deemed eligible for services, levels of support are
often inadequate to remain independent and maintain a good quality of life. Normally
only the most essential services are provided; for instance, help to get out of bed,
wash and eat a meal. Home visits frequently last only 15 minutes at a time. Wider
services to help support a good quality of life are often unavailable, for example
domestic cleaning, help with practical tasks around the home, the chance to go out
and social activities. This is despite evidence that these low-level services are the
ones that older people most value.10
Decision makers in local and central government have attempted to counter these
problems by giving people more control over the services that are commissioned on
their behalf. Personal Budgets and Direct Payments (cash payments provided by
councils in lieu of care) are designed to enable people to decide for themselves the
support that would best meet their needs. However sadly they are often paid at such
low levels that older people have little room for manoeuvre in buying their own
services. In 2008 the Commission for Social Care Inspection, raised concerns that the
Resource Allocation System used by many councils was not transparent, did not allow
for equity between different types of service user, and limited the support available to
older people with more complex needs.11 There is no evidence that the situation has
Age discrimination in the allocation of care resources dates back decades, with
commissioners too often having lower standards about the lives older people can
expect to lead. An independent review of age discrimination in social care found that
younger service users are allocated an average of £78 a week per person, compared
to £53 a week per person. Aged over 65.12 The study estimated that equalising the
level of support would imply spending 25% on older people’s care packages.13 Yet, in
recent years spending on older people’s services has stagnated, while allocations for
adults aged under 65 have risen quickly.
... care homes left teetering on the brink
Discussions about the future of social care tend to focus on how to transform support
for people living independently in the community. But more than half of public
spending on older people’s care still goes to care homes – and the share of private
spending on care homes could be even greater. In recent years the care home sector
has made real strides in improving quality, as testified by improving star ratings under
the previous inspection regime. But the sector now faces growing pressures. The root
of these problems is that public sector commissioners routinely under-pay for older
people’s care homes. Independent research by the leading market analyst concluded
in 2008 that this amounted to a cumulative shortfall of half a billion pounds.14 In 2009
Age UK estimated the average shortfall per resident of £60 per week, rising to £120 in
South East England.15 Since then we have heard numerous stories of fees being
frozen, or in some cases cut, even though costs in the sector continue to rise. This
leads us to fear that the situation is deteriorating.
Under-funding impacts on residents in three main ways. Firstly, service quality is put at
risk as operators seek to cut costs. Secondly, for many years care home operators
have responded by demanding top-up payments from families or charging self-funding
residents over the odds, in order to cross-subsidise public sector commissioners. This
is a real injustice; older people and their families should not have to subsidise the state
when it discharges statutory duties. Thirdly, under-funding increases the likelihood of
residents – who have virtually no security of tenure - losing their homes if operators go
out of business. This is very worrying given the health risks forced moves create for
very frail people. We fear that many reputable care home operators will become
increasingly reluctant to invest in new facilities given such poor returns on investment.
Some are even struggling to maintain their existing operations today. The risk of largescale
closure due to the collapse of a major operator appears to be a real possibility.
...preaching prevention but little in practice
In recent years Age UK has keenly supported the increased emphasis in national
guidance and policy on spending money ‘upstream’ on modest levels of support which
will prevent or delay the need for more expensive services. This includes: ‘that little bit
of help’ to stay independent at home; good quality information and advice; and
community-wide services to help people remain active. There have been effective
examples on a small-scale, including nationally evaluated pilots under the
Partnerships for Older People and LinkAge Plus programmes. But sadly the reality in
most places is quite different. Fewer and fewer people are receiving publicly arranged
low level ‘home help’ support (only 55,000 people of all ages received support for 2
hours a week or less in 2008/09). The number of people using day services continues
to fall, even though these are often people’s only opportunity for social contact and
activity. Over the last five years Supporting People spending for older people’s
housing-related support has fallen by 20% in real terms. This has led to many
sheltered housing schemes losing on-site staffing. Finally the number of people
provided with equipment or adaptations has fallen from 386,000 households in 2005-
06 to 208,000 in 2009-10.16
...and penalising people with mid and high incomes
Too often social care provides poor services for poor people. Services in the
community are intended to be available to people regardless of their means, as long
as they meet needs-based criteria. However there is a tough means-test which leads
to people with mid and high incomes often paying substantial charges. In both 2010/11
and 2011/12 many councils increased charges or abolished maximum caps, leaving
many people who receive a large amount of care facing significant increases in costs.
