How should we fund social care?

With the social care system struggling to meet demand, which is only increasing thanks to demographic pressures, a long term policy response is required.

Greater incentives will be required to promote private financial products in a market with many significant demand and supply side barriers. The coalition government made some modest attempts to encourage growth in the market for self-funded care but the response from the insurance industry has thus far been lukewarm at best.

Amongst the biggest problems are concerns about the size of the market, the considerable actuarial challenges of pricing such products and the general belief that the state will always intervene and pick up the bill eventually.

The government has rightly shelved proposals to impose a cap on costs - and that proposal should be abandoned for good. It’s perfectly reasonable to expect those with assets to sell them to fund their care and target taxpayer funding at those simply unable to afford their own care. A cap on costs would lead to situations in which wealthy people in care have their bills picked up by Council Tax payers so the beneficiaries of their estate can receive larger inheritances.

It is estimated that a social care funding gap of £2.9 billion will have opened up by the end of the parliament and pending a long term policy response the government should consider abandoning poorly targeted spending that could plug the gap such as winter fuel payments (£1.9 billion in 2019-20) and the triple lock which the Government Actuary’s Department says which is costing £6 billion a year.

Further to that, John O'Connell outlined some other reforms that could be enacted to ease the pressure, such as tax reforms to allow more money to be raised locally and planning reforms to get more houses built, thereby increasing the tax base.

Hiking Council Tax won't work in the short-term, let alone the long-term.

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