The figure of £863m constitutes a pretty big hole in London's
adult social care budget, but this is how much
London Councils claims the city's services would lose over the
next three years without "formula damping" - a form of revenue
protection that the government is heavily modifying.
Don't be surprised if you haven't heard of this change, though:
it involves such a complex shift in funding formula that despite
the potential ramifications for services, many in the sector are
the personal social services (PSS) formula, the main distribution
method of social services funding that comes via the general grant.
The formula's criteria were changed in 2006, bringing in a heavier
weighting for the number of people claiming disability living
allowance. And this, claims Nick Stanton, leader of Southwark
Council, would penalise areas where there are more people with
complex needs. "For some reason in London there isn't a very high
take-up of DLA, and that has hit us very badly," he says.
"We've just set a three-year budget, and we've had to take out
about 10% of it."
Damage limitation
The cut in Southwark is, in fact, not as bad as it could have
been. When the formula was first adjusted in 2006, the results of
these changes would have been so dramatic - cutting many budgets by
almost half - that ministers brought in a "damping effect" to
mitigate some of the changes.
However, following much public wrangling between London Councils
and a group representing northern councils - the main beneficiaries
of the change - ministers removed the damping earlier this year,
meaning the modified formula's will now begin to be felt.
The result is a much flatter distribution of funding, and the
only guarantee of an increase for many councils are the grant
floors, which provide a minimum increase every year. Without these
floors, London would be receiving just 15.5% of England's total
expenditure on vulnerable adults (this adjustment means London gets
17.5%, to cater for 20% of England's vulnerable adult needs). But
the increase that the floors provide is being reduced year on
year.
The effects being felt by the changes are leading to widely
differing responses by councils. Kensington and Chelsea says it
hasn't been affected at all and Hackney Council says that any cuts
in their services can be avoided by efficiency savings. By
contrast, Southwark will be cutting £6m from frontline
services.
Eligibility criteria
Stanton says: "To cope with funding over the next three years,
we've got to look again at our eligibility criteria. At the moment
we're providing moderate care, but we're consulting on restricting
down to critical or substantial. We're putting up meals on wheels
charges by 45%, we've shut a day care centre for people with
learning disabilities, and had to close the children's museum. It
was not a good budget round.
"This time we were able to cushion the cuts with one-off
efficiency savings, as we have consolidated our accommodation. But
in three years' time, if this formula carries on being used, we
won't have that."
So how have these changes come about? Jo Mennell, head of local
government finance at London Councils, says the PSS formula is far
too simplistic. "This is the lowest possible common denominator
formula. If you have got quite a lot of high profile clients and
don't have a formula that identifies that, it suggests that
everyone has fairly even distribution of need."
She adds that people in London are less likely to claim DLA than
people in former industrial areas, and as the DLA now accounts for
40% of the weighting for the PSS budget, the results have been
harsh on the most deprived boroughs.
Westminster Council says that it won't change its eligibility
criteria for now, but that future initiatives and services may
suffer. Edward Argar, the Westminster councillor with
responsibility for adult social services, says: "Westminster has an
attraction for people with very complex needs - the bright lights
and the anonymity of being in a big city attracts people, often
substance abusers, the homeless, or those with mental health
problems. Vulnerable people will turn up and we can't predict that
scale of demand. The funding formula for 2006-7 doesn't reflect
those people. And they are the ones that cost a lot more."
Poor survey
Stanton says that the survey to measure need was so poor that
other areas haven't been allocated funding accurately either. "The
difference between what the formula thinks we need to spend on
these services and what we actually spend on these services is
huge. The big one for us is physical disability, where we're
spending something like £5-9m over the odds. Either we're running
the services really badly, or the formula is completely out of
kilter with reality."
In contrast to much of the south, northern areas are broadly
doing well from the formula changes. While nearly half of councils
in Yorkshire are able to provide services to clients with low or
moderate needs, three-quarters of London councils only offer
services to those with critical or substantial. Despite this
existing disparity, there are still sizeable increases being given
to councils in Humberside and Hull.
But the pain for London social services doesn't end there. The
funding formula for children's services also changed in April 2006,
resulting in £180m less a year for inner London boroughs, despite
them having little or no reduction in need. London Councils says
the formula is too simplistic and overlooks London's
disproportionately high number of complex cases.
Both the adults' and children's formulas are based on population
information which fails to reflect the fact that London is growing
faster than the rest of the country. And new immigrants to the
country are more likely to have more complicated cases to handle,
says Stanton.
"The definition of complex cases isn't the same across the whole
country: in Southwark, we're talking about things like
unaccompanied minors coming across from war-torn Africa with huge
psychological disturbances. They're very different to needs in the
North."
Can the formula be changed before decisions are made for the
2008-11 funding round? Argar says no. "We would like a conversation
about the formula for the next round, but equally in the short term
we would like a conversation about how they might create grants for
specific problems, be it substance misuse, learning difficulties or
mental health to make up the shortfall that this grant has
created.
"But every indication we've had so far is that isn't going to
happen."
London Councils briefing on damping
Community Care coverage on the changes
This article is published in the 26 June issue of Community Care
magazine under the headline
Formula for a storm