Budget blues

The
recent Budget appeared to show the
government’s determination to tackle underfunding in the NHS and social
services. But on closer inspection one half of that commitment seems lacking –
guess which half. Rachel Downey reports.

New
Labour has taken a gamble. By raising taxes and linking the move directly to
improvements in the health service, the government has linked its political
future to the reform of the NHS.

Chancellor Gordon Brown had little choice. He
didn’t need the findings of Derek Wanless’ review of health funding to tell him
the service was severely underfunded and that improvements could not be made
without substantial investment. Wanless argued for a sustained rise in
resources. And the chancellor provided it – £41.5bn over five years.

The review contained crucial recommendations
for social care funding. Wanless went beyond his remit by including social
care, arguing it is inextricably linked with health. His report recommends an
immediate study of the trends affecting social care. He points out that
demographic change and, in particular, the ageing of the population, places
more pressure on social care services than on the NHS. He concludes that social
services budgets need to double over the next 20 years.

The chancellor’s response was an additional 6
per cent a year in real terms from April 2003. If this continued for 20 years,
it would have met Wanless’s recommendation. But the increase is only guaranteed
for three years.

The government is betting that the public
will accept an increase in national insurance contributions to sort out a
struggling NHS. It’s an evens bet. But when it comes to social care, the
government’s plans are looking even less certain. There are three fundamental
problems: the increased funding for social services will not meet the spending
requirements of overstretched departments, the money will all be used to solve
the bed-blocking crisis, and none of it will improve pay or conditions for the
social care workforce.

Although the headline figure was £3.2bn over
four years – the largest rise social services departments have seen in a decade
– social services chiefs argue it falls short. The £3.2bn included £800m that
had already been announced for 2002-3. After deducting what social services
departments estimate they will spend from 2003-4 to 2005-6, the headline figure
drops dramatically. The extra money amounts to an increase of just under 20 per
cent over three years – the Local Government Association’s submission for
social services for the same period called for an increase of 30 per cent. In
cash terms, this means a shortfall of £550m.

While welcoming the additional resources as
"an acknowledgement that sustained funding is required for social
care", Liz Railton, chairperson of the Association of Directors of Social
Services resources committee, says: "It is not enough, and we say that in
terms of the scale and the size of the holes we have to fill. A lot of the
increases will drop into the existing hole we have already."

The holes in social services funding are
beginning to look like craters. It is estimated that since the mid-1990s, about
£1bn annually has been either siphoned off from other local authority services,
particularly environment and transport, or obtained via council tax increases
to bail social services departments out of severe overspends on the standard
spending assessments – the amount the government estimates they need.

Last year, the debt crisis worsened. In
February, social services directors predicted further overspends totalling
£200m on the financial year to April – and that was after the bail-out. A
survey by the ADSS and the LGA found the bulk of the projected overspend – 69
per cent – was on children’s services, 19 per cent on services for people with
learning difficulties, and 12 per cent on those for older people. Directors put
the overspend down to the increase in the number of children coming into the
care system.

In the week of the budget, the ADSS released
a further survey revealing that almost all directors believed a lack of
resources had hindered the implementation of the Carers and Disabled Children
Act 2002. Less than one-fifth of local authorities have been able to find
resources to implement the new legislation that came into force last year and
only 5 per cent expected to find additional resources in this financial year.

Inflation in some social care services is
significantly higher than the overall rate of 2.5 per cent. In Railton’s
authority – Cambridgeshire – the cost of nursing home places has risen by 15
per cent. Local authorities have had to spend more money on care home places
just to get a service and have been mounting up debt, saying they will pay it
off next year. In Middlesbrough, care home providers have just turned down the
offer of a 24 per cent increase. The 6 per cent bonus money pales beside these
demands.

Social services departments are also losing
funding from other sources. From April 2003, they will lose the
promoting-independence grant, which was used, among other things, to develop
intermediate care services. The abolition of preserved rights will result in
further costs to local authorities, as will the removal of the residential care
allowance.

On top of all this, new systems will bring
additional costs. For example, some departments are finding the costs of the
financial assessment under the fairer access to care arrangements high.
"We have very little in terms of real new money to invest in new services
for older people, children, and people with learning difficulties," says
Railton.

Whether or not social services departments
will see any increase in the first year is debatable. The extra money will come
from higher national insurance contributions by both individuals and employers.
In total, the public sector will have to fork out an additional £1.2bn to pay
the increased national insurance bill. The LGA argues that the increase for
social services in the first year, which it puts at £280m, will be wiped out by
the higher NI bill.

