The UK prime minister's plans for social care face a formidable funding problem. A full-blown National Care Service would cost an estimated £17bn a year by the mid 2030s. But savings from the new policy Andy Burnham announced on the state pension triple lock will only generate a fraction of this in the early years.
In a report published today by analytics consultancy LCP, we set out a new approach to social care funding that could help Burnham achieve his objectives in a politically acceptable way. It is estimated that about one in seven people will face lifetime care costs in excess of £100,000, potentially wiping out the value of their family home and lifetime savings.
Our proposal builds on the model of opt-out automatic enrolment for workplace pensions. Everyone aged 40 or above would automatically be enrolled into paying a social care premium delivered through a 1 per cent increase in the standard rate of income tax. The maximum premium would be just over £30 per month. One year of contributions would generate a 4 per cent discount, two years an 8 per cent discount, and so on until those with twenty-five years in the system would qualify for completely free personal care.
We estimate that this policy would generate around £3.5bn a year. A huge attraction is that much of the cost falls years down the line. The upfront revenue can be used to relax the draconian capital rules, increase prevention spending, and support informal at-home care by friends and family members.
Source: Financial Times Companies · Summarized by HeadlinesBriefing