UK Social Care: Is the System Broken?

If you read reporting from the largest private chains in the UK, their view is that the system is broken, and they pass the blame onto the government or local authorities who are not paying enough for the public payers. Do you buy into this narrative?

Yes I do. As we know, 90% of social care is provided by the private sector, but there are also individuals who pay their own way, called “self-funded” people. These are people who prefer to pay to know that they are getting the service that they want, as opposed to the service that the local authority can only afford to give them. The increase in the number of people self-funding their way is now just over half of social care—if you imagine the market in total is around about £16bn —just over half of that now is related to people paying their own way. That has just become a bit of an issue.

One of the reasons for that is because of an increasing level of demand, as well as an increasingly tight criteria for funding for the public. This has meant that the actual provision of care has almost become secondary and it’s become quite minimalistic in some ways. Anybody that’s had an older relative, for example, that’s become increasingly infirm and wants to stay at home as long as possible—that is the preferred choice for most people—but they need help and support. Often, you can find that people are waiting two or three years on a waiting list before a local authority can afford to pay, assuming that an individual can’t afford to pay for it themselves. Hence, that’s why it drives people to pay for it themselves if they can. Otherwise, you have to wait two or three years if you can’t afford to get support yourself. In that context, I would say the system is broken.

Indeed, it’s worth also drawing on a report from the CMA. A couple of years ago, they did an investigation into the residential care sector. A key finding was that a provider of care, whether it be in the public sector or private sector, to someone that can only be funded by the government is almost impossible to provide a return and a level of care that is needed with the budget allocated to them. Typically, for residential care funded by the government, the fee is £550-600 on average per week. But it typically costs £800 to provide the level of care for that individual for which the government is only wanting to fund £600-700. Therefore, there is a disconnect in the gap, which means, yes, the system is broken.

Are private payers subsidizing the public payers?

You can look it at that way. Some of the headlines would say, ‘why am I paying £1,000 a week for care when somebody next door is only paying £500? Therefore, I must be subsidizing’. As I mentioned, the reality is that typical cost of care might be £800 a week for a normal residential nursing care, and therefore at £1,000 a week, all that is happening is a resident is simply paying for the care properly and allowing for a margin for the operator to be able to fund the business in the first place and meet financial obligations.

Whereas if the cost of care is £800 and the local authority is only funding £500, then there is effectively a £300 loss. I would like to think that the basic state funding system is fundamentally broken, and indeed that’s what the CMA reported two years ago. There’s a big independent body of thought, and there are lots of other reports that would also support that.