But the bargaining for money is not over yet.
The results of the latest comprehensive spending review will be announced in
the summer. One of the seven cross-cutting reviews that are feeding into the
announcement for further spending plans covered children at risk. Railton and
her colleagues are cautiously optimistic that this will bring additional money.

But Brown’s budget bonus was never intended
to be a bail-out for overspent social services departments. The focus of the
government’s plan is the NHS and freeing up some of the resources it is
spending keeping older people languishing in hospital beds.

Health secretary Alan Milburn’s document on
how the money would be spent outlines a three-pronged approach: more care home
places; an expansion of intermediate care places; and an increase in home care
packages. "The extra resources will allow local authorities to increase
care home fees where this is necessary, to stabilise the care home market and
increase choices for older people," it states. "We expect the
expansion in intermediate care to increase provision by about 30 per cent by
2005-6." The sting in the tail was the news that local authorities would
be fined if they failed to end delayed discharges.

Fiona Campbell, co-ordinator of the
democratic health network at the Local Government Information Unit, does not
believe the plan will work. "It seems very unlikely that social services
departments will be able to reverse the trend and increase the number of care
home places, which is what the health secretary is demanding. It’s very difficult
to believe that would increase the intermediate care market by 30 per cent in
four years. Even if it is possible to do that with a 6 per cent real-terms
increase, there’s a huge need for additional funding for mental health and
children’s services."

Although the extra money will allow local
authorities to increase care home fees where it is necessary to try to
stabilise the market, social services departments will be at the mercy of the
intermediate care providers, she adds.

Care home market analysts and providers are
even more pessimistic. The care home market shrank by 10 per cent in the three
years to 2001 – more than 50,000 care home beds across all sectors were lost
during this period. Care home owners are leaving the business. Health and care
service market analyst William Laing says £1bn annually is needed to stabilise
the market by paying "a fair price for care home costs". And the
chancellor has not come up with anything near that level. There is no
compromise position, says Laing. "Local authorities will be forced to pay
a fair price because if not, the capacity will cease to exist. Whether they get
it from children’s services or from fire brigades, ultimately they will have to
pay it."

Shelia Scott, chief executive of the National
Care Homes Association, agrees. "I don’t think it will work – too many
homes have gone already in specific parts of the country, particularly the
south east. I do not want to deride what the government has done by saying it
is not enough. But it isn’t enough. In many parts of the country we are moving
to under-capacity. The message needs to be getting through loud and clear to
homes that there will be more money, and directors of social services need to
be saying that to homes."

Milburn acknowledges the government needs
staff to be on board if the reforms are going to work. The new star-rating
performance assessments will include measures on how well each NHS organisation
is supporting and involving staff. He anticipates pay reform in the health
service and changes in working practices. But there is not one mention of
social care staff in the implementation. "The fact that many changes in
the social care system are included in an NHS Plan document has alienated
social care staff – we do not consider ourselves a subdivision of the
NHS," says Owen Davies, Unison’s national officer for social services.

He adds that Milburn has already annoyed
social care staff by ruling out using the extra money to improve terms and
conditions. "For ministers to rule out increasing pay before discussing it
with us seems to be just very bad planning." He maintains that any plan to
modernise services will fail unless the government comes some way on increasing
pay. "If government’s fundamental policy is to improve the quality of services,
then they will fail to achieve that without being fair to the workforce. There
is a united front between health workers and social care workers on this."

Unison general secretary Dave Prentis earlier
this month offered only conditional support for the plan to improve the NHS,
saying staff wanted some of the extra money to filter into their pay packets.
Two weeks ago, social workers and other local government workers in London
voted in favour of strike action because local authorities are refusing to meet
their claim for a flat rate of £4,000 for London weighting.

The government cannot ignore these concerns,
warns Janice Robinson, director of health and social care at the King’s Fund
think tank. If it wants to build capacity in the social care market for older
people stuck in hospital beds, it will have to tackle recruitment and retention
across both health and social care.

"If you look at the care workforce, some
of the low-capacity problems are because of the fact that staff receive
appallingly low wages," she says.

The government’s gamble may pay off and it
may be able to make significant improvements by the time of the next election.
However, its plans to expand alternatives to hospital care for many older
people are looking less certain to succeed.

What is clear is that the government
cherry-picked the advice of the Wanless review. It ignored his crucial argument
that demographic changes will have a greater impact on social services than on
health and that therefore social services departments need significantly more
funding to expand older people’s services, ensure they can meet their other
demands, and keep the workforce on board. It may have done so at its peril.