Personal budgets in social care Contents

2Funding and the adult social care market

Financial pressures on local authorities and Care Act obligations

12.Local authorities’ real-terms spending on adult social care fell by 7% between 2010–11 and 2014–15, and social care makes up a decreasing proportion of public spending.27 Meanwhile, demand for adult social care is growing as life expectancies increase. The Association of Directors of Adult Social Services has estimated that local authorities effectively reduced spending on adult social care by 31% between 2010–11 and 2015–16, after factoring in a notional amount of £3 billion to meet demand and price increases over this period.28 The Department of Health and the Department for Communities and Local Government acknowledged the financial challenges for local authorities, particularly those coming in the next two years. The Department of Health told us that local authorities have already transformed services to some extent, to enable services to be delivered within tighter budgets, and that the Department is working with the sector to continue to deliver transformational change.29 The Department for Communities and Local Government considers that it is the capacity and capability of local leadership that often determines the quality of financial management.30

13.The Department of Health and the Department for Communities and Local Government told us that the Spending Review process had considered the affordability of social care. They said the Spending Review gave local authorities additional funding to deliver adult social care through the 2% council tax precept and extra funding within the Better Care Fund.31 The contribution of the council tax precept will vary by local authority, due to local authorities’ differing starting points and abilities to raise more money from residents. The Department for Communities and Local Government told us that it has considered the differential impact on authorities and that the distribution of the Better Care Fund will act as a counter-balance.32

14.In addition to the reduction in funding, other policy changes create challenges for local authorities, in particular the National Living Wage. As a result of these and other changes, the Nuffield Trust, the Health Foundation and the King’s Fund estimate that there is likely to be an adult social care funding gap of between £2 billion and £2.7 billion by 2019–20, even taking into account the additional funding.33 The National Living Wage is not considered a “new burden” which would attract additional funding from central government. The Department of Health engages with providers in the sector and told us that there are cross-departmental discussions about the impact of the National Living Wage. However, it could not tell us when it would have analysis of the impact of the policy.34

15.The Department said personalisation is not itself a mechanism for making savings; the primary objective being to organise care around the person, although savings can occur under some circumstances.35 The Association of Directors of Adult Social Services echoed this view.36 However, local authorities are seeking savings as a result of wider financial pressures, some of which will be made through personalisation.37 This is reflected in the fact that 84% of directors of adult social services expect personalisation to be an area of savings in 2016–17.38 The National Audit Office has flagged that the Department of Health needs to keep under review whether cost-cutting is negatively affecting users. Similarly, Scope was concerned that reducing personal budgets would make them less effective.39 The Department believes that cost-cutting can be done intelligently and generally risks poorer user outcomes only when done crudely. It does not see itself as having a role in scrutinising the impact on users of specific savings mechanisms, but takes a broader view on whether local authorities are consistently meeting their statutory duties.40

16.Aspects of the Care Act are potentially expensive for local authorities. We understand the vital importance of local authorities providing support to users, but some Care Act requirements, such as the blanket requirement for all users to have an annual review, may not be in proportion to their needs and to safeguarding risks, and therefore a cost that local authorities could reduce. The Department is in the process of commissioning research on implementation of the Care Act that it said will include examination of the need for an annual review for all users.41

The social care market

17.The Care Act gives local authorities a statutory duty to make sure there is a sustainable care market with a diversity of providers. The Department of Health told us that “at the heart of that is paying a fair price for care”.42 This is a new responsibility for local authorities and can be challenging for them to implement. The Department for Communities and Local Government told us that adjustments are made to give more funding to local authorities in areas with higher costs.43 However, we heard that funding pressures on local authorities are passed on, at least in part, to providers. A National Care Association poll of providers found that 72 of the 100 respondents were not sure that they would still be in the market in two years’ time.44 Recent analysis by accountancy firm Moore Stephens found that the number of care home businesses falling into insolvency jumped by 18% between 2013–14 and 2014–15: 47 care home operators in England and Wales becoming insolvent in 2014–15, up from 40 in the previous year and 35 in 2012–13.45 We received written evidence which echoed these concerns.46

18.In some areas, and for some user groups, there is insufficient diversity of provision. We heard particular concerns about the availability of services for older adults and for adults with learning disabilities. Rural areas were seen to be particularly hard hit.47 The Department considered the fault to lie with local authorities that have not done enough to stimulate a range of services to give users a richness of experience, but acknowledged that the Department had a role in issuing guidance around meeting the needs of such groups. Some good practice examples do already exist. We heard about Harrow’s use of a large range of voluntary sector providers to create choice, and Wigan’s management of a care market for people with learning disabilities.48

19.Witnesses told us that difficulty recruiting and retaining care workers was a significant barrier for local authorities and providers.49 This can be especially difficult in rural areas, where challenges in recruitment can push up costs and make it harder for local authorities to develop a diverse care market.50 Achieving a balanced supply of workers is challenging: “At the moment, we have a real shortage, but at other times there has been an over-supply in different types of care”.51 The National Care Association said care worker training could be more streamlined if local authorities, providers and health bodies worked together.52 We are concerned that care workers’ conditions (often on zero-hours contracts) and stressful working environments make recruitment and retention difficult.53

20.The Department describes itself as “national steward” of the adult social care market, including having overall responsibility for the care workforce, overseeing work by bodies such as Skills for Care, Health Education England and the NHS.54 There are some areas in which the Department has made welcome progress, such as 93,000 new-start apprenticeships in health and social care in the 2015–16 academic year.55 However, it struck us that the “steward” role is poorly defined, and it is not clear who is accountable for failures in local care markets, nor whether the Department has effective levers to change local care markets.56 The Department told us it is pulling together a workforce strategy and a national market position statement, which we look forward to reading.57

21.Furthermore, the Department’s oversight is limited by the fragmented nature of the care market and limited sector information. The Care Quality Commission monitors the financial health of difficult-to-replace providers, supporting local authorities in their oversight of the adult social care market and working with the Department to support national market stewardship.58 However, we heard that small and medium enterprises make up 78% of adult social care providers, and about the potential to increase market diversity through micro and small providers.59 The Department monitors indicators of service activity and quality by local authority. The indicators include the levels of activity being commissioned for different age groups compared to the expected level of need in the area, and geographical patterns in Care Quality Commission ratings of care providers.60 The Department described how they would react to concerns flagged by these indicators via a “ladder of escalation”, starting with senior-level conversations; progressing to peer support through the Local Government Association and the Association of Directors of Adult Social Services. If further action was needed, the Department of Health and the Department for Communities and Local Government could use statutory powers to do an inspection and report to the Secretary of State. The Departments have not used these powers to date.61


28 Qq 2–3; Association of Directors of Adult Social Services, ADASS budget survey 2015: report, June 2015

33 Q 47; Nuffield Trust, the Health Foundation and the King’s Fund, The Spending Review: what does it mean for health and social care?, December 2015

38 Q 19; C&AG’s Report, para 2.21, citing Association of Directors of Adult Social Services, ADASS budget survey 2015: report, June 2015

42 Q 58; Department of Health, Care Act 2014: statutory guidance for implementation, paragraph 4.2, (this report was withdrawn 10 May 2016)

45 Moore Stephens, Care home insolvencies jump 18% in a year, 25 April 2016

46 Lifeways Group (PBS0003)

58 C&AG’s Report, para 3.16




© Parliamentary copyright 2015

2 June 2016