The Scottish population aged over 65 has grown by more than 20% in the past decade and is showing no signs of slowing. Demand for long-term residential care is set to rise, yet the system we rely on is under immense financial pressure.
Today, around 80% of Scottish care home residents are publicly funded. If future demand mirrors this trend where new residents are reliant on local authority support, how do we fund the additional care, including the build of new homes, we need to secure the nation’s future care?
Currently, most new build care homes are at the higher end of the care provision market and located in affluent areas with care home fees to match.
However, building high-end care homes is not a long term solution to our care demands. The demand for care will ultimately come from those who require publicly funded care.
Can we really sensibly assume that the public purse can shoulder this burden alone? Already, care home payments made by local authorities have remained effectively flat for years whilst the costs of operating homes have risen sharply. Many operators are already under serious financial strain.
If we continue to rely so heavily on public funding, in its current form, we risk standards of care falling and new development stalling. Private developers will not build new care homes if income remains static and costs have increased. What other market with raising costs and stagnant income would attract new investment?
This is why we must explore a more sustainable and creative funding model.
Low-cost borrowing (perhaps government secured) from specialist banks for new care home development is one option.
This could be supplemented with a national public/private real estate investment fund (REIT). REITS are very common across the real estate sector. But with thought and planning, a REIT with some public ownership could be created to invest in care home infrastructure. In this model, new care homes could be jointly owned by public/private investment funds and a proportion of publicly funded care home fees could flow back into the public purse.
In Scotland, we have all the tools to achieve the above. We have seen them used in the housing sectors, with specialist teams within Scottish Government, Scottish Futures Trust, Scottish National Investment Bank and the finance sector is well-versed in creating numerous models to combine public and private sector finance.
This approach could be further supported by incentives for us all to invest in our own longer term care, which can be mobilised to support care infrastructure. In Germany and Japan, citizens of a certain age are required to invest in a vehicle similar to how we invest in our pensions for their nations’ longer term care.
If we are serious about building a care system that meets the needs of a growing and ageing population in Scotland, we must move beyond short-term fixes. That means incentivising long-term saving, reshaping funding models and creating new partnerships between public and private capital.
By acting now, we can ensure that future generations receive the care they deserve.
To read David Wylie's original article, view The Herald - How can Scotland fund the care home capacity it needs?
