Adult social care: a pre-Budget report Contents

2Local government funding and adult social care

4.To understand properly the impact of the Spending Review 2015 on social care, we looked back at the overall changes to local government funding and social care funding since 2010, and set these in the context of pressures on adult social care services.

2010 to today: funding pressures on local government and adult social care

5.Since 2010 local authorities have had to cope with a significant reduction in the core grant they receive from central government. Between 2010–11 and 2015–16, as part of its plan to reduce the fiscal deficit, the Government decreased funding for local government by an estimated 37% in real terms.2 Taking into account council tax receipts, this was an estimated 25% real-terms reduction in local authorities’ income.3 The 2015 Spending Review announced that central government grant to local authorities will be reduced by £6.1 billion by 2019–20, which it was stated would be matched by projected increases in council tax and business rates of £6.3 billion by 2019–20.4 The Government has described this as a “broadly flat settlement”,5 the consequence of which is that councils will themselves have to fund the costs of inflation and increasing demand for care.

6.Adult social care is councils’ biggest area of discretionary spend, comprising around a third (32.6%, £14.4 billion) of their spending in 2016–17.6 The Local Government Association (LGA) said that social care “inevitably has to offer a significant contribution to the council’s full savings requirement to help tackle the overall funding gap”.7 Spending on social care over the years demonstrates this: in 2015–16, councils spent £16.97 billion on social care, 1.5% less in real terms than in 2005–06 when the figure was £14.36 billion.8 In real terms, the National Audit Office estimates there has been a 7 per cent reduction in spending on adult social care by local authorities between 2010 and 2015 and the House of Commons Library has calculated that real terms funding fell by -8.4% between 2010–11 and 2016–17.9 The Association of Directors of Adult Social Care’s (ADASS) Budget Survey 2016 showed that adult social care savings amount to 28.5% of councils’ total planned savings in 2016–17.10 We explore how councils have made savings at paragraphs 23 to 29.

7.Alongside reducing levels of core funding, councils have faced increasing pressure on their services from inflation, an increasing population and increases in core costs, such as the National Living Wage. Furthermore, social care has faced its own particular set of cost pressures which have had to be accommodated by savings to social care budgets. We explore these cost pressures at paragraphs 10 to 22.

8.The Government made extra funding available over the last spending review period, allocating £2 billion a year by 2014–15 to support social care.11 Sarah Pickup, Deputy Chief Executive of the LGA, described this as a “significant effort [ … ] to address the funding issues in social care”, but also said that it had not been sufficient, because of demographic pressures and the reductions in councils’ overall budgets: “You think you have solved the problem, but if you haven’t funded the council’s other pressures some of that falls back on adult social care”.12

9.When we asked witnesses whether there was a shortfall in funding for adult social care at the end of the 2010–15 spending review, Ray James, Immediate Past President of ADASS, said that his organisation had estimated the figure at £4.6 billion in real terms.13 The LGA estimated that adult social care had had a funding gap of £5 billion from 2011–12 to 2015–16.14

Key cost pressures on adult social care

10.Sarah Pickup of the LGA said that, by 2019–20, there will have been “ten years of flat cash for social care in the face of demographic pressures, inflation, Deprivation of Liberty Safeguards, the implementation of the Care Act and all the other responsibilities and expectations that have come our way”.15 This summarises what councils told us about the range of cost pressures they face, all of which are increasing over time. We discuss the main cost pressures on councils’ adult social care budgets in the paragraphs below.

Increasing demand

11.The impact of demographic changes leading to increasing demand for social care was raised by many witnesses. Richard Humphries, Assistant Director of Policy at The King’s Fund, said:

We now have hundreds of thousands of people in their 80s and their 90s. That has increased by almost a third in the last 10 years and is set to double in the next 20 years. These are largely people who have a lot of things wrong with them: at least two health conditions. Many will have dementia; many will have frailty; and they will require not just a substantial amount of care but a mixture of healthcare as well as social care [ … ]

[ … ] the successes of medical science and improved living conditions that see older people living longer very often also see many more younger people living longer with disabilities and complex health conditions.16

12.Councils had observed these changes in the people coming forward for social care. The London Borough of Camden, for example, said that they faced “increasing complexity of care requirements at both ends of the age scale”17 and Cllr Colin Noble, Leader of Suffolk County Council, said that they had identified about 9,000 people over the age of 75 with dementia.18 Witnesses, including the Health Minister, David Mowat, identified the increasing costs of caring for adults with learning disabilities: “The life expectancy of people with learning difficulties has gone up massively, even in the last decade. These people are very expensive in terms of care”.19

