Quality versus cost: A brief history of outsourcing in adult social care

Private sector care has largely replaced council services. But, with more outsourcing planned, debate rages over how much it has improved the quality of care, writes Vern Pitt

In 1992, independent sector providers delivered 2% of state-funded home care in England, but just 16 years later they were providing 81%. Successive governments from both ends of the political spectrum have pushed for greater choice in the care market and thrust public funds into the hands of charities and, in particular, private companies to provide it. Two decades of outsourcing have left councils delivering an increasingly small minority of services, and the UK government’s vision for social care says it wants council provision to contract further in England.

Some argue that outsourcing has resulted in better quality services and greater capacity, which would have been impossible with state provision alone. But others feel this has come at an unacceptable cost to care staff terms and conditions or point to evidence that quality is lower in the private sector.

The outsourcing revolution in social care started with the NHS and Community Care Act 1990, which established councils’ central functions as assessing need and funding and commissioning care, rather than service delivery.

Tailored to need

Outlining the act in July 1990, then health secretary Kenneth Clarke said: “Our policies are aimed at improving social care services by ensuring that they are properly tailored to the needs of individual people. This requires a clear, locally determined set of priorities, and effective collaboration between public, private and voluntary agencies.”

Since the act took effect in 1993, the independent sector has boomed in home care, while it has also claimed an increasing share of the residential care market, though from a higher base.

State funding of independent homes soared through the 1980s as people eligible for supplementary benefit (the forerunner of income support) could use it to fund residential care.

The 1990 act ended this practice and made local authorities responsible for state-funded residential and nursing home care, partly to curb funding from the taxpayer. However, between 1993 and 2010, the private sector’s share of the UK older people’s residential care market, from all funding sources, rose from 53% to 71% as council provision shrank, according to analysts Laing and Buisson’s 2010 report on the market.

But has this shift in emphasis delivered the improvements in quality Clarke hoped for?

“The physical fabric of the service is infinitely better than it used to be,” says William Laing, director of Laing and Buisson. Laing says in the 1980s older people were often placed in long-stay hospitals with open wards, but today’s care homes have private rooms and en-suite bathrooms as standard. He also points out that regulators have charted a steady improvement in the quality of services across the piece.

But economist Howard Reed, director of Landman Economics, cautions against drawing the conclusion that outsourcing and improvements in quality are linked. Reed, who recently wrote a paper criticising the impact of outsourcing for the union Unite, says social care provision in all sectors has improved over time because of better training and technology.

Lower quality

And there is evidence that provision in the private sector is of lower quality. In April 2010, 91% of care services in England run by councils or charities were rated as good or excellent by the Care Quality Commission, compared with 80% in the private sector, according to the CQC’s State of Care report for 2009-10.

The CQC also pointed out that private sector services were generally of lower cost and it could be here where outsourcing has had its biggest impact.

“When you have a market in social care it’s easier to compete on price than quality,” says José-Luis Fernández, principle research fellow at the Personal Social Services Research Unit at the London School of Economics.

The lower cost of private sector provision reflects the fact that pay and terms and conditions remain poorer than in the public sector. But Laing argues this is not a problem, saying staff have comparable qualifications across sectors and are thus of comparable quality.

Reed disagrees: “The normal economist line on this is that if you pay more money you get better quality people or more motivated people doing the job. It’s certainly the argument used in the banking sector to justify huge bonuses to senior executives.”

While the workers may have been paid less there have certainly been more of them. The number of state-funded domiciliary care hours provided in England increased by nearly 50% from 1999 to 2008. Laing says this has been a positive move which would have put extraordinary strain on public finances were it not for the private sector. But Reed argues that increased capacity has come at the expense of quality.

While the past 20 years have seen the marketisation of the supply of social care, the purchasing power remains within local authorities. However, that is set to change with the roll-out of personal budgets, which make service users the purchasers.

“There’s a potential risk there that, as we marketise the demand side, the balance of power in the market shifts quite significantly,” says Fernández. “If you are a big provider and you are talking to a local authority then you are going to offer them the best deal because losing their business could kill you, but when you talk to users you are in a much stronger position.”

But Laing doubts this will be the case: “It would be madness for a local authority to give up all its powers. If I ran a council I would accredit only those that are willing to meet my fee level.”

Outsourcing has been one of the most significant developments in adult social care in the past two decades; but despite the government’s plans for it to go further, at least in England, doubts remain over how far it has been a good thing for the sector.

Case study: Public sector still dominates in Northern Ireland

While England, Scotland and Wales have care providers galore, Northern Ireland has little over five. Most of the country’s care provision is handled by five regional health and social care trusts, while relatively little is contracted out to independent providers.

This is not, however, rooted in ideology, says Carolyn Ewart, manager of the Northern Ireland Association of Social Workers. Instead she says years of sectarian violence made it difficult to get investment from any large companies so developing an independent sector would have been difficult.

But Alyson Dunne, director of care at Praxis, a provider which operates in Northern Ireland, disagrees: “There has been a reluctance to put a lot of work out to tender because of the anxiety about the loss of public sector jobs. Some would see it as devaluing the staffing costs.”

Ewart says that keeping provision within the public sector has allowed the country to maintain a stable workforce that is experienced and trained. “The first part of the UK to introduce registration of the social care workforce is Northern Ireland. I think we are able to do that because they are mostly employed in the public sector.”

Northern Ireland is not unlike the rest of the UK in facing large budget cuts and, while the assembly is protecting health spending, it is not doing the same for social care. Both Ewart and Dunne say this could result in more outsourcing in the future.

However, Dunne is sceptical about the extent of this: “As new services come on-line there is a better chance that these will be tendered out but I don’t think there is the will to get current services moved out.”

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