UK: Health And Social Care Levy – What Does It Mean?

Yesterday (7 September), Boris Johnson announced one of the most significant changes to funding of social care in a generation. However the headlines aren't always all that they seem - so what does it all mean?

The highlights

• Employers National Insurance and Employees National Insurance will be increased by 1.25% with effect from April 2022.
• From April 2023 this amount will show separately on employee payslips as "Health and Social Care Levy".
• This levy will also be paid by those people who continue to work past retirement age (unlike traditional National Insurance).
• There will also be an additional "National Insurance" charge of 1.25% on dividends taken out of companies.
• This funding (anticipated to be £12bn per year) will be ringfenced for health and social care.
• A "cap" is being introduced whereby no-one will pay more than £86,000 over their lifetime for care costs. After this, care will be paid for by local authorities.
• Individuals with assets under £20,000 will not have to contribute towards care costs from their assets.
• Those with assets between £20,000 and £100,000 will get means-tested help towards care costs from their local authority.

The detail

As always, there are bits and pieces hidden in the detail that do alter the initial headlines. Some bits that you may not be aware of:

• The cap of £86,000 applies only to care costs - it does not include "living costs" such as accommodation, food etc.
• It is expected that individuals at all levels will be required to contribute/pay for living costs at a rate equivalent to the cost to individuals living in their own home - but no detail has been set out for this, and no formula prescribed currently.
• Whilst those with assets under £20,000 won't have to contribute towards care costs from their savings or the value of their home, they may still have to make a contribution towards their care costs from income - potentially on top of living cost contributions.
• Those with assets between £20,000 and £100,000 won't have to contribute more than 20% of their assets per year to care costs, but may still have to make a contribution towards their care costs from income - potentially on top of living cost contributions.
• Whilst the plan will raise an anticipated £12bn a year, for the first 3 years of the plan, money raised will go towards easing the NHS backlog, meaning that potentially the first £36bn of funding won't go into the social care system, and no funding is going to be added to the system for the ongoing cost of the changes until at least April 2025.
• The government have said that they will invest £5.4bn in the social care system in the next 3 years, but this is likely to be to develop the systems needed to develop the funding and reform planned, rather than contribution to the system itself.

So what does this mean?

The detail in the "Build back better" plan released by government provide some very different readings than the headlines would first have you believe. Whilst the effort to tackle the problem has been welcomed by many, there is significant concern amongst the sector that the amount to be generated from the levy will not touch the problem at hand, even once the sector starts to receive the funding in 3 years' time.

There is no detail about how Local Authorities will receive the funding and there remains concern, particularly after the pandemic, that funding in real terms will continue to fall short of what is required.

There is also no mention within the documents about how the Local Authorities assess "care needs" and what will qualify as such (if there will be a change at all). Currently a significant number (some reports say as much as 50%) of applications for a care needs assessment are turned down by Local Authorities, and so nothing of the above would help those individuals.

There is also a concern amongst many that the National Insurance rise for employers will negatively impact businesses, with the cost being eventually pushed down to employers through suppressed wages.

My final point on the matter is to add my voice to those saying that it needs to be ensured that some funding reaches the front-line workers, who have done so much over the course of the last 18 months, but continue to be amongst some of the lowest paid people in the country. Without an investment in people, no grand plan will work, and currently those forming the backbone of our social care system face an increase in National Insurance themselves, potentially without an increase in wages.

As always, the devil is in the detail and we are still lacking a lot of that so continue to watch this space!