What impact will the government’s decision on social care funding have? 

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After more than two years of delays, the government is predicted to unveil its blueprint for social care funding on MPs’ return to Westminster this week.  

The impact of a rise in National Insurance 

According to Hargreaves Lansdown, leaked suggested solutions include National Insurance rising by either 1% or 1.25% and care costs being capped at around £65,000. 

Under the manifesto ‘triple tax lock’, the government committed to not raising the rates of income tax, National Insurance or VAT. But it appears that sticking to this would leave the chancellor’s options extremely limited when it comes to boosting government coffers.  
Previous speculation suggested the favoured approach was an increase in National Insurance. But Sarah Coles, personal finance analyst at investment platform Hargreaves Lansdown, said this puts the cost on “the shoulders of younger working people”. 

“By choosing National Insurance, the government is specifically picking a tax that isn’t paid by people who are over state pension age,” said Coles. “It raises the question of whether the government is specifically choosing to do this, or whether this is the precursor to making National Insurance payable on earned income over state pension age too.” 

Using an adjusted earnings increase figure is also rumoured to be on the table, but could open accusations of breaking another manifesto commitment. 

“Delivering a fair and sustainable social care funding deal remains one of our greatest societal challenges,” said Steven Cameron, pensions director at provider Aegon. “The government needs to gain public support for a deal which is fair across wealth bands and generations.”  

Clearer understanding and action needed 

Aegon has called for a stable and sustainable way of sharing costs between the state and individuals based on their wealth, and a clear understanding of what individuals are expected to pay should they need care at some future point in their lives. This includes a call for an overall limit or a ‘cap’ on their personal contribution towards care.  
“It’s easy to claim that higher taxes to pay for care favours older people at the cost of younger people, but a cap on the cost of care will come as an enormous relief for the families of those who need care,” said Coles.  

Although there was some talk of a social care plan before the government’s summer break, there’s still likely to be a wait before it will present a fully fledged plan. 

“The issue of how to fund social care […] now needs to be addressed alongside the chancellor’s future plans to get the UK’s finances back on a sounder future,” said Cameron.  

“The health effects of the pandemic have been particularly cruel to our most elderly, which has shown just how important it is to have a high quality, properly funded care system, meaning action can’t be deferred any longer.” 

What do you think would be the best approach to solving the social care crisis?