ASSOCIATION (PEX 13)
1. The LGA is a voluntary membership body
and our 422 member authorities cover every part of England and
Wales. Together they represent over 50 million people and spend
around £113 billion a year on local services. They include
county councils, metropolitan district councils, English unitary
authorities, London boroughs and shire district councils, along
with fire authorities, police authorities, national park authorities
and passenger transport authorities.
2. The LGA is pleased to submit a written
response to the Health Select Committee's inquiry on public expenditure
and would welcome the opportunity to give oral evidence. Should
the Committee be interested in case studies of council work that
is relevant to this inquiry we would be pleased to provide this.
3. Money spent by councils on adult social
care comes from the overall total funding that the Treasury allocates
to local government. Councils contribute on average nearly 40%
to total adult social care spend through Council Tax. In some
areas this figure can rise to nearly 80%.
4. Whilst expenditure has increased on adult
social care over the last decade it has not seen anything like
the increase for health funding. The interdependency between adult
social care and health is now widely recognised as being more
crucial than ever.
5. Based on the assumption of needing to
reduce spending by 25% over the next four years, the sector would
need to save £3.6 billion. However, demographic pressures
combined with the complex nature of care and support suggests
the level of saving will need to be considerably higher. Councils
have an excellent track record of delivery savings and over the
last three years adult services departments have realised cash
releasing savings of over £900 million.
6. Councils cannot call on many levers to
manage demandparticularly given the pressures particular
issues generate, such as learning disability, dementia and the
transition from children to adult services. Councils do not ignore
those individuals who fall outside the eligibility threshold and
spend more than £325 million on services that can be accessed
without a formal assessment or without meeting eligibility criteria.
7. In the main there is no specific sum
of money allocated by central government to councils for adult
Instead, money spent by councils on adult social care comes from
the overall total funding that the Treasury allocates to local
8. The main channel of government funding
for local government is Formula Grant, which comprises general,
or Revenue Support Grant, plus redistributed Business Rates. Formula
Grant is allocated under the "four block model", the
elements of which are:
relative Needs Formula (RNF) allocation;
a reduction based on relative resources
(essentially the ability of councils to raise Council Tax);
a central allocation based on a per head
an allocation to ensure a minimum increase
in grant (negative for authorities above the floor whose grant
is scaled back to pay for the floor).
9. RNF is a series of mathematical formulae
that include information on population, social structure and other
characteristics of an authority's area. The formula is built on
a basic amount per client, plus additional top-ups to reflect
local circumstances, such as factors that affect service costs.
The biggest factor is deprivation.
10. The RNF for adult social care comprises
two blocks: younger adults personal social services, and older
people's personal social services. The components of each block
are summarised below.
a basic amount for 18-64 year olds that
is the same for all authorities;
a deprivation top up calculated from
a number of factors, such as the proportion of people in receipt
of Disability Living Allowance, the proportion who have never
worked or are long-term unemployed;
an area cost adjustment;
a basic amount per person aged over 65
either in households or supported by the council in a care home;
an age top-up for those aged over 90;
a deprivation top up calculated from
a number of factors, such as the proportion of people in receipt
of Income Support, Pension Credit and Attendance Allowance;
a low income top-up to recognise councils'
differing ability to raise income from charges;
a sparsity top-up to reflect the greater
costs of providing domiciliary care for older people in rural
an area cost adjustment.
11. The LGA does not typically comment on
allocation formula and resource distribution issues given that,
in the main, different systems are inevitably good for some councils
and bad for others. Two issues are worth flagging up, however.
Damping is a real issue for councils and in simple terms means
that even if need goes up, any grant increases will be heavily
This, coupled with the prospect of Council Tax referenda if increases
over what the Secretary of State decides is right are sought,
will make the funding problems in adult social care much harder
to solve. We therefore believe the key issue is about the overall
quantum of funding to ensure future, increased demand is met.
To that end we await with great interest the findings of the Commission
on Funding for Care and Support.
