The government is proposing to change the legislation underlying the new £86,000 cap that people will have to pay towards their social care costs. The amendment means that receipt of means-tested support to pay for care will not count towards the cap.

A joint report by Institute for Fiscal Studies (IFS) and Health Foundation, funded by the Health Foundation, found that the proposed government amendment would impact most strongly older people with modest levels of wealth. Those with wealth, including their home, of around £75,000 to £150,000 would face the biggest loss of protection as a result of the amendment. The result is that someone with around £110,000 in assets could lose 78% of their total wealth even after the cap is in place, while someone with £500,000 could use up only 17%.

Given that levels of wealth vary substantially across England, those in the North East, Yorkshire and the Midlands, where wealth tends to be lower, would see the biggest erosion of their protection against large care costs, as a result of the proposed amendment.

In September, the government announced a cap on lifetime social care costs in England, beginning in October 2023 and set at a level of £86,000. When the possibility of a cap was first legislated for in the 2014 Care Act, total care costs incurred – including those covered by council funding for those with low assets or income – were to count towards the cap. However, in November 2021, the government proposed to amend the Care Act so that only the amount someone spends themselves would count towards the cap. This amendment is now being considered by Parliament.

The government’s proposed amendment would not substantially change the number of people at risk of having to use their housing wealth to pay for a long period of residential care, since most who would receive means-tested support and have some housing wealth would have to draw on it even under the system without the amendment.

“The government’s proposed amendment to the Care Act will, in effect, increase the time it could take for some poorer people to reach the £86,000 cap on care costs,” said assistant director for the REAL Centre at the Health Foundation Charles Tallack.

“So far Parliament has been voting in the dark on this issue, having had insufficient information about its impact and which groups of people would be affected. This independent analysis will help to shed light on this and ensure that as the amendment is further debated and voted on, peers and MPs can fully understand its impacts on people who need care.”

“The new social care cost cap is important not just for those who end up having large care costs,” added IFS senior research economist David Sturrock. “Given the unpredictability of future care needs, it offers many people peace of mind and an ability to plan.

“The government’s proposed amendment would significantly reduce those benefits for those with moderate assets and income. This disproportionately affects those in the North East, Yorkshire & the Humber and the Midlands, given lower house prices and wealth levels in those regions compared to the South of England. This change seems to cut across the government’s plans to “level up” across regions.”

The full ‘Does the cap fit’ report can be read here.