Funding social care, and the care home market (England): Briefing ...

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BRIEFING PAPER Number 07463, 10 February 2017

Funding social care, and the care home market (England)

By Tim Jarrett and Hannah Cromarty

Inside: 1. Key features of the market 2. Key issues facing the care home sector 3. Regulation of the market 4. The outcome of the 2015 Spending Review 5. Provisional local authority funding settlement 6. Social Care in Crisis? 7. Autumn Statement 2016 & Local Government Finance Settlement 2017 to 2018

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Number 07463, 10 February 2017

Contents Summary

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1. 1.1 1.2 1.3 1.4 1.5 1.6

Key features of the market Domination by the private sector The “big four” private sector providers Composition of clients – self funding vs local authority funded Local authority purchasing power Cross subsidisation of local authority funded clients by self-funded clients Substantial debts

5 5 5 5 6 6 8

2. 2.1 2.2

Key issues facing the care home sector Introduction of the National Living Wage Trends in local authority funding for state-funded residents

9 9 11

3. 3.1 3.2 3.3

Regulation of the market Monitoring the financial health of “difficult to replace” care home providers Care Quality Commission Local authorities Responsibilities of a local authority when a provider fails The “market shaping” role of local authorities

12 12 12 12 13 13

4. 4.1 4.2 4.3

The outcome of the 2015 Spending Review Analysis of the 2% precept for social care Extra resources for the Better Care Fund Reaction to the Spending Review

19 19 20 21

5.

Provisional local authority funding settlement Social care funding Interaction of the 2% social care precept and the Better Care Fund

24 24 24

6. 6.1 6.2 6.3 6.4 6.5 6.6

Social Care in Crisis? The Local Government Association Association of Directors of Adult Social Services (ADASS) Care Quality Commission - State of Care Report 2015/16 United Kingdom Homecare Association (UKHCA) Care England Health Select Committee

26 26 27 28 28 29 29

7.

Autumn Statement 2016 & Local Government Finance Settlement 2017 to 2018 Autumn Statement 2016 Social Care Funding Debate – 12 December 2016 Local Government Finance Settlement 2017/2018 Social Care Precept – 2017/18 and 2018/19 Adult Social Care Support Grant - 2017/2018 Reaction to the Local Government Finance Settlement announcement

31 31 32 32 33 34 34

7.1 7.2 7.3 7.4

Cover page image copyright: Wheelchair / image cropped

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Funding social care, and the care home market (England)

Number 07463, 10 February 2017

Summary This briefing paper considers the current state of the market for residential care (i.e. care homes), and also the announcements made in the November 2015 Spending Review (and subsequently) regarding funding for social care. The rather fragmented nature of the care home market combined with the fact that local authorities are the largest single purchasers in most parts of the country, means that local authorities have what has been described as monopsony purchasing power (a single buyer, but many sellers). Given the pressures facing local authority budgets, they have sought to negotiate lower prices for the care home places they finance; this has prompted care home providers to seek further cross-subsidisation from self-funded residents, in a situation where many care home providers have significant debts and the introduction of the National Living Wage has increased costs. The briefing paper also considers the role of the Care Quality Commission (CQC) in monitoring the financial health of strategically important care home providers, and the duties of local authorities in the event of the failure of a provider. Given the prevailing funding climate, in his Statement on the Spending Review in November 2015, the Chancellor announced both a discretionary 2% Council Tax precept for social care, and an additional £1.5 billion for the health and social care “Better Care Fund”. In the run up to the Autumn Statement 2016 a range of organisations, including local government, health bodies, the voluntary sector and the Care Quality Commission, questioned the sustainability of the market for publicly-funded social care and called for immediate additional funding to avert a ‘social care crisis’. On 15 December 2016, as part of the English Provisional Local Government Finance Settlement 2017/18, the Secretary of State for Communities and Local Government, Sajid Javid, announced additional funding of up to nearly £900 million for adult social care in 2017/18 and 2018/19. This funding will be provided to local authorities with social care responsibilities through increased flexibility over the Social Care Precept and a new Adult Social Care Support Grant. A range of stakeholders have expressed disappointment with the level of this additional funding and have called for a review of the long-term sustainability of social care provision.

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Funding social care, and the care home market (England)

1. Key features of the market 1.1 Domination by the private sector The care home market, both for residential and nursing care, is dominated by private sector, for-profit, providers. The picture has changed over time: in 1984, the number of residential care places in local authority-run accommodation for older and physically disabled people peaked at 137,200 (55% of all places), at a time when the private sector had 67,100 places and the voluntary sector 45,900. In 1984 the number of private sector places was almost double the number in 1980 (37,400), and this trend has continued. By 2014, the number of private sector places had reached 200,200 (74% of all places). Local authority places were 21,700 (8% of all places), which was under half the 47,400 voluntary sector places. 1 In terms of nursing care homes, in 2014 the private sector had 187,800 places (86% of all places) compared to 17,600 in the voluntary sector and 12,300 long-stay NHS beds. The figures above relate to the UK.

1.2 The “big four” private sector providers In terms of market share by number of care beds in July 2015, just over 15% were provided by: Four Seasons, Bupa Care Homes, HC-One Ltd, and Barchester Healthcare. The next 21 biggest providers (six of which are voluntary sector) have nearly 15% of beds; the remaining (approximately) 70% of the market is composed of providers who each have no more than 0.4% of total beds. 2 LaingBuisson describe the level of market concentration as “fairly low compared … with other segments of healthcare provision”. 3

1.3 Composition of clients – self funding vs local authority funded Although private sector for-profit companies now dominate the care home sector, a large number of their clients are funded, in part or in full, by local authorities. A means-test is applied to care home residents to determine if they are eligible for support from their local authority. 4 For example, in September 2014, while there were 89,000 self-funders in residential

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2 3 4

LaingBuisson, Care of Older People: UK Market Report, 27th edition, September 2015, p12 As above, p112, Table 4.10 As above, 27th edition, p88 For more information on the means-test, see the Library briefing paper Social care: paying for care home places and domiciliary care (England).

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care homes, there were 136,000 whose place was funded by local authorities. 5 A number of private care home providers have a business model that operates on the basis of providing care for those funded by local authorities. For example, LaingBuisson notes that three of the “big four” care home providers that have in excess of 10,000 beds – Four Seasons, Bupa and HC-One –– “each … has a high level of exposure (about 70%) to local authority paid residents”. 6 The fourth and smallest member (in terms of number of beds) of the quartet, Barchester Healthcare, on the other hand, “operates a high quality portfolio targeted principally at private payers”; LaingBuisson estimates that “50%-plus of its residents are private payers”. 7

1.4 Local authority purchasing power LaingBuisson observes that “the balance of market power in the public pay segment of the market usually remains firmly with local authority commissioners, which are the largest single purchasers in most parts of the country”. 8 Although some care home providers have a concentration of over 25% in some local authority areas, this “pales into insignificance”, LaingBuisson contests, because of the concentration of purchasing power in the hands of local authorities. 9 Unlike individual self-funders, local authorities can enter into agreements with care home providers for a number of beds, which gives them more negotiating power. LaingBuisson observes that “independent sector providers … typically serve a catchment area of less than 10 miles in diameter and are often heavily reliant on referrals from a single council”. Describing them as having a “monopsony” purchasing power, 10 LaingBuisson contends that, due to “intense budgetary pressures”, local authorities had “reduced their fee rates by a national average of over 5% in real terms over the period 2010/11 to 2015/16”. LaingBuisson calculates the “fair price band” for the cost of a care home place; following the recent cuts in local authority fee rates, the average fee rate paid by local authorities in England overall “is now significantly below the floor” of its modelled fair price band. 11

1.5 Cross subsidisation of local authority funded clients by self-funded clients Given local authorities reduced fee rates for funded clients, LaingBuisson notes that “private payers [self-funders] are vitally 5

6 7 8 9 10 11

LaingBuisson, Care of Older People: UK Market Report, 27th edition, September 2015, p198, Table 7.1 As above, p116 As above, pp122 and 123 As above, p88 As above, p108 A monopsony is a market where there is a single buyer, but many sellers. LaingBuisson, Care of Older People: UK Market Report, 27th edition, p204

