Adult social care: a pre-Budget report Contents

4Adult social care funding mechanisms

39.This chapter brings together the evidence we heard about the mechanisms by which funding for social care is being made available to local government, namely the social care precept, the improved Better Care Fund (improved BCF), and the adult social care support grant.

The social care precept

40.The social care precept allows councils to raise council tax by up to 2 per cent each year, or 3 per cent in in 2017–18 and 2018–19 only, to fund social care. James Lloyd, Associate Fellow at the Strategic Society Centre, explained the significance of this new way of funding social care:

It is a step forward in political terms that finally we have an explicit acknowledgement in fiscal policy that there are funding pressures on the social care system. Having the precept included as a line on people’s council tax bills does hopefully raise awareness of the fact that local authorities actually do this thing that we call social care.79

Mr Lloyd went on to say, however, that it had “multiple limitations and drawbacks”, which were illustrated by the evidence we received.

Assumptions about the amount raised

41.The Government has forecast that the 2% social care precept will raise the following amounts over the spending review period:

2015–16

2016–17

2017–18

2018–19

2019–20

£ million

-

392.8

820.9

1,289.8

1,804.0

Source: DCLG Core spending power supporting information, 15 December 2016

42.In addition, it has stated that the flexibility to raise the precept to 3% in 2017–18 and in 2018–19 could provide a further £208 million and £444 million respectively.80 However, the Local Government Association (LGA) said that the value given by the Government to the precept is based on “assumptions that cannot be guaranteed”. They said that the assumptions were that:

a. All councils will use the precept to the maximum amount. Not all councils used the precept this year (144 out of 152 councils implemented it, generating £382 million income) and it is difficult to predict how many will use the option in future years.

b. The number of Band D equivalent dwellings eligible for full council tax will rise by 7.8 per cent or 1.3 million over the four year period. At council level this varies from a 0 per cent increase to a 25 per cent increase, suggesting that some councils may struggle to match the forecast.

c. Core council tax will increase by CPI each year. It is difficult to say with any real certainty what level councils will set their council tax at in future years.81

43.All of the councils that we heard from had raised the precept in 2016–17, but not all of them were sure that they would continue to do so. The London Borough of Camden said they had “reluctantly”82 levied it and Gateshead Council said that the Government had assumed:

That a local area can not only grow its base substantially year on year but that its residents will be willing and able to pay uplifts of up to 4% year on year. This moves funding for essential Council services from government funding to local residents. This does not take into account the mix of a Council’s tax base and their ability to pay. In Gateshead 61% of our residents are in band A, the lowest property value banding.83

According to the LGA, however, 97% of councils (147 out of 151) are considering or have approved introducing the precept in 2017–18, which they say would raise £543 million. Of these, 72% are considering or have approved introducing the 3 per cent precept.84

The amount raised

44.All of the councils that submitted evidence agreed that, although helpful, the amount raised by the 2016–17 precept was not enough to tackle the funding pressures they faced or to cover the costs of the National Living Wage (NLW).85 In the context of overall spending on social care, The King’s Fund said that the £382 million the precept raised in 2016–17 “represents less than 3 per cent of council spending on adult social care”.86 Cllr Jason Arthur, Cabinet Member for Finance and Health at the London Borough of Haringey, told us that:

For us, the social care precept, although useful, ultimately hasn’t really addressed the fundamental challenges that we face, with regard to either the national living wage or, ultimately, all the pressures on our social care budget—the demand increases. Somewhere like Haringey, where we have high levels of deprivation, the impact of the precept was relatively limited compared with, perhaps, other boroughs where the property values are slightly higher.87

However, the impact of the precept was limited even for wealthier councils which are able to raise more council tax; for example, Surrey County Council said that the £12 million raised by the precept only covered 34% of the cost pressures they faced in adult social care.88

