Social care 360: expenditure

This content relates to the following topics:

6. Spending has fallen in real terms

In real terms, total expenditure on social care by councils is still £700 million below 2010/11

Spending on adult social care is decided, individually, by 152 local authorities. There is no national social care budget, though the amount available to spend locally is affected by national government decisions on the formula underpinning local government finance.

The overall way in which local authorities are funded is under major review, with a planned shift away from a central government support grant towards increased local revenue-raising capacity.

In 2017/18, total expenditure on adult social care by local authorities was £21.3 billion, up £684 million (3.3 per cent) from the previous year.

However, while local authorities have sought to protect adult social care budgets, in real terms, expenditure is still £700 million below the level of 2010/11, despite increasing demand for services.

Local authorities now spend nearly as much money on long-term care for working-age adults as for older people, though these percentages are essentially unchanged in the last three years.

The sources of funding are, however, changing. There are three main sources1 for local authority expenditure on adult social care; the largest amount (technically, net current expenditure) is that which councils allocate to social care from their central budget. In recent years, this has been bolstered by the potential to raise more income from council tax through an additional 'social care precept'. Despite this, net current expenditure now accounts for less of total adult social care expenditure: in 2011/12, it was 76 per cent but by 2017/18 this had fallen to 70 per cent.

The other two main sources are income from client contributions – charges levied on users of social care services – and income from the NHS, much of which since 2015/16 has been channelled through the Better Care Fund. 

  • 1. The Local Government Association has a more detailed taxonomy, albeit estimated, of the sources of council expenditure on adult social care: client contributions 13.1 per cent; government grants 14.7 per cent; other income (NHS partnerships) 15.5 per cent; business rates 18.1 per cent; council tax 38.6 per cent

The means test for social care considers not just people's assets (their savings and house) but also their income. Users of services are expected to contribute from their income towards the cost of their care but must be left with enough income to live on – the minimum income guarantee.  

The chart below shows that, for the three years for which this information is available, income from the NHS has increased.

The chart also shows that client contributions – the fees and charges that local authorities levy on service users after means testing – have also increased by more than inflation, despite a reduction in the number of people receiving services. A survey of local authority directors of adult social services suggests that fees for community services may have been most affected.

As with other indicators in this review, there is variation between local authorities in how much they spend, at least part of which stems from differences in the level of central government support to their central budgets, their ability to raise money locally and the level of need in the local population. 

An important qualification is that this data only shows expenditure by local authorities (including money received from the NHS) on social care. It does not include private spending on care, for which there are no reliable estimates of trends (though the National Audit Office estimates the total size of the self-funder market at £10.9 billion in 2016/17). There is also significant expenditure on disability through the benefits system, which was covered in indicator 5.


7. It’s costing councils more to buy care

Local authorities are having to pay more for nursing and residential care and for home care

The cost of providing care

Though local authorities have increased spending on adult social care in the past two years, the cost to them of providing residential and nursing care and home care has risen at more than the rate of inflation.

Between 2015/16 and 2017/18 the average weekly unit cost for providing residential and nursing care to over 65s increased by 6.6 per cent to £615 and the average for under 65s increased by 1.3 per cent to £1,225.

As with other indicators, these figures relate purely to local authority expenditure; we have far less information about the costs to self-funders of residential and nursing care, though the Competition and Markets Authority estimates that on average they pay 41 per cent more than local authorities for the same level of care.

An underlying factor in the increased spending by local authorities may be increased costs faced by providers, for example arising from increases in the national living wage. Additionally, local authorities may feel they need to pay providers more in order to stabilise the market following closures and withdrawals. Extra money provided by the government for social care in the 2017 budget through the Better Care Fund had, as one of its three purposes, support for local social care provider markets.

Surveys of local authorities suggest this is more an issue with home care than residential and nursing care, though average care home fees remain well below the level LaingBuisson regards as the minimum to ensure acceptable rates of return for care homes.

An additional or alternative explanation for rising costs is that residents require increasing amounts of support because only those with highest needs enter residential or nursing care in the first place. This in turn may be because more people are being cared for at home.

While far fewer working-age adults are in residential care, their costs are significantly higher than those for over 65s. This may be due to the type of support provided (around 45 per cent of working-age people have a learning disability as their primary reason for support, compared to just 3 per cent of over 65s), but it may also be that a higher level of support is provided to younger people – an argument put forward by one of the care home industry representative groups, Care England. 

Unit costs for the provision of care at home have also been increasing. Rates paid by councils for externally-provided home care averaged £16.04/hour in 2017/18, compared to a rate of £15.82/hour in 2016/17, when adjusted for inflation.

However, the rate of increase has fallen compared to 2015/16 and the average rate remains well below the £18.93 minimum put forward by the United Kingdom Home Care Association, which represents home care providers.

There are also local and regional differences in the cost of commissioning – the hourly cost of externally provided home care was lowest in the north east (£14.07) and highest in the south west (£18.27). As with residential and nursing care, these differences may reflect active attempts by local authorities to shore up a fragile care market and avoid closures or contracts being handed back. However, it may also reflect the differences in costs of delivery in rural areas and those where it is particularly difficult to recruit a workforce.

Care provided in-house by local authorities is significantly more expensive than that which is externally commissioned. The unit costs for in-house provision of long-term residential care were on average £1,785 for younger people and £933 per week for older people in 2017/18, compared with external provision at £1,263 and £591 respectively.

The hourly cost of in-house home care rose from £25.60 to £32.90 between 2016/17 and 2017/18. The additional cost of in-house home care provision may at least partly be because many reablement services – which are more expensive to provide than standard home care – are still provided in-house.

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Hedley Piper FRCS

Comment date
15 August 2019

Has anyone at the kings fund ever tried to read this stuff ?

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