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Care reforms 'face £50m black hole'

Published 11/06/2015

The NAO warned the Department of Health may have underestimated the cost to councils of social care reforms
The NAO warned the Department of Health may have underestimated the cost to councils of social care reforms

Councils could find themselves forced to cut services due to a potential shortfall in funding for major changes to the social care system, a spending watchdog has warned.

The National Audit Office (NAO) praised the way the Government had introduced the changes in the Care Act but warned the Department of Health "may have underestimated the cost to local authorities".

Implementing the first phase of the Care Act is expected to cost £2.5 billion between 2013/14 and 2019/20, the NAO said, but there were uncertainties over the level of demand that councils would face.

The legislation, which was passed last year and came into effect in April, is the most comprehensive overhaul of the system since 1948, providing the first-ever national eligibility threshold - a set of criteria determining when local authorities will have to provide people with support, which is aimed at tackling the variations between local authorities.

Reforms also include a personal cap on personal care costs of £72,000, excluding accommodation, and councils will have a new duty to provide preventative services.

The NAO's report on the first phase of the policy commended the Department of Health for the way it had managed the introduction of the changes, which meant 99% of local authorities "were confident that they would be able to carry out the Care Act reforms from April 2015".

"We judge therefore that the programme has been implemented well and the approach shows good practice from which other programmes could learn," the report said.

But it warned that " with the level of demand so uncertain, the Department's cost estimates and chosen funding mechanisms put local authorities under increased financial risk".

"In a challenging financial environment, with pressures on all services, local authorities may not have sufficient resources to respond if demand exceeds expectation.

"In response, local authorities could delay or reduce services in the short term, risking legal challenge and potentially creating extra burden for individuals, their families and carers, who in turn might seek help elsewhere that is not suited to their needs."

Around £1.2 billion is expected to be spent on carers' assessments and services, but the NAO estimated that increased demand could add another £27 million to the cost this year.

There was also an "uncertain" level of demand from people who currently fund their own care.

The NAO said: "If demand or costs exceed expectations, pressure will fall first on individual local authorities. The Department may not have sufficient information and does not have a contingency fund to avoid impacts on services."

NAO chief A myas Morse said: "The first phase of the Department of Health's new approach to adult social care has been implemented well. But this places new responsibilities on local authorities whose core funding is being significantly reduced.

"They may not have enough resources to respond if, as could be the case, demand for care exceeds expectation. This could result in their having to delay or reduce services in the short term. This risk to value for money needs to be managed."

The Local Government Association (LGA) said councils had warned about the potential costs of the Care Act, claiming there could be a £50 million black hole.

Izzi Seccombe, chairman of the LGA's community wellbeing board, said: "This report supports what councils have long been warning - that there is a real risk that the Care Act could be underfunded leaving councils exposed to additional and unplanned costs.

"Unless the Government fully funds all new burdens brought in by the Care Act then vital reforms to improve care and support for the elderly and disabled could be jeopardised.

"Councils are implementing the Care Act at a time when rising demand and escalating costs means that the adult social care system is already under immense stress."

Although councils had worked hard to be ready for the reforms "many still have serious concerns about there not being enough money in the system to cover these changes", she said.

"While the Government has committed to monitoring additional costs of the first phase of the Care Act, councils still anticipate it could be underfunded by as much as £50 million.

"If this is the case, it could leave them without the resources they need to care for the most vulnerable in society. It is vital that the Government works with councils to ensure any increased demand or costs experienced from the changes in the Care Act are fully covered and do not impact on other valued council services."

A Department of Health spokesman said: "We are pleased the NAO has confirmed that we are implementing the Care Act well and that 99% of local authorities were confident about bringing in our changes.

"We will continue to work with local authorities to ensure our improvements to care are funded."

Sarah Lambert, head of policy at the National Autistic Society, said the squeeze on resources " could lead to delays in people accessing vital support and raises the prospect of the reforms failing to live up to their potential.

"George Osborne has a chance to address these issues before it's too late, as he prepares next month's Emergency Budget. He must ensure that the DH has got its sums right and make the necessary investments so that people with autism get the care and support they need.

"Supporting the most vulnerable members of society by investing in social care isn't just the right thing to do; evidence shows that it also saves local councils and the NHS money by giving people the care and support they need before they fall into crisis and need expensive specialist care."

Sue Brown, vice chair of the Care & Support Alliance, said: "The Care Act is a bold reform of the system, but the Government needs to provide adequate funding so that local authorities can actually implement the reforms.

"Last year, nine out of ten councils signalled concern that lack of funding could jeopardise vital reforms to the care system with the implementation of the Care Act 2014.

"Last week, the Association of Directors of Adult Social services found 83% of directors report there will be an impact on services over the next two years due to funding cuts.

"The Government needs to urgently address the crisis in care funding to prevent the care system from total collapse in the next decade. Anything else is a false economy."

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