45.The flexibility for local authorities to bring forward the social care precept by raising council tax from 2 per cent to 3 per cent in 2017–18 and 2018–19 (but then not at all in 2019–20) was recognition of the sector’s call for funding to be front-loaded. The Government expects this to provide an additional £208 million in 2017–18 and an additional £444 million in 2018–19.89 The County Councils Network said it would have only a “nominal effect” and that councils were likely instead to “draw down on reserves to minimise the impact on local council tax payer”.90 Shortly after the flexibility was announced, council leaders were reported to be doubtful as to whether they would use it.91 The Leader of Kent County Council, Cllr Paul Carter, was reported as saying that it would make “very little difference over the medium-term” (about £5 million extra) and that he wanted to keep council tax bills “as low as possible”.92 The House of Commons Library has calculated that, assuming all councils opt to do so, increasing the precept to 3% in 2017–18 and 2018–19 could potentially result in around £677 million additional revenue over the four year period.93

Variation in the amounts raised

46.The variation across councils in the revenue generated by the precept has received criticism. The King’s Fund said:

Relying on the precept is also likely to widen the existing inequalities in access to publicly funded social care, as the places with the greatest need will be the least able to raise extra money. This is because areas of higher deprivation contain fewer homes in higher Council Tax bands. The King’s Fund analysis of 2016–17 shows that the 10 least deprived council areas will raise almost 2.5 times as much from the precept as the 10 most deprived. The amount raised per head of the adult population varies from £5 in Newham and Manchester, to £15 in Richmond upon Thames.94

47.At the same time, deprived areas with the least ability to raise extra funds will face higher costs of implementing the NLW as a larger proportion of employees in their area will be on the national minimum wage. According to the Association of Directors of Adult Social Care (ADASS) the amount raised by the precept in 2016–17 was less than two thirds of the costs of the NLW that year, which they calculated at £612 million.95 At individual council level, however, the gap was often much greater; for example, the precept only covered a third of the costs of the NLW for Sefton Council96 and half the costs of it for St Helen’s Council.97

48.To address this variation, the Government has said that additional funds in the improved Better Care Fund (improved BCF) will top up the varying amount that councils raise through the precept. Marcus Jones, the Local Government Minister, said:

As we go forward, obviously the cumulative effect of the adult social care precept will ameliorate the situation for the places with the larger council tax bases, by which time the more significant money from the improved Better Care fund will be benefiting the places that have smaller council tax bases.98

49.However, the first tranche of funding from the improved BCF will not reach councils until 2017–18, despite the fact that the precept was available in 2016–17 and the NLW was also introduced that year. We will explore this in more detail at paragraphs 62 to 64.

A short-term funding mechanism

50.Witnesses suggested that the precept could only be a short-term funding mechanism for social care. James Lloyd of the Strategic Society Centre said it was a “temporary fix during the current spending review”99 and Richard Humphries, Assistant Director of Policy at The King’s Fund, said it was not a sustainable solution due to the varying amount that it raises.100 The evidence we heard about councils’ reluctance to levy the precept in future years also indicates it may not be long-lived.

51.It was also unpopular due to the fact that it was an extension of council tax, Cllr Colin Noble, Leader of Suffolk County Council, said that he was not in favour of increasing council tax because “it is a tax you have to pay and it is very difficult for families that cannot really afford significant increases”.101 Cllr Arthur of the London Borough of Haringey said his council was “keen to keep it as low as possible”.102 On this point, the Local Government Minister, Marcus Jones, said:

Whether it is collected locally or nationally, it is taxpayers’ money in either case, and that is therefore a cost to people as individuals. The way in which the majority of adult social care is funded enables local people, through raising local taxation, to support the care needs of local people.103

52.James Lloyd of the Strategic Society Institute argued that council tax was a “regressive tax” and asked why there should be a link between “social care and the demographic growth of demand for social care to the growth in council tax revenues”.104 Sarah Pickup, Deputy Chief Executive of the LGA, identified the further problem that:

It only works in this spending review period with that BCF to balance out the areas that have less access to resources. If we go into the next spending review period, you would either need some more BCF money to do the balancing or you would have to do it through the new business rates retention.105

53.The precept is recognition that councils need extra funding and, as a hypothecated tax, is helping to bring social care into the public consciousness. However, Government assumptions about the amount it will raise may be somewhat optimistic. Although some councils are concerned about the impact on their residents of raising council tax, we believe that, given the severity of the current situation, all councils should use the precept to its maximum amount to raise funding for adult social care.

