Councils at risk of Care Act funding shortfall triggering further cuts to services, warns watchdog

Government has implemented legislation well but flaws in cost estimates and demand uncertainties create funding risk for councils, says National Audit Office

Councils are at risk of a funding shortfall in implementing the Care Act because of uncertainties about demand for support and problems in government costings estimates.

That was the warning from the National Audit Office (NAO) in a report today on the implementation of phase 1 of the Care Act, in 2015-16.

The public spending watchdog praised the Department of Health for the way it had implemented the act saying it had consulted carefully and involved the sector significantly, including through a programme office to support implementation run jointly with local government leaders.

However, it warned that problems with the way the DH had estimated the costs of the reforms and allocated funding for them meant councils may not have the resources to respond if demand exceeded expectations. This could trigger further cuts to services following a 29% fall in the number of people receiving council-funded support from 2008-9 to 2013-14 and, according to the NAO, a £1.1bn reduction in budgeted net spending on adult social care by councils from 2010-11 to 2014-15.

This was particularly true in respect of the act’s lowering of the threshold for carer’s assessments and introduction of an entitlement to support for carers who meet new eligibility criteria, for which the government has allocated £125m.

The NAO said the total cost could be as much as £27m more than this in 2015-16 because of the way the DH had estimated the cost. It used the number of people receiving carer’s allowance to estimate the number likely to come forward for an assessment. However, the NAO pointed out that it did not include people who had claimed carer’s allowance and would have been eligible but for their receipt of other benefits.


The DH also allocated £116m in 2015-16 for councils to start – from October this year – assessing self-funders wanting to be considered for the cap on care costs that comes into force under the act in April 2016. However, the NAO said there were uncertainties about the number of self-funders in the community, as opposed to care homes, on which the DH based its estimates.

The NAO also challenged the way the DH had calculated the unit cost of additional assessments and services for carers and self-funder assessments. The DH took the median unit cost from figures supplied by local authorities but placed greater weight on costs supplied by local authorities that expected to carry out greater numbers of assessments. This group of councils tended to have lower unit costs, pushing the DH estimate downwards. However, the NAO warned that authorities whose costings had carried greater weight may not be representative of other councils, for instance they may be better able to achieve economies of scale pushing down the costs of assessments. By putting greater weight on these councils, the DH may have underestimated total costs, the NAO warned.

Better Care Fund concerns

The NAO also raised concerns about the use of the Better Care Fund – the mandatory pooled budget between councils and NHS clinical commissioning groups – to channel £174m of the £470m allocated in 2015-16 to implement the act to authorities. This included £69m of the money for carers.

However, this money is not ring-fenced and its use must be negotiated locally between councils and CCGs. While NHS England has signed off BCF plans only after receiving confirmation that the Care Act money would be used as intended, it will not be monitoring whether this happens in practice..

Impact on services

“With the level of demand so uncertain, the department’s cost estimates and chosen funding mechanisms put local authorities under increased financial risk,” the report warned. “In a challenging financial environment, with pressures on all services, local authorities may not have sufficient resources to respond if demand exceeds expectation. In response, local authorities could delay or reduce services in the short term, risking legal challenge and potentially creating extra burden for individuals, their families and carers, who in turn might seek help elsewhere that is not suited to their needs.”

The Local Government Association said the report supported concerns it had long raised about the risks that Care Act implementation had been underfunded, by as much as £50m.

“If this is the case, it could leave [councils] without the resources they need to care for the most vulnerable in society,” said Izzi Seccombe, chair of the LGA’s community wellbeing board. “It is vital that the government works with councils to ensure any increased demand or costs experienced from the changes in the Care Act are fully covered and do not impact on other valued council services.”

Spending review

The report said the DH would be monitoring actual demand for assessments and support in the first three months of the act – from April to June 2015 – and use this as part of its bid for funding for the next government spending review later this year. This will set government spending plans from 2016-2020.

Besides pouring extra money into social care to meet unexpectedly high costs, the DH could also change regulations or guidance to reduce the effective costs of implementation of the act, the NAO suggested.

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