Introducing a cap on care costs

In September 2021, the government announced it would provide £3.6 billion between 2022/23 and 2024/25 to reform how people pay for social care in England.

It was originally planned the reforms would be implemented from October 2023. However, at the Autumn Statement 2022 the government announced they would be delayed by two years, until October 2025.

On 29 July 2024, the Chancellor, Rachel Reeves, announced the reforms would be cancelled, along with several other projects. The Chancellor said this was to help reduce spending in response to an inherited projected overspend of £22 billion pounds for the 2024/25 financial year. The Shadow Chancellor, Jeremy Hunt, disputed the rationale for cancelling the projects and said the decision was political rather than economic.

Cap on care costs

Under the proposals set out by the previous government, a new £86,000 cap would be introduced on the amount anyone in England would have to spend on their personal care over their lifetime.

Only money spent by a person on meeting their personal care needs would count towards the cap. Spending on daily living costs would not be included. The cap would also not apply retrospectively; costs accrued before implementation would not count towards the cap.

The legislative framework for a cap is already provided by the Care Act 2014, but the relevant provisions are not currently in force. The previous government amended the Care Act so that only money paid by an individual towards their care would count towards the cap and not any local authority contributions. This change proved controversial.

Changes to the social care means test

The previous government also proposed to make the means test for accessing local authority funding support more generous. The upper capital limit (the threshold above which somebody is not eligible for local authority support) would increase from £23,250 to £100,000. The lower capital limit (the threshold below which somebody does not have to contribute towards their care costs from their capital) would increase from £14,250 to £20,000.

Fair cost of care reforms

Local authorities can use their position as a large purchaser of social care to obtain lower fee rates from care providers, which can be less than the cost of providing the care. To compensate, providers often charge more to people who fund their own care. The previous government said this leads to market failure and proposed two measures to address the issue:

• enabling self-funders to access local authority care home fee rates (by bringing section 18(3) of the Care Act 2014 fully into force)
• Providing £1.36 billion to local authorities to help them increase the rates they pay to providers (move towards paying a “fair cost of care”)

After implementation was delayed to October 2025, most of the funding for the fair cost of reforms was reallocated. However, £162 million a year was allocated to local authorities between 2022/23 and 2024/25 as part of a fund, which aimed, among other things, to increase fee rates paid to providers.

Analysis of proposed reforms

The previous government estimated, based on implementation in October 2023, that the proportion of older people in care receiving support from the state would increase from around half to around two-thirds as a result of the proposed reforms.

It estimated the annual cost of the reforms, including the “fair cost of care”, would start relatively low (£1.42 billion in 2023/24 based on implementation in October 2023) but would increase to an estimated £4.74 billion by 2031/32 (in 2021/22 prices).

The proposals were broadly welcomed by stakeholders, but it was also suggested they may “not live up to their marketing” and that the cap would “help relatively few people.”

Concerns were also raised about whether funding for the reforms was sufficient, particularly for the fair cost of care plans, and it was questioned whether local authorities would have the workforce capacity to implement them successfully.