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

As the Chancellor puts the finishing touches to this week’s budget, anxiety is growing within and around the social care sector. Among the countless calls for a finite pot of money, will social care be heeded?

There is a risk that the Government may consider the forthcoming Fair Pay Agreement and long-term ambition to create a National Care Service sufficient to justify inaction in this budget period. That would be a risky strategy. If social care is not adequately supported over the next eighteen months, there may be little left to reform, and the weaker it becomes, the more difficult and expensive the eventual reform will be.

What’s the problem?

Deep cuts in central government funding between 2010 and 2014, followed by only gradual increases in subsequent years, have left local authorities increasingly dependent on municipal taxes and other local revenue sources such as the adult social care prescription and business rates.

Funding has failed to keep pace with growing need and as a result, councils reported a social care budget overrun of £586m in 2023/24, with 37% saying they had to draw on one-off reserves. As many as 90% say they are not confident their budget will allow them to achieve these goals even their legal dutiesand the Association of Local Governments predicts a financing gap of £2 billion for local authorities next year.

Furthermore, the sporadic nature of central government funding has created a context of uncertainty. In recent years, budget days have been characterized by small top-ups and one-off cash injections, often for specific initiatives. Due to the financial pressure, municipalities have switched to purchasing healthcare in the short term close to or below cost – which means that many providers of care and support are struggling to make ends meet. This results in high costs for self-financers and can pushing providers towards closuregiving people less choice and poor continuity of care.

In response to funding pressures, eligibility criteria for care have been tightened and funding thresholds have remained static since 2010, leading to an increased number of people be squeezed out of the publicly funded system, or face 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 caregivers – 68% of whom say they worry about their ability to save and plan for their own future. There are long waiting times for care has become commonplacewith over 220,000 people waiting for a care assessment in March this year – 35% of whom had been waiting for more than six months.

The cost of living crisis has put additional pressure on providers and municipalities. To help ease the pressure, the then government diverted £3.2 billion of funding in 2022 intended for a reform package (including a ceiling on healthcare costs and an increase in the income test) in daily services, delaying implementation until 2025.

One of the first actions of this current administration was to abandon these reforms in an effort to save money for the Treasury. However, the £1.1 billion set aside to implement the reforms from 2025 has not been earmarked for adult social care and will therefore do nothing to ease pressure on council budgets next year.

What should the healthcare sector hear from the shipping box on Wednesday?

The whole system, including the way revenue is raised, is in urgent need of long-term reform, but the social care sector cannot wait for the eventual creation of a National Care Service. While the details of this are being worked out, the sector urgently needs to be stabilized over the next eighteen months.

At the very least, the sector will need assurance that national government funding will take into account increasing demand next year and will be increased to accommodate inflation. more dependent on generating local income through regionally variable mechanisms such as municipal taxes. The Health Foundation estimates that just keeping up with current demand will create a funding gap of £600 million this year, rising to £8.3 billion by 2032/33. That is without any expansion or improvement of services and without provisions to protect people from catastrophic costs.

Councils and providers will want to hear that the short-term cash injections that saved the sector – such as redirecting funding for reforms to day-to-day operations – will be baked into the basis for national grant funding in the years to come. They will also likely want maximum flexibility to increase council tax rates and the social care precept, although residents will not welcome an increase in these local charges.

Although hopes for a more radical expansion of publicly funded provision in the near future have been dashed by the abandonment of more generous policies, means test and a cap on costs, many people who rely on care will need a commitment that the minimum income guarantee and the personal expenses allowance (i.e. the amount of income that someone can keep after the costs of care) are at least in line with inflation will rise.

The budget must also take into account the impact of changes to national insurance on employers, the national minimum and living wages on social care. With a huge workforce of more than 1.7 million people, wages are the main driver of social care costs.

It will be important that funding for the next 18 months is sufficient to accommodate a further increase in the National Minimum and Living Wage, National Insurance or any additional measures. better pay for healthcare workers. Not wanting to finance another increase means providers, many of whom are small and medium-sized, will have to absorb the costs at the risk of going bankrupt, or pass them on to individuals who rely on the care. At a time when needs are growing and more, not less, capacity is needed, it would be unwise for the government to take that gamble.

The Labor Rights Act will usher in much-needed stability for the workforce with improved access to sick pay and the right to guaranteed hours. For this beleaguered workforce, these improvements in working conditions cannot come quickly enough, but the government must be aware of their implementation. In a sector heavily reliant on zero-hours contracts, a sudden shift to guaranteed hours could destabilize the market by raising costs for providers that they cannot absorb.

No time for complacency

It is commendable that we have a long-term vision for a National Care Service, but it is not a license to ignore the immediate situation of the sector. Social care is gone on the edge for years and the worn-out safety net of services are in danger of fraying beyond repair.

It is not a nice-to-have or a burden on national finances. On the contrary, social care is a key pillar of our national infrastructure, and its proper financing is an investment in enabling people to live well, exercise their choice and independence, and participate in society and work. The government must invest now to stabilize the country, otherwise it may have little to reform in the longer term.