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important to care home operators as sources of premium fee rates, especially in locations where care home margins are under pressure because of inadequate state paid fees” and, further more, “the stability of the UK care home sector for older people currently depends on cross subsidies from self-funders to state-funded residents”. 12 LaingBuisson add that: New research … undertaken by LaingBuisson on behalf of a consortium of 12 counties forming part of the County Council Network of the Local Government Association, has demonstrated that in 96% of cases in a large scale sample across a number of geographies across England in 2015, private payers paid more than state funded residents in the same home for the same type of room and (presumably, though this was not specifically tested) the same level of care. The 12 counties study showed not only that private payers nearly always cross-subsidise state-funded residents, but also that the quantum of cross subsidy is usually substantial (a 43% private pay premium on average) and, by inference from accounting records, that care homes with mixed clientele usually depend on cross-subsidisation to generate a reasonable return on investment. 13

The Financial Times has noted that “The care home market is highly polarised between lucrative self-pay homes, mostly in southeast England, and those with local government-funded residents, which are struggling”. 14 As the table below from LaingBuisson for 2014 demonstrates, the pool of self-funders varies region-by-region: 15 Self-pay %

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13 14 15

North East

18%

North West

36%

Yorkshire and the Humber

42%

East Midlands

43%

West Midlands

39%

East of England

45%

Greater London

30%

South East

54%

South West

49%

Wales

24%

Scotland

30%

Northern Ireland & Isle of Man

16%

United Kingdom

41%

Laing and Buisson, Care of Older People – UK Market Report 2013/14, 26th edition, April 2014, pp208 and 89 LaingBuisson, Care of Older People: UK Market Report – 27th edition, pp208–209 “Care home owners warn on spending cuts”, Financial Times, 18 March 2015 LaingBuisson, Care of Older People: UK Market Report – 27th edition, p210, table 7.3

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1.6 Substantial debts The care home market has a particular feature – the requirement for providers to have a property to accommodate clients. The capital outlay to purchase a building capable of being used as a care home can require a substantial loan, as well as further costs to convert it to a care home that meets the statutory requirements set out by the regulator, the Care Quality Commission (CQC). 16 Previously, care home operators had used “sale and leaseback agreements” in regard to their properties. 17 LaingBuisson observed that: Looking back to the turn of the century, risky financial gearing was also responsible for the last spate of financial failures which took place in the early years of the new century as providers which had expanded rapidly with 100% sale and leaseback funding found their narrow margins eliminated by adverse trading conditions brought about by local authority purchasers’ unwillingness to increase fee rates by more [than] RPI [Retail Prices Index – a measure of inflation]. As a result, landlords forced several defaulting sale and leaseback operators into receivership. 18

The most high-profile failure arising from sale and leaseback was Southern Cross in 2011, the largest provider in the care home market. LaingBuisson added that while the largest four providers (Four Seasons Health Care, Barchester Healthcare, HC-ONE and Bupa) had improved (but not eliminated) their debt overhangs, for example through new external financing, “excessive debt … still remains an issue for some of the medium-sized care home companies”. 19 The cost of servicing these debts can vary depending on factors including interest rates and the credit rating of the care home company.

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See Care Quality Commission, How CQC regulates: Residential adult social care services – Appendices to the provider handbook, March 2015 These involved selling the care home building and entering into a lease agreement with the purchaser. This relieved the care home owner of the debt, but meant they had to meet the rent instead. LaingBuisson, Care of Older People: UK Market Report, 27th edition, p114 As above, p115

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2. Key issues facing the care home sector 2.1 Introduction of the National Living Wage As LaingBuisson noted in its 2013/14 care home market report, “payroll is by the largest cost item of care homes”. However, in the years following the global financial crisis “care home operators have benefited from a ‘recessionary dividend’ in terms of low levels of overall staff cost inflation, which has helped them to withstand real terms reductions in fees paid by local authorities”. It noted that “hourly pay inflation was particularly low in the [then] latest (October 2013) pay round, at an average of just 0.9%”. Looking ahead the report noted that “care home operators pay inflation is unlikely to be so benign in financial year 2014/15, with an impending 3.0% increase in the National Minimum Wage in October 2014”. 20 The latest edition of the report, published after the Government’s July announcement that it would introduce in April 2016 a National Living Wage for worked aged 25 and over, noted that: The care home sector depends heavily on low paid staff, usually paid by the hour. Care assistant and domestic staff are typically paid close to the National Minimum Wage (NMW), which will be replaced by the NLW [National Living Wage] for employees over 25 in April 2016. 21

Because many care home staff are paid at or close to the NMW, the introduction of the NLW has seen the pay of those staff increase. The 2014/15 LaingBuisson report was much more definite in stating that the period of low wage inflation for care home staff is now at an end: This period has now come to an end and staffing costs can be expected to rise much more rapidly in the future, driven by both regulation (the NLW) and the strengthening economy generally. Weighted average paid staff pay rates are projected to rise by 7.5% in 2016/17 as a direct result of the implementation of the NLW. Manager salaries will be unaffected by the NLW and are projected to rise by at least 3.5% in 2016/17 in line with past pay trends. 22

A parliamentary question asked the Health Secretary, “what assessment he has made of the effect on the future of the private sector home care industry of the implementation of the national living wage”. In reply, the Health Minister, Alistair Burt, told the House in October 2015: “The Department has engaged with the social care sector, including care providers, to understand how the introduction of the National Living Wage will affect them. The overall costs of providing social care will be considered as part of the Spending Review later this year”. 23

20 21 22 23

LaingBuisson, Care of Older People: UK Market Report, 27th edition, p240 As above, p242 As above, p242 PQ 11609 21 October 2015

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In a report on 22 September 2015 entitled “Care homes warn on living wage and nurse shortage”, the Financial Times said: Businesses that run care homes for the elderly are at risk of going bankrupt from a double blow of the imminent increases in the minimum wage and tighter immigration rules making it harder to recruit nurses from overseas, operators and experts warn … especially those reliant on revenues from local authority-funded patients. […] Mr [Ian] Smith [chairman of Four Seasons, Britain’s largest care home operator] and four others of Britain’s largest care home providers are lobbying the chancellor for an extra £1bn to fund the increase in the living wage by 2020. The Treasury has said it will consider the plea ahead of the Autumn statement [due on 25 November]. Wages account for about 60 per cent of care home turnover and the industry warns the increase in the living wage to £6.70 on October 1 [sic NMW increase, not NLW], and [for the NLW] to £7.20 in April next year, will risk a “catastrophic collapse” in the industry. About 40 per cent of employees in the sector are on the minimum wage but operators say they will also have to raise wages for other staff to maintain differentials. Four Seasons, for example, has said the increase will cost it £10m next year. A national shortage of nurses has also meant they are relying on agency staff who cost two or three times as much as permanent employees. 24

Following the introduction of the NLW on 1 April 2016, a parliamentary question in October 2016 asked the Government for an assessment of the “future viability of care providers after the introduction of the national living wage. In response, the Parliamentary Under-Secretary at the Department of Health, David Mowat, said: Social care continues to be a key priority for the Government. This is why, against the context of tough public sector finances; the Government has taken steps to protect social care services. The Government is giving local authorities access to up to £3.5 billion of new support for social care by 2019/20. This should mean local government has access to the funding to increase social care spending in real terms by the end of the Parliament. This will support councils to continue to focus on core services and to pay fees which reflect provider costs including the National Living Wage. The spending took into account a range of financial and economic factors, including projections and data on the National Living Wage from the Office of Budget Responsibility and Skills for Care. The National Living Wage is an important step in rewarding the valuable contribution made by care workers, who often fall into the lowest earning occupations. Out of an estimated 1.16 million workers in adult social care in England, up to 900,000 people are expected to benefit. Under the Care Act 2014, local authorities must have regard to fostering an effective workforce with the appropriate capabilities when shaping their local markets. The Act and its statutory 24

