William Eichler 06 January 2016

The crisis in social care funding

One in ten people over the age of 50 are not having their care needs met. Around 1.5 million people in the UK are providing over 50 hours per week of unpaid care. The UK is heading towards the bottom of the OECD league table for spending on care as proportion of GDP. These are just a few of the worrying figures on adult social care in a report, produced by the International Longevity Centre (ILC-UK), ominously titled The end of formal adult social care?

If there is one thing that everyone - from politicians to health care professionals to academics - agrees on it is that adult social care is severely under funded. And if there is a second thing, it is that the problem is only going to get worse. The longer we live, the more support we need; the more support we need, the more money social care services require to function.

One of the most controversial announcements in the chancellor’s Spending Review last November was the Government’s two-part plan to tackle the looming crisis in the funding of adult social care. First, he would create a social care precept that would empower local authorities to raise extra funds. This means councils will be able to increase council tax by 2% above the threshold on the condition that they invest the extra cash into adult social care services. This could, he claimed, raise nearly £2bn a year by 2019-20.

The chancellor’s second announcement concerned the Better Care Fund (BCF). Established in June 2013, the BCF (also known as the Integration Transformation Fund) is ‘a pooled budget for health and social care services’. The aim was - and continues to be - the integration of health and social care services in order to improve their delivery. Back then the Treasury allocated £3.8bn to the fund. Last November, however, the chancellor added an extra £1.5bn, which will become available from 2017.

Many are sceptical that the increase in funding is sufficient. The King’s Fund, a leading health think tank, has produced an in-depth report on the chancellor’s plans and described them as ‘short-sighted’. Its author, assistant director of policy Richard Humphries, in fact paints a dystopian picture of the future of adult social care, not far off that described by the ILC-UK.

‘You may see social care providers collapsing,’ he told the Guardian, ‘more people going without the care they need or having to pay for it themselves, and even more pressure on families and the NHS to pick up the pieces when there’s a breakdown in individual care and support. Older people will be more likely to end up in hospital.’

Before looking at why such a bleak outlook, it might be useful to consider how we got to where we are. In a blog piece for The King’s Fund, Mr Humphries and John Appleby, chief economist at the think tank, sketched the background to the crisis.

Local authority net spending on social care increased an average 6% per annum in the 15 years leading up to 2009, but since then it has dropped by an average of 2.2% a year (a figure that would have been closer to 3.6% if it wasn’t for money transferred from the NHS). This is because social care forms part of local government funding and so it was hit hard by cuts.

The second dimension to the problem is the rapidly ageing population. Spending per capita on the over-85s, i.e. the group most likely to require social care support, is at nearly the same level it was in 2002. And even this low level is only maintained thanks to transfers from an already struggling NHS. But the population is getting older. As Mr Humphries and Mr Appleby write: ‘Funding has not kept pace with the 34% increase in the over-85 population over this period.’ In fact, as they point out, spending on social care services for all age groups is over 10% less than it was in 2009, a figure that, again, would be 17% without the help of the NHS.

So why won’t the chancellor’s new plans help? Firstly, the money will not be enough to plug the funding gap. The chancellor’s £2bn estimate is built on the optimistic assumption that all 152 of England’s councils will raise taxes by 2%. This is a highly unlikely scenario given the political costs they would incur from doing this. In reality, The King’s Fund estimates that the social care precept will only raise at most £800m a year - a long way from the chancellor’s figure.

The second problem, closely connected to the first, is that by attempting to offset funding cuts with local increases in council tax, the Government will widen the gap in social care provision between wealthy and poor areas. Local authorities in rich areas, in the unlikely scenario that they actually decide to raise council tax, will be able to raise more cash than those in poor areas due to their stronger tax base.

As The King’s Fund’s research, quoted in the Guardian, shows, the five councils that will raise the most from the social care precept will be in wealthy areas such as Richmond upon Thames, south London (£14.90-a-head); City of London (£14.40); Rutland in Leicestershire (£13.80); Wokingham, Berkshire (£13.50) and West Berkshire (£13.10). By contrast, the five councils which would generate the lowest income are all in areas of high deprivation: Newham, east London (£5.00); Manchester (£5.80); Barking & Dagenham and Hackney, both in east London (£6.10); and Kingston upon Hull (£6.20).

Traditionally, central government funding has reduced this gap through redistribution. But the present government’s emphasis on austerity, and faith in the power of the free market, means that local councils are expected to become entrepreneurs, increase growth in their backyards by attracting investment, and pay for social care from the (possible) windfall of increased taxation.

Furthermore, it is precisely those areas that will struggle to raise sufficient funds that are most in need of state-funded social care. As Mr Humphries explained to the Guardian: ‘Relying on councils to plug the gap in social care funding won’t be equitable or effective because of the inverse social care law that councils that have the greatest need for publicly funded social care are least able to meet it. George Osborne’s new policy is of very limited help for them.’

The International Longevity Centre (ILC-UK) arrived at the same conclusion. Ben Franklin, the head of Economics of an Ageing Society at ILC-UK, warned: ‘The social care settlement will be insufficient to meet the growing care needs of an ageing population and does little more than paper over the cracks which many of those who are in need of care are already falling through.’

Is this, as the title of the ILC-UK report suggests, the end of adult social care? It’s impossible to say for sure. But it seems that the charity might be right to describe the future as ‘bleak’ for older people needing care.

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