How might the recent Adult Social Care Reforms impact on the recovery of care charges?


On 7 September 2021 the Government announced its long awaited plans for the reform of the Adult Social Care System.

The need for reform is undoubted and the Covid-19 crisis has only served to place more strain and pressure on a sector which arguably has been on the brink for several years. The pandemic has shone a light on this vital sector and highlighted the often superhuman effort made by care workers delivering at the front line. Those workers often underpaid, care for the most vulnerable in our society and over the last couple of years have continued to deliver vital services in the face of unimaginable risks. Alongside our NHS workers they have been heroes. We shouldn’t however forget the Local Authority staff who play a critical role in ensuring the Adult Social Care system works. From social workers to financial assessment officers and those tasked with collecting charges. They all play a critical role in the operation of the current system. All of them will have watched recently as the Government announced its changes. All of those officers, and the few of us who work closely with them, as well as society as a whole, want an Adult Social Care system that is properly funded and works at all levels.

Adult Social Care is a wide ranging and broad area so it is important to consider how these reforms will impact all aspects of delivery, funding, and operation of the system. One area which is often overlooked is the recovery of the charges raised for the services provided. Despite the proposed changes, there remains a challenge for Local Authorities to recover the accrued Adult Social Care debt as well as ongoing charges, which will accrue before and after the new changes are implemented. The collection of such costs will not make any headlines and perhaps rightly will not achieve the focus that fair pay for care workers, or funding through direct taxation will obtain. However, it is a vital topic. Unsurprisingly the Government’s proposals do not seek to make the provision of Adult Social Care  services free for all.  Even with a cap, most people will still have to contribute substantial sums to their care costs. It is essential that any reformed system ensures Local Authorities can recover the monies they charge for the services provided. If individuals fail to pay for the services, then funding shortfalls will arise that will put at risk those vital services. As such in reviewing the reforms we must ask, will these changes make it easier or harder for Local Authorities to recover their charges for the services provided?

Background to the Reforms

Before looking at the detail of the latest reforms, it is important to briefly consider the history of the reforms and the current situation of the Adult Social Care sector. Consecutive governments have realised there was a need for a substantial reform of the Adult Social Care Sector. In July 2010, the Independent Commission on Funding of Care and Support was set up and chaired by Sir Andrew Dilnot. The Commission published its report “Fairer Care Funding” in July 2011 and critically suggested that “the current adult social care funding system in England is not fit for purpose and needs urgent and lasting reform”

The report made several key recommendations:

  • The idea of a cap on care costs was proposed, to protect individuals from extreme outgoings, with a cap during their lifetime. The report suggested the cap should be between £25,000 and £50,000 and suggested a fair figure would be £35,000.
  • An increase to the asset threshold for those in residential care beyond which no means tested help is given. To be increased from £23,250 to £100,000.
  • Those who enter adulthood already having a care and support need should get free state support to meet their care needs; and
  • People should contribute a standard amount to cover their general living costs, such as food and accommodation, in residential care. It was suggested a figure of between £7,000 to £10,000 a year would be appropriate.

The Care Act 2014 was subsequently introduced and included clauses which would bring into existence the recommended cap on care costs. However, the implementation of the cap along with changes to the means tested threshold were deferred in July 2015 and subsequently indefinitely postponed. Therefore, although the Care Act 2014 brought in significant changes and sought to unify approaches, including Deferred Payment Agreements, it did not deal with the most pressing challenges. The question of whether the cost of care would be limited for individuals, and if so, how would society fund that significant change.

Fast forward 10 years from Dilnot and the current Government committed, as many before them had done, to finally tackle the issue of reform. In the interim the financial position of the sector has arguably got much worst.  Back in October 2020 the Local Government Association suggested that Councils in England would face a funding gap of more than £5 billion by 2024 to maintain services at current levels. They suggested that figure could double because of the impact of the Covid 19 pandemic. They called for the Government to provide the sector with £10 billion to not only plug the gap, but to also meet the growing demand pressures and to improve services.

The ADASS Spring survey published in July 2021 provides some worrying data. The budgeted spend on Adult Social Care by councils rose from £15.6 billion in 2020/21 to £16 billion in 2021/22. For 2022/23, 75% of Adult Social Care Directors either have partial or no confidence that their budgets will be sufficient to meet statutory duties.

After a few false dawns we have finally now received the broad detail behind the Government’s planned reforms.