“Care homes warn on living wage and nurse shortage”, Financial Times, 22 September 2015

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guidance make clear that prices and fee rates agreed with providers must reflect these new duties, including the National Living Wage. The Department continues to monitor the whole of the market of care providers and engage with the sector to better understand the challenges they face and support local authorities who purchase services. 25

2.2 Trends in local authority funding for state-funded residents In terms of local authority funding, LaingBuisson stated that “at September 2014, an estimated 48.9% of independent sector care home residents were having their fees paid, in part or in full, by local authorities”. It added that “the level of resources that government makes available to local authorities to fund community care is, therefore, very important to the care home sector, especially in less affluent areas where the local authority funding share is higher than average”. However, “care home placements are local authorities’ largest single cost head, and one that they would like to reduce”. 26 The report noted that, following a “golden period” from 2005/06 to 2007/08 when Personal Social Service spending increased at a rate of 4% per annum in real terms, the 2007 Comprehensive Spending Review gave local authorities a 1% real-terms annual increase in their revenue support grant from 2008/09 to 2010/11. Under the Coalition Government, the report found that: English councils’ gross spending envelope on the entire range of social care services for older and physically disabled people remained roughly static in nominal terms over the period 2010/11 to 2013/14. This translates into a real terms reduction of about 2% a year compound, depending on what real terms deflation factor is used.

25 26

PQ 49214 20 October 2016 LaingBuisson, Care of Older People – UK Market Report, 27th edition, p197

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3. Regulation of the market 3.1 Monitoring the financial health of “difficult to replace” care home providers Care Quality Commission Since April 2015, the financial health of some care and support providers has been subject to national oversight by the Care Quality Commission (CQC), namely those providers which, because of their “size, geographic concentration or other factors, would be difficult for one or more local authorities to replace”. The Care and Support (Market Oversight Criteria) Regulations 2015 (SI 2015/314) set out the entry criteria for a provider to fall within the regime. As the CQC explained: The Care and Support (Market Oversight Criteria) Regulations 2015 set out the criteria for entry to the Scheme. The criteria are designed to be met by those care providers that, because of their size or concentration, Local Authorities would find difficult to replace were they to fail. The criteria relate only to how difficult a provider would be to replace and bear no relation to any judgement of actual or potential risk of failure. 27

The CQC explains that the market oversight regime would provide an “early warning where we think one of these is at risk of failure and the delivery of services is going to be affected”. This early warning would allow “the right people (providers, shareholders, lenders and other stakeholders) to take the right action to potentially avoid failure and to support Local Authorities to plan in case failure does happen”. However, the market oversight regime “aims not to pre-empt or precipitate provider failure and market exit. The Government will not bailout failing providers or act as a lender of last resort”. 28

Local authorities In its Care and Support Statutory Guidance for the Care Act 2014 (and associated regulations), the Department of Health (DH) has stated that: Local authorities should have effective communications and relationships with providers in their area that should minimise risks of unexpected closures and failures, and have effective interaction and communication with the Care Quality Commission (CQC) about the larger and most difficult to replace providers that CQC will provide financial oversight for. 29

There is scope for a local authority to provide or broker assistance to a care home provider in financial difficulties:

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Care Quality Commission, Market Oversight of ‘difficult to replace’ providers of adult social care – Guidance for providers, March 2015, p9 Care Quality Commission, Market Oversight of ‘difficult to replace’ providers of adult social care – Guidance for providers, March 2015, p7 Department of Health, Care and Support Statutory Guidance, October 2014, p49, para 4.36

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Where the authority believes there is a significant risk to a provider’s financial viability, and where they consider it would be in the best interests of service users, the authority should consider what assistance may be provided or brokered to help the provider return to viability, and consider what actions might be needed were that provider to fail. 30

3.2 Responsibilities of a local authority when a provider fails The CQC notes that, under the provisions of the Care Act 2014 that came into force on 1 April 2015: if providers become unable to continue to deliver care to people because of business failure, Local Authorities must ‘step in’ and make arrangements for anyone affected so that their needs carry on being met. This includes all people using social care services, not just those whose care the Local Authority is paying for.

In the case of a provider that is “difficult to replace”, because of its size for example, the CQC notes that: they might struggle with the failure of one of these difficult to replace providers for several reasons: there may be no alternative provision in the area that can support the sheer number of people affected; or the provider might have been providing services to people across a number of different authority areas. Coordinating an effective response in such circumstances would need careful planning to ensure the welfare of the people who use those services is not put at risk. The Market Oversight Scheme is designed to give Local Authorities earlier warning of potential failure so they can prepare to implement contingency plans, should their legal duty to step in become necessary. 31

However, the DH states that “CQC’s trigger to contact authorities is that it believes the whole of the regulated activity in respect of which the provider is registered is likely to fail, not parts of it. It is not required to make contact with authorities if, say, a single home owned by the provider in the regime is likely to fail because it is unprofitable and the CQC is not satisfied that this will lead to the whole of the provider’s relevant regulated activity becoming unable to continue”. 32 Irrespective of whether a care home provider is in the CQC market oversight regime, “the temporary duty on local authorities to meet needs in the case of business failure applies regardless”. 33

3.3 The “market shaping” role of local authorities Although the care home market is dominated by for-profit private providers, under the Care Act 2014 local authority now has a 30

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Department of Health, Care and Support Statutory Guidance, October 2014, p49, para 4.36 Care Quality Commission, Market Oversight of ‘difficult to replace’ providers of adult social care – Guidance for providers, March 2015, pp8–9 Department of Health, Care and Support Statutory Guidance, October 2014, pp70– 71, para 5.19 Department of Health, Care and Support Statutory Guidance, October 2014, p71, para 5.24

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responsibility for “market shaping”. Section 5(1) states that each local authority in England: must promote the efficient and effective operation of a market in services for meeting care and support needs with a view to ensuring that any person in its area wishing to access services in the market— (a)

has a variety of providers to choose from who (taken together) provide a variety of services;

(b)

has a variety of high quality services to choose from;

(c)

has sufficient information to make an informed decision about how to meet the needs in question.

Sections 5(2) and 5(3) add that “in performing that duty, a local authority must have regard to the following matters in particular … the need to ensure that it is aware of current and likely future demand for such services and to consider how providers might meet that demand … [and] also have regard to the need to ensure that sufficient services are available for meeting the needs for care and support of adults in its area and the needs for support of carers in its area … and the importance of ensuring the sustainability of the market (in circumstances where it is operating effectively as well as in circumstances where it is not)”, among other factors. Section 5 came into force on 1 April 2015. The Care and Support Statutory Guidance (CSSG), published by the DH in October 2014, sets out what the new duties on local authorities in section 5 mean in chapter 4, which is entitled “market shaping and commissioning of adult care and support”: The principles which should underpin market-shaping and commissioning activity: •

focusing on outcomes and wellbeing;



promoting quality services, including through workforce development and



remuneration and ensuring appropriately resourced care and support;



supporting sustainability;



ensuring choice;



co-production with partners.