13.Lifestyle is also highly relevant to the scale of demand. Cllr Jason Arthur, Cabinet Member for Finance and Health at the London Borough of Haringey, said that the increasing prevalence of diabetes meant that they had to provide care to younger residents20 and Cllr Tony Kirkham, Director of Resources at Newcastle City Council, said that people were starting to have “life threatening issues from their early 60s in Newcastle”.21

The Care Act 2014

14.The Care Act 2014 reformed and modernised social care law and, while councils were enthusiastic about the changes it brought in, many highlighted the additional costs they had faced, firstly, in implementing the legislation and, secondly, from the resultant increase in demand for social care services. The North West region of ADASS said that the Care Act funding allocations had been “insufficient to meet the requirements of Part 1 of the Care Act”.22 The National Audit Office’s report on the first phase of the Care Act, published in June 2015 (which we refer to as “the NAO’s Report”), said that:

The Department [of Health] estimates it will cost local authorities £470 million in 2015–16 to carry out. We estimate that that Care Act Phase 1, including the cost of white paper-related activities which did not require legislation and central programme spend, will cost £2.5 billion to implement from 2013–14 to 2019–20. The largest cost is £1.2 billion for carers’ assessments and services, a new entitlement.23

They also concluded that a significant proportion of the funding from the Department of Health was not new money, as £174 million (40%) of Care Act funding would come through the Better Care Fund.

15.Some councils said that the Care Act had resulted in an increased demand for assessments and services at a time when their funding had been reduced. West Berkshire County Council said that it had placed “a significant financial pressure” on the council, the burden of which has “fallen on the council tax payers of West Berkshire”.24 Richard Humphries of The King’s Fund said that the legislation had “substantially added to both the expectations and statutory duties of local authorities without necessarily being reflected in the money they get”.25

16.The NAO’s report found that the Department of Health may have underestimated the cost of extra assessments and services, particularly in relation to carers. The evidence councils gave us supported this: Bristol City Council, for example, reported a 23% increase in the number of carers’ assessments at a cost of £142,000.26 In addition, many councils had seen an increase in safeguarding activity, necessitating investigatory action, which had added to cost pressures.27

National Living Wage

17.In the July 2015 Budget, the Government announced the National Living Wage (NLW) for those aged 25 and over, initially set at £7.20 per hour rising to around £9 per hour in 2020.28 Gateshead Council explained what the NLW meant for social care:

The majority of commissioned adult social care services rates of pay are around the minimum wage level [ … ] The move to the NLW with increases far in excess of inflation has resulted in the need to pay providers significant fee increases to enable them to pay staff the statutory minimum required. It has also meant those providers paying marginally higher wages have had to look to increase their pay rates and consequently are seeking increases in commissioned rates from the council.29

18.While the NLW has given care workers, among whom recruitment and retention is a significant issue, a much needed increase in pay, it has substantially added to the funding pressures on councils since taking effect in April 2016, and will continue to do so. The ADASS 2016 Budget Survey suggested that the total cost for councils, including compliance with the existing national minimum wage, will be over £600 million in 2016–1730 and £360 million in 2017–18.31The pressure on councils from the NLW varies depending on the number of employees in their area on the national minimum wage. For example, among the councils that submitted evidence to us, the costs of the NLW for social care in 2015–16 ranged from £350,000 for West Berkshire County Council32 to £13.7 million for Lancashire County Council.33

19.We note that, in the 2015 Spending Review, the Government said that the social care precept and the improved Better Care Fund funding would “taken together [ … ] support councils to continue to focus on core services and to increase the prices they pay for care, including to cover the costs of the NLW”.34 However, the improved Better Care Fund funding was not available in 2016–17 and the revenue from the precept alone was not sufficient for the councils who responded to our inquiry to cover the costs of the NLW that year; for example, Sefton Council said that the precept raised only a third of what the NLW had cost them.35 We look at the amount raised by the precept in more detail at paragraphs 44 to 56.

Deprivation of Liberty Safeguards

20.A Supreme Court judgement in March 2014 changed the interpretation of “deprivation of liberty” under the Mental Capacity Act 2005, resulting in more people who have been deprived of their liberty for treatment, care or to protect them from harm coming forwards for safeguarding assessments by councils, ‘Deprivation of Liberty Safeguards’ (DoLS). Although the Department of Health gave councils £25 million in 2015–16 to meet the associated costs, the LGA has estimated that DoLS are costing councils £127 million a year.36 Kent County Council said that the number of applications for DoLS assessments they had received had increased from 286 in 2013–14 to 4,870 in 2015–16.37 Similarly, Essex County Council had seen the number of applications increase from 13 to 21 a day.38 West Berkshire County Council said that each assessment cost them £460.39 Hull City Council explained that the costs came from “The cost of funding assessments, training social workers so that they are qualified to carry out assessments and Court of Protection costs”.40

