Paul Carey-Kent on the recession and social care

The recession and associated government debt will deeply affect public services. Social care budgets already face challenges and may expect to suffer most. There are three likely areas of impact:

● The effects on total funding for councils and knock-on effects on social care budgets.

● Direct effects on specific social care funding.

● Demand for social care.

The first impact will be most significant. The government’s overall public sector spending plans for 2011-14 have been assessed by the Institute for Fiscal Studies as representing a cut in real terms of 2.9% a year.

There is an unusual degree of uncertainty because no local government funding settlement is likely before 2011-12, after the general election. Commentators talk about real-terms cuts of up to 5% in each of the three years 2011-14. This is a difficult scenario for local government as a whole, but for social care there are two more problems.

Demographic growth

First, there is increasing pressure from demographic growth on the number and complexity of cases. This applies not just to older people but in adults’ services as a whole, with increasing survival rates at birth and greater longevity for people with learning disabilities.

In addition, the green paper, Shaping the Future of Care Together, did not make clear how the implications of demographic growth will be tackled. There is shorter-term uncertainty because the government’s proposals for free home care for people with greatest needs are predicated on efficiency savings of £250m. Implementation from October 2010 looks untenable against the current background.

The other uncertainty is whether the personalisation agenda will bring additional costs, either through increasing demand or more expensive services emerging. The consensus is that personalisation will be cost-neutral, but it is too early to tell.

Specific areas of adult social care funding may be under additional threat, the largest of which is the social care reform grant. The assumption must be that this will stop from 2011-12. However, it is doubtful that all transitional costs of personalisation will have been dealt with by then.

Income from clients

Adults’ services rely heavily on income from clients, but the recession will reduce client income and reduce the value of property. Thus, older people going into residential care will use up their own resources more quickly and need earlier financial help from councils.

Because health and social care spending is inter-related, pressure on health budgets could have severe effects. The voluntary sector is also likely to have its own funding pressures and will be less able to assist.

The final area of impact is on demand for social care services. Although too early to quantify, increased unemployment is likely to lead to more people with debt, mental health issues and housing problems. Lest we get too gloomy, though, there are some possible benefits from the recession, such as reduced price inflation and more flexibility in the markets. But overall, times that were already very challenging may be made more difficult by the recession.

However, 2010-11 will be a comparatively favourable year, though it may not feel it: there are funding settlements inherited from before the recession and grants already in place.

Paul Carey-Kent is deputy county treasurer, Hampshire Council, and a member of the social care panel at the Chartered Institute of Public Finance and Accountancy

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