The steps which local authorities should take to develop and implement local approaches to market-shaping and commissioning: •

designing strategies that meet local needs;



engaging with providers and local communities;



understanding the market;



facilitating the development of the market;



integrating their approach with local partners;

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securing supply in the market and assuring its quality through contracting. 34

The CSSG notes that “local authorities should pursue the principle that market shaping and commissioning should be shared endeavours, with commissioners working alongside people with care and support needs, carers, family members, care providers, representatives of care workers, relevant voluntary, user and other support organisations and the public to find shared and agreed solutions”. 35 In terms of “supporting sustainability”, the CSSG states that: Local authorities must work to develop markets for care and support that – whilst recognising that individual providers may exit the market from time to time – ensure the overall provision of services remains healthy in terms of the sufficiency of adequate provision of high quality care and support needed to meet expected needs. This will ensure that there are a range of appropriate and high quality providers and services for people to choose from. Local authorities should understand the business environment of the providers offering services in their area and seek to work with providers facing challenges and understand their risks. Where needed, based on expected trends, local authorities should consider encouraging service providers to adjust the extent and types of service provision. This could include signalling to the market as a whole the likely need to extend or expand services, encourage new entrants to the market in their area, or if appropriate, signal likely decrease in needs – for example, drawing attention to a possible reduction in home care needs, and changes in demand resulting from increasing uptake of direct payments. The process of developing and articulating a Market Position Statement or equivalent should be central to this process. 36

The guidance adds that local authorities “must not undertake any actions which may threaten the sustainability of the market as a whole”, for example “by setting fee levels below an amount which is not sustainable for providers in the long-term”. Local authorities should “have effective communications and relationships with providers in their area that should minimise risks of unexpected closures and failures”, and with the Care Quality Commission (CQC) in respect of the larger and most difficult to replace providers that it provides financial oversight of. 37 In order to do this effectively, local authorities “must understand local markets and develop knowledge of current and future needs for care and support services, and, insofar as they are willing to share and discuss, understand providers’ business models and plans”. The CSSG explains that “this is important so that authorities can articulate likely trends in needs and signal to the market the likely future demand for different types of services for their market as a whole, and understand

34 35 36 37

Department of Health, Care and Support Statutory Guidance, October 2014, p41 As above, p52, para 4.50 As above, pp48–49, paras 4.33–4.34 As above, p49, paras 4.35–4.36

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the local business environment, to support effective commissioning”. 38 It adds that: Local authorities (through an engagement process, in concert with commissioners for other services where appropriate) should understand and articulate the characteristics of current and future needs for services. This should include reference to underpinning demographics, drivers and trends, the aspirations, priorities and preferences of those who will need care and support, their families and carers, and the changing care and support needs of people as they progress through their lives. This should include an understanding of: •

people with existing care needs drawn from assessment records;



carers with existing care needs drawn from carers’ assessment records;



new care and support needs;



those whose care and support needs will transition from young people’s services to adult services;



those transitioning from working-age adults to services for older people;



people whose care and support needs may fluctuate;



people moving to higher needs and specialised care and support; and



those that will no longer need care and support. 39

Additionally, local authorities should: • • •

“include in their engagement and analysis, services and support provided by voluntary, community services, supported housing providers, and other groups that make up ‘community assets’”; “seek to understand trends and changes to the levels of support that are provided by carers, and seek to develop support to meet their needs”; and “include an understanding of people who are or are likely to be both wholly or partly state funded, and people who are or are likely to be self-funding”, including those likely to move from selfto state-funded, taking into the cap on care costs (which has now been deferred until April 2020). 40

The CSSG also encourages local authorities to develop an understanding of providers, and highlights the importance of a local authority publishing a “Market Position Statement” to signal to the market its demand, among other things, noting that developing and publishing such a statement is “one way a local authority can meet its duties to make available information about the local market, and demonstrates activity to meet the other parts of Section 5 of the Act”: 41 In order to gather the necessary information to shape its market, local authorities should engage with providers (including the local authority itself if it directly provides services) to seek to understand 38 39 40 41

As above, p56, para 4.68 As above, p57, para 4.69 As above, p58, paras 4.72–4.74 As above, p59, para 4.83

17 Funding social care, and the care home market (England)

and model current and future levels of service provision supply, the potential for change in supply, and opportunities for change in the types of services provided and innovation possible to deliver better quality services and greater value for money. Local authorities should understand the characteristics of providers’ businesses, their business models, market concentration, investment plans etc. Information about both supply and expected demand for services should be made available publicly to help facilitate the market and empower communities and citizens when considering care and support. […] Local authorities should ensure that the market has sufficient signals, intelligence and understanding to react effectively and meet demand, a process often referred to as market structuring or signalling. Local authorities should publish, be transparent and engage with providers and stakeholders about the needs and supply analysis to assist this signalling. It is suggested that this is best achieved through the production and regular updating of a document like a Market Position Statement that clearly provides evidence and analysis and states the local authority’s intent. A Market Position Statement is intended to encourage a continuing dialogue between a local authority, stakeholders and providers where that dialogue results in an enhanced understanding by all parties is an important element of signalling to the market. A Market Position Statement should contain information on: the local authority’s direction of travel and policy intent, key information and statistics on needs, demand and trends, (including for specialised services, personalisation, integration, housing, community services, information services and advocacy, and carers’ services), information from consumer research and other sources about people’s needs and wants, information to put the authority’s needs in a national context, an indication of current and future authority resourcing and financial forecasts, a summary of supply and demand, the authority’s ambitions for quality improvements and new types of services and innovations, and details or cross-references to the local authority’s own commissioning intentions, strategies and practices. 42

However, the Department of Health acknowledges that where local authorities consider that “market structuring activity”, such as the development and publication of a Market Position Statement, are “not achieving the strategic aims as quickly or as effectively as needed”, or where there is “an immediate need for intervention” then a local authority “may wish to consider more direct interventions in the market”. 43 A list of possible interventions is set out in paragraph 4.86 of the CSSG: Market interventions could for example include: refocusing local authority business support initiatives onto the care and support sector, exploring how local care and support projects could attract capital investments and support and what guarantees may be needed, encouraging and supporting social enterprises, microenterprises, Community Interest Companies, and User-Led Organisations (for example, incentivising innovation by third sector providers, possibly through grant funding), exploring

42 43

As above, p58, para 4.77 and p59, paras 4.81–4.82 As above, p60, para 4.85

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planning barriers and using planning law, offering access to training and development opportunities. 44

The CSSG noted that “the Department of Health funded a programme in 2013/14 to support local authorities prepare for market shaping duties; further information is available at the website for the Developing Care Markets for Quality & Choice programme website. The Department is also funding a project to develop commissioning standards for local authorities that will deliver guidance and standards by December 2014”. 45 These are now available:

44 45 46



the Institute of Public Care (Oxford Brookes University) has published the Developing Care Markets for Quality & Choice programme website at: http://ipc.brookes.ac.uk/dcmqc.html



the Health Services Management Centre and the Institute of Local Government Studies (University of Birmingham) have published the commissioning standards, noting that “12 principles for good commissioning have been identified which underpin the standards”. 46 The standards are available at: http://www.local.gov.uk/documents/10180/5756320/Com missioning+for+Better+Outcomes+A+route+map/8f18c36f -805c-4d5e-b1f5-d3755394cfab

As above, p60, para 4.86 As above, p65, para 4.110 University of Birmingham, New set of standards to improve adult social care commissioning, 4 November 2014, webpage

19 Funding social care, and the care home market (England)

4. The outcome of the 2015 Spending Review In his Statement on the Spending Review made on 25 November 2015, the Chancellor announced a new social care precept, and additional funding for the “Better Care Fund”: The health service cannot function effectively without good social care. The truth we need to confront is that many local authorities will not be able to meet growing social care needs unless they have new sources of funding. That, in the end, comes from the taxpayer, so in future those local authorities that are responsible for social care will be able to levy a new social care precept of up to 2% on council tax. The money raised will have to be spent exclusively on adult social care, and if all authorities make full use of it, it will bring almost £2 billion more into the care system. It is part of the major reform we are undertaking to integrate health and social care by the end of the decade. To help to achieve that I am today increasing the better care fund to support that integration, with local authorities able to access an extra £1.5 billion by 2019-20. The steps taken in this spending review mean that by the end of the Parliament, social care spending will have risen in real terms. 47

4.1 Analysis of the 2% precept for social care The Institute for Fiscal Studies (IFS) has calculated that the precept 48 would raise “£1.7bn a year by 2019-20 if used in full”. 49 In a presentation, the IFS also noted that the precept could, on average, lead to a 11% increase in adult social care spending (based on spending in 2015/16), although there would be wide variation depending on how much Council Tax a local authority raises and how much they spend on adult social care, 50 as the following chart shows: 51

47 48

49

50 51

HC Deb 25 November 2015 cc1363–1364 The Department for Communities and Local Government explains that the precept is “the amount of council tax income all billing and precepting authorities need to provide their services. The amounts for all authorities providing services in an area appear on one council tax bill, which is administered by the billing authority”. [Department for Communities and Local Government, The provisional Local

