Give 1.9 million more people access to publically funded care and create almost a million new jobs through a new universal care service

Creating a universal care service could enable over 1.9 million extra people to access publically funded care services and create almost a million new jobs, according to new research from the New Economics Foundation (NEF) and the Women’s Budget Group (WBG), published today. For the first time, this research calculates the costs of all the reforms needed to create a high-quality, universal care service with well-paid care workers, and shows that the government’s new health and social care levy would only raise 6% of the funds needed to create such a service.

Currently, many are unable to access essential care and support services and at least 1.8 million people in England have unmet care needs. The report argues that a combination of means-testing, underfunding and competition between private companies to keep costs down has resulted in a failing social care system, in which quality is often poor, and gaps in provision are met by increasing numbers of friends and family providing unpaid care. The report concludes that the economic recovery from the pandemic is a unique opportunity to establish a universal care system that meets everyone’s needs and stimulate the economy with new funding.

NEF and the WBG are calling for a new universal social care system which is free at the point of need, improves the quality of care, and ensures good pay and conditions for care workers. The report recommends that the government increase the social care budget by £31.9bn, or 2.6 times the current budget, in order to create a new universal social care system by:

• Investing £19.6bn a year into the creation of a new universal care system, plus an additional £12.3bn to raise care worker pay to the Real Living Wage.
• Shifting away from local authorities contracting for-profit companies to deliver social care, and towards non-profit model with a legal mission to provide quality care.
• Creating a new national body, Social Care England, to work with local authorities, and set and enforce high standards for social care.

In April of this year, the health and social care levy will kick in, meaning that national insurance contributions will rise by 1.25%. NEF and WBG recognise that taxes need to rise to improve social care, but argue that a flat increase on national insurance is neither the most progressive option, nor will it raise enough. £5.4bn of the money raised through the government’s measures has been earmarked for social care over the next three years, but not to increase the quality or quantity of care. The report shows that the level of investment required to meaningfully address unmet need and increase pay would be 17 times higher than what the government is proposing.

The report sets out two options for tax reform that would be more progressive than the government’s proposals while raising the funds required for a new universal care service. The first option is deeper reform of national insurance, including removing exemptions for investment income and pension-age earners, and taxing high earners the same as low earners. This would raise more than £31bn a year.

Alternatively, the second option would be to raise the funds by taxing income from wealth on a similar basis to earnings from work, including closing loopholes in inheritance tax, reducing tax relief on pension contributions for high earners and taxing dividend income and capital gains at comparable rates to earnings from work. Combined, these measures would raise at least £35bn a year. The report also notes that the new jobs created by the investment could boost tax receipts by up to a further 14bn.

Daniel Button, senior researcher at the New Economics Foundation, said:

“Boris Johnson promised to ​‘fix’ social care when he took office. Despite this, the government have failed to outline a realistic plan to transform social care. Plans they have announced, including the white paper last year, will not address many of the systemic issues: people unable to get the care they need due to limited access, poor quality care, underpaid workers, and family and friends asked to plug the gaps in the care system through unpaid care. The government have failed to raise a realistic amount of money, and a flat increase on national insurance is not the fairest way to fund care.

To build a more caring society post-Covid, social care needs to reformed in the round. A universal social care system provide the security of knowing that if we, or someone we care about, has a disability or health condition during our lives, we would have the support we need. And it would drive jobs and incomes nationwide, supporting the government’s levelling up agenda.”

Dr Mary-Ann Stephenson, director of the Women’s Budget Group, said:

“We will all need care at some point in our lives, and the only way to meet that universal need is with a universal service. The last two years have given most people a new appreciation for care and how central it is to our lives, yet government proposals, to date, have failed to recognise this. A properly funded universal care service would deliver quality care to users and provide decent wages to carers, helping to boost the economy. Solving social care can’t just be about investing in the current broken system. Any long-term solution must be rooted in a broader definition of social care. It is about more than just providing personal care. Social care should support people to stay rooted in their communities and live their lives with autonomy and dignity. That’s something we would all wish for, but it requires vision and investment.”

Notes

The New Economics Foundation is a charitable think tank who are wholly independent of political parties and committed to being transparent about how it is funded.

The Women’s Budget Group is an independent network of leading academic researchers, policy experts and campaigners. Our vision is of a caring economy that promotes equality between women and men.

The report, Universal Quality Social Care, will be available at https://​newe​co​nom​ics​.org/​2​0​2​2​/​0​2​/​u​n​i​v​e​r​s​a​l​-​q​u​a​l​i​t​y​-​s​o​c​i​a​l​-care from 00.01 Friday 18 February 2022

The Real Living Wage is currently £9.90 an hour outside London, and £11.05 an hour inside London. The rates are calculated annually by the Resolution Foundation and overseen by the Living Wage Commission, based on the best available evidence about living standards in London and the UK.

Methodology of costings: To estimate the level of demand for care under a more generous system, NEF use the Care Act definition of the minimum eligibility criteria for local authority care. Using data from the Family Resources Survey and the Health Survey for England, we have estimated that 17% of those aged over 65 and 2% of those aged between 18 and 64 would have eligibility needs under this definition in a given year.

To estimate the number of hours per week needed to provide adequate care to meet these needs, we have used two different methods. For domiciliary care services, we have used information about average hours of formal care provision commissioned by local authorities in England (12 hours for those aged over 65 and 21 hours for those aged 18 – 64). For residential care, we used 24 hours of care a week based on current ratios of staff to residents, excluding hotel costs.

We have also included an allowance for overheads and modelled raising minimum pay to the Real Living Wage, a rate designed to be sufficient to meet what members of the public consider to be everyday needs.

For our core scenario, presented here, we have used a 68% take up rate, based on the assumption that everyone eligible, except those who receive informal care between 1 and 19 hours, takes up care in a universal system.

Analysis of the impact of taxes on wealth in raising funds for a universal social care service based on Advani, A., Hughson H., and Tarrant, H. (2020) . Revenue and distributional modelling for a UK wealth tax. Fiscal Studies, 42. Retrieved from https://​ifs​.org​.uk/​p​u​b​l​i​c​a​t​i​o​n​s​/​15814; Corlett, A. & Whittaker, M. (2016). Save it for another day: pension tax relief and options for reform. Retrieved from: https://​www​.res​o​lu​tion​foun​da​tion​.org/​a​p​p​/​u​p​l​o​a​d​s​/​2​0​1​6​/​0​3​/​P​e​n​s​i​o​n​-​t​a​x​-​r​e​l​i​e​f.pdf; Nanda, S. (2019). Reforming the taxation of dividends. London: IPPR. Retrieved from https://​www​.ippr​.org/​r​e​s​e​a​r​c​h​/​p​u​b​l​i​c​a​t​i​o​n​s​/​r​e​f​o​r​m​i​n​g​-​t​h​e​-​t​a​x​a​t​i​o​n​-​o​f​-​d​i​v​i​dends; Nanda, S. (2019). Just tax: Reforming the taxation of income from wealth and work. London: IPPR. Retrieved from https://​www​.ippr​.org/​r​e​s​e​a​r​c​h​/​p​u​b​l​i​c​a​t​i​o​n​s​/​j​u​s​t-tax

For a fill outline of the methodology, see the report’s appendix.