Written evidence submitted by the Society of County Treasurers [ASC 022]

Long Term Funding of Adult Social Care - Housing, Communities and Local Government Committee

The Society of County Treasurers (SCT) is comprised of all Chief Financial Officers from the 24 shire counties in English local government. Following successive reorganisations of local government, the SCT also includes 16 shire unitary authorities that have similar interests in local government issues. Together, these authorities represent 47% of the population of England and provide services across 87% of its land area.

This letter represents the combined SCT response to the Housing, Communities and Local Government Committee’s Inquiry into the long-term funding of adult social care. Please also refer to responses from individual member authorities. Given the significance of Adult Social Care within our members’ authorities, the Society is keen to contribute to the discussion on finding a long-term and sustainable way to fund of the service.

The committee launched the inquiry by highlighting that for local authorities, adult social care makes up over 40% of their total expenditure. For SCT members that figure rises to 48%. The Committee’s opening introduction succinctly captures the situation before COVID; continuing pressures and increased demands which have been “addressed by short-term and fragmented additional funding from central Government, making long-term planning difficult”. The pandemic added additional pressures and costs to a service already under strain. The SCT welcome this important inquiry and agree with the inquiry team that this challenge is one of the toughest questions to be faced in the coming years.

Background

Prior to the Coronavirus pandemic, Adult Social Care (ASC) was under immense pressure from an ageing population with increased life expectancy which, in turn, was leading to more complex care needs. Some ASC care is funded directly by the individual whilst others receive care paid for by their local authority, which contrasts with the NHS which is free at the point of access. Many have felt that the sector has been underfunded for many years leading to inconsistencies in approach and eligibility criteria. This has also led to LA-funded care beds being subsidised by self-funders in many authorities.

It’s not hard to see why the sector is facing such financial difficulty; the LGA have highlighted that whilst costs for the sector have risen £8.5bn in the last ten years, that funding has only increased by £2.4bn. Roughly two thirds of this gap has been met by making savings whilst the remaining £2bn has been diverted from other services. As a result of population growth, inflation and the national living wages increases, this gap is expected to widen.

In recent years funding for Adult Social Care has tended to be one-off in nature which has made budget planning very challenging. This is further compounded by funding announcements coming out very late in the planning process, sometimes after budgets have been set. When funding is announced there is often no indication about whether it will continue into future years and at what level. The ASC Precept, which allows LAs to levy additional precept to contribute to the costs of ASC is also announced late with no certainty to enable planning budgets into the future. This uncertainty and short-sightedness cannot be allowed to continue.

When compared to the NHS, ASC has no national strategy, no joined-up approach to investment in assets and technology, no national supply chains and no central data function. The service is delivered through lots of small and medium sized providers made up of private companies and charities. Provision of some one-off funding to help authorities transform their service models would greatly assist and enable a more sustainable funding position in the future.

Society members are also concerned about the eligibility criteria, which have become stricter as budgets have become tighter. There is a risk that many potential service users are not receiving the preventative care when they need it and LAs are often less aware of the care needs of self-funders until their assets are sufficiently depleted to become eligible for council support. The workforce model needs revisiting with the aim being to remove the stigma attached to social care of being an employment of last resort. ASC must put service users at its very heart, improving the choice and provision to protect vulnerable service users from not only an escalation in their care needs but also an escalation in costs.

How has COVID-19 changed the landscape for long-term funding reform of the ASC sector?

It remains a little too early to fully understand the effect that the pandemic has had on ASC. The effects on demand are unpredictable; increased mortality during the pandemic may have reduced demand in the short-term but could equally increase due to the ongoing health impacts of the pandemic and associated lockdown measures (i.e. loneliness and isolation).

Prior to the coronavirus pandemic ASC was already under immense pressure, financially. The number of deaths in care homes also points to the sector being relatively unprepared for infectious diseases. Cash-strapped ASC providers and LAs did not have the resources available to absorb increased costs at the start of the pandemic. When a service is chronically underfunded it reacts by only providing to meet demand – there is little to no excess capacity in the system. This is as important when responding to a pandemic as it is in responding to an unplanned closure of a care provider.

Most local authorities will have already had some kind of ‘transformation plan’ in place for ASC; aiming to shift demand away from traditional residential care homes to care in the community and domiciliary care. The objective is not only to keep people living independently for as long as possible, but to allow limited ASC budgets to stretch further. The pandemic has accelerated the sector towards this goal much quicker than envisioned, with demand for residential care declining and more families choosing to care for their relatives at home. To date it appears that that there has been a smaller impact because of COVID on those care providers providing domiciliary care. It is imperative that the ASC sector doesn’t slip back into the old ways of delivering care.

