Rachel Reeves scraps long-awaited cap on social care costs - here is what it means

Rachel Reeves has scrapped a planned cap on care costs to help fill a multi-billion pound black hole in the public finances that the chancellor says was left behind by the Conservatives.

Along with a raft of other cuts, including the removal of Winter Fuel Payments for millions of pensioners and the cancellation of a NatWest public share sale, the Labour government has abandoned a promise made by the Tories to limit social care costs to £86,000.

Reeves says that removing the cap will save taxpayers £1.1bn by the end of 2025/26, adding that the measure had never been properly funded by the previous Conservative government.

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In a speech to MPs on Monday, Reeves said Labour had inherited a projected overspend of £22bn from the Conservatives, and accused the previous government of “covering up the true state of the public finances”. 

What was the £86,000 social care cap?

The cap, which had been set to come into effect in October next year, would have introduced an £86,000 limit on the amount anyone in England would have had to spend on their personal care. 

It was first mooted by former Prime Minister Boris Johnson but its introduction was postponed by ex-chancellor Jeremy Hunt after Liz Truss's ill-fated mini-Budget, with a new implementation date of October 2025.

Personal care relates to support with things like washing, dressing, mealtime assistance and managing health problems. For those who move into a care or nursing home, it does not include things like rent, food and utility bills.

Emily Hindle, policy manager at the Alzheimer's Society, says: “We are very disappointed at the UK government's decision not to proceed with the cap on social care costs in England.”

For people living with dementia in particular, she adds: “While we appreciate the financial challenge the new government faces, this decision pushes the burden on to individuals who pay around £100,000 for care on average when they are already dealing with dementia's devastation on their lives.”

So, what are the rules now on social care costs?

Currently, anyone with savings over £23,250 has to pay the full cost of permanent, temporary respite or nursing home care – which can run into six figures.

If your assets are below £14,250, then the local authority will pay for your care costs. Any income you do have will be used to pay part of your care fees. If your assets fall between the two, you may be eligible for some help from the state.

Tony Clark from wealth manager St James’s Place says: “At the moment, there’s no limit to the amount that someone can pay for social care during their lifetime. Because of this, many families find that their assets are swallowed up by care-home costs.”

He points to data that shows the “cost of residential care has rocketed by 11% to just over £46,000 per year – and that’s without nursing costs”. In cities such as London and Brighton, the annual figure can be over £50,000, he adds.