A new proposal aims to introduce a monthly contribution of around £30 for taxpayers aged 40 and over to help finance a national social care service in England. The plan, devised by Sir Steve Webb, a former pensions minister and partner at consultancy LCP, would automatically enroll individuals into the scheme, although opting out would be permitted. Contributions would be linked to income tax, set at roughly 1p of the basic rate.
Under the proposal, each year of payments would grant contributors a 4 percent discount on their personal social care costs, eventually covering 100 percent after 25 years. The scheme is designed to provide a stable funding source for the national care service recently announced by Prime Minister Andy Burnham, which aims to offer free care at the point of use, similar to the National Health Service.
LCP estimates the proposed levy could generate approximately £3.5 billion annually, even accounting for substantial opt-outs. The plan is under consideration by government officials and the Casey Commission, which is currently examining potential social care reforms.
Prime Minister Burnham has maintained that his national care service would not require additional taxes for funding. His strategy includes adjusting the triple lock mechanism, which sets annual pension increases, to help finance the system gradually. He stated that revisions to pension upratings in the 2030s could unlock significant funds to support social care reform.
However, some experts remain skeptical. Jonathan Cribb, deputy director of the Institute for Fiscal Studies, has expressed doubts about whether the pension adjustments alone would generate sufficient savings to cover the costs of the new care system.
The LCP report also suggested raising the financial thresholds for receiving means-tested social care support. Currently, individuals with assets above £23,250 are ineligible for assistance; the plan proposes increasing this limit to £100,000, potentially affecting eligibility criteria.
Webb highlighted the success of automatic enrollment in workplace pensions, which has encouraged over 11 million people to save since its introduction in 2012, as a model for this social care funding approach. He emphasized that individuals currently face the risk of losing life savings due to high care costs and that automatic enrollment would allow risk to be pooled more effectively. The opt-out option, Webb noted, could enable the government to raise funds without violating manifesto commitments on taxation.
Overall, the proposal seeks to provide an affordable, long-term funding solution for social care that starts delivering financial support more rapidly than the projected savings from changes to the state pension triple lock, which are expected to materialize primarily in the late 2030s.