Councils weigh up future of in-house adult care services

Cost-cutting and personalisation are forcing councils to rethink service provision which could see social care staff working in or with new types of bodies. Jeremy Dunning looks at the options

The future of council in-house adult care services is under review in England as a result of the twin forces of personalisation and the public funding crisis. Gradual outsourcing over the past 20 years has left councils providing a minority of adult care services. The latest figures from 2008-9, show local authorities delivered only 19% of the home care hours they funded, according to the NHS Information Centre.

Some councils are now taking a more strategic look at their in-house provision that could leave them only commissioning care, as they implement personalisation and prepare for a massive public funding crunch.

A key driver is cost. An hour of home care provided by councils cost £23.20 on average in 2008-9 compared with £12.60 for independent providers.

Although this may reflect the more specialist and intensive forms of care provided by councils, some independent sector leaders attribute it to bureaucratic procedures and higher staff costs in local authorities.

With council adult care budgets facing a possible cut of 25% between 2011 and 2015, such arguments may prove difficult to resist. The cost differential and other factors also appear to be leading personal budget holders to shun council-run services.

Liverpool Council announced last month that it faced a £3.8m deficit for 2011-12 for in-house adult care services, such as day centres, some of which were lying half-empty because personal budget holders were not using them.

Essex Council has ceased providing services, by transferring them to a new company wholly owned by the council.

Earlier this year, Blackburn Council proposed transferring all its in-house provision to a social enterprise but then put this on hold pending a consultation.

By contrast, Liverpool is planning to keep about 25% of the adult care market in-house while reducing its costs.

Claudia Wood, senior researcher at think-tank Demos, believes a majority of councils will ultimately retain a rump of in-house provision, including niche services. “You will always have certain services that your free market won’t go into – it’s stuff that isn’t viable for a voluntary provider,” she says.

Richard Jones, president of the Association of Directors of Adult Social Services, says the focus of councils’ role in future should be commissioning and that it is not “sustainable on costs” for authorities to be “major” providers of services.

It seems clear that the overall level of in-house provision will decline but how this happens, and to what extent, is up for grabs.

• Read Southern Cross Healthcare’s Jamie Buchan and Unison’s Helga Pile going head-to-head on the case for and against greater outsourcing of adult care services.

Option 1 Outsource services to the private sector

There is a long history of councils outsourcing provision to the private sector. In February, Nottinghamshire Council agreed to take forward plans to put its remaining residential care homes for older people out to tender.

Key drivers include reduced demand for residential care and the fact that in-house care homes cost £568 a person each week, compared with £478 in the independent sector.

The change could generate savings of £3.3m a year, though the council intends to invest much of the capital raised by selling the homes in building extra care housing.

But outsourcing to the private sector may leave staff worse off. Although they move on existing terms, under the Transfer of Undertakings (Protection of Employment) regulations, these can be changed later for “economic, technical or organisational” reasons.

Professor Jill Manthorpe, director of the Social Care Workforce Research Unit at King’s College, London, says: “The concern for the workforce is the transfer of terms and conditions and what will happen to them. The strength of the local authority workforce has been its enormous respect for things like training, conditions and health and safety.”

There is also unease about the cost of tendering. Nottinghamshire has warned that other councils have “gone through expensive procurement processes which have failed” and had to be redone.

Option 2 Set up a social enterprise

Social enterprises are businesses driven by a social purpose in which any profits are re-invested to meet that objective.

In June, Blackburn with Darwen Council put forward plans to transfer remaining in-house services to a new social enterprise that would provide services under contract from the council. The council’s adult social care function would be purely a commissioning one, as part of the borough’s “care trust plus” that is also responsible for health.

In a paper, the council said an enterprise could cut costs by making savings on overheads, while driving innovation so that services better met users’ needs.

However, it said it would also help services retain a public service ethos, including by retaining council terms and conditions for transferred staff.

If it does go ahead, the plan is for the enterprise to be run by a board comprising staff and community representatives. This idea chimes with government plans to give public sector workers a new right to form public service co-operatives and take over the services they deliver.

However, Blackburn’s plan ran into opposition from the local Unison branch, which expressed concerns over potential redundancies. It is now on hold pending a consultation.

Council chief executive Graham Burgess says the advantage of being a commissioning-only body is that it allows councils to focus on the quality of the service rather than on the management of staff.

In terms of the social enterprise plan, he says: “There needs to be new ways of working. We need to be flexible otherwise we will suffer salami cutting and allow in the private sector, which has a profit motive. We have an obligation to the user to come up with a model not based on the profit motive.”

Option 3 Local authority trading company

Since 2004, councils have been able to set up trading companies to provide services. Last year, Essex Council became the first authority to set up a local authority trading company in social care, Essex Cares.

Its aim was to drive down costs and promote innovation by exposing services to competition with the independent sector, including for the business of personal budget and direct payment holders and self-funding care users.

But a public service ethos was retained because the company remained in council ownership. Staff terms and conditions have also been protected since they were transferred.

Read about how Essex Cares is implementing this model.

Option 4 Retain most in-house services but cut costs

Some councils may choose to retain the bulk of their in-house services and combat the financial pressures they face by reducing costs, a route being taken by Liverpool Council.

To tackle a projected deficit of £3.8m on in-house services this year, it plans to reshape day and residential care services, close nine day centres and cut the workforce from 1,014 to 850.

The changes, subject to a 12-week consultation, could save an estimated £3m over the next three years.

Roz Gladden, cabinet member for adult health and social care, emphasises the importance of retaining some in-house provision, adding: “If we want something that’s quite specific and we can identify a gap in the market we will go for it. That means provision and commissioning.”

The Liverpool branch of Unison describes the decision as “downsizing” and questions whether the plan would leave a viable service.

Related stories

Personalisation may force day centre closures in Liverpool

Blackburn puts plan to hive off care services on hold

Blackburn with Darwen Council plan to outsource adult services under fire