Written evidence submitted by London Borough of Havering [SOC 010]

1              Introduction

1.1              The Spending Round (SR15) and the Local Government Financial Settlement will dominate local government finance for the next 5 years. As a result, it was crucial not only to ensure that cuts to local authorities were allocated fairly but also to address inconsistencies that were historic in the funding methodology baseline. Havering does feel there are some implications as a result of the settlement which are having a detrimental impact in our borough. 

1.2              Havering residents have historically had to deal with below average grant allocations, which have ultimately impacted on services and the level of council tax they have had to pay. They now face the consequences of the Central Government grant being cut even further.

1.3              To summarise our points and concerns:

• Havering has always been one of the lowest funded authorities in London.
• The new methodology in allocating funding apportions reductions to those authorities with high council tax - which has been driven by already low funding levels.
• Havering’s population has the highest proportion of elderly people in London and this is expected to increase considerably by 2021. The funding model will not address this high need and high cost area.
• The ability to raise an additional 2% on the council tax to fund adult social care is welcomed, although this does not cover the demand pressures.
• Market sustainability is an issue which will only grow as the demographic in Havering will become proportionately and numerically more elderly.
• Part two of the Care Act will have significant implications for Havering from 2020.
• There is a correlation between responding to carers needs as prescribed by the Care Act and an increase in costs to local authorities.
• Local authorities have been given the responsibility for sustaining markets without the fundamental resource required to do so.
• Since 2012, Havering has been a part of  an Integrated Care Coalition (ICC) that brings together senior executive leaders from the health and social care economy  across 3 London Boroughs (Barking and Dagenham, Havering and Redbridge (BHR)), to support commissioning integrated care and ensuring the building of a sustainable health and care system.
• The Chancellor’s vision of self-funded councils can only work if the method of equalisation is justifiable.
• Havering has had to make steps to find savings and efficiencies and increase council tax in order to protect front line services.

2.              Settlement / Changes in funding methodology

2.1              In 2013, the funding formula was frozen to enable the introduction of business rate retention. Deprivation indicators previously used in the settlement calculation were heavily weighted in the formula, despite the level of population being the biggest driver of costs. Havering’s population is average for London but it has had the oldest proportion of elderly population for a very long time.

2.2              The 2016 settlement brought about a significant change in the methodology in apportioning cuts with no prior warning. Whilst we understand the need to distribute funding reductions proportionately, the methodology in using past council tax funding does not reflect the ability to raise income in the future. Based on this methodology, the past decisions made by councils and its residents are now impacting the councils future core grant. This methodology is penalising Havering’s residents for contributing more to local services; as we have had a relatively high council tax, the core grant funding has subsequently been reduced. This puts a disproportionate burden on local people to fund services moving forward.

2.3              Havering has always been one of the lowest funded authorities in London despite having the highest proportion of over 65’s in London. Below is a table comparing Havering to its east London neighbours and the huge cliff edges in funding it produces.

Table 1

2.4              As can be seen, Havering is the lowest funded east London borough per head of population. Other authorities are receiving over twice as much funding per population head which in our opinion disadvantages residents of Havering.

2.5              Prior to 2013, the funding formula was changed annually to reflect a change in need, so the formula was at least trying to keep up with the changing pressures that local authorities faced. 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 burdens, at a time when need is no longer considered, whilst demand for services is rising.

3              Council Tax

3.1              For the last ten to fifteen years, Havering has had one of the highest council tax levels in London. This high council tax was in direct response to the historic flawed funding methodology put in place by Government which is still impacting authorities today and now will for the next four years. The table below shows the highest and lowest council tax band D for London and their respective Settlement Funding Allocation (SFA) which clearly identifies the implications of the flawed central government funding methodology.

3.2              As can be seen, there are huge variances not only between authorities but also the between inner and outer London. There is direct correlation between settlement funding and council tax. This makes the new methodology in allocating funding reductions even more severe for those authorities with high council tax which have been derived from government flawed methodology in allocating funding.

4              Demand

4.1              As can be seen, Havering residents are being unfairly penalised by the current methodology in allocating funding. The deprivation indicators used do not reflect the demographic pressure, especially given the pressures surrounding adult social care. In our opinion the allocations should be based on indicators that represent the true costs and true drivers of costs, rather than perceived deprivation. Cost pressures in relation to adult social care are primarily driven by the population of elderly residents, however the formula does not represent the full extent of this true activity driver. Other grants such as the Better Care Fund (BCF) are based on the formula grant calculation which multiplies the funding problem. As a result, Havering’s grant per head in regards to the BCF is the lowest in London. Also from viewing the grant allocations, some authorities who receive the largest grant per head actually have the lowest population of over 65s in London. In our opinion this methodology, which is impacting multiple grants, is severely flawed and disproportionately impacts Havering.

4.2              Havering’s population has the highest proportion of elderly people in London and this is expected to increase considerably by 2021. Within the current methodology the funding model will not address this high need and high cost area. The ability to raise an additional 2% on the council tax to fund adult social care is welcomed, although this does little to cover the demand pressures, and once again penalises local people to pick up the costs

5              National Living Wage and Market Stability

5.1              Due to recent market pressures in the homecare market we have increased our hourly homecare rate from £14.94 to £16.43, which represents a 10% rise, estimated to cost £782k per year. This decision was made in part due to the national living wage, due to concerns expressed by providers with regard to rising costs and difficulty in ensuring market stability. Also we need to sustain the high levels of performance in getting people placed in the community from a hospital which itself faces huge and increasing pressure from an ageing population. It has also been driven by particular circumstances in Havering around demography and the geographical nature of the borough, meaning difficulties in recruiting care workers are exacerbated. This pressure will only grow as the demographic in Havering will become proportionately and numerically more elderly. This level of cost to the council does create a new pressure which we shall have to fund.