A recent survey showed that 88% of local authorities are planning to raise charges for
care.17 Another survey found that 43% of care service users thought that they were
less able to afford essentials such as food and heating due to changes to services.18
The result is that huge numbers of people do not seek help. The PSSRU estimates
that by 2015 290,000 disabled older people will be not using services because they
are means-tested, rather than partly-funded for everyone.19 In recent years these
problems have been augmented by ‘gate-keeping’ from councils, who have avoided
assessing and offering services to people with mid and high incomes when they ask
for help in spite of legislation and guidance. In many cases families are unable to
access help to arrange services, even when they are willing to bear the full costs
The system also creates a lottery for people with mid and high incomes and assets,
which many view as wildly unfair. People who die without needing to use care services
end up paying nothing, while others who started out with the same amount of money
but need expensive services for many years face the full costs. These costs which
may add up to tens or even hundreds of thousands of pounds are usually very difficult
to predict in advance. While people with very high incomes may be able to cope, those
with middle incomes – people who own a home and may have moderate savings - are
hit very hard. Currently there is no way of sharing this risk between people with similar
incomes, through either private insurance or the welfare state.
...with four years of cuts to come
All this could grow far worse as councils implement four years of significant funding
cuts. We do not yet have the full picture on the scale of cuts councils have
implemented this year to older people’s social care. The most optimistic scenario is
that national spending will fall by 4% in real terms (this assumes that all the
Government’s planning assumptions hold good, including councils spending a new
non-ringfenced allocation entirely on social care). This would leave real spending on
older people’s care £250 million lower in 2014/15 than in 2004/05, while the number of
people over 85 has risen by two-thirds (630,000 people).
To make matters worse, the early indications suggest councils are making larger cuts
than this optimistic scenario would suggest. This may be happening in part because
local authorities have not used their extra allocation for social care as intended.
Additionally many councils, especially in disadvantaged areas, have seen their funding
fall by far more than the national average and have been forced to make very
substantial cuts as a result. If real spending were to fall by 6 to 7% the PSSRU
projects that 250,000 older people would lose services (assuming councils are unable
to reconfigure services to improve efficiency).20
Age UK will publish a full audit of cuts to older people’s care services in June.
4. The architecture for reform
To pull back from the brink older people’s social care needs a new ‘architecture’ and
significant extra resource. This section outlines ten principles for designing a new
system. Collectively these amount to a recipe for a viable new architecture of care and
support. In section 5 we look in detail at how much it would cost.
A re-designed system is required to give everyone with care needs clear and equitable
access to support, while also creating a framework in which innovation can flourish. In
Age UK’s view this implies a more national system, in which the key entitlements
people can expect are secured on a uniform basis. This would significantly change the
role of local government, giving it less discretion with respect to who should receive
services, what they should pay and what outcomes should be achieved. Councils
would be left free to focus on developing effective local care markets and providing
support to people to make effective decisions especially at times of crisis.
Ten key principles for a new care system
1. A guarantee of sufficient quality and quantity of care for low income groups
is Age UK’s highest priority by far. People with few means who cannot possibly
pay for care themselves should become eligible for support earlier; their care
homes fees need to fully reflect the costs of quality services; and packages of
support for those living in their own home (usually in the form of direct payments)
must be enough for people to enjoy a decent quality of life. Together this will cost
two to three billion pounds for older people alone, and the money available will
need to rise further in future to reflect rising demand and costs.
2. Additionally, we support a non means-tested financial contribution for all with
care needs (subject to this being affordable, after money has been found to
improve support for low income groups). The ‘offer’ could be a limited liability
scheme, which the Dilnot Commission has indicated it is minded to recommend.
This would reduce extreme costs for those with the highest needs.
3. New financial products to meet remaining care costs should be facilitated
and promoted by the Government. Models should include viable private
insurance products (although these will only be of interest to a minority) and a
range of options for paying at the point of need.
4. Payments to support the additional costs of disability should continue to be
available on a non means-tested basis as a national, legal entitlement. Retaining
existing disability benefit entitlements (even if they are packaged as part of a new
support system) will ensure everyone has money to meet the additional costs of
being disabled, and prevent the need for more intensive and expensive services.
5. A national legal entitlement to support is essential to end the worst excesses
of the post code lottery. In addition to today’s disability benefits, this should
include (1) the right to a personalised assessment; (2) a national eligibility
threshold so the same level of needs triggers a right to support everywhere; (3)
once someone is deemed eligible for help, an entitlement to the cash resources
(or arranged services) required to meet nationally-determined acceptable
outcomes (albeit subject to means-testing for mid and high income groups). The
allocation of resources to service users should vary in line with regional
differences in the costs of meeting these outcomes, but not with local political
decisions about the extent to which social care is a priority. A fair system for
distributing funds to local government is essential to bring this about.
