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Stephen Hughes: An American solution might be the way to ward off social care crises

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The Local Government Association’s future funding outlook predicts that each year the sector has to find £700m savings to maintain adult social care, after finding annual efficiency savings of between 1-1.5%. 

This is partly due to increased demand – more elderly adults and more people with disabilities – compounded by increases in the price of services and reductions in funding. Local authorities will always balance their books, but in the process services will be affected.

Councils will drive efficiencies across all their services before reducing spend on non-statutory services. Ultimately though, there will need to be reductions in services and the scale of the savings needed is very daunting.

For example, total spending on children’s centres amounts to about £750m, which is equivalent to one year’s contribution to the adult care funding gap. Perhaps in year two we could close all libraries, which cost £736m?

The savings challenge doesn’t include the effect of some serious structural weaknesses in the provision of care services. Prices have been pushed so low that domiciliary care providers are under acute pressure.

Most staff are paid near the minimum wage so the national living wage will drive up costs. To make contracts viable, staff are put under pressure to keep visits short with tight allowances for travel time.

HMRC is investigating pay rates to ensure adequate payment for travel and breaks, which also increases costs. Staff turnover rates are very high and the quality of care consequently challenged.

Some providers have already left the market and others are moving to a quality (and higher-priced) model only. Without above inflation increases in price, the sector could see a growing shortage in adequate supply.

The situation is as demanding in residential care. Many providers are at marginal viability and others only able to accept local authority price rates by cross-subsidising with self-funders. This cross-subsidy is about to be exposed as a result of the Care Act duty to arrange care for a self-funder. 

Some providers may withdraw from the public sector market to concentrate on services to self-funders. The likelihood is that costs will rise by more than planned if failure in supply is to be avoided.

In practice, adult social care will be required to make more savings. Under the Care Act, councils provide care and support only to clients with needs above the ‘substantial’ threshold, preventing formal reduction to care packages, although social workers are likely to feel great pressure to be ‘tight’ in their assessment of need and significant savings will arise this way.

Some efficiencies can still be made in some places by further reduction in direct provision, increased use of direct payments, use of technology and re-enablement strategies, but there are limits to their effectiveness.

What happens when all avenues have been exhausted? Catastrophic service failure is unlikely. Instead a variety of adaptive behaviours will emerge, often without conscious design. Time to do assessments will be extended, care packages will be trimmed and quality reduced.

How will it become apparent that the service is failing? There could be a dramatic collapse in supply, which might be either local if small, localised supplies fail or national if a major provider falls over. 

This may require public intervention to correct, if large enough, or it will drive up prices and create overspending that reinforces the need for rationing. Or, in some places, there may be successful judicial reviews of care assessments, particularly with respect to services for disabled people.

Courts are likely to move the boundary further in favour of clients as they have done previously, with significant effects on all local authorities, not just those under scrutiny. There will be a growing risk of a scandalous tragedy, which while reflecting poorly on the individual providing authority, will also illustrate the growing risk in the sector.

It would be complacent indeed if the national response to such individual failure was to focus just on the management and leadership in that one place.

As the service is less able to maintain people in their own homes and prevent accidents, so the demand for increased NHS services will grow. Simon Stevens has made clear that the £8bn NHS gap would be greater if social care was cut.

Proposals for closer integration and pooling of health and social care resources will ensure the problem is shared, but may not deliver extra cash.

Perhaps it’s time to adopt an American solution. There, massive tax breaks for wealthy individuals and corporations who make charitable donations, such as to organisations providing care for the elderly or vulnerable, create a situation in which the third sector funds and subsidises social care.

Stephen Hughes, executive director, Local Government Association. He writes here in a personal capacity.




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