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Simon Bottery: Hammond must create an ‘OBR for health and care’

Simon Bottery
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The crisis facing social care is not going away. 

So, in his Budget on 22 November, the chancellor needs to put new impetus behind what seems to be a faltering process of social care funding reform and plug a funding gap that we, with Nuffield Trust and the Health Foundation, estimate will be £2.5bn by 2020.

The government has committed to act “where others have failed to lead” but many fear this may be an empty promise, hollowed out by Commons voting arithmetic and the sheer challenge of reforming a system that has proved remarkably resistant to change. 

Yet the dangers of inaction may be even greater. Last month’s report on local councils’ social care expenditure in 2016-17 provides little comfort. It is true the headline figure of gross current expenditure on social care increased by 1% in real terms compared to 2015-16 to £17.5bn. But spending has still fallen 7% in real terms since 2009-10, and at least 400,000 fewer people are receiving support. 

The additional expenditure in 2016-17 did nothing to boost the number of people receiving support. In fact, the number of people provided with long-term support fell slightly, as did the number of delivered episodes of short-term care. This is despite increased demand for services from two groups: older people and working age adults with disabilities. So, at a time of increased need, councils are providing reduced services. 

The increased expenditure went instead to service providers, in an attempt to shore up a market destabilised by provider withdrawals and failures. The average fee paid by councils for home care rose last year by 7% from £14.46 to £15.52 per hour, while the average fee for residential care for older people rose 3% from £548 to £565. Though these are still well below the ‘minimum’ rates promoted by the care industry, councils do appear to have accepted that the process of cutting overall expenditure by cutting rates has gone as far as it can – and probably too far. This recognition has been made more acute by the costs to providers of implementing the national living wage. The minimum wage paid to care workers rose to £7.50 an hour in April 2017 and it could reach £9.00 by 2020. This will add a further £500,000 to costs for care providers this year, £700,000 in 2018-19 and £900,000 in 2019-20. 

This market stabilisation was needed but doesn’t solve the problem of reducing service provision, which will only increase unmet demand. The number of older people estimated to have unmet care needs has risen to nearly 1.2 million. It will mean more demand is placed on unpaid carers and more people may need to self-fund. 

Nor will current levels of funding be enough to deal with emerging, additional cost pressures. The most high-profile of these is the bill for paying care workers for ‘sleep-in’ shifts, which our three organisations estimate will increase provider costs by £400,000 in 2018-19 and a further £100,000 in 2019-20. 

These cost pressures mean that, despite the extra money in the spring Budget, the social care funding gap of £2.5bn by 2019-20 is bigger than that facing the sector this time last year. So, when the chancellor stands up on Wednesday, he should have these problems at the front of his mind. 

Mr Hammond should begin by promising additional funding to meet the identified funding gap. 

He should then reaffirm the government’s commitment to producing a meaningful green paper that sets out proposals for wide-ranging reform and costed options for a sustainable funding settlement. This paper will also need to address the longstanding workforce challenges in the sector and consider how best to improve service models. 

Mr Hammond must also address the serious problems in systems that link with social care, particularly the NHS and public health. The analysis by the King’s Fund, Health Foundation and Nuffield Trust estimates that NHS funding will be at least £4bn lower than is needed in 2018-19 and the Budget must address this. The government should also use the Budget to reverse the false economy of planned cuts to public health budgets and renew its commitment to prevention as a fundamental priority of its health policy.

Finally, the Chancellor should aim to set health and care free from the annual planning and short-term thinking that Budgets too frequently represent. He should announce a new independent body, modelled on the Office for Budget Responsibility, to identify the long-term health and social care needs of the population and the staffing and funding required to meet them. 

This would be the final, essential plank of a programme that would genuinely reform the long-term funding of social care in England. It will not be a simple process, and it will not all be resolved by promises from the chancellor, but it would at least be a start of a solution – and nothing more than the government promised in their manifesto.  

Simon Bottery, senior fellow – social care, The King’s Fund

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