54.The amount raised by the precept is not going to be enough to tackle the funding pressures councils face or cover the increasing costs of the National Living Wage. The £382 million raised by the precept in 2016–17 represents less than 3 per cent of council spending on adult social care and is significantly less than the cost of implementing the National Living Wage in 2016–17, estimated at £612 million. While the flexibility for councils to raise the precept by an additional 1% in 2017–18 and 2018–19 is a recognition of the scale and urgency of the financial pressures facing social care and the sector’s call for funding to be front-loaded, it is not a significant increase in funding in the context of the funding gap.

55.Furthermore, as the amount raised varies across councils and does not correlate with need and National Living Wage costs, the precept is dependent on the improved Better Care Fund to offset the variations in the amount it raises.

56.Given these limitations, the precept is not adequate as the main solution to the funding shortfall, but we believe that councils should exploit the opportunities it provides for increasing the funding available to them in the short-term. Arguments about the lack of central government funding will be weakened if councils have not raised the maximum amount available to them.

The adult social care support grant

57.The 2017–18 Provisional Local Government Finance settlement announced a £240 million adult social care support grant for 2017–18, distributed according to relative need.106 The funding was generated as a result of reforms to the New Homes Bonus, specifically the introduction of a national baseline for housing growth of 0.4%, below which the bonus will not be paid to local authorities. The Minister for Local Government told us that “It is a short-term measure to support the places where there are the greatest challenges at present”.107

58.This announcement generated criticism from the sector. In a press release on the day, Lord Porter, Chairman of the LGA, said it was:

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.108

59.The County Councils Network said that the “reprioritisation of funding” is “neither an ideal or sustainable solution to the significant funding shortfall facing adult social care”109 and The King’s Fund said it was an “inadequate response to the social care crisis”.110 Furthermore, the LGA has said that their analysis suggests that “57 social care authorities might also be worse off because they will lose more in NHB payments than they gain in adult social care support grant”.111

60.The adult social care support grant is an un-ring fenced reprioritisation of funding from the New Homes Bonus to social care and therefore does not represent new money for councils. Furthermore, it is distributed via the relative needs formula which, having been frozen since 2013–14, no longer reflects current need. Moreover, it represents a small proportion of the funding gap in 2017–18, estimated at £1.6 billion by the Association of Directors of Adult Social Care, and is available in that year only. Although welcome recognition of the upfront funding pressures facing the system, given these limitations it will not significantly ameliorate the funding shortfall in the short- and longer-terms.

The improved Better Care Fund

61.The Spending Round 2013 announced the creation of a Better Care Fund (BCF); local health bodies and councils would pool existing funding into the BCF and agree joint plans for closer working between health and social care.112 In 2015–16, the BCF’s minimum pooling requirement was £3.8 billion. In the Spending Review 2015, the Government announced that additional funding for social care would be made available in an “improved Better Care Fund” (improved BCF).113

Amount and timing

62.The Government has said that funding from the improved BCF will be available in increasing amounts in 2017–18, 2018–19 and 2019–20:

2015–16

2016–17

2017–18

2018–19

2019–20

£ million

-

-

105

825

1500

Source: DCLG Core spending power supporting information, 15 December 2016

63.The LGA said that, by 2019–20, £800 million of the total £1.5 billion of the improved BCF funding will come from planned savings to the New Homes Bonus.114 They went on to ask what would happen to social care funding if the savings were not realised. Furthermore, concerns were raised about the sufficiency of the overall funding available through the improved Better Care Fund, with ADASS saying that it only “reaches a significant contribution to the crisis in 2019–20”.115 Tony Kirkham, Director of Resources at Newcastle City Council, said that the funding would:

Come to us more proportionately because of our ability to raise council tax, but even when you take that into account—by year three the council would be anticipating about £12 million from that—and you add back the social care precept of £1.7 million for each of those years, we will still not be meeting just the national living wage pressure from those two sources.116

64.As the table above shows, the improved BCF funding is backloaded, both in terms of timing and quantity. The LGA said “there is no money available this year and only £105 million available in 2017–18, despite acute pressures impacting on the care system today”.117 Richard Humphries of The King’s Fund said that “the problem with it is that most of it does not start to arrive until 2018”.118 In their joint written submission, The King’s Fund and the Nuffield Trust observed that the timing was “inconsistent with the frontloading of additional funding for the NHS”.119 Ray James, the Immediate Past President of ADASS, said that as a result of the timing of the improved BCF funding:

The most acute years will be 16–17 and 17–18, because of the injection of money that is being signalled for 18–19 and 19–20. I think all the evidence points to the fact that there is a need for some of the funding signalled for later years to be accelerated and brought forward sooner, if we are not going to approach those later years with a bigger hole than we already have today.120

These sector organisations, along with councils,121 have therefore called for the funding from the improved BCF to be brought forwards.

Access

65.The 2017–18 Provisional Local Government Finance Settlement confirmed that the improved BCF funding would be allocated through a separate grant to local authorities,122 unlike the current BCF funding which is channelled through Clinical Commissioning Groups. However, the details of how the improved BCF will work are not yet known, in particular whether there are administrative requirements similar to those relating to the BCF. José-Luis Fernandez, Deputy Director of the Personal Social Services Research Unit, LSE, said that “as it is designed at the moment, the BCF is not going to fund a lot of home care, day care and those core services”.123 Richard Humphries of The King’s Fund set out some of the reasons why:

We saw a lot of process requirements, with plans that had to be submitted with ridiculous timescales, which had to be signed off and escalated if they were not good enough, all for a sum of money that is less than 5% of total NHS and social care budgets. While in some places the Better Care Fund helped to get local authorities and their NHS partners around the table, in other places it was, quite frankly, a pain in the neck for very little gain.124

66.This was echoed by witnesses from local government. Sarah Pickup of the LGA said that there were a lot of “complexities” in the way the BCF had been set up, “a lot of conditions” and “a lot of form filling and completion”,125 and Liverpool City Council assumed it would come with “additional responsibilities and new burdens”.126 Based on their case studies and stakeholder interviews, the National Audit Office also observed that the BCF had “created a significant bureaucracy, which some local areas found was disproportionate and had in some cases disrupted other integration work”.127

67.Despite the fact that the pressures on social care are acute, the improved BCF funding is back loaded in its timing and quantity, which also means that it was not available in 2016–17 to equalise the amounts raised by the precept. For these reasons, the improved BCF should have been available in 2016–17. Furthermore, the Government should confirm that councils will receive the full amount of the improved BCF, even if the savings from the New Homes Bonus are not achieved.

68.The exact details of how the fund will work have not yet been published. Evidence suggested that accessing funding from the BCF was bureaucratic and burdensome. The improved BCF funds should be dedicated to social care and councils should be free to use them flexibly, without having to meet requirements and conditions.

69.As we concluded in paragraph 38, estimates of the funding gap in 2017–18 range from £1.3 billion to £1.9 billion. We call on the Chancellor to use the Budget on 8 March to make the £1.5 billion 2019–20 tranche of the improved Better Care Fund immediately available to meet the shortfall in 2017–18.

