Care Bill [Lords]

Written evidence submitted by Local Government Association (LGA) and Association of Directors of Adult Social Services (ADASS) (CB 18)

1. The Local Government Association (LGA)

1.1. The LGA is the national voice of local government. We work with councils to support, promote and improve local government.

1.2. We are a politically-led, cross party organisation which works on behalf of councils to ensure local government has a strong, credible voice with national government. We aim to influence and set the political agenda on the issues that matter to councils so they are able to deliver local solutions to national problems.

2. The Association of Directors of Adult Social Services (ADASS)

2.1. ADASS represents Directors of Adult Social Services in councils in England. As well as having statutory responsibilities for the commissioning and provision of adult social care, ADASS members often also share a number of other responsibilities for the commissioning and provision of housing, leisure, library, culture, arts, community services and a significant proportion also hold the statutory role of children’s services Director.

3. Summary

3.1. For a number of years local government has been at the forefront of making the case for change in the way that support and care is commissioned and delivered. We broadly support the proposals set out in the Bill.

3.2. The reforms being implemented through the Care Bill need to be fully costed and funded as new burdens. This means funding both implementation in 2015/16 (for which £335 million has been allocated) and supporting on-going running costs (money for which will be allocated through future Spending Reviews).

3.3. Assurance that there is sufficient funding for the reforms is essential and there should be a mechanism for providing this. Assurance could, for example, be built into the process by requiring the Care and Support Reform Programme Board to confirm that it is confident in funding levels as a pre-condition of implementation. The LGA and ADASS are calling for the Department of Health to make sure that there is sufficient funding, for example, to cover the additional duties relating to carers, social work in prisons, the potential impact of introducing the principle of general wellbeing to the eligibility criteria and to cover the impacts of the bill upon ordinary residency costs.

3.4. The LGA and ADASS recommend that a national body oversee and administer the universal Deferred Payment Agreements (DPAs). Through their own work, including workshops with councils, the Chartered Institute of Public Finance and Accountancy (CIPFA) have similarly concluded that deferred payment should be overseen by a national deferred payment company. Whilst the Government has already committed £110 million to funding new burdens of DPAs, a nationally-run scheme will remove any financial and reputational risks to councils if this funding is inadequate. This would provide councils with the flexibility to opt into a national framework for deferred payments should they wish to do so. The system would be similar to the way the national Student Loans Company operates.

3.5. There is much detail still to be provided by regulations. We understand that there will be 25-30 pieces of secondary legislation required alongside statutory guidance in areas such as eligibility, assessments, charging, the operation of the care account, annual reporting and universal deferred payment. Until this detail is available, it is difficult for local authorities to start working through how they will implement the Bill.

4. Funding

Baseline funding

4.1. A fundamental difficulty with the Care Bill’s proposals is that they detach policy direction and decisions from financial direction and decisions. The overall context in which the Bill is being considered, namely the need to identify further savings across the public sector, does not fit well with the aspirations of the Bill.

4.2. Financial sustainability is the greatest challenge facing local public services. In the period of the current Parliament, local government’s core funding will fall by 40 per cent and the Audit Commission’s Tough Times 2013 [1] report independently verifies the huge financial challenge faced across local government.

4.3. The funding gap is growing at around £2.1 billion a year. It is created by a combination of funding reductions and spending pressure. If current Government proposals are confirmed, this could be as high as £15.3 billion.

4.4. In addition, the recently published provisional local government finance settlement [2] confirmed that the central government grant to run local services will fall by 8.5 per cent over the next two years, which includes NHS support for social care. Discounting the NHS support for social care, which is not available for shire district councils, the reduction is 15.9 per cent.

4.5. Despite councils’ best efforts to protect frontline services, the reality of cuts on this scale has meant that adult social care has not been immune to their impact. Adult social care budgets have therefore reduced by £2.68 billion over the last three years (20 per cent of the budget), compounded by the cost of demography which is approximately 3 per cent. It costs around £400 million a year just to meet on-going demographic pressures.

Funding for the Care Bill reforms

4.6. The June 2013 Spending Round announced £335 million for implementation in 2015/16, which we understand breaks down as follows:

· £145 million for early assessments and reviews.

