Last reviewed 10 November 2015

How seriously should we take it that two ex-ministers for social care have recently delivered dire warnings about the underfunding of health and care services? Jef Smith discusses the Conservative Government’s new policies affecting social care.

Paul Burstow, now out of Parliament but heading the Right Time, Right Place Commission on transfers between care settings, has proclaimed that “the fragile care market will collapse unless councils act quickly”. Meanwhile, in even more apocalyptic terms, Norman Lamb, Burstow’s successor at the Department of Health (DH) and now his party’s spokesperson on health and social care, has predicted that “The NHS will crash within two years with catastrophic consequences unless the Government orders an immediate multi-billion pound cash injection”.

An assessment of these alerts might be somewhat influenced by the knowledge that both politicians are Liberal Democrats. Their party was in the Coalition government until May — and should, perhaps, have been able to do something about the problems they now highlight — but has now been exiled to a very marginal Westminster role. These voices, however, are not the only ones expressing serious concern. It is true that almost everyone with views about the future of care services has an axe to grind, but that does not always mean that their opinions should be rejected out of hand. Even the highly biased sometimes speak the truth.

Three developments since the formation of the new Government have attracted particularly strong adverse comment. They are the decision to delay the implementation of the care cost cap for individual service users until 2020, the proposal to introduce a National Living Wage (NLW) for employees next year, and the continuing austerity in the public finances. Each will have serious consequences for the way care is delivered for many years into the future.

The first two — the care cap postponement and the NLW — were completely unexpected, but the continued squeeze on public spending came as no surprise. The Chancellor of the Exchequer’s determination to reduce the national deficit, however controversial the methods he is using and despite the fact that the objective is not being achieved at anything like the promised rate, is broadly endorsed across the political spectrum. The sharpness of the impact of these economies on the local authorities who are responsible for delivering adult social care is much more controversial.

Local authority cuts

Compared with the 2010 figure, 150,000 fewer people now receive support with meeting their social care needs. This is an astonishing trend given that the number of older people both absolutely, and as a percentage of the population is growing rapidly. The principle contributing factor is the budget cuts local authorities have been forced to make in the face of the withdrawal of a central government grant, a 40% loss of resources over the term of the last parliament. Most councils have attempted to protect social care, but when doing so involves disproportionate damage to other local facilities like libraries and sports centres, and delays to high profile responsibilities such as filling pot holes in road surfaces, even an ageing electorate protests.

It seems a very long time ago that Ray James, then President of the Association of Directors of Adult Care Services wrote, “We urge the Government to act to meet the significant growth in the volume and complexity of needs faced by generations which rightly expect to lead longer, more fulfilled lives”. This was a view in fact expressed just before the general election. The urgency of the plea seems to have fallen on deaf ears.

In the past, adult social care departments responded to tightening cash restraints with what can only be described as harsher rationing, but the DH has attempted to deal with the inequalities this caused by setting, in regulations formulated following the Care Act and applicable since April, a “national minimum threshold for eligible needs”. It is widely believed that this requirement has increased costs by outlawing councils’ treating some people as ineligible because their needs were considered as less than critical, now anyone falling within the threshold will have to be helped.

Between irresistible demand and falling resources, local authorities say they have no alternative but to limit what they pay independent sector providers. Whether operating commercially or on a not-for-profit basis, home care agencies in their turn have inescapable costs. The result is that, when recently surveyed, 56% of directors of adult social care report that providers in their areas are now facing significant financial difficulties. A run of exits from the care business would of course seriously affect councils’ ability to respond to the needs of seriously vulnerable people requiring support to retain some sort of independence.

National Living Wage

The problem for care agencies has been greatly exacerbated by the Chancellor’s announcement in his post-election budget of the introduction next year of what he calls the National Living Wage (NLW). This is effectively a new compulsory minimum for all workers over 25, calculated at a level over 20% above the currently applicable National Minimum Wage. No one had predicted this move, which coupled with cuts in various welfare benefits, has the effect of shifting a large part of the task of coping with workers’ low incomes from government to employers.

