Fourteenth Standing Committee
on Delegated Legislation
Monday 14 July 2003
[Mr. Joe Benton in the Chair]
Special Grant Report
(No. 125) (HC No. 776) on the
Preserved Rights Grant for 2003–04
The Parliamentary Under-Secretary of State for Health (Dr. Stephen Ladyman): I beg to move,
That the Committee has considered the Special Grant Report (No. 125) (HC No. 776) on the Preserved Rights Grant for 2003–04.
Although we are not debating the other special grant reports today, all of the reports that we will debate come under section 88B of the Local Government Finance Act 1988.
The Chairman: Order. I must point out to the Minister and the Committee that we are debating the other orders today, but the Committee has agreed that they will be debated separately.
Dr. Ladyman: Thank you, Mr. Benton. I did realise that. It was just a slip of the tongue.
The orders come under section 88B of the 1988 Act, which allows us to make grants to local government authorities without imposing conditions, or a ring fence. We believe that that is an important new freedom for us to give to local authorities, particularly those that have done well.
The grant money allocated by special grant report No. 125 will be spent on whatever the local councils wish, and it is given because of our commitment to support preserved rights now that they are the responsibility of local authorities. The Department of Health pays the preserved rights grant to all councils with financial responsibility for particular individuals—in care homes and other facilities—who were in receipt of the preserved rights higher rate of income support until its abolition in 2002.
The decision to abolish preserved rights derived from recommendation 4.6 of the March 1999 report of the royal commission on long-term care for the elderly ''With Respect to Old Age: Long Term Care—Rights and Responsibilities''. The commission had been alerted to concerns that income support rates were becoming increasingly inadequate. The commission recommended that the Government
''should consider whether 'preserved rights' payments in social security should be brought in line with the post 1993 system of community care funding''.
Sitting suspended for a Division in the House.
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Dr. Ladyman: I am sure that my opening comments were burnt into everybody's minds, so there is no need for me to reiterate them.
Until 1993, responsibility for arranging placements and funding the cost of placing individuals in independent sector residential care or nursing homes did not lie with local authorities. Financial responsibility for such placements lay with the Department for Work and Pensions. Individuals who became residents of such homes and were eligible for state benefits were awarded a special higher rate of income support that would cover the costs of the accommodation. With effect from 1 April 1993, with the commencement of the relevant provisions in the National Health Service and Community Care Act 1990, the statutory regime changed. Since 31 March 1993, responsibility for funding the placement of individuals entering residential care or nursing homes has lain with local authorities. The principal reason for the change was the Government's view that local social service authorities should have lead responsibility for arranging all types of community care in their areas.
However, regime change at that time did not affect those who were already resident in a care home or a nursing home by 31 March 1993. Those individuals had their right to receive funding in the form of special higher rate income support from the DWP preserved under the legislation. It was considered that that would reassure and protect existing care home residents, not least because the continuation of the higher rate of income support would enable preserved rights users to retain purchasing power to exercise a choice about where their residential or nursing care was provided.
The introduction of preserved rights also ensured that social services departments would not be faced with the enormous task of carrying out financial and care assessments on an additional 290,000 existing residents at the same time as getting to grips with the new community care reforms. However, in the years after 1993, the higher rate of income support that those clients received did not rise in line with care home fees, and many preserved rights clients subsequently suffered a shortfall and required a third-party top-up to bridge the gap. It was decided that the shortfall could be met by including preserved rights users in the post-April 1993 system. Local authorities agreed with the proposal, and preserved rights to higher rates of income support were abolished on 8 April 2002.
The Department for Work and Pensions estimated preserved rights expenditure on the basis of the number of clients who would become the responsibility of local authorities from April 2002. It transferred £614 million to the Department of Health, which was paid in the form of a grant to councils in respect of their new responsibilities to those clients.
Mr. John Redwood (Wokingham): Great play was made in the Minister's opening remarks—as it is in annex B—of the fact that local authorities have discretion. Annex B states that grant is to go towards the expenditure that authorities incur
''in exercise of their statutory functions'',
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but it does not specify what those are. How big is the power of virement that the Minister is giving local authorities? Are the Government not running the risk of leaving preserved rights clients without adequate funding?
Dr. Ladyman: I do not believe that we are. Local authorities will have responsibility for funding the care of elderly people, so their rights and future will be protected. Indeed, they will probably be better protected under the new arrangements than they were previously.
For the second year of the preserved rights grant, we were able to ask councils for the precise number of ex-preserved rights clients for whom they were responsible as at 30 September 2002. The figures were confirmed with councils, and the calculations for the 2003–04 grant are based on those case load numbers.
As I said, the grant for this financial year has no conditions attached, and the grant freedoms that the special grant report makes real are simply part of the package.
Mr. Redwood: Is the Minister saying that a council could vire the money to a statutory purpose in, for example, education? Surely that would leave it short of money when providing for the people whom it was meant to protect.
Dr. Ladyman: The council can vire the money for any purpose. If it can provide care home places for elderly people in its care at such a rate that it has money left over, it is perfectly free under the present arrangements to use that money for any other service that it provides.
Mr. Paul Burstow (Sutton and Cheam): Will the Minister put on the record the number of people who were assumed to have been paid preserved rights grants last year? What numbers were subsequently fed into the Department as a result of the survey work that he mentioned? It would be useful to know what change there had been over the two years.
