Postponing Phase 2 of the Care Act 2014 presents opportunities for government

On the last day before Parliament rose for summer recess, otherwise known as the best day to bury bad news, the Government announced that it was delaying the implementation of Phase 2 of the Care Act 2014 until 2020. This means that key reforms due to come into force in April 2016 – particularly the introduction of the £72,000 cap on social care costs for self-funders and the increase in the eligibility threshold for personal assets from £23,250 to £118,000 – will no longer be delivered, breaking a Conservative manifesto commitment.

Announcing the delay in a letter to the Local Government Association (LGA), and subsequently in a written statement in the House of Lords, Care Minister Alistair Burt said the time was not right to introduce expensive new commitments (the Government had estimated that the reforms would cost £6 billion over the next five years to implement). He also said earlier consultation in the year had highlighted significant concerns about the provision and that the Government needed extra time to better understand the potential impact on the care market and the interaction with the cap on the care costs system.

As expected, this decision has been widely criticised. Sarah Wollaston, Chair of the Health Select Committee, has been very vocal about her “disappointment” at the Government’s decision, criticising the way in which the announcement was made – on a Friday when the House of Commons was not sitting – and the reason given for delaying implementation.

Separately, the LGA, which warned against the introduction of the cap on the basis that the Government cannot reform the way people pay for social care while the social care system remains highly unstable, has since defended its warning. The Association noted that its decision was based on pragmatism, particularly as the social care system has been significantly underfunded, with a shortfall of £4.3 billion predicted by the end of the decade.

While much can be said for the way in which the delay was announced, it can also be argued that this delay has allowed for further debates on the viability of the provisions. Alistair Burt and Health Secretary Jeremy Hunt have recognised the opportunities created by this delay and have said the Government will work with relevant industries to consider what else might be done to support people to prepare for later life, including the risk of needing care and support. Burt also said he will meet with the insurance industry to discuss how they could establish new products to deal with social care costs.

For me, two opportunities spring to mind.

First is the need to ensure that people understand what the cap on social care cost will and will not cover and that they are encouraged to seek independent regulated financial advice where appropriate, building on the guidance available through Pension Wise, the Government’s free service which provides guidance on defined contribution pension options. This will support the estimated seven in eight people who will not benefit from the cap if implemented as it currently stands.

Second, and as suggested by the LGA, will be the opportunity to use the £90 billion needed to implement Phase 2 to plug the growing funding gap in social care that is increasing by an estimated £700 million a year. This will allow local councils to provide a fair and sustainable care for those who need it most.

The majority of the social care industry are hopeful that the delay will allow current social care services to benefit from the extra funding it so desperately needs. However, with the Government failing to indicate whether the £6 billion saved by delaying the reforms will be injected into the social care system, some believe that the reforms will never see the light of day again.

But if the Government capitalises on the opportunities this delay presents, it can help ensure people are better able to plan and prepare for later life.