Government Finance Settlement 2016-17 and an offer to councils for future years – Consultation, December 2015, p32] Institute for Fiscal Studies, Presentations – Local government and the nations: a devolution revolution?, powerpoint slides, 26 November 2015, p6 As above, 26 November 2015 As above, 26 November 2015, p9

Number 07463, 10 February 2017 20

This point was also made by the President of the Association of Directors of Adult Social Services (ADASS), Ray James, who said that “The Council Tax precept will raise least money in areas of greatest need which risks heightening inequality. Councils in deprived areas will have greatest social care needs, yet they will raise less than 1/3rd of what more affluent areas do through this approach”. 52 In terms of monitoring whether local authorities were using additional money raised through the precept for adult social care, the IFS argued that it was “really tricky” to do this in practice. 53

4.2 Extra resources for the Better Care Fund Box 1: What is the Better Care Fund? The Local Government Association explains that: The £5.3bn Better Care Fund was announced by the Government in the June 2013 spending round, to ensure a transformation in integrated health and social care. The Better Care Fund (BCF) is one of the most ambitious programmes across the NHS and local government to date. It creates a local single pooled budget to incentivise the NHS and local government to work more closely together around people, placing their wellbeing as the focus of health and care services, and shifting resources into social care and community services for the benefit of the people, communities and health and care systems. 54

52

53

54

Association of Directors of Adult Social Services, ADASS responds to the 2015 spending review, press release, 25 November 2015 Institute for Fiscal Studies, Presentations – Local government and the nations: a devolution revolution?, 26 November 2015 Local Government Association, Better Care Fund, webpage [taken on 12 January 2016]

21 Funding social care, and the care home market (England)

The 2015 Spending Review document stated: Locally led transformation of health and social care delivery has the potential to improve services for patients and unlock efficiencies. Spending Round 2013 established the Better Care Fund which has driven the integration of funding for health and social care and enabled services to be commissioned together for the first time. This year the NHS and local authorities in England shared £5.3 billion in pooled budgets. The Spending Review continues the government’s commitment to join up health and care. The government will continue the Better Care Fund, maintaining the NHS’s mandated contribution in real terms over the Parliament. From 2017 the government will make funding available to local government, worth £1.5 billion in 2019-20, to be included in the Better Care Fund. 55

It added that: The Better Care Fund has set the foundation, but the government wants to further, faster to deliver joined up care. The Spending Review sets out an ambitious plan so that by 2020 health and social care are integrated across the country. Every part of the country must have a plan for this in 2017, implemented by 2020. Areas will be able to graduate from the existing Better Care Fund programme management once they can demonstrate that they have moved beyond its requirements, meeting the government’s key criteria for devolution. The government will not impose how the NHS and local government deliver this. The ways local areas integrate will be different, and some parts of the country are already demonstrating different approaches, which reflect models the government supports, including: Accountable Care Organisations such as the one being formed in Northumberland, to create a single partnership responsible for meeting all health and social care needs devolution deals with places such as Greater Manchester which is joining up health and social care across a large urban area. The government continues to support Greater Manchester in delivering the vision and scale of their transformation Lead Commissioners such as the NHS in North East Lincolnshire which is spending all health and social care funding under a single local plan. 56

To date, there has been a lack of information regarding the trajectory of the additional Better Care Fund allocation before it hits the additional £1.5 billion point in 2019/20, for example what the additional monies for the Better Care Fund will be in the first year (2017/18).

4.3 Reaction to the Spending Review •

55

56

Community Care reported that “James Lloyd, director of the Strategic Society Centre, says the 2% levy [precept] is ‘meaningless’. ‘A 2% ring-fence that sits on top of a largely discretionary budget means councils will just spend any

HM Treasury, Spending Review 2015, Cm 9162, 25 November 2015, p33, para 1.111 As above, p34, paras 1.112–1.113

Number 07463, 10 February 2017 22

additional money they raise on social care, but may just reduce the money they would have spent on social care elsewhere’”. 57 •

a joint letter was sent from the ADASS, Care Provider Alliance, Care and Support Alliance and the NHS Confederation to the Government stating: We believe the package put forward for social care will not enable us to fill the current gap in funding, cover additional costs associated with the introduction of the National Living Wage, nor fully meet future growth in demand due to our ageing population. […] If we do not collectively address the highlighted issues relating to levels of and phasing of funding there is the potential for significant and adverse impacts, including:





An increasing number of older people, disabled people and their carers without any, or without sufficient, support to meet their needs;



An acceleration of the failure of domiciliary, residential and nursing home providers. This is likely to accelerate fastest in those areas of the country where providers are predominantly delivering support to state funded clients. These are exactly the areas of the country that additionally will raise the least areas of council tax. The impact of this will be the compounding of the number of people who do not have their needs met, or who are avoidably admitted or remain in hospital; and



An increasing pressure on the NHS with more people admitted to hospital and more delays to get people home safely. 58

The Observer reported the reaction of the Local Government Association (LGA) to the announcement, and the DCLG’s response: The LGA’s finance spokeswoman, Sharon Taylor, leader of Labour-controlled Stevenage borough council, said increases to the Better Care Fund – which aims to transform funding of health and social care – were welcome but would not come soon enough. “Councils will not see the money until 2017. We have got a crisis now in social care funding. Our services are at breaking point and they are at breaking point now,” she said. A Department for Communities and Local Government spokesman said: “The social care precept is part of a wider £3.5bn investment package to ensure councils can support older and vulnerable people in their area. “In particular, the increased and improved Better Care Fund will offer support to councils with greater demands for their social care services, on top of the funds they raise through the precept.

57

58

“Councils still in funding crisis despite welcome recognition for adults’ social care”, Community Care, 1 December 2015 Association of Directors of Adult Social Services et al, Letter – Re: Social Care Sector Response to Spending Review, 3 December 2015

23 Funding social care, and the care home market (England)

“This is a short-sighted analysis from the LGA as we will be setting out proposals on changes to the local government finance system which will take into account the main sources of revenue currently available to councils, including council tax. “Councils will have almost £200bn to spend over this parliament, a cash terms increase and a reduction of just 1.7% in real terms each year”. 59

59

“Cuts ‘to hit care of elderly in poorest areas’”, The Observer, 28 November 2015

Number 07463, 10 February 2017 24

5. Provisional local authority funding settlement On 17 December 2015, the DCLG published The provisional Local

Government Finance Settlement 2016-17 and an offer to councils for future years – Consultation.

Social care funding The Secretary of State for Communities and Local Government, Greg Clark, told the House that: Local government has asked for £2.9 billion by 2020 as a contribution to the costs of social care. In this settlement, we make up to £3.5 billion available by that year, distributed fairly towards local authorities with social care responsibilities. I applaud the maturity of local government as a whole in telling me that it accepts that this prioritisation implies that, over the next few years, those councils with social care responsibilities should have relatively more resources than those councils which do not have them. Some district councils—those with low council tax bases or those which serve the most rural areas—face particular pressures, so while this settlement maintains the core referendum threshold at 2%, the threshold for the lowest cost district councils will be £5 a year, so that they are not punished for being economical while those who have spent more in the past are allowed to spend more now. 60

In its analysis of the provisional settlement, the IFS said: Looking to the next four years, spending on adult social care is likely to be particularly protected, because some of the grant to authorities is being ring-fenced for this purpose and because councils are being given the ability to raise council tax by an additional 2% a year specifically to fund adult social care. If this ring-fenced funding and council tax revenue were used to stop further cuts to adult social care and instead offer a real-terms freeze – which may not be enough given rising demands and cost pressures – real-terms cuts to other areas of spending would need to be around 12%, on average, by 2019–20. This could mean difficult choices for other services like children’s social services, refuse collection, libraries, transport, economic development, planning and housing, some of which have already seen very large cuts. Every additional 1% increase in adult social care spending would require additional cuts to other areas of spending of around 0.5%. 61

Interaction of the 2% social care precept and the Better Care Fund In the provisional settlement, the DCLG set out how the Better Care Fund formula would be designed to provide “greater funding to those authorities which benefit less from the additional council tax flexibility for social care”:

60 61

HC Deb 17 December 2015 c1723 Institute for Fiscal Studies, Observations – Council tax rises to ease the pace of cuts to local government budgets, 18 December 2015

25 Funding social care, and the care home market (England)

The Government recognises that authorities have varying capacity to raise council tax. We therefore propose to allocate the additional funding for the improved Better Care Fund through a separate grant to local government, using a methodology which provides greater funding to those authorities which benefit less from the additional council tax flexibility for social care. For the purposes of core spending power projections out to 2020 published alongside the 2016-17 provisional local government finance settlement, the methodology adopted is as follows:

62

1.