6. Information, assessment, advocacy and brokerage services should be funded
to a level that they are available to everyone who needs them. This will help
ensure informed decisions and appropriate use of resources.
7. There should be complete age equality in the availability of care and support
resources and the outcomes the system aims to achieve.
8. A reformed system should be carer neutral. Those who want to provide informal
care should be supported to do so, through benefits and services – including
quality respite care – and new financial entitlements should not be designed so
they are a disincentive to caring. But no one should be forced to assume
exclusive or excessive caring responsibilities.
9. There must be alignment with the NHS and other local government services,
especially housing support. The NHS should continue to support health needs in
care homes, and jointly commission preventative services with councils. Councils
should be responsible for joining-up all local support, including coordinating joint
assessments and referrals. They should have a financial stake in the funding of
care so they have an incentive to reduce demand for services by providing
community support and services.
10. The funding system should be flexible to promote diversity of provision and
give users control. This should including neutrality between different types of
tenure and the option of cash payments or commissioned services, whichever is
more appropriate. Funding should encourage innovation and positive risks.
This architecture would redraw the lines of responsibility for social care. National
government would have a more explicit responsibility for defining entitlements and the
outcomes people should expect. It would set out rights, duties and standards of
service and ensure these are met. And it would need to establish a funding
mechanism that ensures these can all be met; in all likelihood this will mean something
different from the current arrangements for local government finance. Councils will be
the critical local hubs for care and support: they will support people to access
entitlements and choose services; ensure local public provision is well coordinated;
and promote a diverse local market of care services. Other public services would need
to cooperate with councils to develop joint approaches to identifying need and offering
preventative support. Finally providers would have much more clarity about their role,
with a direct relationship with the end-users of care - often facilitated by independent
agencies there to support informed decision making - while also maintaining strong
relationships with councils to respond to local demand and improve practice.
What about free personal care?
It is important to recognise that although our principles for reform would be expensive
to achieve, they are very different from previous proposals to offer ‘free personal care’.
Age UK accepts that free personal care regardless of people’s means, is not a viable
option in the current financial climate. More generally, we believe that the question of
free personal care, although a totemic political issue in the past, is actually a
distraction from the wider funding challenges facing the care system. As experience in
Scotland has shown, creating an entitlement to non means-tested support leaves
many questions unanswered:
• At what point should eligibility for support begin?
• What amount of support is sufficient to meet needs?
• How should mid and high income families meet the accommodation costs of
Our proposals for reform answer all these questions; indeed they could easily cost
more than some versions of ‘free personal care’. But they are designed to improve the
whole of the care system and address the full range of issues that have created the
care crisis. Our acceptance of a partly means-tested system is in line with the public
opinion. There is now broad support for a care funding system based on mid and high
income groups meeting some, but not all, the costs of care. This position is now
significantly more popular than support for either today’s means-tested system or a
totally free service.
Public views on means-testing of care and support in later life
18-24 25-39 40-54 55-64 65-74 75+
Percentage of adults
The government should only pay the whole cost of care for the least well off, and people
with income or assets over a certain level should pay part of the costs of their care
The government should pay all the costs of care regardless of people's own assets or
The government should only pay the cost of care for the least well off, and people with
income or assets over a certain level should pay the whole cost of their care
The government should not pay any of the cost of care
5. How much will it cost?
There is no escaping it. A new ‘architecture’ for care will need to be adequately
resourced. The first task is to prevent further damage being done by stopping short
term spending cuts which go beyond efficiency savings. All the indications are that this
year’s budget reductions are leading to cuts in frontline services and entitlements, not
just reorganisation behind the scenes; and they mark the first year of a four-year
programme. Once the Dilnot Commission proposals are published we hope the
Treasury will authorise ‘bridging’ finance to stabilise today’s social care provision, and
help local authorities prepare to implement a new architecture and new national
Then, from around 2015, significant extra money will need to come on stream. Solving
our care crisis will take billions of pounds. In the not too distant future spending on
older people’s care may need to double. From one point of view, this makes the whole
debate a non-starter. In a time of austerity how can we possibly contemplate an
increase of that magnitude? But put another way, this just underlines the depth of the
crisis. And fortunately English social care makes up less than 5% of age-related
spending in the UK, with the NHS and social security taking up the lion’s share.
Doubling spending on care would amount to an increase of around 4% in overall
spending on over-65s. As a nation, if we value it enough, we can afford it.
To illustrate the scale of spending required in more detail, Age UK has re-analysed
existing publicly available data, principally work by the Personal Social Services
Research Unit for the King’s Fund. These costs do not include provision of support for
disabled people under the age of 65. The affordability of the overall package will need
to take into account extra demand for support from this group.
