spending review impacts on health and social care


Additional resources for health are welcomed, particularly against the backdrop of wider expenditure reductions. However, the headline of £6bn extra investment in the NHS isn’t quite the straightforward good news it sounds, as:

  • £2bn is already factored into the 2015/16 resourcing, which is set to overspend
  • It seems that there are several calls on the extra £4bn compared with 2015/16 budgets:
    • Rectifying any underlying overspending in the 2015-16 position
    • £0.6bn new commitment to mental health spending
    • Costs associated with moves to seven day working, which is a commitment which was made after Simon Stevens’ £30bn assessment (and has been assessed as costing up to £3bn per year long term)
    • Any shortfall between the five year expectation of new spending pressures (£30bn) and savings plans (£22bn), i.e. £1.6bn even assuming no ‘frontloading’ of the £8bn. 
    • As set out in The Health of Health Finances, CIPFA believes that the overall level of pressure in the health system was underestimated, and the ability to achieve savings overestimated leading to an overall gap greater than £8bn. For example, cost pressures include an estimated £1bn additional annual pension costs from 2016/17.

On balance, then, it seems unlikely that the £6bn does allow significantly for frontloading to enable investments to be made up front to generate later benefits.  

Further assessment is also required of:

  • Whether the extra 2% council tax option to support social care will provide sufficient protection in deprived areas with a low council tax base
  • The effects of the new arrangements for nursing training, places are currently oversubscribed but it remains to be seen how the level of demand for places responds to the new funding arrangements.
  • How, given the structural split between commissioners and providers, a sensible approach will be taken to tariff and efficiency setting if the problems currently being experienced by providers stand any chance of being stabilised.  

CIPFA's position for social care may be summarised as:

  • The confirmation that the Better Care Fund will operate at least to the end of this Parliament, that contributions to into will increase in value by £1.5bn, and that BCF will act as a transition mechanism towards devolution of integrated health and social care. Those are all points called for by CIPFA in Let’s Get Together
  • The added flexibility provided by the ability to increase Council Tax by an extra 2% without a referendum in order to support adult social care.
  • The positive news on health, benefits, housing and police budgets, all of which will have positive indirect effects on social care.

Nonetheless, some caution is in order: 

  • What is proposed enables councils to fund the pressures locally. It would be more equitable for the Government to fund the extra costs of its legislative action: in this case, the consequences of the living wage on social care purchases.
  • Given that the Government previously planned on the basis of funding the now-deferred aspects of the Care Act, that money should now be first call to cover the new burden in the usual way.
  • Council tax funding of social care doesn't address distribution issues, which is problematic: poorer areas rely more on general grant (which will be cut) and have lower tax bases on which to generate council tax. The IFS has estimated that the effect if applied in full across the CSR period ranges from 4 - 18% of the relevant social care budget.  
  • The additional £1.5bn for the BCF seems likely to be phased in slowly, with only £100m in 2017-18 and £700m in 2018-19. Moreover, communities secretary Greg Clark has stated that £800m of that will come from the ‘new homes bonus’, meaning that only £700m is new money for local government. Neither the  timing nor the additional amount, therefore, are consistent with the scale of investment up front which is needed for transformation. 
  • It seems possible that there will be reductions in Public Health budgets, due to be issued in December.

So the principles are good but should be supplementary to usual cover for new burdens. CIPFA recommends that:

  • Care Act funding should be redirected to cover the additional costs of the living wage (with consultation on quantification), with distribution as per the usual social care formula.
  • Council Tax flexibility should be used to cover the other pressures on social care.
  • We would also ask that the Government avoid cumbersome or bureaucratic assessment processes for:
    • how authorities prove the extra 2% has been used correctly; and
    • how the extra BCF is invested.