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Funding social care: the role of deffered payment agreements

England’s social care system is widely believed to be in crisis. As the population ages, the number of people requiring adult social care and support is on the rise. At the same time, local authorities – who are responsible for delivering state-funded assistance – have curbed expenditure in response to reduced central government grants.

To date, the principal policy response has been to give local authorities greater revenue raising powers through the Social Care Precept. The Local Government Association estimates that 97 per cent of England’s local authorities are considering or have approved taking up this opportunity in 2017-18, a move that could see an additional £543 million enter the social care system.

Council tax is a highly regressive instrument, with those on low incomes paying proportionately more than their wealthier neighbours. Recognising this is not a sustainable solution in the long term, Number 10 has announced a review of social care funding models, with even the social insurance schemes of Germany and Japan under consideration.

Wholesale funding reform is likely to take years, if not decades, to implement, so addressing pressures in the short term must remain a priority. Extending deferred payment agreements (DPAs) could help in this regard. Under a DPA, a local authority agrees to defer an individual’s care costs until a later date. This funding, plus interest, is then recouped by the local authority when the participant’s house is sold.

Since implementation of the Care Act 2014, councils have been obliged to offer DPAs to those who would otherwise have to sell their home to fund residential care. But even after this extension in coverage, take-up rates have remained low. This may indicate there is scope for widening eligibility for DPAs.

This paper uses data from the English Longitudinal Study of Ageing (ELSA) to uncover who currently benefits from DPAs, and explore the merits of relaxing the DPA means-test.