The New Reforms

The Government has detailed the new reforms in its command paper ‘Build Back Better: Our plan for health and social care’

The paper confirms the Government is “committed to creating a sustainable adult social care system that is fit for the future, alongside its programme of wider healthcare reform”

The key announcements were as follows:

  • From April 2022 there will be a 1.25% increase in National Insurance Contributions for working age employees, self-employed and employers.
  • From April 2023 a new Health and Social Care Levy will be introduced at 1.25%. At this point NICs rates will return to the 2021/22 levels. The revenue raised will be ringfenced for health and social care.
  • The rate of dividend tax will be increased by 1.25% from April 2022.
  • The headline figures suggest a £36 billion investment in health and social care over the next three years.
  • Cap on Care Costs – The cap has been set at £86,000 significantly higher than the figures anticipated in the Dilnot Report. The cap is to come into effect from October 2023.
  • Change to the upper and lower capital limits which will be £100,000 and £20,000 respectively.
  • From April 2022 the current freeze on both the Personal Expenses Allowance and the Minimum Income Guarantee will end.
  • Although the existing provisions for Deferred Payment Agreements will remain in place the Department of Health and Social Care will work with partners to review the existing scheme to allow more flexibility for people to defer their care payments; and
  • There appears to be a commitment to self-funders to ensure that they can ask their Local Authority to arrange their care for them so they can benefit from better value care.

Beyond the eye-catching headlines, there is a commitment to producing a White Paper for reforming Adult Social Care. That paper will be the culmination of work with leaders in Local Government, the social care sector, service users, carers as well as the NHS chief Executive and the NHS. There is no confirmation of the precise date when this White Paper will be produced.

It is suggested that Local Authorities will have access to sustainable funding for core budgets at the Spending Review. Again, no detail of what precisely this means or will entail is provided. However the Government has already limited what is to be provided by suggesting that it expects “demographic and unit cost pressures will be met through Council Tax, social care precept and long-term efficiencies; the overall level of Local Government funding, including council tax and social care precept, will be determined in the round at the Spending Review”

The Government has pledged to invest £5.4 billion in Adult Social Care over the next three years to deliver the funding and system reforms. This means the lion share of the headline £36 billion in funding to be provided will go to the NHS. However, the full funding package for social care is far from clear. Although many have welcomed the first tentative reform steps there have been real questions about whether the reforms and funding will go far enough.

ADASS say“ We have been left perplexed and concerned that the proposals pose more questions than answers. There is a promise to develop White Paper for reforming adult social care which ‘will commence a once in a generation transformation to adult social care’ but we can find no funding commitments to make that happen”

The Local Government Association have also raised questions :

“However, there are a range of additional crucial issues which need to be addressed if we are to deliver a care and support system that is fit for the future. The promise of a new adult social care white paper – developed with councils, people who draw on social care and other partners – is positive but will need to be backed by adequate investment.

More immediately, greater information is needed on what proportion of the new levy will come to social care, including when and how the funding will be distributed. The Spending Review must also set out how immediate and short-term pressures will be addressed along with funding to improve the quality, quantity and accessibility of care and support, without relying on measures such as the adult social care council tax precept, which raises varying amounts in different parts of the country and is not related to need.”

The lack of detail regarding what the full funding package is going to look like means it will remain vital for Local Authorities to have a clear and effective strategic plan for ensuring they collect Adult Social Care charges. Although it is possible the Government will come up with the funds required to plug the growing gap and allow proper investment in improving services as well as meeting the growing demands, there remains a risk in the short term, that funding will not be enough. As such Local Authorities cannot afford to allow their debt books to grow.

The Cap on Care Costs

The cap is finally to be brought in, but there remain real questions on its operation. The command paper suggests the new cap will use the statutory framework set out in the Care Act 2014. The provisions for the cap are set out in s.15 of the act. We know the cap will be £86,000 but the Care Act provisions always limited the sums that would contribute towards the cap. An individual’s daily living costs, sometimes referred to as the “hotel costs”, will not count towards the cap. Dilnot anticipated fixing the level of those daily living costs, but there is no current suggestion this will be done. So although  the headlines have suggested none us will pay more than £86,000 for our care, what has been made less clear, is the fact that even when that cap is reached, we will still have to pay towards the daily living costs. For individuals, the split between care and daily living costs in a residential care home, are not made obvious, and precisely how those daily living costs will be calculated, remains unclear. Even after the cap is reached individuals could still face considerable charges.

The cap comes into effect from October 2023 and will not be retrospective. This means that those individuals who already have accrued substantial Adult Social Care charges, will not have those debts written off. Even more significant, further charges will accrue without the safety net of a cap between now and October 2023. All the charges incurred prior to October 2023, will have to be paid.