12. For 2008-09 total gross expenditure
on adult social care amounted to £16.6 billion, of which
£2.2 billion was funded through client contributions. Net
spending therefore amounted to £14.4 billion. Councils contribute
on average nearly 40% to total adult social care spend locally
(through Council Tax). This equates to more than £5 billion
and is an additional amount of money to that which councils receive
from central government. In some areas councils will fund as much
as 80% of local spend with locally raised money.
13. Furthermore, whilst expenditure has
increased on adult social care over the last decade it has not
seen anything like the increase for health funding. As the Health
Select Committee's report on Social Care (March 2010) notes:
"Overall gross expenditure on adult personal
social services rose in real terms by 57.4% between 1997-98 and
2007-08. This is in contrast to spending on the NHS, which doubled
in the same period".
14. A brief examination of local authority
and NHS contributions to Section 31 and 28a pooled budgets also
suggests that the two systems are not committing anywhere near
equal amounts as a percentage of their overall budget.
COUNCIL AND NHS CONTRIBUTIONS TO SECTION
31 AND 28A POOLED BUDGETS
|Drugs and alcohol||£12.818
|Percentage of budget||Approx 15%
The NHS contribution of £2.3 billion to Section 31 and
28a arrangements is significantly less than the amount it spends,
for example, on drugs, which is about £8 billion.
15. Based on inflation projections adopted in the June
2010 Budget Report, relatively modest assumptions about pay and
pension cost inflation, and cost pressures attributable to demographic
pressures, we estimate that the cost of adult social care will
grow as follows:
16. This is not to suggest that we must view health and
social care as two separate systems. Indeed, interdependencies
between health and adult social care are crucial and are rightly
becoming an increasing focus for national and local government.
As the Secretary of State said in June:
"We must see the many links and connections between health
and social care, seeing care in its wider aspects... Health and
social care should be integrated more. And so we need to reform
social care alongside healthcare..."
17. Integration, and a commitment to forging stronger
links between the two systems, will be tested as the proposals
in the health White Paper, Equity and Excellent: Liberating
the NHS are played out. We welcome the paper's focus on removing
unnecessary bureaucracy, devolving power to the local level and
the transfer of public health responsibilities back to councils.
However, if local government is to truly "promote the joining
up of local NHS services, social care and health improvement"
then it will be important that:
The relationship between councils and the proposed
NHS Commissioning Board is clearly defined.
Councils are supported financially to carry out their
new responsibilities for local health improvement.
Outcomes frameworks for the NHS, public health and
social care need to reflect the linkages between and across the
system. This could mean, for example, that national goals for
the NHS include the goals for social care, and certainly they
will need to align with local government's objectives for improving
population health outcomes. As national outcomes frameworks will
likely translate into a framework of commissioning outcomes for
new GP consortia such a joined up approach will be particularly
18. Based on the assumption of needing to reduce spending
by 25% over the next four years, the adult social care sector
would therefore need to save £3.6 billion. However, the reality
of increasing demand combined with the complex nature of care
and support suggests that the level of savings required will be
considerably higher than this figure.
19. The country's changing demography is certain to exert
significant additional pressures on adult social care. We can
expect 300,000 more older people to have care needs by 2014 and
1.4 million more older people in the next 20 years. Over the course
of their retirement, men aged 65 today have a 7/10 chance of needing
some care before they die, with a 9/10 likelihood for women. The
best estimate of this demographic pressurewhich both councils
and the Department of Health agree onis 4% per year. The
reality is therefore that if local authorities cannot achieve
this additional 4% then services will suffereven before
any funding cuts.
20. Additionally, funding for care and support covers
more than just the adult services department's budget book. Many
care and support services locally will be funded in partnership
with other agencies, such as PCTs. Individuals may also be entitled
to benefits such as Attendance Allowance and Disability Living
Allowance. And considering a more holistic view of "wellbeing",
individuals will also access services such as transport, leisure
and housing as part of their wider support needs. Any changes
to other departments', or other agencies', funding will therefore
inevitably impact on the ability of local public services to respond
to individuals whose needs span the full spectrum of intensity
21. We can be more confident in quantifying the impact
of demographic pressures than we can for the implications of cuts
in other areas for care and support. But a conservative estimate
would see adult social care needing to deliver savings of more
than 40% over the next four years, or a spending reduction of
close to £6 billion.