We calculate the additional funding available to spend on adult social care at a national level, combining the 2% council tax flexibility for adult social care and the additional funding for the improved Better Care Fund.

2.

We then calculate the share of that national amount which each authority with responsibility for social care would receive if it were distributed according to the 2013 adult social care relative needs formula.

3.

We then calculate how much each authority with responsibility for social care could raise from the additional 2% council tax flexibility for adult social care.

4.

The additional funding for the improved Better Care Fund is then allocated in such a way that, when combined with the money which could be raised from the council tax flexibility, each council would receive its share of the combined national amount as calculated in step (ii) above.

5.

These allocations are adjusted so that, where an authority could receive more from the additional council tax flexibility for social care than its share of the national amount calculated in step (ii), its allocation for the improved Better Care Fund is set to zero rather than a notional negative figure.

6.

The remainder of the allocations are then reduced proportionately, so that the combined totals sum to the national total for additional funding available to spend on adult social care, as calculated in step (i). 62

Department for Communities and Local Government, The provisional Local

Government Finance Settlement 2016-17 and an offer to councils for future years – Consultation, December 2015, p25, para 5.6

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6. Social Care in Crisis? In the run up to the Autumn Statement 2016 a range of organisations, including local government, health bodies, the voluntary sector and the Care Quality Commission, have questioned the sustainability of the market for publicly-funded social care and called for immediate additional funding.

6.1 The Local Government Association Autumn Statement 2016 Submission In its Autumn Statement submission to the Treasury, the Local Government Association (LGA) warned that social care is facing a potential funding gap of at least £2.6 billion, despite the additional funding from the 2% council tax precept and the Better Care Fund (see section 4). The LGA warn that the under-funding of social care could lead to: •

Growing difficulties meeting basic needs such as ensuring people are washed, dressed and helped out of bed



Shorter care visits



Potential reduction in quality and safety of care



Increase in people being stuck in hospital rather than cared for in the community. 63

Chairman of the LGA's Community Wellbeing Board, Cllr Izzi Seccombe, said: "Our analysis shows the sheer scale of the funding crisis we face in social care, both now and in the near future, as well as the damage done from the historic underfunding of adult social care. "Councils, care providers, charities and the NHS are all united around the need for central government to fully fund adult social care. This is essential if we are to move away from just trying to keep people alive to ensuring they can live independent, fulfilling lives, as well as alleviating the pressure on the NHS "The care provider market cannot carry on as it is and there is a real danger of more widespread market failure. Either care is properly funded or providers will pull out of council contracts or in worst case scenario go bust. The market for publicly-funded care is simply not sustainable as it stands. "Councils have an excellent track record in spending money wisely and efficiently, but are at the point where there is little room left to make further savings. There simply isn't the money left to pay providers at the level they say they need and we are in real danger now of seeing people suffer the consequences of this in the care that they receive. "The current funding crisis risks creating an unfair, unequal, twotiered care system where only the well-off will be able to get the care they need. If we are to have a fair and equitable society then 63

Local Government Association Media Release, £2.6 billion could be needed to fix social care - LGA warns, 13 October 2016

27 Funding social care, and the care home market (England)

we must be able to ensure that everybody is able to receive a high quality standard of care, not just those who can afford it. "We must all aspire to ensuring the care our loved ones receive goes beyond just helping them to get washed, dressed and fed, but to supporting them to live dignified, independent lives." 64

Adult Social Care Funding: 2016 State of the Nation Report In November 2016 the Local Government Association (LGA) published a 2016 State of the Nation Report on Adult Social Care Funding. 65 The report identifies the challenges of rising costs, the ageing population, difficulties recruiting staff, and central government funding reductions and calls on the Government to avert crisis by addressing the funding gap: Adult social care is an absolutely vital public service that supports some of our most vulnerable people and promotes the wellbeing and independence of many more. For too long the service has too often been seen by decision-makers as an adjunct to the NHS, rather than a service of equal importance. A lack of recognition in terms of profile has combined with a lack of recognition in terms of funding to place our care and support system under enormous pressure. This has been particularly acute since 2010 and although governments of the day have responded with their own wellintentioned solutions, they have failed to properly resolve the gap between available resources on the one hand and cost, demand and pressures on the other. The situation now is critical and it is no exaggeration to say that our care and support system is in crisis. But what shape is that crisis taking, and how can we move away from it and towards a position of being best able to maximise people’s quality of life and support their wellbeing? 66

6.2 Association of Directors of Adult Social Services (ADASS) The Association of Directors of Social Services (ADASS) Pre-Autumn Statement 2016 Representation67 called for an increase in social care funding and provided a range of estimates of the shortfall in funding between 2016/17 and 2019/20. The ADASS urged the Government to take action by: a) Immediately addressing the shortfalls in budgets for this and next year in order to stabilise the sufficiency and quality of the market. b) Making provision for the gap in funding to 2020, ensuring that social care funding is protected, transparent and sustainable. Whilst not the only answer, recurrent additional funding to local

64

65

66 67

Local Government Association Media Release, £2.6 billion could be needed to fix social care - LGA warns, 13 October 2016 Local Government Association, Adult social care funding: 2016 state of the nation report, 2 November 2016 Ibid., p.4 Association of Directors of Adult Social Services, Autumn Statement 2016 Representation, undated [accessed 14 December 2016]

Number 07463, 10 February 2017 28

government, based on need for social care is integral to any solution. c) Helping us to address the workforce recognition, recruitment and retention issues by affording care staff, social workers and social care nurses the same recognition and attention as doctors and other key professionals and by resourcing this. Enhance the status of care workers, address pay issues, review key worker housing, training, and the contribution of DWP/work programme providers, funded apprenticeships, and skill mix. Engage with us on a national recruitment campaign and address our concerns about the uncertainty for non UK EU citizens who are part of our workforce. d) Addressing the longer term resourcing issues for social care for 2020 and beyond. This will necessitate radical reconsideration of how to incentivise family and other informal carers and revisiting the role of the individual, family, community and the state. 68

6.3 Care Quality Commission - State of Care Report 2015/16 The Care Quality Commission’s (CQC) annual overview of health and social care, the State of Care 2015/16 69 published in October 2016, concluded that the sustainability of the adult social care market is approaching a tipping point: State of Care finds that the sustainability of the adult social care market is approaching a tipping point. This view is based on the evidence of inspections, information received through our market oversight function, and external data. The fragility of the adult social care market is now beginning to impact both on the people who rely on these services and on the performance of NHS care. The combination of a growing and ageing population, more people with long-term conditions, and a challenging economic climate means greater demand on services and more problems for people in accessing care. This is translating to increased A&E attendances, emergency admissions and delays to people leaving hospital, which in turn is affecting the ability of a growing number of trusts to meet their performance and financial targets. 70

6.4 United Kingdom Homecare Association (UKHCA) A UKHCA report, The Homecare Deficit 2016, published in October 2016 raised concerns about the under-resourcing of state-funded homecare, and estimated there will be a £513 million deficit across the UK during 2016/17. The report identified a postcode lottery of the prices that individual councils pay for homecare services, and in many cases a funding gap between the rate paid by councils and the costs of services which must 68

69

70

Association of Directors of Adult Social Services, Autumn Statement 2016 Representation, undated, p.4 [accessed 14 December 2016] Care Quality Commission, The state of health care and adult social care in England 2015/16, HC 706, 12 October 2016 Ibid.

