The government’s public sector spending cuts have begun. In this special report on surviving the cuts, Community Care reporters examine how councils can save money in social care.

Below, you can see a nine-point guide to saving money. Geoff Ettridge, an independent adviser on social care services, has scored the proposals for ease of implementation and likelihood of savings.

“My scoring of the austerity proposals laid out here is subjective but aims to reflect the ‘ease of implementation’ and the likelihood of the proposals delivering ‘significant and ongoing savings’. However, much depends on local circumstances and, as always, the devil will be in the detail,” says Ettridge.

He adds: “Savings between 5% and 10% will require structural changes within councils and savings above 10% will probably require working in partnership with other agencies; savings above 15% are only likely to be delivered with the closure of services.”

Local authority social workers are facing a basic pay freeze for 2010-11, which unions have branded a real-terms pay cut of more than 5% under the current rate of inflation. Local Government Employers argues this is the only way to protect frontline jobs.

But basic pay is not the only area where public sector staff face cuts. Perks such as golden hellos, lease car schemes, mileage allowances and relocation allowances could also be at risk.

Employee benefits are managed locally rather than through the national pay agreement.

Nevertheless, LGE says it expects all councils “to look urgently” at what they can cut and has produced a guide for employers on reducing costs.

There are already signs of perks disappearing. Derby Council, for example, is in negotiations with Unison over plans to scrap its car user allowance, which compensates council staff for wear and tear to their cars.

A key issue for councils will be the legality of removing payments and perks. If such benefits were written into a social worker’s contract, it would be difficult to remove them without his or her agreement.

Ettridge says: “Conditions in the private care sector are less favourable than in local authorities so a mass exodus is unlikely, but there is a risk the greatest burden will fall on the lowest paid. This would be unfair and could result in the workforce finding employment in other sectors.”

This involves setting up a company that is, in effect, wholly owned by the council to run in-house services and competes in the market against voluntary and private providers.

It is envisaged the rigours of the market will help councils reduce costs while their local knowledge and economies of scale will enable them to offer personal budget holders a competitively priced service, in comparison with independent providers. In-house trading units could also ­market services to people with direct payments who are barred from using traditional council-run services.

Essex Cares was set up last year to run the council’s domiciliary care, equipment and employment support service for people with mental health problems.

It has a three-year contract with the council and employs 850 former Essex staff. Any savings will be recycled back into the council’s budget but Essex Cares is not expecting any to be made in the first two to three years.

However, Manchester Council is expecting to make £1.4m over two years from changes to in-house services, including the establishment of trading units, according to last year’s Department of Health report on the use of resources in adult social care.

This has involved comparing the costs of in-house services with those of external providers.

Ettridge says: “If a service is already efficient, savings opportunities are limited.”

Strategic savings usually come from determining which are the most effective and efficient interventions.

However, the approach relies on good quality evidence and research. Although in health and, to an extent, adult social care that evidence is long-standing, in children’s services it is more patchy.

The last wide-ranging review of evidence of costs and outcomes was in 2006. It concluded that children’s homes were an area that should be targeted for cost savings because the evidence showed homes with more staff did not necessarily produce better outcomes.

Instead, resources and staff were better used when placed in prevention teams working with teenagers, the research found. Preventing placement breakdown was also found to be cost-effective because the more broken placements a child or young person underwent, the more they ended up costing the system.

More recent government-sponsored programmes, such as family intervention projects and short breaks for carers of disabled children, have had a stronger focus on cost-effectiveness and outcomes. Directors of children’s services are also now teaming up with researchers to find preventive services that are worth investing in that will save money and reduce referrals over time.

In adults’ services, a Department of Health (DH) paper last year, Use of Resources in Adult Social Care, advised councils that the best way of releasing efficiencies was to reduce the proportion of money spent on residential care.

While the DH said that residential care was the right environment for some service users, others were moving into it because of a lack of available cheaper options in the community.

Ettridge says: “It can be very difficult to prove the negative, ie, that something didn’t happen because of a particular intervention. Further research may be costly in terms of money and time, and unlikely to produce definitive proof.”

Total Place is an approach in which local public bodies co-ordinate their work to improve outcomes for users and make efficiency savings. It was piloted in 2009-10 in 13 areas and an evaluation report earlier this year called for the programme to be rolled out nationally.