The Relative Needs Formula

21.Councils’ relative needs were assessed in 2013–14 to determine the starting point for the current business rate retention scheme and there has been no reassessment since then.41 Councils told us that they were seeing the impact of this on their share of business rates and revenue support grant. The London Borough of Havering, for example, said:

Since 2013 the formula has been frozen, changes in need are no longer considered. When mapped along with some of the changes in national policy, this has created significant additional burden, at a time when need is no longer considered, whilst demand for services is rising.42

22.Cllr Noble, Leader of Suffolk County Council, said that for his council, “the freezing of the relative needs formula and ageing population, with that slight increase in the county areas, reflect similar things—a 40% reduction over the last few years in terms of the amount of money we have had to spend”.43

Savings and efficiencies

2010 to today

23.As noted in paragraph 6, after spending on schools where their discretion is limited, councils spend the largest proportion of their funds on adult social care and the adult social care budget has therefore had to contribute to the savings councils have needed to make. The LGA said that “adult social care had to deal with a funding gap of £5 billion from 2011–12 to 2015–16” and that:

Half of this came from savings and service reductions within adult social care, with the other half coming from savings from other council services including library and youth services (in other words, savings above the trend that general council funding changes would have implied).44

24.While the amount varied—for example, Hull City Council told us that, since 2010, they had had to find £18 million45 and Norfolk County Council had to find £77 million46—all councils who responded to our inquiry had been required to make savings in their spending on social care. Most, however, had protected social care as far as possible; for example, Tony Kirkham, the Director of Resources at Newcastle City Council, told us that his council had ensured that social care contributed only £39 million of the £221 million savings that needed to be made but, to do this, had had to halve its leisure budget.47

25.In terms of savings within social care, we learnt that they had partly been achieved through service redesign and shifting the focus of services to prevention, early intervention and promoting independence. The London Borough of Haringey described how they were meeting their savings target of £24 million by 2018–19 by refocusing their adult services on “providing the right support at the right time, preventing needs escalating and reducing future demand on care services”.48 Similarly, Janice Dane, Assistant Director of Early Help and Prevention at Norfolk County Council, said that her council was:

Trying to meet people’s needs in other ways as much as possible: giving information and advice at the right time, re-ablement, assistive technology—anything that helps reduce people’s need for funding services while giving them the outcome of staying in their own home, which most people say they want.49

26.However, Sarah Pickup of the LGA said that the level of savings needed was such that they were also having to be obtained through service reductions:

Some of that would be legitimate savings through proper efficiencies, good service redesign and preventive measures, but some of it was just squeezing the amount of care: you are meeting the need, but you are just meeting the need. You are meeting a need but you are not allowing someone to live a life, which is part of what social care is about.50

Indeed, our witnesses told us that the number of people they provided care for had reduced over the last five years, in Newcastle City Council’s case from 9,780 to 5,237.51 The Director of Resources, Tony Kirkham, said that this had been through:

Strict adherence to the eligibility criteria. Whereas we might have a much more rounded package of support, we are now, as our assistant director for adult services said, trying to prevent deterioration rather than actually helping people to thrive.52

This is supported by what we heard from witnesses who receive local authority funded social care; for example, Anna Severwright who, when asked whether her care and support package had been increased to meet her needs, said:

I was reviewed last year and my hours were actually increased to 23, but in those three and a half years I had deteriorated a lot—a lot more, I think, than what the hour increase met. I could have done with a bigger increase, I felt, but I was just relieved that they weren’t trying to cut any care.53

Official data on the number of people receiving care over the years, published research and evidence to this inquiry indicate that people are not getting the care required or that the care they already have is not being increased as their needs grow. We plan to explore this further, as well as the impact of funding pressures on the quality of care, carers, the care provider market, the care workforce and the NHS, in our final report.

Capacity to make further savings

27.The Comptroller and Auditor General, Sir Amyas Morse, recently observed that, while local government was initially able to respond to budget reductions by making efficiencies, this has shifted over time from doing “‘more for less’ to ‘less for less’”.54 We heard evidence to support this. Cllr Noble, Leader of Suffolk County Council, said that “for all the different [efficiency programmes] we run, there is a law of diminishing returns—they will only go so far”.55 Indeed, ADASS has reported that, although savings planned for this year are less than last year:56

The proportion of savings planned to be secured through efficiencies has fallen from 75% of savings in 2015–16 to 55% in 2016–17 whilst savings from service reductions increased from 18% to 39% over the same period. Fewer savings are proportionately being made from efficiencies and more from reducing frontline services.57

They also said that Directors of Adult Social Services had reported that at least 24% of this year’s savings will come from “cutting services or reducing personal budgets”.58