29 Funding social care, and the care home market (England)

meet the National Living Wage. UKHCA’s research found that across the UK the average price councils paid for homecare in April 2016 was £14.58 per hour, compared to UKHCA's Minimum Price for Homecare of £16.70 per hour. The report also raised concerns about the implications of low rates of pay for the recruitment and retention of homecare workers. UKHCA's Policy Director, Colin Angel, said: "We know that an ageing population is increasing demand for homecare services. Councils which decide to pay inadequate rates for homecare are taking major risks with people's wellbeing and the jobs of local people who provide care. "We have already seen evidence of homecare providers leaving the state-funded care market, or closing their doors for good because they cannot afford to remain in business." “People who use homecare services are already experiencing the consequences of unstable care markets.” "Underfunded homecare is an urgent situation, which must not be allowed to continue." 71

6.5 Care England Care England, the largest representative body for independent providers of adult social care, has also voiced concerns over the funding pressures faced by the social care sector: Despite the excellent work of social care workers and managers, underfunding is damaging the sector. The current funding settlement entirely disregards demographic change, the pressure on the market, and the impact on people receiving care. As CQC highlights, more and more people are living with unmet needs for care, and more providers are pulling out of unaffordable caring activities like nursing. CQC’s emphasis on providers turning down contracts reflects the impossible market for care: Care England members are still being asked to care for adults with complex needs for as little as £2.25 per hour. This undoubtedly affects the NHS, where delayed discharge figures will not improve while social care remains starved. The fragility of the market cannot be overstated: as this week’s media coverage has also shown, providers are being put in a perilous position by a lack of political will to meet the funding needs of social care. The CQC is a trusted voice, and is right to use its role to highlight sector difficulties: now the government must take heed and action to reverse a trend of gradual but definite erosion of this sector, a lifeline for many vulnerable people. 72

6.6 Health Select Committee Prior to the Autumn Statement, on 26 October 2016 the Health Select Committee wrote to the Chancellor setting out concerns about the

71

72

United Kingdom Homecare Association Media Release, Older people's homecare at risk from £513 million UK deficit - 25/10/2016, 25 October 2016 Care England Press Release, Government must heed CQC’s warning, 13 October 2016

Number 07463, 10 February 2017 30

extent of the pressures on NHS finances. In particular, the letter highlighted the Committee’s concerns around social care funding: Of more immediate concern even that the reductions in spending on public health and prevention, however, are the reductions in spending on social care which have been seen over recent years. We have heard that these reductions are having a serious impact on the NHS…The evidence we heard over the course of our two most recent evidence sessions indicates that unless urgent action is taken to improve the state of social care and thus mitigate the effects on trusts which the CQC describes, the NHS cannot be expected to deliver the Five Year Forward View. 73

73

Health Select Committee, Letter from Chair of Health Select Committee to the Chancellor of the Exchequer concerning NHS funding, 26 October 2016

31 Funding social care, and the care home market (England)

7. Autumn Statement 2016 & Local Government Finance Settlement 2017 to 2018 7.1 Autumn Statement 2016 When asked whether the Autumn Statement 2016 would include additional funding for social care, the Chancellor, Philip Hammond, replied: No, these are not the occasions when we commit to additional funding. We have a funding settlement in place and substantial increases in social care funding will become available by the end of the Parliament. But as I have said, we recognise that some authorities are facing some challenges on the profiling of that funding, and my right hon. Friends the Health Secretary and Communities Secretary are discussing that issue with local authority leaders. 74

The Chancellor’s Autumn Statement, given in November 2016, did not allude to extra funding for social care. In the debate following the Statement the Shadow Chancellor, John McDonnell, said: Councillors from all political parties are reporting that they are at a tipping point in the provision of social care. The previous Chancellor cut nearly £5 billion from social care, meaning that over 1 million people who need care are not getting it. They are not even “just about managing”, and they got little help today. We have called for additional support for social care, because the funding being provided today is only a stop-gap measure. Our social care system will not be secure without long-term funding. Tonight, many elderly people will remain trapped in their homes, isolated and lonely, lacking the care they need because of continuing cuts to social care—and social care cannot be cut without also hitting the NHS. 75

Some commentators, including health and social care leaders, have been highly critical of the absence of any additional social care funding in the Autumn Statement 2016. 76 Care England, for example, the largest representative body for independent providers of adult social care, expressed disappointment with the Autumn Statement: Yet again the Chancellor has ignored social care. In doing so the Government needs to be prepared for the detrimental impact on families, local economies and the NHS. Social care needs to be a priority, indeed in some regions it is a huge employer and stability is crucial for those in receipt of care and those in its employment”. As expected, the Chancellor raised the National Living Wage, from £7.20 to £7.50 by April 2017. Whilst the adult social care sector applauds this, it needs to be accompanied by commensurate funding for the sector.

74 75 76

HC Deb 29 November 2016 c1398 HC Deb 29 November 2016 c911 ‘Autumn Statement: Row as care funding omitted from measures’, BBC, 24 November 2016

Number 07463, 10 February 2017 32

Unfortunately the lack of investment in social care spells disaster in the NHS and potentially a perpetual winter. 77

7.2 Social Care Funding Debate – 12 December 2016 In an “urgent question” debate on social care funding in the House of Commons on 12 December 2016, the Parliamentary Under-Secretary of State for Health, David Mowat, acknowledged that the social care system was “under strain, and that pressure has been building for some years now”. The Minister made the following points: •

”The Government response has been to ensure that councils have access to funding to increase social care spend by the end of this Parliament. We estimate that the increase could be around 5% in real terms. Additional funding comes from the better care fund, the additional better care fund and changes to the precept”;



”Spending on long-term care in our country is more than the OECD average—in particular, it is more than comparable economies such as France and Germany”;



”many councils right across the country—something like 40%— have increased, and will increase, their social care budget in real terms next year”;



“I said that money would help with any system, but the issues are about quality, leadership and best practice as well. All those things are within the ambit of my job, and that is what I am pursuing”. 78

7.3 Local Government Finance Settlement 2017/2018 On 15 December 2016, as part of the English Provisional Local Government Finance Settlement 2017/18, the Secretary of State for Communities and Local Government, Sajid Javid, announced additional funding of up to nearly £900 million for adult social care in 2017/18 and 2018/19. 79 This funding will be provided to local authorities with social care responsibilities through increased flexibility over the Social Care Precept and a new Adult Social Care Support Grant. The Department for Communities and Local Government (DCLG) press notice accompanying the announcement explained how additional funding to address immediate social care funding pressures would be

77 78 79

Care England Press Release, Missed Opportunity, 23 November 2016 HC Deb 12 December 2016 c502-511 Department for Communities and Local Government and the Rt Hon Sajid Javid MP,

Oral statement to Parliament: Provisional local government finance settlement 2017 to 2018, 15 December 2016

33 Funding social care, and the care home market (England)

made available, and reiterated the Government’s longer-term commitment to deliver integrated health and social care: Today, the Communities Secretary confirmed that he will bring forward flexibility over the social care precept, so councils can choose to raise it by 3%, rather than the 2% originally planning – meaning they will have the ability to raise an additional £208 million next year. This comes on top of a new adult social care grant, worth £240 million next year, and an improved Better Care Fund worth up to £1.5 billion so councils can work more closely with the NHS. It brings total dedicated social care funding to £7.6 billion over the settlement period, with councils receiving almost £200 billion over the Parliament. But Mr Javid made clear that more money is not the only answer, and highlighted the importance of better integrating health and social care. Where this is already happening, it is making a real difference to people’s lives: for example, in Oxfordshire this has led to a 40% fall in delayed discharges in just 6 months; and in Northumberland, work between the council and the local health trust has reduced demand for residential care by 12%. At the same time the government will develop long-term reforms that will provide a sustainable system for everyone who needs social care, in order to finish the job of integrating health and social care systems. 80

