Social care reforms likely to take 'some time' to materialise: Sarah Coles

Tony Blair was a fresh-faced 43-year-old when he told the party conference in 1997 that he didn’t want today’s children growing up in a country where pensioners had to sell their home to pay for care. He established the Sutherland Commission to look into it, which recommended free personal care, paid for through taxes, and a more generous means test of £60,000 for housing and living costs. However, the costs involved meant the government didn’t accept the findings, choosing to make tweaks around the edges instead.

There were more reports and commissions in the following years, and in 2002, free personal care was introduced in Scotland. However, in England, significant structural reforms have yet to materialise.

There have been a number of attempts to tackle social care, and some common themes have emerged. The first is that reforms have often featured some sort of lifetime cap on the cost of care, and a more generous means test - although each time the lifetime cap seems to rise. It was suggested by the Dilnot Commission in 2011, which proposed a £35,000 cap. In 2013, the government suggested a £72,000 cap, and after that fell by the wayside, a new plan in 2021 suggested a cap of £86,000.

The second common thread is postponement. The Dilnot Commission reported in 2011, and the government at the time put off replying on the grounds that the country’s finances weren’t in good enough order. It finally made proposals in 2013, with plans to introduce changes in 2016. Then in 2015, the start date was postponed to 2020, before eventually being dropped.

The final theme is that in the endless gap between proposals and anything concrete actually happening, either the party or leader is often replaced, and the newcomer baulks at the plans. It scuppered Coalition proposals for a lifetime cap from 2016, when the election of 2015 brought in a Conservative government with different priorities. Boris Johnson’s 2021 plan subsequently unravelled under the short-lived leadership of Liz Truss, when the Health and Social Levy designed to pay for changes was scrapped and reform was postponed until 2025. In 2024, under the new Labour government, these proposals were scrapped altogether, on the basis that money hadn’t been set aside to pay for them.

Most recently, the Starmer government announced a new independent commission into social care, due to report on the challenges this year and potential reform in 2028. In fact, there have been 25 social care commissions, select committee inquiries and white papers on social care since 1997. Tony Blair’s oldest child is now in his 40s, and his grandchildren are currently growing up in a country where pensioners are selling their homes to pay for care.

Shockingly, the constant cycle of pledges, commissions, proposals, postponements and cancellations, has meant successive governments have left key planks of the system untouched. The means test, which determines whether you can get help with care, sets lower and upper limits – so those who own less than the lower level have all their care costs covered and those who have assets between the lower and upper levels get some support. These have been frozen since 2010 at £14,250 and £23,250. If they’d risen with inflation. they would now be £26,690 and £43,546.

It means that while we can hope for change, we need to consider what care we might need, and what preparations we need to make in case change isn’t forthcoming soon. If you’re expecting a family member to step in, it’s vital to talk to them about the practicalities, to see whether they can provide the help you need, and if they’re prepared to do so.

Otherwise, you need to consider how you’d cover the cost of formal care. This is a significant challenge for anyone, because it can easily run to tens of thousands of pounds – or more – and it’s difficult to build that kind of savings pot. However, if you have emergency savings to cover 1-3 years’ worth of essential expenses, then later in life it can help cover the cost of care for a while.

Some people will ringfence money in their pension for care if needs be. In some cases, they will just take the income produced by their investments, so the pot remains intact for this sort of eventuality. They run the risk that if they don’t need the money, there could be inheritance tax on it if they bust their allowances and live beyond 5 April next year. But they may well decide that this is a better risk to take than not having the money available at all.

There’s a good chance that many people will need to use the value of the family home to cover the cost. Some will try to rent it out – although this comes with risks and costs you need to think through carefully. Some will use equity release, or use a deferred payment agreement with their local authority (where the care fees roll up and are repaid when the property is sold). Others will sell the home, which can be a cost-effective solution if they can face the prospect.

Once you have the cash available, you can also weigh up the possibility of buying a long-term care annuity – also known as an immediate needs annuity. These tend to have much higher incomes than normal annuities, because your life expectancy is likely to be lower. They also pay out tax-free if the monthly payment is made direct to the care provider. It can be difficult for people to consider, because it involves a significant outlay upfront, but if you expect to need care for a considerable period, it can pay off.

Unfortunately, it’s incredibly difficult to plan when the future is uncertain, but anyone thinking about care in 1997 might have thought they didn’t need to worry about meeting care costs, because a solution was just around the corner: yet almost 30 years on, we’re still waiting.

Unemployment among younger people

The latest jobs figures this week revealed that unemployment for those aged 18-24 rose by 0.3% to 14.8% in the three months to May. No one doubts the huge challenges facing Andy Burnham and his new cabinet, or the difficulty he will face prioritising those challenges, but tackling rising levels of unemployment among 18-24 year olds must rank near the top.

These young people are the next generation of taxpayers, future homeowners and tomorrow’s consumers. Without their full and early integration into UK plc, the country’s economy will struggle to grow over the long term. If the new PM is going to accomplish all the things he has said he wants to do, particularly if he wants to foster hope, making the jobs market work for everyone must be a priority.

​Sarah Coles is head of personal finance for AJ Bell.