The Government has announced a new ring-fenced charge on income to provide funds for health and social care. The new levy will raise on average £12 billion across the UK each year, starting next year and continuing until at least 2025.

In this article we set out our understanding of what the announcement means to patients and people who use health and social care. Many of the details are not yet clear, as the Government hasn’t yet set out how the money from the new health and care levy will be distributed. This means we can’t currently say how or if this money will lead to improvements for patients, and we will follow up with announcements once more details are available.

How the money will be shared across the UK

Of the £12 billion, £2.2 billion a year will be shared between Scotland (£1.1 billion), Wales (£700 million) and Northern Ireland (£400 million) – again, these are average figures across the period 2022-2025.

That leaves £9.8 billion a year for England. Over a three-year period, that’s £29.4 billion.

What this means for social care

Of the total three-year amount of £36 billion, £5.4 billion is going to social care between 2022-2025 in England. That funding appears to be enough to cover the cost of the new ‘cap and floor’ arrangement, plus £500 million to improve conditions for the social care workforce in England.

What that means is that some people will have to pay less for the social care they use and currently pay for. Once someone has paid £86,000 for social care, the state will step in and pay for it (the ‘cap’). The state will also start paying some of the cost once someone’s assets have been reduced to £100,000, and all of the cost once they reach £20,000 (the ‘floor’).

However, not enough care is being provided at the moment, and many people are going without. There is nothing in this announcement about funding to fix this.

We plan to post more details about how these changes will affect individuals and when they will happen.

What this means for the NHS

So, the new levy will generate £36 billion over three years: £5.4 billion is earmarked for social care in England, and £6.6 billion will be given to the other home nations during this period.  That leaves £24 billion for the NHS in England over three years, so £8 billion per year. 

However, the Department of Health and Social Care told us that the NHS would get £15.4 billion extra over the three years, although this sum doesn’t appear in any of the Government documents we’ve seen.

If this figure of £15.4 billion is correct, then it suggests there is £8.6 billion of levy funding available. This money appears to be ear-marked for tackling the waiting lists that have built up over the pandemic. There will also be an extra £1 billion in the current financial year (not from the levy).

So, if you’ve been waiting for treatment, this is good news. 

If our assumption about the £8.6 billion is correct, there will be an ongoing increase in NHS baseline funding of only the £5.1 billion per year. The money spent on bringing waiting lists down will then go to adult social care – an uplift for social care of £2.9 billion per year.

Is the new money enough?

For the NHS, the new money might not fall too far short, though that depends exactly what the NHS will be required to do.

Last week, NHS Providers and the NHS Confederation estimated that the NHS needed an extra £10 billion next year to cope with extra costs from COVID-19 and to make progress in treating the rising number of patients on waiting lists. 

The promised £8 billion per year does not reach that level, but the Institute of Fiscal Studies says this could be enough to meet the pandemic-related pressures on the NHS. And if the NHS can boost its capacity to treat patients, the IFS thinks there’s enough money to return the waiting list to pre-COVID-19 levels within three or four years.  

The Health Foundation’s REAL Centre has also developed estimates of how much the NHS needs to treat patients on the waiting lists, stabilise the NHS, and enable it to recover. For ‘stabilisation’ it estimates an extra £11.6 billion is needed over three years, and £21.5 billion for ‘recovery’. Therefore, like the IFS the Health Foundation’s calculations suggest the sums announced by the Government look to be enough. 

But be aware, even with extra funding the NHS’s ability to increase the number of patients it can treat at any given time will depend on having enough staff and not having to shut down parts of the service because of another major COVID-19 outbreak, or even a severe ‘flu pandemic. 

Also, none of these estimates include political pledges such as hospital redevelopments or additional COVID services. At the moment, we do not know what extra requirements of the NHS, such as turning the NHS Health Check programme into a National Prevention Service, might mean for patients, and we will watch developments closely. 

What about social care? As we’ve seen, no new money was promised for the system just yet. What’s not clear is whether the Chancellor’s spending review and Budget on October 27th will increase funding for local authorities, which would mean more money for social care. The Health Foundation estimates that to meet future demand, improve access to care, and provide more care, spending would have to be £9.3 billion higher per annum by 2023/4 than in 2019/20. The funding that will eventually flow to social care from the new levy after the first three years (the £2.9 billion per year identified above) does not come close to this.

Reform of social care

The Government’s announcement includes references to changes that could be important to individuals, but where the detail is yet to be developed. One is the possibility that people who now pay for their own care would, in future, pay at the same rate as the local authority pays. This would be a big change, as self-funding is currently much more expensive. 

This is really important because the difference between what you pay as a self-funder and what someone whose care is funded by the council, is not counted towards the ‘cap’: so someone who hits the £86,000 cap may have paid a lot more than that. Aligning the payment rates would make the cap more meaningful for many people over the coming years.

There will also be a consultation on the charging reforms. This too, is important: calculating what has been paid towards a ‘cap’ will be a complicated business, and we have heard estimates that local authorities might have to spend £500-700 million per year just to administer the system. How the charging system is implemented will, therefore, be critically important and we’ll be keeping our eye on this. 

Finally, it’s worth saying that the publication of firm proposals at all is a milestone. This week’s announcements are the only firm commitments made in decades to sorting the long-running problems with social care charging.  To us, who along with others, have lobbied for adequate funding of social care, even without details, this is progress.

We’ll be posting an article that looks in greater detail into what we know about the cap and floor in social care and how it will affect you later this week.