6              The Care Act 2014

6.1              The Care Act has introduced new statutory responsibilities. Whilst New Burdens funding has been granted to offset the implications, particularly around carers and assessment costs, the longer term implications are yet to be seen.  Part two of the Care Act will have significant implications for Havering from 2020.

7              The Role of Carers

7.1              According to the 2011 Census, 25,214 people, 11% of Havering’s residents identified themselves as carers, an increase from 23,253 (8.4% increase) in 2001.

7.2              The Care Act has given carers rights that Havering is addressing through the development of its own Carers Strategy, very much aligned with Care Act principles. However there is a correlation between responding to carers needs as prescribed by the Care Act and an increase in costs to local authorities. This is of particular concern to Havering because of its demographic and the significant number of carers that are associated with that demographic.

7.3              A national carers strategy is being drafted to acknowledge the significance of the role carers play but there should be some understanding that commitments to carers, particularly where there is likely to be a significant preponderance of carers, need to be funded or at least engage with the issues that arise when commitments are made.

8              Market Oversight

8.1              The challenges to care markets are increasingly surfacing in reports and data that suggests that various parts of the market are under pressure, including:

• Older people’s residential and nursing care
• Learning disabilities residential and supported living providers
• Home care providers
• Mental health provisions

8.2              The local authority has a duty to ensure a sustainable market and we are actively working with providers to explore all options in supporting them to continue to deliver the quality services to the volume and quality required.

8.3              There are continual discussions about shifting resources to places where these pressures are threatening the market.

8.4              At some point however the discussion is about whether market forces are being undermined by the capacity of the local authority to respond to pressures that would normally mean that costs would rise. This has been articulated by Prof Julian Le Grand at the LSE in a paper on ‘A brief report on the crisis in Homecare supply in the South of England’ and its effects upon Delayed Transfers of Care (DToC) for NHS England (South):

In essence, the free market is not working properly. There is a strong demand for Home Care hours to meet the needs of patients. There is a shortage of employees willing to work at the rate of pay on offer. Normally, in a free market, the imbalance between supply and demand would lead to an increase in the price of the commodity of which there was a shortage (i.e. labour) which would be transmitted into the price paid for the final product (i.e care hours as charged by the provider agency). However, the local authority commissioners are already facing a substantial deficit which is preventing this market adjustment. If, instead of seeing the purchased hour of Home Care as the end product, the end product was seen as a vacant hospital bed for an acute patient, then it might be that the NHS as a whole (at least in those parts of the country where these market conditions occur) might want to bring its resources to bear so that wages could rise.

The point made could equally apply to other markets and commodities within those markets as listed above.

8.5              The natural corollary of the argument is that local authorities have been given the responsibility for sustaining markets without the fundamental resource required to do so. This is beginning to have an impact on much wider issues, such as DTOC as an indicator and the quality of experience of people within the care system. For Havering, again because of its particular demographic and the lack of recognition from a rule based funding system, these challenges are mounting and need to be addressed.

9              Innovative Approaches

9.1              Since 2012, Havering has been a part of  an Integrated Care Coalition (ICC) that brings together senior executive leaders from the health and social care economy  across 3 London Boroughs (Barking and Dagenham, Havering and Redbridge (BHR)), to support commissioning integrated care and ensuring the building of a sustainable health and care system.  The ICC is responsible for developing recommendations for a system wide integrated care strategy for consideration by commissioners, the Health and Wellbeing Boards and CCGs.  All our commissioners are committed to working together to shape and create a marketplace and effect the required behavioural and attitudinal change across the system to ensure that the ICC and our own local plans for integration happens at scale and pace.

9.2              The ICC has driven the agenda for change with successful bids to become Prime Minister Challenge Fund and Vanguard Urgent and Emergency Care (UEC) pilot sites and also in December 2015 being selected to be a pilot site for devolution, through the development of a business case exploring the merits of creating an Accountable Care Organisation (ACO). These have all been cross Borough initiatives with the BHR footprint becoming increasingly important and relevant to the creation of sustainable plans for an integrated system for health and social care.

9.3              These initiatives demonstrate both the appetite for change and the practical realisation that only by working together will we resolve the pressing challenges that we face across the health hand social care economy. .

10              Conclusion

10.1              The Chancellor’s vision of self-funded councils can only work if the method of equalisation is justifiable. Anything based on the current methodology will only be at the detriment of those authorities who are low geared authorities that have to charge more in council tax to compensate for poor grant allocations. Residents should not be penalised for a funding formulae that is based dominantly on deprivation instead of true activity drivers. Also the impact of the new methodology in using past council tax decisions on future grant allocations creates a double hit to those authorities who have not received the appropriate level of funding in the past.

10.2              In an attempt to combat the poor funding allocation, Havering has had to make steps to find savings and efficiencies before most other authorities and increase council tax in order to protect front line services thus resulting in residents having to pay more in council tax than the majority of other London Boroughs. This can only be sustained for a short time before the gap in funding becomes unsustainable.

July 2016