70.Estimates of the funding gap vary as there is no single method or set of variables for identifying the precise amount required. We therefore request that the National Audit Office (NAO) build on its earlier work and determine the amount needed to meet the funding shortfall for the rest of this Parliament. We then call on the Chancellor to commit to closing the funding gap in line with the NAO’s recommendation.

Distribution

71.Both the improved BCF and the adult social care support grant will be distributed to councils via the adult social care relative needs formula. The 2016–17 Provisional Local Government Finance Settlement said that the improved BCF would be allocated:

Using a methodology which ensures every authority gets its share of the total funding available through the improved Better Care Fund and the Social Care Precept, as measured by the social care Relative Needs Formula.128

However, as discussed in paragraphs 21 and 22, the relative needs formula has not been updated since 2013–14, when needs and resources were assessed to determine the starting point for the current business rate retention scheme. Work to update the formula is, however, ongoing and the Committee also intends to contribute to this in the coming months, having commissioned its own independent research on the topic.

72.The County Councils Network said that the relative needs formula should be updated in order to better reflect demographic growth,129 highlighting that county areas which have “the largest and fastest growing over 65 population of any local authority type in England” are particularly affected. Kent County Council said needs redistribution should “focus on social care funding since this represents the largest proportion of budgets for upper tier authorities”.130

73.We note that work to review the needs assessment formula is ongoing and is expected to conclude by the end of 2018. The Fair Funding Review should prioritise work on the adult social care relative needs formula so that an updated formula can be used in the distribution of the improved BCF funding as soon as possible.


79 Q69 [James Lloyd]

80 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

81 Local Government Association (SOC075)

82 London Borough of Camden (SOC129)

83 Gateshead Council (SOC146)

85 See, for example, Lancashire County Council (SOC141), Rochdale Borough Council (SOC122), London Borough of Newham (SOC133)

86 The King’s Fund (SOC222)

87 Q96 [Jason Arthur]

88 Surrey County Council (SOC192)

89 LGFS

90 County Councils Network (SOC223)

91 Local Government Chronicle, Leaders express doubts over taking up 3% care precept offer, 16 December 2016

92 Local Government Chronicle, Leaders express doubts over taking up 3% care precept offer, 16 December 2016

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

94 The King’s Fund (SOC222)

95 Association of Directors of Adult Social Care (SOC134)

96 Sefton Council (SOC167)

97 St Helen’s Council (SOC014)

98 Q378 [Marcus Jones]

99 Q69 [James Lloyd]

100 Q27 [Richard Humphries]

101 Q98 [Colin Noble]

102 Q97 [Jason Arthur]

103 Q374 [Marcus Jones]

104 Q69 [James Lloyd]

105 Q65 [Sarah Pickup]

106 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

107 Q378 [Marcus Jones]

108 Local Government Association, LGA responds to the Local Government Finance Settlement, 15 December 2016

109 County Councils Network (SOC223)

110 The King’s Fund (SOC222)

111 Local Government Association, Submission to the 2017 Spring Budget, January 2017

112 HM Treasury, Spending Round 2013 (June 2013)

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

114 Local Government Association (SOC075)

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

116 Q97 [Tony Kirkham]

117 Local Government Association (SOC075)

118 Q18 [Richard Humphries]

119 The King’s Fund and the Nuffield Trust (SOC198)

120 Q62 [Ray James]

121 See, for example, written submission from Cambridgeshire County Council, Essex County Council, Hertfordshire County Council, Norfolk County Council, Suffolk County Council, Southend Council and Thurrock Council (SOC195)

122 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

123 Q33 [José-Luis Fernandez]

124 Q33 [Richard Humphries]

125 Q63 [Sarah Pickup]

126 Liverpool City Council (SOC127)

127 National Audit Office, Health and social care integration (February 2017)

128 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

129 County Councils Network (SOC223)

130 Kent County Council (SOC035)




3 March 2017