In Bournemouth, Dorset and Poole, work led by the three councils and two primary care trusts found improvements could be made to services for older people and costs reduced by shifting resources from acute health and residential social care into community and preventive services.

The project involved mapping spending, including on avoidable hospital admissions and residential care.

It then identified interventions that could shift the balance of care towards the community, such as joint case management of people with long-term conditions by integrated health and social care teams.

Although it concluded that savings could be made by reducing avoidable hospital admissions by 15%, it identified significant barriers to doing so.

The obstacles could be overcome by creating new ways of managing finances across organisations to cope with the fact that investment by one organisation can lead to savings for another.

Elsewhere, Croydon Council and PCT predicted they could make net savings of £8.3m from 2011-12 to 2013-14 and improve outcomes in services for children from conception to the age of seven, after mapping current services and spending. They found that separate budgets between agencies created delays and extra costs in delivering services and early warning signs in children and families were not noticed.

Ettridge says: “There is a variable record of pooled budgets delivering significant savings. Local authorities could find themselves subsidising the NHS. Total Place needs to include more than health and social care services.”

Outsourcing allows councils to lose the infrastructure costs of providing services while creating a market that enables bargaining on contracts. The same service can then be delivered at a lower cost. But unions say outsourcing provides contractors with a profit motive to cut jobs, wage levels, staff conditions or the quality of services.

Further criticisms of the model include the blurring of the lines of accountability and the large sums spent on tendering and drawing up contracts.

More councils are outsourcing vast swathes of their work. Essex has signed a £5.4bn deal with IBM to manage and provide public services, including schools management, social care and roads, to save 20% of its annual £1.2bn budget within three years. Brighton council and Barnet in north London are also investigating large-scale outsourcing.

In adult social care, outsourcing is almost universal nationwide. In 2008-9, 81% of home care hours provided to clients funded by councils were delivered by the independent (private or voluntary) sector, up from 78% in 2007-8.

Outsourcing is gaining popularity in children’s social care, with residential care now largely outsourced and more fostering services provided by private and voluntary organisations.

There is less outsourcing in statutory areas of children’s services, such as child ­protection.

As an alternative to contracting out to a private company, the Conservatives say poorly performing councils should examine handing child protection to social work practices. They claim this would save money on absenteeism and high staff turnover.

Social work practices remain in their infancy and there has been no cost-effective evaluation made. Such a policy would reflect NHS programmes to help staff, such as district nurses and occupational health workers, set up their own companies and contract services back to primary care trusts.

Ettridge says: “Most in-house services are outsourced so additional savings may be limited.”

The contribution of high-quality administrative and IT support in social work was highlighted by the Social Work Task Force, yet the Treasury’s announcement of budget cuts in local government has raised fears this resource is under threat.

The government emphasised that councils in England could make the required £1.2bn efficiency savings without affecting frontline services, given that ring-fencing on other grants will be lifted. Back-office functions have been identified as a prime target for cuts.

But sector leaders, such as Hilton Dawson, chief executive of the British Association of Social Workers, warn that this approach would be counter-productive in social work. “There’s no room for more back office cuts – this has already been cut to the bone in councils,” he says.

“What we have ended up with is social workers not just spending all their time in front of the computer but dealing with photocopiers, booking taxis, and doing all these things for which they’re not trained and to the detriment of social work practice.”

Meanwhile, the biggest survey of social workers’ workloads, published by the task force earlier this year, revealed the premium placed by practitioners on administrative support.

The research, which found practitioners spent 26% of their working time on direct contact with clients and 22% on case recording, showed more than two-thirds of social workers in statutory children’s services had experienced cuts in administrative support.

Respondents said managers had taken the view that admin workers, who could support practitioners in tasks such as responding to referrals, taking minutes of case conferences, and assisting in budget reports, could be cut without affecting frontline services.

Yet social workers named more administrative support and better IT among the top 10 recommendations to improve their professional lives, and many raised concerns about the “inherent danger of removing a significant resource from frontline practitioners”.

The Association of Directors of Children’s Services also acknowledged the dangers of cutting the “vital infrastructure” that helps free-up time for social workers.

