Raising National Insurance will not bring about the wholesale reform that the sector desperately needs

For 25 years, successive British Governments have agreed that sorting out social care is urgent, but that it’s always too difficult to do at this moment. I should know. In 2017 I became one of the many former ministers involved in drawing up plans that were destined never to see the light of day – until now.

As Prime Minister, Boris Johnson has declared that he will produce a plan this year, and kites are now being flown about what it might contain. The proposal to raise National Insurance payments to cover social care as well as parts of the NHS backlog is interesting but contains many dangers.

The first is that too much of the extra money will end up inside the NHS, leaving social care as the poor relation once again. The second is that the working age population will end up paying not only for their own social care but for their parent’s generation as well, which would be particularly unfair as the older generation (mine) is much more likely to be sitting on housing wealth that has accumulated over the years.

The horrors of what happened in care homes in the early weeks of the pandemic have made this a pivotal point, a “1948 moment” when the public expects a full solution and may just have the necessary appetite to pay for it.

To help this process along I have directed a report for Public Policy Projects (PPP) which offers a vision of a care system for the elderly fit for the modern world. Of course, within the report, we address the funding problem, because there is a current shortfall of about £7 billion a year if we want a sustainable system. But the PPP report goes further, dealing with issues of infrastructure and innovation, as well as the need for better integration of health and social care.

The NHS needs the care system to work if it is to fulfil its own role. Between 2017 and 2019, £340 million was spent on unnecessary hospital bed days because of a lack of capacity in the social care system. More widely, the longer you can keep people in their own homes, not needing residential care, not only are they happier, but also the less money you spend on care costs. So, what you need is a housing system, and the use of technology, that enables people to stay in their homes without risking regular spells in hospital.

How to pay for the necessary changes is at the heart of the conundrum that has defeated successive governments. The coalition government passed the 2014 Care Act, but then shied away from its costs. As such, it was never implemented. This relied on a funding mechanism devised by the Dilnot Commission, which set a cap on the total individual contribution to care costs before the state picked up the tab, and a threshold so that when your assets have been reduced to a certain point (Dilnot suggested £100,000) the state starts paying all or part of the bills.

The PPP report suggests a key variation on Dilnot, because of the geographical unfairness of a national cap, and the unintended consequences. House prices are higher in London and the South East than the rest of the country, and housing wealth is by far the most significant asset for most people. Consequently, any single cap level would have a wildly different effect in Ashford (average house price £370,000) and Hartlepool (average house price £130,000). Observant readers will see I have chosen two Conservative constituencies. One suggestion has been for a cap of £50,000 on personal contributions, but £50,000 from an inheritance of £370,000 is a lot less painful than the same sum from £130,000.

The use of a threshold below which your assets are not taken for payment gives the opposite unfairness, because those in the South East will lose almost all the value of their home. So, the effect of the Dilnot system may well be to force people to sell their homes in all areas of the country, exactly the opposite of what the Prime Minister has promised. Also, if the limits are set at a level that pushes many more people into depending on state support, the fees paid to care home operators will fall markedly. A number of operators will simply not survive, and the capacity crisis will get worse.

Instead, the PPP report, having considered other funding models, proposes a Personal Asset Protection guarantee, which says that when a percentage of assets has been spent the state will step in. The report takes an example where everyone can keep 70 per cent of their assets. This would mean the net cost to the taxpayer would be about £2 billion a year. So, in all areas of the country, you can be sure that the same percentage of your assets will be preserved, which is a good deal fairer.

While funding the necessary improvements lies at the heart of any serious reform, and that £2 billion gap will still need to be filled to meet the needs of the system and to pay staff more, the PPP report makes clear that a wider set of reforms are also needed. From online local care portals to greater use of personal budgets we need wholesale change if we are to move the social care system to a level that preserves the dignity and comfort of those who depend on it.


Damian Green MP is a former first secretary of state and deputy chair of Public Policy Projects