Social Care Precept – 2017/18 and 2018/19 The Social Care Precept, announced in 2015, gave local authorities the flexibility to raise council tax in their area by up to 2% above the ‘standard’ threshold 81 for each year between 2016/17 and 2019/20, with the additional funding to be spent on adult social care. The Local Government Association reported that around 95% (144 out of 152) of local authorities used the social care precept in 2016/17. 82 The Government announced on 15 December 2016 that local authorities can, if they wish, bring forward the Social Care Precept, by raising council tax by up to 3% in 2017/18 or 2018/19. The Government expects this to provide an additional £208 million for adult social care in 2017/2018 and £444 million in 2018/ 2019. However, the overall limit of 6% above the ‘standard’ threshold by 2019/20 remains. Thus, it appears that if authorities make full use of the 3% precept in 2017/18 and in 2018/19, they will not be able to use the precept in 2019/20: 83 The policy intention set out at the time of the 2016-17 Settlement was that this would be 2% per year up to 2019-20. In recognition 80

81

82

83

Department for Communities and Local Government, Dedicated adult social care funding forms key part of continued long-term funding certainty for councils, Press Release, 15 December 2016 See the House of Commons Library Briefing Paper Council tax: local referendums (SN05682) for further information on council tax referendum thresholds. Local Government Association, Adult social care funding: 2016 state of the nation report, November 2016, p.6 Institute for fiscal Studies, How far do today’s social care announcements address social care funding concerns?, 16 December 2016

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of the particular pressures on adult social care services, especially in the next two years, social care authorities will now be able to introduce the rise sooner. They will have the freedom to increase by up to 3% in 2017-18 or 2018-19, but still cannot exceed 6% in total over the three-year period.

According to the Government, “the extra flexibility to raise funding for adult social care next year will add just £1 a month to the average Council Tax bill. And the overall increase to the precept in the next 3 years will remain at 6%, so bills will be no higher in 2019 to 2020”. 84

Adult Social Care Support Grant - 2017/2018 The Government proposes to provide £240 million in Adult Social Care Support Grant to local authorities with social care responsibilities in 2017/2018. The new grant will be funded through savings from the New Homes Bonus scheme, which is aimed at incentivising the building of new homes. 85 The grant will be distributed according to relative need; the Government proposes to give “each authority a share of the £240m of funding proportional to the Adult Social Care Relative Needs Formula”. 86

7.4 Reaction to the Local Government Finance Settlement announcement A wide range of stakeholders have expressed disappointment with the additional funding for social care in the Provisional Local Government Finance Settlement 2017/18. 87 The Local Government Association, for example, has criticised the level and redistribution of funding and has called for a fundamental review of review of social care and health before the Spring Budget 2017: By bringing forward council tax raising powers, the Government has recognised the LGA's call for the urgent need to try and help councils tackle some of the immediate social care pressures they face. Measures announced in today's settlement will help in part but fall well short of what is needed to fully protect the services which care for elderly and vulnerable people today and in the future. Councils, the NHS, charities and care providers have been clear both before and since the Autumn Statement about the need for an urgent injection of genuinely new additional government funding to protect services caring for elderly and disabled people. Given this unified call for action, it is hugely disappointing that today's settlement has failed to find any of this new money to tackle the growing crisis in social care. Bringing forward council tax raising powers will help some areas in the short-term but extra council tax income will not bring in anywhere near enough money to alleviate the pressure on social 84

85

86

87

Department for Communities and Local Government, Provisional local government finance settlement 2017 to 2018, Oral statement to Parliament, 15 December 2016 See House of Commons Library Briefing Paper The New Homes Bonus (England) (SN05724) for further information about the New Homes Bonus scheme. Department for Communities and Local Government, The provisional 2017-18 local

government finance settlement: confirming the offer to councils - Consultation Paper, 15 December 2016, p.14, para.2.6 ‘Tories join NHS chiefs in call for increased social care funding’, The Guardian, 12 November 2016

35 Funding social care, and the care home market (England)

care both now and in the future. Increasing the precept raises different amounts of money for social care in different parts of the country and will add an extra financial burden on already struggling households. Social care faces a funding gap of at least £2.6 billion by 2020. Council tax rises will not be enough to prevent the need for continued cutbacks to social care services and very many other valued local services. Already planned further £2.2 billion cuts to Revenue Support Grant to councils next year will far exceed the benefit of any extra council tax income. Today's announcement of funding for social care from New Homes Bonus reforms is not new money but a redistribution of funding already promised to councils. It is wrong to present this as a solution, given the scale of the funding crisis. This is money which was taken from councils in the first place and this move will see money taken away from councils which is designed to incentivise new homes at a time when the Government has made boosting housebuilding a clear priority. The Government must recognise why social care matters and treat it as a national priority. There needs to be an urgent and fundamental review of social care and health before next year's spring Budget. Local government leaders, who are responsible for social care in their local community, must be part of that review. This is imperative to get a long-term, sustainable solution to the social care crisis that the most vulnerable people in our society deserve. 88

Public Finance have report negative reactions from a range of commentators, including the following statement from CIPFA: Responding to the settlement, Sean Nolan, CIPFA’s head of local government, said allowing councils with social care responsibilities to front load the maximum allowed precept increase would be cautiously welcomed as a short-term boost to spending. However, this would be “a short-term sticking plaster” and, as most councils were already planning to use the existing freedom to increase the social care precept by 2% in the next financial year, it would only amount to a real-terms boost of 1% for 201718. Although the change to the New Homes Bonus will be a blow, mainly to districts, Nolan added that the resources are to be welcomed for addressing the distributional inequalities that would otherwise have been caused by using the social care precept alone. 89

On 16 December 2016 the Institute for Fiscal Studies (IFS) published an analysis of How far do today’s social care announcements address social care funding concerns?, concluding that: Yesterday’s announcements therefore represent a modest increase in funding for social care in the short-term, largely paid

88

89

Local Government Association, LGA responds to the Local Government Finance Settlement, Media Release, 15 December 2016 Council tax precept and New Homes Bonus deployed to stem social care crisis, Public Finance, 15 December 2016

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for by above-inflation increases in council tax, and a small reduction in grants to District Councils next year. 90

On 6 January2016 the Chairs of the Communities and Local Government Committee, the Public Accounts Committee and the Health Committee wrote to the Prime Minister calling for a review of the long-term sustainability of health and social care provision: We were encouraged by your recognition at the Liaison Committee that everyone has a part to play in finding a sustainable way of ensuring social care provision in the future. You also accepted the need for a review to find a way of funding· social care sustainably for the long term. We believe that can best be achieved if there is cross-party consensus, and therefore urge you to invite all parties to become involved in a review, which should begin as soon as possible. Given the scale of rising demand, this immense challenge will face whichever Party is in government over the coming decades. Each of our committees has examined the challenges of financial sustainability from its own perspective. The Health Committee has already concluded that the system is now at breaking point, the CLG Committee will be publishing its findings shortly and PAC continues its scrutiny of financial sustainability of the NHS in a hearing next week. The Lords Committee on the Long Term Sustainability of the NHS is also conducting a full examination of the issue and is due to report in the spring. The need for an agreed approach for the future has been supported by many organisations, including the Kings Fund, the Nuffield Trust and the Local Government Association, as well as by Simon Stevens, Chief Executive of NHS England, and Stephen Dorrell, Chair of the NHS Confederation. The CLG Committee's recent visit to Germany demonstrated how important such a cross-party consensus is to finding a lasting solution which retains public support. […] We are calling for a new political consensus to take this forward. This needs to be done swiftly so that agreement can be reflected in the next spending round. We also feel that the ongoing separation of health and social care is creating difficulties for individuals and avoidable barriers and inefficiencies. Any review should cover the two systems. In short, the problem is widely recognised-we now need political agreement so that a solution for the long term can be found. 91

90

Institute for Fiscal Studies, How far do today’s social care announcements address

91

Letter from the Chairs of the Communities and Local Government Committee, the Public Accounts Committee and the Health Committee, Health and Social Care, 6 January 2016

social care funding concerns?,16 December 2016

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