22. Local authorities have a good record on delivering
efficiency savings and adult social care in particular has a longstanding
culture of seeking efficiencies to offset the changes in the makeup
of our population that affect demand for services. Over the last
three years, for example, local authority adult services departments
have realised cash releasing savings of £242 million (2007-08),
£379 million (2008-09) and £324 million (2009-10). Moreover,
councils have achieved these savings without having to drastically
tighten their eligibility criteria, which have remained relatively
unchanged during this three year period. Councils have also managed
to hold fee levels to around or below inflation.
23. Councils will continue to rigorously pursue activity
and projects that both improve outcomes for individuals and save
money. This may involve, for example, the application of telecare,
crisis or rapid response, low level interventions for adults with
learning disabilities, the elimination of more expensive in-house
services, and reablement. However, even the best efforts in these
areas are only likely to generate savings of around £800
milliona figure estimated, albeit cautiously, by the Department
of Health. This is well short of the near £6 billion savings
(40% of total spend) that may be required.
24. Moreover, changes to other key funding streams that
contribute to meeting the needs of individuals will inevitably
have an impact pressure on local authority services. This reflects
the reality that an individual in receipt of a social care package
is likely to be receiving other forms of support. The Independent
Living Fund is a prime exampleparticularly given recent
announcements restricting new funding only to clients in work.
According to John Fuller, Strategic Policy Director of ILF, 93%
of the fund's £360 million budget was spent on existing usersthe
vast majority of whom are not in work.
25. Against the backdrop outlined above we believe it
is reasonable for adult services departments to offer 3% cash
releasing efficiency savings per year. This would deliver £1.7
billion savings by 2014-15. To do this councils would need to
squeeze every last potential pound out of the activity mentioned
above and pursue other ideas ruthlessly. But the fact remains
£1.7 billion is also still a long way short of the estimated
savings requirement of £5.6 billion.
26. The stark reality facing adult social care is therefore
a drastic reduction in the budget and a resultant very real impact
on the thousands of people who rely on care and support services
every day. In a recent report by Age UK, for example, the charity
warns that a 25% cut in adult social care could mean that three
quarters of the 650,000 people in England who currently receive
home-based care may not be able to access services.
27. Local government cannot call on many levers to manage
demand, cost and efficiency and those that it can use are inevitably
limited, and indeed in some cases self-defeating. Demand and cost
are obviously closely linked although the relationship between
the two is complex. First and foremost, packages of care are for
real, individual people who have real, individual needs. For that
simple reason it is not possible to neatly compartmentalise individuals
into groups and groups into costs. Below are some typical issues
facing the sector in this respect:
An individual with learning disabilities could require
support based on a very broad scale of need. Thus whilst some
packages of care for adults with learning disabilities at the
low end of the scale may cost a relatively small amount, those
at the opposite end of the scale may well run into the hundreds
of thousands of pounds. It does not take many of these high-end
cases to swiftly and dramatically alter council budgets.
Similarly, dementia is another condition that will
undoubtedly place pressures on council budgets in the future.
There are currently 700,000 people in the UK with dementia (approximately
570,000 in England) at a cost of about £17 billion to the
UK economy. In the next thirty years the number of people who
will suffer from the condition is likely to double, with the cost
expected to treble to over £50 billion a year.
As people born with a disability are living longer
the adult social care sector is seeing an increase in the number
of individuals making the transition from children to adult social
services. In Worcestershire, for example, the council is experiencing
an average of 43 new learning disability cases per year through
the transition from children to adult services. This represents
a £700,000 annual commitment.
28. Future demand is not solely about specific conditions
either. More generally the changes in our demography that we are
likely to witness over the coming years will have a profound impact
on demand for care and support services across the piece. There
is widespread agreement amongst both professionals and politicians
on the population shift that we can expect to see, and there is
a whole library of evidence to back such predictions up. One statistic
is worth repeating here to highlight the extent of the change
we are likely to see: by 2026 the expectation is that there will
be 1.7 million more adults who need care and support. This is
a 30% increase on current numbers, which stands at around six
million. So what
levers can councils apply to manage cost and demand?