As expectations of ‘what care looks like’ continue to emerge, there will need to be measures put in place to help the sector transition to a new way of working and being funded. For example, the impact of self-funders leaving the care sector and the knock-on implications on cross-subsidised LA care placements.

Investment will be needed to ensure that the provider market remains both responsive and viable into the longer-term. Day-to-day funding also needs to be stable and reliable. An obvious first step would be confirmation that the Better Care Fund will become a recurring funding source together with real terms growth in the Public Health Grant to reverse the effect of the freezes applied in the past.

Costs in all settings are likely to increase due to the ongoing requirement for enhanced standards of infection prevention and control. Costs may also rise if care providers find it difficult to recruit – there may be a perception that social care is riskier but, on the other hand, higher unemployment may aid recruitment. There may also be an impact of Brexit on recruitment although it is too early to be sure.

Recent increases in the national living wage will clearly increase costs but it is hoped that making the job more financially attractive will lead to a more stable workforce and improved outcomes for service users. However, the NHS typically pay higher rates than social care for the same service – until parity can be achieved, ASC will continue to face difficulties recruiting and retaining staff. This equality cannot be achieved whilst the sector continues to face a significant funding shortfall coupled with massive uncertainty of funding.  Reforming the pay and pensions of the workforce will help to attract people to the profession as will re-defining what a carer does and tapping into family and community networks.

Although most current ASC provision is delivered by care homes and domiciliary providers, an important part is the care provided in the community as day or respite care. The impact of COVID is still very much unknown and will be so until the restrictions on social contact and mixing are lifted.

One of the positives to come out of the pandemic is the way in which the NHS and ASC have worked together. The Discharge to Assess model has allowed people to leave hospital when they are medically fit to do so and then be supported to return home with clear benefits for all, including people who are self-funders. It has, however, also highlighted the different ways in which the ASC and NHS operate, in the national v local approach and how wide the NHS’s supply chain and workforce are spread (i.e. GPs, training, ability to flex the workforce).

The coronavirus pandemic provides an opportunity to re-frame the conversation; missing it would result in 2020-21 simply being an anomaly year. This is a chance to change the conversation about what care looks like, who provides it and seeing the people who access it as assets rather than liabilities. 2021 is the time to think about a community-wide landscape where everyone plays a part (national government, local government, NHS, families, charities, and individuals). The changes needed are wider than the care sector and local government alone and include building suitable homes to enable people to stay independent for longer and maximising the community response with a volunteer strategy. The Society supports the LGA’s call for a common and easily accessible data set, bringing together data collected across numerous agencies.

The SCT calls on the inquiry to use this opportunity to not just consider the long-term funding of ASC but also the investment in carbon-neutral care services, data services, national supply chains and the funding of key medical supplies as well as to build upon the successes of the NHS and care sector working together to unlock bed-blocking and reablement services.

How should additional funds for the ASC sector be raised?

The Society considers it unlikely that, in the future, all care will be funded by the state and there must be an incentive for people to stay healthy and independent to reduce or delay the need for care. Similarly, there must be an incentive for people to save and contribute towards the cost of their care, including the potential for insurance schemes.

Current Government-run insurance schemes would indicate that a national scheme is more affordable than locally run schemes and avoids any issues with residents moving between different local authority areas. However, any national scheme must clearly be able to earmark personal contributions rather than become blurred like national insurance contributions.

If the responsibility for the state element of funding is to remain with local government then it is imperative that the sector is given tax raising powers rather than relying on fragmented handouts from central Government. The sector must be able to plan for the long-term rather than live Spending Review to Spending Review or budget to budget. In addition, the Society asserts that the current ASC precept is not fit for purpose. There is no demonstratable link between need for ASC provision and the price of houses, and the ASC precept is another cause of confusion and frustration for both councils and taxpayers.

Short-term funding settlements coupled with significant budget pressures means that local authorities are forced to pay providers low rates and are also not able to offer any certainty on the longevity of contracts. LA contracts make up a significant proportion of many local providers’ income so, predictably, this drives their behaviour.  Providers react by paying minimum wages to their workers who are also likely to be on flexible or short-term contracts. The result is that care becomes a relatively unattractive profession when compared to the NHS. The SCT support the establishment of an independent body to make recommendations on the level of social care pay. The implementation of such recommendations must come with the necessary investment so that it does not become another burden on an already overstretched service.