Estimated costs of funding care and support for older people in England
£ Billions % of GDP
2015 2026 2015 2026
Status quo £8.1 £12.1 0.5% 0.6%
Priority 1 – fully meet needs,
£10.9 £16.5 0.7% 0.9%
Priority 2 – some help for all
(eg liability cap covering 1/3
of remaining costs)
£13.4 £20.6 0.9% 1.1%
Notes: Prices are 2006/07.
In section 4 we explained that Age UK’s first priority for new money is to adequately
meet the care needs of people currently eligible for support under the existing meanstested
system (priority 1). Any new financial system that fails to achieve this objective
will fail. The PSSRU analysis suggests that meeting needs up to an objectively defined
benchmark would require an injection of £2.8
increases of 4%. If this was implemented p
people would rise from 0.5% to 0.8% of
Projected costs of older people’s care in England
To go further, and also deliver a non
The precise figures would depend on the design of the scheme, but
have assumed that a new system would meet one
(including accommodation costs in care homes). This could take the form of a limited
liability cap (ie the final costs when someone has very high needs) or a co
system (a constant share of costs throughout).
By coincidence the costs of achieving decent outcomes under the means
system and of meeting one-third of all remaining care costs
However they cannot be viewed as alternatives. There is no point in widening access
to publicly funded care to a broader
the needs of those who are eligible for help today.
gets support can only come as a supplement to finding the resources to transform
provision for people with limited means
2015 2016 2017 2018
Billions (2006/07 prices)
spending rises in line with GDP
extra to maintain m/t system
plus improve quality and availability
plus limited liabilty scheme (1/3 remaining costs)
remaining self-funded fees
billion in 2015, followed by annual
public spending on English care for older
UK GDP21 by 2026.
(£billions, 2006/07 prices)
non-means-tested care payment would cost more.
to illustrate we
one-third of the remaining costs of care
are roughly the same.
group of people when it is already failing to meet
Creating a system where everyone
2019 2020 2021 2022 2023 2024 2025
Projected costs of older people’s care in England
There are many permutations and an array of numbers
• Today taxpayers spend 0.5% of GDP on ca
merely maintain this level we will cause misery and danger for hundreds of
thousands of frail older people.
• In Age UK’s view, we need to spend 0.
mid 2020s to deliver good quality care for people
• If there is appetite for a public system that also helps mid and hi
groups then spending would
2015 2016 2017 2018
% of UK GDP (England spend)
(£billions, 2006/07 prices)
numbers, but the financial challenge is
oday care for older people in England. I
0.9% of GDP on care in later life by the
while maintaining a means
ould need to rise to anything up to 1.1% of GDP
2019 2020 2021 2022 2023 2024 2025
to maintain m/t system
plus improved quality and availability
plus limited liabilty scheme (1/3 remaining costs)
remaining self-funded fees
% gh GDP.
6. Where could the money come from?
Specifying the design principles required to bring older people’s care back from the
brink - and putting a price tag on it - begs a crucial question: where will the money
come from? One option is for the Government to simply declare ‘the money will be
found’ and leave the Treasury to allocate funds from the overall pot of general
taxation, in competition with other spending priorities. This is after all how we fund the
NHS and state pensions, which cost far more than care and support. If the
Government is to proceed in this manner, there would need to be explicit guarantees
that extra funding would be available on the scale required. Otherwise the proposals
will lack credibility when they are put before Parliament.
The alternative approach would be to specify in some detail the sources of revenue
which will support a package of reform. There are two arguments in favour of this
route. First a new unfunded ‘offer’ from the Government at a time of financial pressure
is likely to be distrusted (even though we would expect the new system to kick -in from
2015 after the deficit has been eliminated). Second, views on the fairness of the
reforms – real and perceived – will depend on people being able to assess both how
the money will be spent and where it has come from. For example many would be
concerned if new support for richer people in later life was being largely funded by low
income working households. Saying where the money would come from does not
mean taxes or charges for care would need to be hypothecated. Indeed we think a
special care levy would be inflexible and administratively complicated. New revenue
could simply be identified and informally earmarked as meeting future care needs.
Any new earmarked revenue could take the form of a package of several new or
increased taxes or charges, designed so that overall they are seen to be fair and
affordable. As part of this, we think it is important that a reasonable proportion of the
costs are borne by people in later life, especially those with considerable wealth, not
just workers’ payroll taxes. To illustrate what might be possible we have assembled a
menu of possible options for earmarked tax changes to support a new care system.
Age UK is not setting out detailed proposals or recommendations, but these examples
demonstrate the order of magnitude of the charges required and the combinations of
policies that might be possible.