29. The principal means of managing demand is to tighten
eligibility criteria, which are used by councils to determine
whether a person qualifies for support. The eligibility framework
is based on a person's needs and the associated risks to their
independence. There are four eligibility bands: critical, substantial,
moderate and low.
30. In 2009-10 roughly three quarters of councils set
access to care at the "substantial" level, meaning individuals
with "substantial" or "critical" needs would
be eligible for council support. Roughly one quarter of councils
set their access level to "moderate" and just a handful
of councils were at the extremeseither offering services
to people just with "critical" needs, or for those with
"low" needs and above.
31. Over the last three years, this rough percentage
split of 2% (low), 24% (moderate), 72% (substantial) and 2% (critical)
has remained very stable. However, in a future that we know will
be characterised by severe funding limitations we may well see
an increase in the numbers of councils setting their eligibility
level to "critical" only. The difficulty with such an
approach is that, whilst it may stem demand in the short term,
the decrease in numbers presenting to councils will only be temporary
as individuals' substantial/moderate needs escalate to the point
of being "critical". This could likely mean a sudden
increase in the more costly "critical" end care packages.
32. It should be noted that councils do not ignore those
individuals who, following assessment, are deemed to fall outside
the eligibility threshold. And indeed, putting in place services
to prevent people entering the system in the first place is becoming
an increasingly important council strategy to manage demand.
33. For example, local authorities provide valuable advice
and information services for such people, signposting them to
community support and other sources of help. In 2008-09 councils
spent more than £325 million on adult social care that people
can access without a formal assessment, or without meeting eligibility
criteria. This is an increase of 10% on 2007-08 and councils expect
the figure to rise a further 4% for 2009-10. Supporting self-funders
is a particularly important area of work. By signposting them
to information and financial advice such individuals will make
best use of their resources and prevent a scenario whereby their
own savings are relatively quickly and unwisely spentthe
result of which is another cohort of individuals presenting themselves
to councils for eligible public support with needs that have escalated
and are therefore more costly.
34. The other alternatives for managing demandsuch
as raising charges, stopping or closing services, reducing staffing
levels and service budgets, and outsourcingare difficult
to pursue. Councils do not want to jeopardise outcomes for residents,
which the aforementioned may do, and such activity is obviously
hugely unappealing on a political level. Over the coming months
consideration of some of these alternatives will inevitably come
more to the fore as budgets are scrutinised in ever more detail.
And councils will work hard to ensure that the most vulnerable
members of our society continue to get the help and support they
The main social care revenue grant that remains ring-fenced for
2010-11 is the Carers Grant, worth £256 million for this
year. The Social Care Reform Grant also remains ring-fenced for
2010-11. However, previously ring-fenced grants, have had the
ring-fence removed. These includes, for example, the AIDS Support
Grant, the Stroke Strategy Grant, and the Learning Disability
Campus Closure Programme Grant. Back
Damping is a process used by government to lessen the impact of
changes to the revenue grant distribution system and provide funding
stability for councils. It is achieved by setting a minimum floor
level for a percentage increase in grant, with this additional
amount met by scaling back the grant allocated to councils whose
grant increase is above the floor. Back
House of Commons Health Committee, Social Care, Third Report of
Session 2009-10, p 14. Back
LGA/ADASS report on adult social services expenditure 2009-10,
Summer 2010. http://www.adass.org.uk/images/stories/rpt-LGA%20ADASS%20Survey%202009-10%20final.pdf Back
The bigger increase between 2010-11 and 2011-12 is because of
the £1.5 billion transfer of Learning Disability funding,
which will translate into additional spend on new responsibilities. Back
Speech by Rt Hon Andrew Lansley CBE MP, 8 June 2010. Back
Equity and Excellence: Liberating the NHS, HM Government,
July 2010, p 4. Back
See Community Care, 25 March 2010. Back
Building the National Care Service, HM Government, March
2010, p 48. Back