Universal Credit and Social Care – does anyone gain?

In my last post on Universal Credit and adult social care, I discussed how social care is not just an issue for older people and how around half of all spending goes towards the care of 18-64 year olds. The roll-out of Universal Credit will have a significant impact on many of these younger people but, unfortunately, The Care Act of 2014 was not written with Universal Credit in mind. The implications for people receiving care and for councils supporting them are significant and complex.

Why does it matter?

Costs for care vary greatly but can be substantial. Around two thirds of 18-64 year olds in residential care have a learning disability. The average cost to support such a need is just short of £1,500 per week. Most recipients cannot afford this extraordinary cost, so must be supported by the council. Not all charges are so high, but care is rarely affordable to those on a low income.

In order to help meet those costs, adult social care is means tested by local authorities. A financial assessment is made of the cared-for person’s circumstances and a charge is issued accordingly. If they do not have enough money to pay for the care themselves, the local council picks up the bill, maybe asking the person to pay an affordable proportion of the care. Any change in income will affect the amounts they and the local authority must pay for their care.

A person who receives care at home needs to keep enough money to pay for food and bills, housing costs and extra costs caused by their disability. The typical amount the government suggests for a single person aged 25-64 who has a significant disability starts at £151.45 per week plus whatever else is needed for rent, council tax and disability related costs. By contrast, a person who receives care in a residential care home has most of their needs met by the home so is only given an allowance of £24.90 per week. Any money they have over these allowances is expected to be paid towards the cost of their care.

How does Universal Credit affect the amount charged for care?

A recent report from the Institute for Fiscal Studies showed that 42% of people considered disabled will be worse off under Universal Credit. More than half of those worse off, lose out by at least £1,000 per year. On the other hand, 38% of disabled people are better off, with almost 10% gaining more than £1,000 per year. These are dramatic shifts in entitlement in opposite directions for huge numbers of disabled people.

There are two big changes in entitlements. The biggest cause of increased entitlements is the Limited Capability for Work-related Activity (LCWRA) element of Universal Credit. This is an amount for people who are sick or disabled and are not expected to work because of that. Under the old benefit system is was called the Support component of Employment and Support Allowance. The basic benefit entitlement for people in this situation is increased by £22.50 per week over the old system. For people receiving care at home or in a supported living environment, this increase is still below the amount the council allows for personal expenses so recipients are likely to be able to keep all of this increase.

It’s worth noting that the council’s allowances are intended to be about 25% higher than basic benefit entitlements, giving recipients a buffer to account for additional income, savings and the like. This buffer is all but wiped out by the increased basic allowance in Universal Credit, meaning any variation they have in their income is likely to impact on the costs of care.

For people in residential care, most of their income has to go to pay towards the care costs and this increase is no different. They will see no benefit from it.

The second big change is the loss of the severe disability premium (SDP). This is an extra £65.85 per week in their benefits if the person needs a carer but doesn’t have someone available to provide that care, such as a partner or an adult child who lives with them. The loss of this substantial amount of benefit accounts for most of the people worse off by more £1,000 per year. Someone receiving social care likely pays much of their SDP towards their care. Losing it means the council picks up more of the care bill.

Who is better or worse off?

People receiving care at home or in supported living environments have the most variety. Anyone who receives just the LCWRA increase and doesn’t qualify for the SDP will receive more money from Universal Credit and will probably get to keep it. The council will still pay as much of their care costs as before.

People who qualify for the LCWRA and would previously have received the SDP will be able to keep about the same amount of income as before but the council will have to pay more towards their care due to the loss of the premium.

People who would have qualified for the SDP and do not receive the extra LCWRA to offset it will be worse off personally and the council may well have to pay more towards the care as well.

Anyone in residential or nursing care will see no change in the money they get to keep. They keep so little of their money anyway, these changes make no difference to them. The SDP is rarely paid to people in residential care so these changes are much more likely to improve incomes for those in care homes, reducing the council’s costs.

Further burden on councils

More than 80% of 18-64 year olds receiving care, get that care at home or live in supported accommodation. Many of these people will be personally better off under Universal Credit, but little of that money will help the local authority with it’s contributions towards care costs. The council will typically pay as much as it ever did. Anyone who loses the severe disability premium though, will increase the costs to the council.

The council’s financial assessment process ensures that people get to keep most of the benefits that Universal Credit brings and protects them from most of the losses, albeit not all. But it means councils picking up extra costs where the severe disability premium has been cut from Universal Credit. With strapped budgets already, Universal Credit means councils paying more to offset yet more government cuts.