Social care: cap amendment means people will have to pay for longer

Amendment means that council support doesn’t count towards the cap and means many will face higher bills for longer.

Proposed changes to the new cap on social care costs will “significantly reduce” the protection against massive care bills provided to those with modest incomes and assets.

That’s according to new analysis of the plans by the Institute of Fiscal Studies (IFS).

As we highlighted at the time, the issues around the social care plans came down to the cap on costs.

The idea of the cap is to limit how much any individual ends up paying towards their own care, and was set initially at £86,000.

In other words, once you have paid £86,000 on care costs, the cap then comes into effect and the state picks up the rest of the tab.

In theory, this would then protect people at the lower end of the scale from seeing all of their assets disappearing on care costs, allowing them to at least pass something onto their loved ones after they die.

Crucially, when this was first put forward, this cap would include the means-tested council funding that is available for people with low assets or income, meaning that money from both you as an individual and support from your council would count towards hitting that cap.

However, the Government wants to amend this so that such support is excluded from the cap ‒ it will only be the money that you have paid directly that counts.

Why change the cap rules?

Obviously, this change is designed to save the Government cash.

We aren’t talking about small change either ‒ the Treasury reckons this amendment will save a monster £900 million per year from 2027-28.

Years of payment pain

Saving that money is all well and good for Rishi Sunak and his team, but it’s still grossly unfair.

Analysis by the IFS makes clear that most people who end up needing care won’t be impacted by the cap amendment, yet for people who might need to take advantage of means-tested support, it will “significantly reduce” the protection against having to pay large sums.

Importantly, people who qualify for that support will inevitably take much longer to reach that cap. The IFS provides the example of someone needing residential care costing £700 per week.

Without the amendment, that person would hit the cap after three years and four months, irrespective of their income or assets.

But if that person had an annual income of £16,000 and assets of £100,000, it would instead take them almost six and a half years to hit the cap following the amendment.

That’s astonishing, dragging out the financial pain for some of our least comfortable people at an already incredibly stressful time.

Far from providing protection for people, the amendment instead means that those who receive means-tested support end up handing over a larger chunk of their assets towards their care costs.

According to the IFS, for someone who ends up spending a full decade in residential care ‒ what it calls the worst-case scenario ‒ someone with £106,000 in assets and an annual income of £11,800 would be the most severely impacted.

Under existing legislation, they would pay no more than £44,000, which is 41% of their assets. However, under the new plans, they would instead end up paying a massive £76,000 ‒ the equivalent of 71% of their initial assets.

How on earth that can be justified for such a low earner is beyond me.

Regional differences

It’s worth bearing in mind that this amendment will have a particular impact in specific regions.

According to the IFS, those in the North East, Yorkshire and the Humber and the Midlands will see the biggest erosion of their protection against large care costs.

For example, it calculated that around a quarter of those in the North East would have to contribute an additional 10% of their initial assets in order to pay for their care, should they spend a decade in care.

By contrast, just one in 40 people in London would face the same bill.

Of course, areas of the country where care costs are higher will inevitably see the cap reached far quicker as well. 

Amending means-tested support

It’s worth highlighting that the Government is at least planning to open up means-tested support for care costs to more people.

Currently, you only qualify for this help if you have chargeable assets of less than £23,250. That is to be increased to £100,000.

A universal cap, or not at all

It’s absolutely a positive that the Government is doing something ‒ anything ‒ about the state of social care, and capping the amounts that people have to pay towards their treatment is a sensible and compassionate thing to do.

But that only works if you do it in a fair way, and I don’t see how you can honestly make the argument that the amendment is fair. A cap designed to restrict costs is doomed to failure when from the outset it penalises those in a less well off position.

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