We’ve reported today on Age UK’s research showing a £500m increase in the funding gap for older people’s social care in the past year. The news story gave no indication as to how they reached this figure so I thought I’d do it in a blog post. Forgive the Q&A format for those who find that irritating
What is the basis for the £500m figure?
It is the gap between how much councils needed to spend on older people’s social care in England in 2011-12 to maintain services at the same level as in 2010-11, and the amount that they actually did spend. In this case, between £7.8bn for spend required and £7.3bn for spend delivered. (All of the comparisons below between 2010-11 and 2011-12 show changes in real terms i.e. inflation has been taken account of the equation by basing all figures on 2011 prices).
How was the £7.8bn figure reached?
This was based on research carried out for Age UK by the Personal Social Services Research Unit at the London School of Economics, specifically Julien Forder and Jose-Luis Fernandez who are recognised experts on adult social care economics.
The £7.8bn figure is split into two parts: service costs (£7.0bn) and care management (£0.8bn). Forder and Fernandez calculated that service costs needed to rise from £6.8bn to £7bn from 2010-11 to 2011-12 to keep pace with rising demand/need for care due to demographic change. With a nod to the very tight financial environment that councils are in, they calculated that this could be achieved while massively cutting spend on care management, by 27%, from £1.1bn to £0.8bn. We’ll return to this cut later.
How was the £7.3bn figure reached?
This is a bit more complicated. Government figures (from the Department for Communities and Local Government) show councils spent £7.645bn on older people’s social care in 2010-11 and are on course to spend £6.961bn in 2011-12. The latter figure excludes the £648m transferred to councils from primary care trusts to spend on adult social care, as mandated by the Department of Health. Age UK has assumed that all of this money has gone on adult social care and been allocated between clients aged over 65 and under 65 in line with existing spending patterns. This mean 51% has gone on older people, boosting council spending on the group by £330m, which, when added to £6.961bn gives you the £7.3bn figure.
Has Age UK overestimated the decrease in spending on older people’s social care?
It quite possibly has. I would be very surprised if the £648m transferred from PCTs has been spent as Age UK assumes. This funding is intended to be used to support services at the boundary between health and adult social care that help keep people out of hospital or enable them quicker discharge from hospital. Spending on these services – reablement, falls prevention, intermediate care etc – is concentrated on older people to a greater extent than adult social care as a whole. Therefore you would assume that more than 51% of the £648m has gone on older people.
Moreover, the NHS was allocated £150m in addition to spend on reablement services. We have no idea how this money is being spent. But it is a fair assumption that most of it is going on social care for older people. Also, a further £150m was allocated to PCTs in January to spend in conjunction with local authorities in a very similar way to the £648m figure.
All of these point to Age UK overstating the decrease in funding on older people’s social care, so the £7.3bn figure could be, say, £7.5bn.
Has Age UK overestimated the increase in the funding gap?
No, not necessarily. The £7.8bn target spend figure is based on the assumption of a 27% cut in care management costs for older people from 2010-11 to 2011-12. While care management has been cut back, a reduction of this magnitude is highly unlikely. A more modest decrease in care management costs, from £1.1bn to £1bn, would leave a target spend for 2011-12 of £8bn. Were actual spending to be £7.5bn, you’d still be left with a £500m increase in the funding gap.
The £8bn and £7.5bn figures are totally notional. They are just designed to explore the assumptions used by Age UK and to suggest that any risks in these may cancel each other out.
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