ELDERLY CARE RULES HIT FUNDING

Social services authorities may lose up to £200 million in the next financial year because of government relaxations to the means-testing arrangements for elderly people in care.

In the last Budget, chancellor Kenneth Clarke announced residents of old people's homes would now be allowed to hold £16,000 in savings before being required to contribute to the costs of their care - twice the old limit.

The Association of Metropolitan Authorities last week wrote to its members asking how much they would lose as a result. The AMA believes the government has earmarked £60m as compensation to authorities, while some councils claim they are likely to be compensated only for a third of their losses in residents' contributions.

'We are estimating we could face a shortfall in the region of £3m,' said a Kent CC spokeswoman. 'It's good news for old people and their families, but councils are not being fully refunded.'

Birmingham is worried it may lose £2m a year. Leicestershire calculates it will receive £600,000 in compensation, but income will fall by between £1m and £2m, which could lead to cuts in social services spending of more than 1%.

A Department of Social Security spokeswoman said she did not understand why councils were worried, as arrangements were still out for consultation and no final decisions had yet been taken. 'It is far too early to say,' she said. 'Local authorities need to wait and see.'

The new arrangement comes into effect in April.