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Tony Travers: Whitehall is neither funding care properly nor reforming the system

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The Competition and Markets Authority has not been a major player in British local government.

Its role, a necessary one, is to strengthen business competition and reduce anti-competitive activities. These responsibilities have led it to investigate and produce a 219-page report about the care homes market.

The publication’s analysis and conclusions are hugely revealing about the way local government and its services have been treated by the centre in recent years.

Successive governments have failed to produce a financially sustainable funding arrangement for the social care of older people. The politically damaging fallout following Theresa May’s decision to put forward a new policy during the 2017 general election has further toxified the subject.

It is worth remembering that, until the 1990s, care for older people in homes was paid for out of the social security budget until this led to rapidly escalating costs for the Exchequer: the government simply paid any charges set by care home owners, inevitably leading to inflation.

In the early 1990s, responsibility for care was shifted to local authorities which were charged with creating a competitive market for ‘community care’ and thus to reduce costs. Cuts to council funding since 2010, allied to rising numbers of older people, have left local government having to drive down care home fees while also reducing entitlement to care.

The CMA has analysed the consequences of Whitehall’s doomed ‘spend more while spending less’ policy. The authority’s report concludes “funding to LAs has declined…while they have a wide variety of different demands to be met, covering not just social care for the elderly, but also, for example, other aspects of social care, education, housing, highways and the environment”. In future, councils “are likely to have considerable negotiating power to force prices down to levels that may not be permanently sustainable”.

In effect, the government is forcing councils to use contracting to push care homes towards bankruptcy because ministers cannot reform the funding of care or, alternatively, provide sufficient resources for the existing system.

Funding social care, prisons and, indeed, defence in this destructive way is not best practice: the time has come to stop pretending we can have a big state with small taxes.

Tony Travers, director, LSE London

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