Any financial solution must also consider the NHS budget, from which resources need to be diverted into ASC if the best use is to be made of public money (see answer to question 4). Without a fluid arrangement in which the needs of both sectors are represented equally, it is difficult to see how Integrated Care Systems will succeed in the way that is envisaged.

How can the ASC market be stabilised?

As already highlighted, pre-pandemic, the ASC sector was already facing significant financial pressure. It is likely that, given the predicted and desirable shift from care homes to care at home, that some care homes will fail. The market needs to change, and the objective should not be to maintain all existing providers. As highlighted above, many local authorities will have been aiming for this shift which, because of the pandemic, has simply come faster than originally expected.  

Providers in most local authority areas were either closing, ceasing to trade or handing back public contracts. The pandemic has caused occupancy rates in care homes to fall – putting smaller care homes at the most risk. However, it is these smaller care homes that can offer bespoke care packages, delivered in the community, that often have the best outcomes. Either the market is left to adjust and find its new “normal” or this is managed and stabilised through temporary, short-term funding.

Achieving future equilibrium will require a mix of approaches.  In some situations, e.g. where a residential home supporting people with complex needs has suffered high levels of turnover due to Covid-19, it may be necessary for higher rates to be paid.  In others, the driver will be around working in partnership with providers to incentivise them to change their business models.  This could mean supporting a traditional residential provider to diversify to become a more specialist facility or into extra care housing.  Alternatively, it might be to enable a learning disability home to de-register and convert into a supported living provider. All of this will require up-front investment and clear ASC commissioning strategies.

Government intervention can support a market adjustment – growth in home care and new technologies and the (potentially) managed decline in residential care homes – but LAs must lead on the review and shaping of the local market. Local authorities simply do not have the resources available to fund this transition to lower demand and a shift in the delivery of care.

Society members support the creation of a stabilisation fund for LAs to access and local government will need clarity on what support is available from central Government as we emerge from COVID. There must also be recognition that the transition out of lockdown 3 will take longer in ASC than the national timescales within the Government’s road map. It must also be recognised that costs will continue to be above pre-COVID levels due to continuing need for enhanced infection control measures in addition to the longer time scales.   

It is this required mixture of locally determined approaches that will mean that a formulaic approach to funding the transition is unlikely to be successful. Funding needs to be flexible to meet the demands of each area and their market situation. Although the SCT is normally opposed to bid-based funding, this may be a suitable use for such a mechanism, providing there is sufficient funding and one LA’s gain is not another’s loss. This must not be a competitive fund.

How can the ASC market be incentivised to compete on quality and/or innovation?

As highlighted throughout this response, the shift from traditional care homes towards domiciliary and care in the community is to be encouraged. However, this does not yet seem to be recognised by Central Government. For example, recent funding tranches to support the COVID response were highly prescriptive about the proportion of the funding which had to be spent in care homes, despite this not being reflected in budgets.

Shifting care delivery into individual’s homes and the community will require investment in buildings and technology, not just for those already receiving care but to assist those living independently to stay doing so for longer. However, short-term settlements and one-off allocations of funding makes planning longer-term investment very difficult.

Currently, most care is commissioned and paid for on a unit basis, e.g. a care home bed or an hour of domiciliary care, and providers compete on price. The market is comfortable with this arrangement and some will be resistant to any change.

Much less common are approaches that reward providers according to the care outcomes that are delivered. If quality and innovation are to be encouraged, arrangements are required which will allow ASC and the market to share the benefit when good results are delivered. For example, phasing out the use of ‘additional hours or additional support’ funding within contracts and replacing them with bonus credits for number of clients who are ‘stepped down’.

If the current successful partnership working between local authorities and the NHS can be built upon then the care sector could provide further support to individuals, potentially freeing up resources within the NHS. The health and social care system will not only be improving quality of life but also be more efficient and effective.

Increased competition in terms of quality will likely increase the cost of the service but all providers must be required to meet a quality benchmark. It is meeting this benchmark rather than competing in quality that must be encouraged.

In summary, the Society is pleased to see the committee recognising the financial difficulties facing the sector. There is not doubt that the pandemic has exposed the weaknesses in the overstretched ASC sector. Although the pandemic has been a national tragedy it has accelerated the sector toward delivery based in homes and the community. As a priority, alongside the managed transition to a new way of delivering care, there must be improvements to the desirability of a career in care – working with the NHS, offering carers an opportunity to really improve people’s lives and putting them at the heart of a community based care system.

We look forward to the recommendations of the Committee and remain willing to provide further detail or assistance as needed.

April 2021