13 Feb 2023

Changes to Social Care Funding

How to Navigate New Capital Gains Rules

In September 2021, the Government set out plans to reform adult social care in England. It said that £5.4 billion would be used to fund the reforms between 2022/23 and 2024/25:

The funding was initially planned to come from the new Health and Social Care Levy, but in September 2022 the then Government announced the levy would be cancelled. The then Health Secretary, Thérèse Coffey, however, said funding for social care would remain unchanged.

  • £3.6 billion would be used to reform how people pay for social care (charging reforms). This included £1.4 billion to help local authorities move towards paying a “fair cost of care” to providers.
  • £1.7 billion would be used to support wider system reform.

Charging Reforms Delayed to October 2025

The Government originally proposed that the adult social care charging reforms would be implemented from October 2023. However, at the Autumn Statement 2022, delivered on 17 November 2022, the Chancellor announced that the reforms would be delayed for two years, with the funding allocated “to allow local authorities to provide more care packages.”

The decision to delay the reforms provoked a mixed response from stakeholders. While some expressed disappointment ... others suggested it was the right decision

The decision to delay the reforms provoked a mixed response from stakeholders. While some expressed disappointment and said the Government was breaking a promise, others suggested it was the right decision to focus resources on other areas of adult social care.

Cap on Care Costs

Under the now-delayed reforms, the Government plans to introduce a new £86,000 cap on the amount anyone in England will have to spend on their personal care over their lifetime. The cap will apply irrespective of a person’s age or income. The legislative framework for a cap is already provided by the Care Act 2014, but the relevant provisions are not currently in force.

Only money spent on meeting a person’s personal care needs will count towards the cap. Spending on daily living costs (commonly referred to as “hotel costs” in a care home) is not included. Prior to its announcement delaying the reforms, the Government had said daily living costs would be set at a notional level of £200 per week at 2021/22 prices.

The cap will not apply retrospectively (ie costs accrued before implementation will not count towards the cap).


Health and Care Act 2022

In November 2021, the Government announced it would seek to amend the Care Act 2014 so that any money paid by a local authority towards meeting a person’s eligible care needs will not count towards the cap. A clause to this effect was added to the Health and Care Bill at report stage in the Commons.

The proposed change proved controversial and was the subject of disagreement between the Commons and the Lords during the Bill’s passage through Parliament. However, the change was included in the agreed final version of the Bill, which received Royal Assent on 28 April 2022.


Changes to the Social Care Means Test

The Government also proposes to make the means test for accessing local authority funding support more generous. 

  • The upper capital limit (the threshold above which somebody is not eligible for local authority support) will increase from £23,250 to £100,000.
  • The lower capital limit (the threshold below which somebody does not have to contribute towards their care costs from their capital) will increase from £14,250 to £20,000.

Fair Cost of Care Reforms

Local authorities can use their position as a large purchaser of social care to obtain lower fee rates from care providers, which can be less than the cost of providing the care. To compensate, providers often attempt to cross-subsidise by charging more to people who fund their own care. The Government said this leads to market failure and announced two measures to address the issue:

  • Provisions in the Care Act 2014 (section 18(3)) will be brought fully into force enabling self-funders to ask their local authority to arrange their care in a care home for them so that they can benefit from lower rates.
  • £1.4 billion will be provided to local authorities to support them to increase the rates they pay to providers where necessary (move towards paying a “fair cost of care”).

Prior to the Autumn Statement announcement delaying the charging reforms, the Government had announced the Fair Cost of Care reforms would be implemented in stages from October 2023 to April 2025 at the latest.

Analysis of Charging Reforms

The Government said the proposed charging reforms will mean “people will no longer face unpredictable or unlimited care costs”. It estimated, based on implementation in October 2023, that the proportion of older people in care receiving support from the state would increase from around half to around two-thirds as a result of the reforms.

The proposals were broadly welcomed by stakeholders, but it was also suggested they may “not live up to their marketing” and that the cap will “help relatively few people”.

The Government estimated the annual cost of the reforms, including the “fair cost of care”, start relatively low (£1.42 billion in 2023/24 based on implementation in October 2023) but would increase to an estimated £4.74 billion by 2031/32 (in 2021/22 prices).

The proposals were broadly welcomed by stakeholders, but it was also suggested they may “not live up to their marketing” and that the cap will “help relatively few people”.

Concerns were also raised about whether funding for the reforms was sufficient, particularly for the fair cost of care, and it was questioned whether local authorities have the workforce capacity to implement them successfully.

One of the main areas of controversy has been the amendment to the Care Act 2014 ... Stakeholders have highlighted the change will mostly affect those with modest levels of wealth and in lower wealth regions.

One of the main areas of controversy has been the amendment to the Care Act 2014, under which a local authority’s contribution will not count towards the cap on care costs. Stakeholders have highlighted the change will mostly affect those with modest levels of wealth and in lower wealth regions. However, the Government says the change makes the reforms fairer and that the savings created have allowed the proposals to be made more generous in other areas.

(Source: https://commonslibrary.parliament.uk/research-briefings/cbp-9315/)

Are you unsure about any of the Social Care Funding changes?

Feel free to contact one of our specialist advisors to talk things through if you are unsure about any of the changes to funding listed above.


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