My concern from a credit perspective, is that those currently liable to pay Adult Social Care will hear loudly the fact that the new cap exists and the general concept that the Government wants to limit charges. They will understand the fact that there is a new tax to pay for Adult Social Care and will potentially conclude they should no longer be paying charges. They may understandably take the view that it is unfair that they should be burdened with considerable charges, whilst those incurring charges from October 2023 will have the benefit of the cap to safeguard, to a degree, their assets. This is very likely to make it harder to collect Adult Social Care charges.

Changes to the Upper and Lower Capital Limits

The adjustment to these limits is a significant change. At present individuals with more than £23,250 in capital assets (excluding any assets that may be disregarded or not taken into account for assessment purposes) are required to pay the full costs of their care.  Those individuals who have less than £14,250 in such capital assets are not required to contribute from their capital towards the cost of their care. Although a point which is often missed is that such individuals may still have to contribute towards their care from their income.  For those who have capital assets which fall between the two thresholds of £14,250 and £23,250 they are required to pay a contribution to their care costs from their capital, based on a tariff income approach. Every £250 worth of capital above £14,250 up to the £23,250 limit resulting in a required £1 contribution per week.

The increase of the upper capital limit to £100,000 will undoubtedly reduce the number of individuals who are automatically treated as being liable to pay the full cost of their care. However, it will not mean those individuals are excluded from contributing, it is likely to lead to Local Authorities carrying out more detailed financial assessments, particularly so they can understand the precise income position of those individuals. Assessment teams are already overstretched, the need for these extra resources may have to be factored into annual budgets. The potential loss of revenue resulting from a reduction in number of full cost individuals, will, if not met by adequate alternative funding, likely further exacerbate the funding gap. The extension of the means tested bracket will mean more individuals fall into the category of being required to pay some form of tariff income from their capital. It will be vital for Local Authorities to be able to effectively explain the tariff income approach and to carefully consider how changes in capital assets will impact assessments.

The reduction of the lower capital limit, though important, has to be understood alongside the potential obligations to contribute from income. The changes to these limits are aimed at protecting an individual’s accrued capital assets but are not intended to allow an individual to accrue more capital assets from their income. It will be vital that individuals appreciate their potential obligation to pay, what might be significant sums from their income, subject to how that obligation will be impacted by the cap on care costs from October 2023.

Deferred Payment Agreements

There is no detail regarding potential changes to the approach to Deferred Payment Agreements, beyond a commitment to “work with partners to review the existing scheme in order to provide more flexibility for people to defer their care payments”.

We must again wait to get the details behind this comment. However, it seems to me that there is a risk that the Government will seek to encourage a greater use of Deferred Payment Agreements. These agreements are fundamental to the concept of avoiding a situation in which an individual is forced to sell their home to fund care charges. However, to date, the rules around such agreements have meant their use has often been limited. We wait to see if the government will amend the rules which might in turn compel Local Authorities to offer more Deferred Payment Agreements. If the Government takes this approach, the impact on the short-term funding of the services will have to be assessed and a solution provided.

Approach to Self Funders

The Adult Social Care system is arguably propped up by significant numbers of Self Funders who pay higher rates for residential care placements than Local Authority funded individuals.  The emphasis in the Command Paper to ensuring a fairer system, which will allow self-funders to benefit from the lower rates negotiated by Local Authorities, appears reasonable. However, the removal of this cross subsidy, will mean less money going into care homes at a time when they and the system has a significant funding shortfall


There is no doubt that the first step towards reform of an Adult Social Care system in crisis is completely welcomed. However, there are several questions that have been left unanswered by the recent announcement. As we wait for those answers, one thing will remain true, namely that it will be vital for Local Authorities to maximise the recovery of Adult Social Care charges so they have resources to fund, as best they can, the delivery of services, the demand for which is only growing.

Local Authorities cannot afford to wait for the White Paper or the Spending Review before they consider seriously their current strategic approach to Adult Social Care Debt Recovery. Effective income recovery alone, will not cover a funding gap which already exists, but a failure to recover current charges for services delivered will only serve to make the existing challenges even more difficult to meet.

Rachel Addai

Rachel Addai is a Partner at Judge & Priestley LLP, who specialises in Adult Social Care Debt Recovery. If you would like to discuss your current strategic approach to Adult Social Care, we may be able to assist. Rachel can be contacted on her direct dial 0208 290 7356 or email address

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