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Polly Simpson: Hunt has two ways he can tackle care cash tensions

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Jeremy Hunt wants to shake up social care. Unfortunately for him, recently implemented reforms to local government finance are pulling in the opposite direction to the one in which he wants to head.

In a recent speech at the British Association of Social Workers conference, the health and social care secretary highlighted what he called “unacceptable variations in quality and outcomes between different services and different parts of the country”.

He went on to explain his seven principles for reform, which implied a strong focus on country-wide standards and fairness.

This is the latest in a series of steps which suggest central government is keen to exercise more control over social care. Earlier moves include the introduction of national minimum standards in 2014, and the growing pot of local government funding that is ringfenced for social care – set to be worth around £5bn by 2019-20.

At the same time, the government has been reforming the finance system so it is less focused on redistribution according to need, and more focused on providing financial incentives for local authorities to grow local tax revenues. The government hopes this will spur councils to promote local economic growth.

But with less redistribution, councils could find themselves with revenues that differ significantly from their spending needs. Those with insufficient revenues will face the choice of reducing the generosity of social care or cutting other service areas.

What can Mr Hunt do to address this tension? One option is to stick to the status quo, with top-up social care grants allocated to councils according to need. The risk from a central government perspective is that they become accountable in the eyes of the public for social care services, but can’t force councils to spend this money on social care (even if it’s technically ringfenced).

Alternatively, he could follow the example of schools and introduce a dedicated grant that fully funds social care. This would enable central government to decide how much is spent, and where this funding is targeted, independent from who is raising what in local tax.

But it is not an easy option – it might result in big redistributions of spending around the country. It also means sacrificing the benefits of local choice and responsibility.

Either way, decisions made about social care standards and funding could affect the delivery of other council services, and the new incentives for local growth that finance reforms were designed to create.

When the government sets out its plan for social care this summer, it needs to acknowledge these wider implications, and reconcile any reforms with recent changes to local government finance.

Polly Simpson, research economist, Institute for Fiscal Studies


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Readers' comments (1)

  • Time was when the care cap was to be funded by freezing inheritance tax thresholds and giving councils the additional NI funding from the end of contracting out. Then the inheritance tax threshold was raised to £1m and who knows what happened to the extra NI. And the cap was kicked into the long grass for a couple of years. Now look where we are!

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