Social care and the budget: stabilisation for long-term reform

As the Chancellor puts the final touches to this week’s budget, anxiety within and around the social care sector mounts. In amongst the myriad calls on a finite pot of money, will social care be heard? 

There is a risk that the government sees the pending Fair Pay Agreement and long-term aspiration to create a National Care Service as enough to justify not taking action in this budget period. That would be a risky strategy. If social care is not adequately supported through the next 18 months, there may be little left of it to reform, and the weaker it gets, the more difficult and expensive eventual reform will be.

What’s the problem?

Deep cuts to central government funding from 2010 to 2014, followed by only gradual increases in subsequent years, have left local authorities increasingly reliant on council tax and other local revenue sources such as the adult social care precept and business rates. 

Funding has failed to keep pace with growing need and, as a result, in 2023/24, councils reported a budget overspend on social care of £586 million, with 37% saying they had to dip into non-recurrent reserves. A staggering 90% report they are not confident that their budget allows them to fulfil even their statutory duties, and the Local Government Association predicts a funding gap of £2 billion for local authorities next year.

Furthermore, the sporadic nature of central government funding has created a context of uncertainty. Budget days in recent years have been characterised by small top-ups and one-off injections of cash, often for specific initiatives. Financial pressures have seen councils adopt short-term purchasing of care at close to, or below, cost – leaving many providers of care and support struggling to make ends meet. This results in high costs for self-funders and can push providers towards closure, leaving people with less choice and poor continuity of care.

In response to funding pressures, eligibility criteria for care have been tightened and the financial means-test thresholds have remained static since 2010, resulting in increased numbers of people being squeezed out of the public-funded system, or left facing expensive top-ups. 

Age UK estimates that as many as 2 million older people have at least some unmet care needs, which has put enormous pressure on unpaid carers – 68% of whom say they are worried about their ability to save and plan for their own futures. Long waits for care have become commonplace, with over 220,000 people waiting for a care assessment in March this year – 35% of whom had been waiting over six months.

The cost-of-living crisis has put additional strain on providers and councils. To help relieve pressure, in 2022 the-then government diverted £3.2 billion of funding earmarked for a package of reform (including a cap on care costs and raising of the means-test) into day-to-day service delivery, delaying implementation to 2025.

One of the first actions of this current government was to abandon those reforms in a bid to save money to the Treasury. However, the £1.1 billion that was earmarked for the implementation of reform from 2025 onwards has not been retained for adult social care and therefore will do nothing to relieve pressures on council budgets next year.

What does the social care sector need to hear from the despatch box on Wednesday?

The whole system, including how revenue is raised, desperately needs long-term reform, but the social care sector cannot wait for the eventual creation of a National Care Service. As the details of that are worked through, the sector urgently needs stabilising over the next 18 months.

At the very least, the sector will need assurance that next year’s funding from national government will take account of increasing demand, and be uplifted for inflation, so not to leave councils even more reliant on local revenue raising via regionally variable mechanisms such as council tax. The Health Foundation estimates that just keeping pace with current demand will create a funding gap of £600 million this current year, rising to £8.3 billion by 2032/33. That is without any expansion or improvement of services and with no provision for protecting people against catastrophic costs.

Councils and providers will want to hear that the short-term cash injections that have bailed the sector out – such as diverting funding for reform into the day-to-day – will be baked into the baseline for national grant funding over future years. They will likely also want to have maximum flexibility to increase council tax rates and the social care precept, although residents will not welcome a hike in these local levies.

While hopes of a more radical expansion of public-funded provision have been dashed for the foreseeable future with the abandoning of a more generous means-test and a cap on costs, many people who draw on care will need a commitment that the minimum income guarantee and personal expenses allowance (i.e. the amount of income someone can retain after care charges) will rise at least in line with inflation. 

The budget must also take account of the impact of changes to employer national insurance, the National Minimum and Living Wages on social care. With a vast workforce of over 1.7 million people, the major driver of social care costs is their wages. 

It will be important that funding for the next 18 months is sufficient to cushion any further uplift to the National Minimum and Living Wages, national insurance or any additional improved care worker pay. To not fund another rise means that providers, many of whom are small and medium-sized, must absorb costs with the risk of going bust, or pass them onto individuals who draw on care. At a time when need is growing and more, not less, capacity is required, it would be unwise for the government to take that gamble.

The Employment Rights Bill is set to usher in much-needed stability for the workforce with enhanced access to sick pay and the right to guaranteed hours. For this beleaguered workforce, these improvements in terms and conditions cannot come soon enough, but the government must be mindful of their implementation. In a sector that relies heavily on zero-hours contracting, a sudden shift to guaranteed hours could destabilise the market by increasing costs to providers that they cannot absorb.

No time for complacency

Having a long-term vision of a National Care Service is to be commended, but it is not a free pass to ignore the immediate plight of the sector. Social care has been on the brink for many years and its threadbare safety net of services are at risk of fraying beyond repair.

It is not a nice-to-have or a burden on national finances. Rather, social care is a key pillar of our national infrastructure, and funding it properly is an investment in enabling people to live well, exercise their choice and independence, and participate in society and work. The government needs to invest now to stabilise it, otherwise it may find it has little left to reform in the longer term.