Care act reforms highlight increasing cost pressures on councils

• Report: Care Act first-phase reforms and local government new burdens
• Report: Care Act first-phase reforms and local government new burdens (PDF 213KB)
• Inquiry: Care Act first-phase reforms and local government new burdens
• Public Accounts Committee

Additional costs

The Report follows the Committee's inquiry into the implementation of the first phase of the Care Act, which places additional cost burdens on local councils.

The Committee believes "carers and the people they care for may not get the services they need because of continuing reductions to local authority budgets and demand for care being so uncertain".

It is concerned the New Burdens Doctrine - the Government's commitment to assess and fund extra costs for local authorities from introducing new powers, duties and other government-initiated changes – does not guarantee funding for significant new costs.

Uncertainty for councils

The Committee finds Government "has not been sufficiently open and transparent" in classifying new burdens, creating "considerable uncertainty" for councils. It also expresses concern over Government response times when councils run into difficulties implementing the Act.

The Report states: "The Care Act is one new area of work for local authorities which will add significant costs locally. Government must recognise this and ensure funding is monitored as it beds in so that carers and the people they care for do not lose out."

The Committee's recommendations to Government include measures to ensure effective implementation of the Act and, more broadly, to ensure councils "have sufficient resources to meet their statutory duties".

Chair's comments

Meg Hillier MP, Chair of the PAC, said today:

"The Care Act should mean carers get proper support from local councils, but with budgets squeezed this support will be hard for councils to deliver.

Local government is taking on more and more responsibilities from central government, but the money does not always follow. The concept of ‘new burdens' is simple enough yet the Government's definition of these burdens fails to reflect reality.

If new costs to councils are not adequately funded then services will suffer. There is also a real danger of cost-shunting – in this instance, costs of providing care falling on other public services, carers or the people being cared for.

This is an issue of concern to the Committee across public services and we will continue to monitor how the Government funds local government."

Background

Between 2010-11 and 2015-16 central government reduced funding to local authorities by around 37% in real terms. Local authorities have tried to protect spending on key areas but have been less able to do so over time.

The Department of Health is responsible for achieving the objectives of the Care Act, which aims to reduce reliance on formal care, promote independence and well-being and give people more control over their own care and support.

The Department for Communities and Local Government oversees and coordinates how the Government applies the New Burdens Doctrine.

The Government has calculated that new responsibilities under the Care Act will cost local authorities £470 million in 2015-16 to carry out and the NAO has estimated that the Care Act Phase 1 will cost £2.5 billion to implement from 2013-14 and 2019-20.

Report summary

Funding reductions

The Department of Health has taken a collaborative approach to the first phase of the Care Act, working with local authorities to plan its implementation. However, we are concerned that carers and the people they care for may not get the services they need because of continuing reductions to local authority budgets and demand for care being so uncertain.

We are also concerned about the government's ability to identify individual local authorities that are struggling and to respond quickly enough. The decision to delay implementation of Phase 2 of the Care Act means that people will have to pay more for their care for longer before the cap on care costs is finally implemented. Given the tough financial context, we were pleased to hear, though, that government will not claw back the £146m of funding it provided to councils in 2015-16 to prepare for Phase 2.

More transparency needed

The Department for Communities and Local Government has not been sufficiently open and transparent in identifying and assessing new burdens on local authorities (like the Care Act) or reviewing their impact. This creates significant uncertainty for local authorities.

The Department's definition of a new burden means that local authorities are not guaranteed funding for some significant new costs, even where these arise from government policy. These unfunded pressures on local authorities will make it more difficult for them to meet their statutory duties and will increase pressure on council tax.

Cost pressures

We urge the Department for Communities and Local Government to ensure that departments review significant new burdens following implementation, as the Department of Health has undertaken to do for the Care Act. It also needs to ensure that Spending Reviews and annual finance settlements for local government take full account of the many cost pressures local authorities face, whether or not they meet the government's definition of a new burden.

The Care Act is one new area of work for local authorities which will add significant costs locally. Government must recognise this and ensure funding is monitored as it beds in so that carers and the people they care for do not lose out.

Further information 

• About Parliament: Select committees
• Visiting Parliament: Watch committees

Image: iStockphoto