· £110 million for deferred payment (cost of administering the loans and the loans themselves).

· £20 million for capacity building including recruitment and training of staff.

· £10 million for an information campaign.

· £50 million for capital investment, including IT systems (this sits within the Better Care Fund).

4.7. The Department of Health has also identified £135 million of other costs associated with reform to cover, for example, national eligibility, training for social workers, and the implementation of statutory Safeguarding Adults Boards. The Government’s position is that these costs should be funded through the Better Care Fund. Local government does not oppose this money sitting in the BCF. These costs should however cover new burdens meaning that the £135 million has to be new money to councils.

4.8. The success of the Bill will however be jeopardised if the reforms are laid over a system that is itself underfunded.

5. Further assurance mechanism for funding

5.1. We recommend that a new clause be inserted into the Bill to provide assurance that the funding for the reforms is adequate. The Care and Support Reform Programme Board brings together senior figures from central and local government as well as senior figures from the wider sector.

5.2. The Board would provide the assurance as a precondition of the provisions being implemented in 2015/16. This would provide a formal mechanism which would provide assurance that the costs of reform are sufficiently funded.

6. Deferred payment system

6.1. We recommend introducing a new clause into the Bill to create a national system for running deferred payment agreements and loans. A national body would oversee the operation of the differed payments so as to mitigate the financial and reputational risks that councils would be exposed to if they are to run it. Such a body overseeing a deferred payments system would help achieve economies of scale and strengthen public confidence in the process.

6.2. The Bill should provide councils with the flexibility to opt into a national framework for deferred payments should they wish to do so. CIPFA, through their work with local government, have arrived at a similar conclusion.

6.3. The LGA and ADASS have analysed the Department of Health impact assessment for the deferred payment system. The Department models the cost of the scheme based on assumed average length of a DPA. We have compared their estimates against the costings developed by a London borough that are based on assumed average length of stay in residential care. In our opinion a likely figure for the cost of deferred payment lies somewhere in between these two sets of figures.

6.4. Our assumptions are based on the mid-point between the Government’s figures and the London Borough’s initial estimate of costs (the Government’s estimates of cost are far lower than the London Borough). LGA calculations are as follows:

· Average scheme length of 2.7 years, with another 0.4 years on average to recover the debt.

· Average annual cost of care per person of £18,800 in year one, uprated by inflation + 2 per cent thereafter (the uplift is in line with the impact assessment).

· Average number of people joining per year of 6,500 in year one, uprated by demographic growth thereafter.

· Interest is assumed to cover the cost of borrowing and other similar elements, and as such both factors are excluded from the calculations.

6.5. Our analysis shows the costs of deferred payment as follows:

Total value of loans / £ million

London borough

Government

LGA

2015/16

107

139

122

2016/17

331

147

379

2017/18

684

155

743

2018/19

1,165

164

786

2019/20

1,233

174

832

2020/21

1,304

184

880

2021/22

1,380

194

930

2022/23

1,460

206

984

2023/24

1,544

218

1,041

2024/25

1,633

230

1,101

6.6. The crude year one cost is likely to be near, or somewhat in excess of, £110 million. It includes the cost of administering the loans, and the loans themselves. This will largely be dependent on the number of people opting into the system.

6.7. In the longer term, the deciding factor in many ways is the number of years it takes for an average deferred payment agreement to finish and the debt to be recovered. The longer this period, the more debt councils will have to manage at any one time. After this initial shock, there is some ‘levelling off’. The main factors affecting the cost to councils will be demographic pressure, inflation and the cost of borrowing.

6.8. Our figures are indicative only at this time and we will be doing further work to understand the likely cost of deferred payment. What is clear, however, is the key risk at play; whether central government has underestimated the average length of the DP agreement. If it has, local government could be exposed to significant reputational and financial risks. This risk is best managed at a national level through a standalone body whose financial risk is underwritten by central government.

January 2014


[1] Audit Commission, Tough Times 2013, available at: http://www.audit-commission.gov.uk/2013/11/toughtimes2013/

[2] DCLG, Provisional Local Government Finance Settlement 2014/2015, available at: https://www.gov.uk/government/publications/draft-local-government-finance-report-2014-to-2015

Prepared 17th January 2014