Eleni Ioannides, vice-chair of the ADCS workforce development policy committee, says: “The Social Work Task Force made it very clear how vital IT and administrative support are to a well-functioning social work team and local authorities will need to convince themselves that savings in this area will not damage the service to children and their families.”

The Local Government Association and ADCS agree that councils should be given the freedom to make the cuts in ways that enable them to meet local priorities, and highlight other ways of making social work teams more efficient.

The LGA prefers extending the use of the common assessment framework across children’s services, while the ADCS suggests simplifying national guidance such as Working Together to Safeguard Children.

Whatever action employers take, it’s clear that social workers will remain desk-bound for large parts of their day.

Participants in the workload survey concluded that while admin workers could help solve some IT problems in electronic case recording systems, social work skills were still needed to record families’ stories in a way that will “help identify risk and pick out patterns of abuse, concern, and need”.

Ettridge says: “Form needs to follow function. Unless workflows and service expectations are changed the pressures are likely to be transferred on to frontline services.”

Pushing for a better deal from contracts is a favourite strategy when times are hard.

In children’s services, pan-commissioning groups in London and the East Midlands have demanded a 2% cut in fees from providers of children’s homes and fostering and adoption services.

Councils in the East Midlands have made savings on residential placements for people with learning disabilities of 17% over 2008-2011 by using a care funding calculator which establishes a benchmark price for placements.

Providers often argue that a decline in the quality of services is the inevitable result of this strategy.

Children’s homes say their margins are so tight that a drop in fees would force many out of business, reducing choice for councils. Contracts may be terminated if councils deem they can provide services cheaper themselves. Doncaster, for example, has brought its care leaver support services in-house.

In adult care, some councils have ended contracts with voluntary providers of day centres, in part because of the personalisation agenda. A recent survey of Community Care readers found that more than half had seen closures of services in their areas.

Ettridge says: “Could be costly depending on severance clauses. Voluntary organisations are likely to attract public and political support. Risk of disenfranchised clients deteriorating and needing more costly services.”

Cross-border commissioning allows councils to use their combined purchasing power to put downwards pressure on prices charged by providers, set clear expectations on quality and standardise documentation.

By working together, nine East Midlands councils have made savings of 20% on contract prices with providers on care placements for people with severe learning disabilities.

This involved setting out a joint commissioning framework, outlining the sort of services they needed for the client group, and then commissioning just four organisations to provide them. Those providers selected have benefited from the standardisation of contracts across the nine councils.

Last year, the West London Alliance – consisting of six boroughs – agreed a joint commissioning plan for adult social care services worth £220m a year, with an aim of making 5% savings each annually.

And West Midlands councils have forged a children’s commissioning partnership designed to manage their spending on independent fostering agencies and residential homes, worth £110m a year. This involves creating standardised contracts and holding down provider fees. In 2008-9 and 2009-10, the councils requested that providers held their prices unless a review was deemed to be necessary, based on a set of standardised criteria.

Ettridge says: “This is a good means to manage a ‘provider led’ market but there’s a risk of price escalation at the time of retendering as ‘disengagement’.”

Ensuring the workforce is as efficient as possible is another long-term strategy for saving money. The children’s social care sector is united in calling for a reduction in the bureaucracy and better designed integrated children’s systems (ICS) to free up the huge amounts of social worker time now spent in front of computer screens.

Directors of children’s services are also claiming that in tough economic times, inspection targets should be stripped back to ensure services and resources are focused on getting the essentials right.

Councils themselves are looking at how their workforce is being used. Some, such as Haringey and Harrow in London, are moving towards multi-agency teams working on each case, allowing social workers to focus on the areas they are most skilled in.

According to Community Care’s personalisation survey, 12% of adult social care professionals have seen reductions in social workers in their teams and 16% have seen an increase in non-social work qualified staff.

Many people in the sector believe personalisation can only be implemented on an affordable basis with reduced social worker numbers and greater use of less expensive staff.

Streamlining the workforce can also refer to reducing recruitment costs. The Grow Your Own scheme in Enfield, for example, estimates it has saved 30% on the council’s staffing bill by investing in social work trainees in return for a ­commitment to work for the council for two years.

Ettridge says: “Form should follow function so workflow and operational procedures need to be ­proportional to the affordable staff ­complement.”