28.At the same time, in an attempt to meet need, councils have already been using reserves or underspending on other council services by, according to ADASS, as much as £168 million across 94 councils in 2015–16.59 They estimate that this will rise to £441 million for 2016–17.60 Ray James, who gave evidence to us on behalf of ADASS, said that “most councils were using one-off money to balance the books last year, and they cannot continue to do that in a sustainable way”.61 Jon Rouse of Greater Manchester Health and Social Care Partnership said that this year in Greater Manchester they were “filling [the gap] mainly through reserves and underspends, but that of course cannot go on forever”.62 Despite this, ADASS say that councils will need to make further savings of “around the £1 billion mark throughout the period up to 2020”.63

29.Since 2010 councils’ overall budgets have reduced, resulting in savings in spending on social care, their largest area of discretionary spend. Combined with costs from growing demand for services, the implementation of the Care Act 2014, the National Living Wage and Deprivation of Liberty Safeguards, this has led to a funding shortfall in most councils’ social care budgets.

30.Councils have partly mitigated the impact of budget pressures in the past with efficiencies and savings, but we do not believe this is sustainable and agree that councils have moved from doing ‘more for less’ to ‘less for less’. There is evidence that people are not getting the care required or that the care they already have is not being increased as their needs grow.

2 National Audit Office, Financial sustainability of local authorities 2014 (November 2014)

3 National Audit Office, Financial sustainability of local authorities 2014 (November 2014)

4 HM Treasury, Spending Review and Autumn Statement 2015 (November 2015)

5 Department of Health and Department for Communities and Local Government (SOC216)

6 National Audit Office, Local Government Overview 2015–16 (November 2016)

7 Local Government Association, Adult social care funding: 2016 state of the nation report (November 2016)

9 Commons Library Briefing, Adult Social Care Funding (England) (February 2017)

10 Association of Directors of Adult Social Care, Budget Survey 2016 (July 2016)

11 HM Treasury, Spending Review 2010 (October 2010)

12 Q57 [Sarah Pickup]

13 Q58 [Ray James]

14 Local Government Association (SOC075)

15 Q57 [Sarah Pickup]

16 Qq4–5 [Richard Humphries]

17 London Borough of Camden (SOC129)

18 Q82 [Colin Noble]

19 Q387 [David Mowat]

20 Q82 [Jason Arthur]

21 Q82 [Tony Kirkham]

22 North West region ADASS (SOC139)

23 National Audit Office, Care Act first-phase reforms (June 2015)

24 West Berkshire County Council (SOC162)

25 Q7 [Richard Humphries]

26 Bristol City Council (SOC132)

27 See, for example, East Sussex County Council (SOC012) and Association of Directors of Adult Social Services South Eastern Region (SOC171)

28 HM Treasury, Summer Budget 2015 (July 2015)

29 Gateshead Council (SOC146)

30 Association of Directors of Adult Social Care, Budget Survey 2016 (July 2016)

31 Figure supplied by the Association of Directors of Adult Social Care to the Communities and Local Government Committee

32 West Berkshire County Council (SOC162)

33 Lancashire County Council (SOC141)

34 HM Treasury, Spending Review and Autumn Statement 2015 (November 2015)

35 Sefton Council (SOC167)

36 Local Government Association (SOC075)

37 Kent County Council (SOC035)

38 Joint written submission from Cambridgeshire County Council, Essex County Council, Hertfordshire County Council, Norfolk County Council, Suffolk County Council, Southend Council and Thurrock Council (SOC 195)

39 West Berkshire County Council (SOC162)

40 Hull City Council (SOC048)

41 A Fair Funding Review is currently underway to review the needs assessment formula in preparation for the implementation of 100% retention of business rates and the Government is working with a sector-led technical working group as part of this.

42 The London Borough of Havering (SOC010)

43 Q83 [Colin Noble]

44 Local Government Association (SOC075)

45 Hull City Council (SOC048)

46 Norfolk County Council (SOC103)

47 Q83 [Tony Kirkham]

48 London Borough of Haringey (SOC159)

49 Q118 [Janice Dane]

50 Q58 [Sarah Pickup]

51 Q93 [Tony Kirkham, Colin Noble]

52 Q93 [Tony Kirkham]

53 Q296 [Anna Severwright]

55 Q89 [Colin Noble]

56 £941 million in 2016–17 against £1.1 billion in 2015–16

57 Association of Directors of Adult Social Care, Budget Survey 2016 (July 2016)

58 Association of Directors of Adult Social Care, Budget Survey 2016 (July 2016)

59 Association of Directors of Adult Social Care, Budget Survey 2016 (July 2016)

60 Association of Directors of Adult Social Care, Budget 2017 representation (January 2017)

61 Q62 [Ray James]

62 Q204 [Jon Rouse]

63 Association of Directors of Adult Social Care, Budget Survey 2016 (July 2016)

3 March 2017