Whatever may be thought of the long-term economic implications of such a move, its immediate impact on the traditionally low wage care industry will be extraordinary. Many employers have struggled to pay the existing minimum wage and some have attempted to evade it, so their capacity to finance such a substantial increase in one of their major expenses is clearly limited. As well as agencies not paying at the legally required level, there has been the widely publicised practice of not meeting employees’ travel costs or paying for the time taken to get from one client to the next.

The capacity of many domiciliary care providers to finance the substantial increase required by the National Living Wage — personnel constitutes one of their major expenses — is clearly limited. Local authorities will be equally unable to raise the fees they are prepared to pay, so the threats of market meltdown no longer look simply alarmist. The Department of Communities and Local Government could of course step in with additional funds to enable councils to pay fees to a level which would incorporate the higher wage costs, but that ministry has a poor record in understanding and responding to the needs of social care.

The only part of the market with anything like the capacity to absorb the rise in the cost of care provision is that paid for by self-funders. The long-standing arrangement by which people financing their own care pay higher rates than those whose fees are paid by social services has long been recognised as a scandal of non-consensual cross subsidy, but the anomaly looks set to intensify. Providers will tend to raise their prices for those paying privately to compensate for not being able to allow market forces to operate in relation to public sector commissioners, but it cannot be long before self-funders challenge, perhaps even in the courts, a system that they perceive to be unfair.

In the domiciliary care sector, it may be that the two tier service already apparent in some areas will become more or less general. Norman Lamb has predicted that “we will have a complete divide between people with money who will get good care and those who have rushed visits, dreadful turnover of staff and poor care or nothing.” The alternative could be a widespread retreat from the publicly funded part of the market, a process which is indeed already under way.

The United Kingdom Home Care Association (UKHCA) reported in the summer that “We have already heard from large providers contemplating handing back up to half of their local authority business unless rates paid increase before next April.” This trend was independently collaborated by the King’s Fund, whose assistant director for policy, Richard Humphries, wrote in September, “Three of the country’s top five home care providers are planning to pull out of publicly funded home care or have already done so; many more have handed uneconomic contracts back to local authorities.” If this process were to continue unchecked, the only service users left would be self-funders, an unthinkable situation.

Delay in care cap

It is here that the other unexpected post-election development, the five- year delay in the introduction of the cap on care costs, comes sharply into play. The idea of limiting to a preset sum what any individual would have to pay for services over the whole period of their needing social care derives from the recommendations of the Dilnot Commission, which was set up in the early days of the Coalition government and reported in July 2011. Dilnot’s plan, severely diluted but retaining the principle that no one should be pauperised by the expenses of care in old age, was eventually accepted by the Coalition government, it was incorporated into the Care Act 2014, and its implementation from April 2016 was apparently guaranteed in the Conservative Party Manifesto.

Its abrupt rejection — 2020 is so far away in political terms that the whole idea of a care cap could simply disappear by then — came as a shock to many in the sector, but the policy U-turn was masked by the announcement’s being made in a letter from Care Minister Alistair Burt to the Local Government Association (LGA). The LGA, representing councils with majorities across the political spectrum, has regularly protested about local authorities’ difficulties in both meeting existing responsibilities and financing new legislative commitments, and Mr Burt’s letter was in response to one from the Association making precisely that point. His cunning claim was to be effectively on the same side as his critics: “this is not a decision which has been taken lightly,” he wrote, “but one that has followed from consideration of the genuine concerns you have outlined”.

Whether this tactic will have satisfied the people who might have expected to have their care costs met from public funds but will now find themselves having to call on capital or even sell their houses to finance their support remains to be seen. Such self-funders and their families indeed will have further cause for discontent with their unfortunate lot, since they now have to shoulder a responsibility that until a few months ago they expected to fall to the public purse.

Over recent years, all major political parties have taken great care to cultivate older people, recognising that they have become a substantial political force and are much more likely than youngsters to turn out at elections. Expensive policies such as inflation-locked pensions, travel concessions, and free TV licenses for over-75s have seemed to be untouchable, so it was somewhat surprising that the care cap, aimed at benefitting many in that same age group, has apparently disappeared over the policy horizon. Not for the first time, social care users seem to have been treated as politically expendable.