Proposed government cap puts more people at risk of 'catastrophic' social care costs, reveals report

Elderly people living in the North East, Yorkshire and the Midlands with modest levels of wealth will be hardest hit with 'catastrophic' care costs when the government brings in the new social care cap, analysis reveals.

A joint report published by the Institute for Fiscal Studies (IFS) and Health Foundation and funded by the Health Foundation, has found that someone with around £110,000 in assets could lose 78 per cent of their total wealth even after the cap is in place, while someone with £500,000 could use up only 17 per cent.

The report states people in the North East, Yorkshire and the Humber as well as the Midlands, where there is less wealth, would see the biggest erosion of their protection against large care costs, as a result of the proposed amendment.

David Sturrock, a senior research economist at IFS, said: “The new social care cost cap is important not just for those who end up having large care costs. Given the unpredictability of future care needs, it offers many people peace of mind and an ability to plan.

“The government’s proposed amendment would significantly reduce those benefits for those with moderate assets and income. This disproportionately affects those in the North East, Yorkshire and the Humber and the Midlands, given lower house prices and wealth levels in those regions compared to the South of England.”

’Parliament has been voting in the dark’

Last September, the government announced a cap on lifetime social care costs in England, beginning in October 2023 and set at a level of £86,000.

Under the old plan, someone needing residential care costing £700 per week would reach the cap after three years and four months, regardless of their levels of income and assets.

With the amendment, someone with that care need who has annual income of £16,000 and assets of £100,000 would take almost six and a half years to reach the cap.

The report says those experiencing costly care journeys, and who would be eligible for means-tested support, would make contributions for longer and spend more on their care.

It adds: Under a ‘catastrophic’ cost scenario of a decade spent in residential care, someone with £106,000 in assets and annual income of £11,800 would be most affected.

Under the government’s plans, their contribution towards their care would be £76,000, or 71 per cent of their assets, compared with £44,000, or 41 per cent of their assets, under existing legislation. Those with assets of over £186,000 would be unaffected.

Areas of the Midlands and the North would be most affected by the changes. If they were to spend 10 years in residential care, one in four individuals in the North East would have to contribute an additional 10 per cent of their initial assets to cover their care costs, compared with just one in forty of those in London, according to the report.

Charles Tallack, assistant director for the REAL Centre at the Health Foundation, said: “The government’s proposed amendment to the Care Act will, in effect, increase the time it could take for some poorer people to reach the £86,000 cap on care costs.

"So far Parliament has been voting in the dark on this issue, having had insufficient information about its impact and which groups of people would be affected.

“This independent analysis will help to shed light on this and ensure that as the amendment is further debated and voted on, peers and MPs can fully understand its impacts on people who need care.”

Mr Sturrock added: “This change seems to cut across the government’s ‘plans to level up’ across regions.”

To read the full report, go to https://www.health.org.uk/publications/reports/does-the-cap-fit-analysing-the-proposed-amendment