Dr. Ladyman: I shall reflect on those numbers and see whether I can provide them to the hon. Gentleman later in my discourse. The important point, however, is that we estimated last year's figures because that was all we could do. This year's figures are the real ones because we have been able to ask councils for the right numbers.
As I said, the grant for this financial year has no conditions attached, and the grant freedoms that the special grant report makes real are simply part of the package. In the 2002–03 financial year, the preserved rights grant was issued under section 93 of the Local Government Act 2000. That meant that conditions were attached and that councils were required to spend the grant on their preserved rights clients. Councils are currently completing an audit of their spending of the preserved rights grant for 2002–03, which will be formally audited by the Audit Commission. No conditions will be attached to the grant in 2003–04, however, so there will be less form-filling for councils and no need to audit their spending next year.
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In general, the principle for the 2003–04 financial year is that grant will not be paid in advance of need. When we specify what money is to be spent on, it is easy to see when that money should be paid. However, we are not specifying what councils should spend grant on, so we cannot say when they will need it. They will have the freedom to spend it on local priorities when they know when and how much money is coming to them. Monthly payments will enable them to budget more effectively throughout the whole year. We expect the initial payment to be made in the summer and to be backdated to April 2003. Grant will then be paid monthly over the 2003–04 financial year, depending, of course, on the will of the Committee.
The removal of ring-fencing gives councils a significant freedom. They can focus on outcomes for local people rather than on spending money in the way set out by Government. That freedom will enable them to be innovative in developing their services. The special grant report makes real a significant freedom, and I commend the provisions to the Committee.
Tim Loughton (East Worthing and Shoreham): Mr. Benton, may I welcome you to the Chair? I also welcome the Under-Secretary on his debut—it is certainly the first time against me—in the wonderful little outings that we have on this subject? Out the three special grant reports, No. 125 is the least contentious and the least technical, although I should like to raise some points. As the Minister rightly said, the report is an historical throwback to 1993, and brings matters into line with the Health and Social Care Act 2001.
In answer to the hon. Member for Sutton and Cheam (Mr. Burstow), the Minister said that he wanted to reflect on the numbers. Can he give the total number of people who are involved this year, using the figures that he garnered from local authorities? What is his actuarial calculation of how that figure is likely to change in the next few years? Obviously, we are talking about a finite number of people. I gather that in 2000, when the Government first addressed the problem, they estimated that about 45 per cent. of residents with preserved rights might have been experiencing a shortfall. How does that estimate compare with the harder evidence that has now come from the local authorities? How much extra overall would have been needed to plug that estimated shortfall, as compared with the actual shortfall, which hopefully—and supposedly—will be plugged by the amount that we are being asked to pass in the grant today? As the Minister said, the 40 per cent. shortfall required a third-party top-up in order to pay the balance of the fees to stay in homes. Can the Minister assure us that the amounts now being provided will do the trick?
The table in annex A shows some big divergences between the amounts that are going to the relevant authorities. Are the amounts based purely on a base figure per head, regardless of where in the country an authority is, or are there age-weighted calculations, or geographical calculations to do with local costs of providing care? For example, under the preserved rights grant allocation in annex A, the Minister's
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authority, Kent, will receive around £22,565,000, which is by far the largest amount in the shire counties table. However, I am sure that that has nothing to do with his current position and the fact that he represents that county.
We can compare that with my local authority, where the population is older and, although perhaps more feisty, makes use of care homes rather more than people in many other shire counties around the country. The grant that my authority will receive is just over £11 million. Dorset, which is another local authority on the south coast, slightly further to the west, will receive greatly less: a little more than £2.5 million, which is barely more than 10 per cent. of what the good folk of Kent are to receive. However, we now know from the latest survey that Dorset has the constituency with the highest number of pensioners in it, Christchurch, as well as many other demographically old constituencies, owing to the many retirement towns in that county. That is excluding Bournemouth, which is now a unitary authority and therefore not involved in the grant. Can the Minister add some flesh to the data and say why there are such apparently big disparities between some of the authorities that I have mentioned?
We all agree that the grant is necessary. There is no contention about that: the grant goes back to changes that the last Conservative Government enacted and that came into force in 1993. We need to know if the amounts are right and fair, and that there will not still be a shortfall. The Minister mentioned that the grants are not ring-fenced. As my right hon. Friend the Member for Wokingham (Mr. Redwood) mentioned, there is no duty or obligation on those local authorities to ensure that all that money is spent on the purpose for which the grants were intended.
The Minister cited the possibility of local authorities being able to fund those places more cheaply, and so enjoy the surplus and spend it on education or anything else within their remit. If that is the case, what auditing procedures does his Department have in place if an authority—his or mine—does particularly well, despite all the discrepancies in the system that the delayed discharges legislation, which we shall discuss next, will certainly bring about? If those authorities can magically summon out of the air many spare beds at a bargain-basement cost that can provide the quality of care that he and I would expect for our constituents, will the assessments for next year be scaled back accordingly? If an authority has done particularly well by paring back its costs, would the same formula apply in future years, purely dependent on the number of heads involved? What incentive is there for local authorities to make savings in one year if they can find such beds—not that I am at all convinced that they exist—if they will get clobbered the following year?
The Minister said that the measure was all about less form filling. Well, we certainly agree with that—there are far too many forms—but will he give us more detail about the procedures for subsequent years? Having said that, I am sure that he will be able to
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reassure us, in which case we have no objections to the grants.