How should we pay for social care in the future?

Published 07/01/2019   |   Last Updated 27/05/2021   |   Reading Time minutes

Why is the funding of adult social care an issue?

The challenge of finding the resources for social care services now and in the future has preoccupied governments across the UK for many years. A succession of inquiries, commissions and reports have proposed alternative models for funding and charging for social care, but the options available to the Welsh Government have widened recently with the devolution of new tax raising powers to Wales.

The current debate in Wales is focused on the Holtham independent report, Paying for Social Care (PDF, 974KB), which proposes a social care tax increase or levy. The report will be debated by the Assembly on 8 January 2019.

Maintaining a sustainable system of care is challenging given Wales’ ageing population and the increasing number of people with care and support needs arising from both physical and mental health conditions. A 2016 report by the Health Foundation, The Path to Sustainability, Funding Projections for the NHS in Wales to 2019/20 and 2030/31 (PDF 1.07MB) noted that fully funding adult social care pressures in Wales would require an extra £1.0 billion by 2030/31, with costs rising from £1.3 billion in 2015/16 to £2.3 billion in 2030/31.

Finding a solution to this financial challenge is a pressing issue. In late 2017, the Assembly’s Finance Committee agreed to undertake an inquiry into the cost of caring for an ageing population which included consideration of how the Welsh Government could reform the arrangements for funding social care.

Is a social care tax or levy a solution for Wales?

In October 2017, the then Cabinet Secretary for Finance and Local Government announced four new taxes that the Welsh Government would consider, using its new powers to introduce specific new taxes, provided under the Wales Act 2014. These included a social care levy proposed in a paper by Professor Gerald Holtham and Tegid Roberts for the Institute of Welsh Affairs, Solving Social Care. And more besides.

In his subsequent independent report, Paying for Social Care (PDF, 974KB) – commissioned by Welsh Government – Professor Holtham sets out the economic case for such a contributory tax or levy system. Under the proposal individuals would contribute a proportion of their income to a social care fund, ranging from 1% to 3% according to age.

While some of the income raised could be used to support immediate pressures on social care, the remainder would be invested in a fund to meet future needs.

Although further work is required, Professor Holtham concludes that a tax increase or levy could provide the solution for Wales. He notes that the proposal is dependent on achieving adequate investment returns, negotiating reasonable collection and administration costs with HMRC, and confirming the income in the fund is not subject to taxation. Success would also depend on ensuring the scheme is seen as fair: benefits would need to reflect contributions.

The report also suggested that people with assets (usually property) should be able to retain a greater proportion of their wealth in return for making contributions. This would ensure that no-one is forced to contribute to the social care fund and pay the full costs of their care.

While welcoming Professor Holtham’s report, the Finance Committee recommended that the Welsh Government continues to explore other funding options. It should also continue to engage with the public about the care they expect to receive and how it should be funded.

The Finance Committee report.

As well as considering the fiscal levers available to the Welsh Government to reform the arrangements for funding social care, the Finance Committee’s Inquiry examined other aspects of the costs of caring for an ageing population. Its report, The Cost of Caring for an Ageing Population (PDF, 989KB) - which will be debated by the Assembly on 9 January 2019 - summarised the evidence received from a range of stakeholders and set out the Committee’s conclusions and recommendations.

Financial pressures on the social care system

The Committee noted concerns about the fragility of the independent care sector and the retention and recruitment crisis in the social care workforce. Some providers are handing contracts back to local authorities since they believe fee levels are not financially viable.

Low pay and the perceived low status of the social care role are unattractive to current and potential staff. Developing a strategy for the social care workforce and taking appropriate action to raise the profession’s status should be priorities for the Welsh Government, according to the Committee.

Demands on the social care system

Overall, spending on social care in Wales has been protected in relative terms during the years of austerity. However, spending per head on people age 65 and over decreased by 14% between 2009-10 and 2016-17, as services focus on supporting people with higher levels of need. The Committee emphasised the need for robust evidence to estimate the current level of unmet need and project future demand for services.

Impact of Welsh Government policies

The report also expressed concern about the effectiveness of the Social Services and Wellbeing (Wales) Act 2014 in securing adequate support for the 370,000 informal carers who provide the majority of social care in Wales. The Committee recommended that Welsh Government evaluates whether the legislation is operating as intended.

The Health, Social Care and Sport Committee is currently undertaking an inquiry into the support provided to carers under the Social Services and Well-being (Wales) Act 2014.

Welsh Government response to the Committee Report

The Welsh Government provided its response (PDF, 636KB) to the nine recommendations in the Committee’s Report, accepting all either in whole or in principle.

The response sets out the work currently being undertaken by Welsh Government, including that by the Inter-Ministerial Group on Paying for Social Care, which will continue during 2019 and inform the Welsh Government’s decision whether a social care levy is a solution for Wales.

In its report, the Finance Committee states that it intends to review in early 2020 the progress made in implementing its recommendations.

In the meantime, a UK Government Green Paper on adult social care is imminent. Although primarily concerned with social care in England, some of the proposals may have relevance to Wales.

Article by Jo McCarthy and Steve Boyce, National Assembly for Wales Research Service