A menu of possible options for raising money for care and support
£3 billion Removing the upper age limit on National Insurance Contributions: people with
earnings aged over State Pension Age do not pay NICs on the grounds that they have
completed their period of contribution for the state pension and aren’t eligible for pre-
SPA benefits. NICs paid after SPA could be earmarked specifically to pay for care costs
- a new ‘offer’ from the state which pensioners can expect to benefit from in future.
£3 billion Permanent increase to NICs of 0.25% The Government is hoping the current elevated
rate of National Insurance Contributions will be temporary. From 2015 some of the
temporary increase could be placed on a permanent footing to provide funding for care,
for example by keep employer and employee contributions 0.25% higher than otherwise
planned. We do not think the entire costs of care funding should be paid through
National Insurance, since people in later life who are able to pay should also contribute.
However, just as with the NHS and state pensions, there is a clear case for people of
working age contributing to the costs of age-related spending, in the knowledge that
they will benefit from equivalent support in their own later life.
£2billion Half penny rise in the basic rate of Income Tax Although Income Tax is paid mainly
by people aged under State Pension Age, around half of pensioners also pay. With tax
free allowances for different age groups being harmonised it is increasingly an ageneutral
tax, where people contribute on the basis of their ability to pay not the stage in
life they have reached.
£2 billion Reducing pension tax relief: pensions tax relief is foregone government revenue today
which is intended to improve later life in future. However most of the tax relief goes to
higher rate tax payers, who do not need such a large incentive to save. Some of the
money chould be re-allocated to meet acute need in late old age today. Following recent
reforms to save £4 billion further adjustments could be made to reduce the relief by
another £2 billion.
£2 billion Permanent increase to VAT of 0.5%: VAT has the advantage of being paid by
everyone, rather than just people with earnings, with patterns of consumption smoother
over the life course than patterns of income. The Government could pre-announce that
whatever else happens to VAT rates from 2015 there will be a permanent earmarking of
0.5% of VAT to cover care costs (this might be in the context of an overall reduction in
the 20% rate, should economic conditions permit). Although VAT is generally a
regressive tax in this instance it would sit within a progressive overall package.
£1 billion Taxing assets at the point of transfer: the ippr has recently proposed scrapping
Inheritance Tax and replacing it with a graduated Capital Receipts Tax for all gifts of
over £150,000. This would include wealth passed from older people to family members
other than their spouse, so would be an incentive to spend money on personal needs
during retirement. It would be particular appropriate as a means to pay for ‘limited
liability’ care protection which will be of most benefit to people with high assets they wish
to pass on to family members.
Whatever funding arrangements are agreed at the point of reform, the question of
revenue will continue into the future. Each Government Spending Review will turn
again to the question of how much money our care system needs, and there is a real
risk that funding increases could fail to keep up with need, just as has happened
through the 2000s. In response we propose a process of regular independent reviews
on the amount of resources needed to meet needs. This could be led by a permanent
body or a time-limited panel convened in advance of each Spending Review. This
process could articulate the level of spending required and leave it to the Treasury to
decide on where the money should come from. Alternatively it could also make
recommendations on ongoing options to fairly raise revenue to pay for care.
Andrew Harrop, Director of Policy and Public Affairs
Public Policy Department, Age UK, Tavis House, 1- 6 Tavistock Square, London,
1 ADASS survey, reported by BBC, April 201; Community Care magazine, September 2010
2 Population Projections, 2004 and 2006 base, ONS
3 Securing good care for more people, King’s Fund, 2010
4 PSSRU analysis for Age UK, 2010
5 How cold will it be? King’s Fund, 2009
6 ADASS survey, reported by BBC, April 2011 http://www.bbc.co.uk/news/uk-13102559; Community
Care magazine, September 2010
8 ONS Population Projections, 2004 and 2008 base
10 The Older People’s Inquiry: That Little Bit of Help, Joseph Rowntree Foundation, 2005.
11 The State of Social Care, 2007-08, Commission for Social Care Inspection, 2008.
12 The Costs of Addressing Age Discrimination in Social Care, PSSRU, 2008.
13 The Costs of Addressing Age Discrimination in Social Care, PSSRU, 2008.
14 Calculating the costs of efficient care homes, Joseph Rowntree Foundation, 2008
15 One Voice, Age UK, 2009
17 Survey of local authorities by Emily Thornberry, shadow minister for care services,
19 Securing good care for more people, King’s Fund, 2010
20 PSSRU analysis for Age UK, 2010
21 Sources for GDP projections: ukpublicspending.co.uk; Economic and fiscal outlook, OBR, Nov 2010