Social care plan ‘a clear improvement’ on current system but leaves key problems unresolved, says IPPR

• Government proposals for ‘cap and floor’ would help thousands of families avoid catastrophic care costs
  
• Instead of new ‘social care levy’, cash should be raised from income tax or raising taxes on the wealthy, think tank argues
  
• Announcement has ‘ducked question’ of reforming structure of social care, including higher workforce pay and quality of services
  
• Overall plan falls far short of putting social care on same basis as NHS

The government’s plan for social care represents a clear step forward, according to the IPPR think tank, but is far from a complete solution - it raises new questions about both the tax and care systems.

The complex cap and floor system still falls short of putting social care on the same basis as other care provided by the NHS – free to all at the point of need.

The new social care levy, raised through higher national insurance contributions and an additional 1.25 per cent tax on dividend income, would be better funded through income tax or by wealth taxation. Raising tax on capital gains so that income from wealth is taxed the same as income from work would raise £90 billion over five years, according to IPPR calculations.

Meanwhile the extra cash announced for the NHS itself falls far short of what is needed, according to IPPR analysis. Estimates put the cost of the NHS’ Covid backlog at £10 billion per year. However, performance and resilience were at record lows in the NHS even before Covid-19 and build back better must include funding for transformation. This would require closer to £15 billion per year, for the NHS alone.

And, in spite of today’s announcements, social care needs further deep reform – including better pay and conditions for workers, and radical change to its current complex structure.

On the social care plan

Chris Thomas, IPPR senior research fellow, said:

“The new cap and floor is a clear improvement on the current system. While it still doesn’t put social care on the same basis as the NHS, it will save the family homes of many and help tackle unmet need. Parliament should support it on this basis – as a first step on a long reform journey.

“Today's announcement has little detail on how the government plans to ensure social care provides people significantly enhanced lives. Delivering quality and personalised care remain huge challenges for our care system, as does a fair deal for social care workers - and there is no clear mechanism here for the prime minister to meet his commitment to ensuring 'dignity' for all.”

On funding most of the extra costs through National Insurance contributions

George Dibb, head of IPPR’s Centre for Economic Justice, said:

“Raising national insurance contributions to pay for this is better than doing nothing at all. However, it is not the best way to fund this policy. Even with the levy extended to working pensioners and dividend income, older working people will be paying far less in contributions and many of those relying on income from wealth will be paying nothing additional on that income at all. On top of this, increasing employer NICs widens the gap between the employed and self-employed.

“A better alternative would be to put a social care premium on income tax or, even better, to raise taxes on the wealthy - including on the income they earn from their wealth. We have calculated that taxing capital gains the same as income earned from work could raise £90 billion over five years – a significant addition to government revenues.

“For a fair general taxation system that funds excellent public services, we need to rebalance our tax system so that it no longer favours wealthy asset owners. That means changes including taxing income from wealth the same as income from work, and introducing a proportional property tax.”

On NHS funding

Chris Thomas, IPPR senior research fellow, said:

“The NHS will be deeply worried about its long-term financial position today. The funding announced is nothing like enough to get through the backlog and deliver the transformation needed to build back better. This will have severe health and economic consequences for years to come, while also leaving the country fundamentally unprepared for future health shocks.”

ENDS