The public sector is facing a sustainability battle. For the majority of councils the combination of austerity measures, cost pressures and increased demand for services mean that it is becoming increasingly difficult to deliver even basic statutory services within the funding envelope. This was borne out recently by Northamptonshire County Council who issued a section 114 notice, indicating that it was at risk of spending more in the financial year than the resources it has available. The NAO noted that it is not alone in the problems it faces: “It exhibits a range of characteristics that are becoming increasingly common across single-tier and county councils as explored above. These include overspending on social care in recent years, and drawing on its reserves, often on an ‘unplanned’ basis... social care accounted for 65.7% of net current expenditure on services in 2016-17.”
One of the most critical front line services for local authorities is social care. Both adults and children’s are seeing demand pressures outstrip any funding increases for the sector. The 2018 NAO report on financial sustainability stated: “The current trajectory for local government is towards a narrow core offer increasingly centred on social care. This is the default outcome of sustained increases in demand for social care and of tightening resources”.
To put this into context, the numbers illustrating increased demand highlight the difficulties. From 2010/11 to 2016/17 the number of looked-after children grew by 10.9% and the estimated number of people in need of care aged 65 and over increased by 14.3%. It is not only the numbers that are rising it is the complexity of care that is also increasing.
These factors together with cost increases such as the national living wage, higher national insurance contributions and the apprenticeship levy all contribute to huge challenges in achieving financial and operational sustainability.
The latest ADASS budget survey indicates that Adult Services overspent by £366m in 2016-17, more than double the overspend in the preceding year of £168m. For children’s social care an LGA analysis of 2015/16 spending published in August 2017 revealed that 75% of councils overspent on children’s services with an overall overspend of £605m. So total overspending across Adult and Children’s Services is likely to have reached £1bn in 2016/17 – an average of over £7m per council. There are substantial risks that at this level of overspend that some councils will run out of money. This issue was also noted in the above 2018 NAO report which stated that the combination of rising demand and statutory services means there is limited room for manoeuvre in delivering further savings within social care- leading to risks of financial sustainability.
Many local authorities are drawing down their reserves to help balance budgets, however this is a short-term fix. The NAO noted that 10.6% of local authorities with social care responsibilities would have the equivalent of less than three years’ worth of reserves left if they continued to use their reserves at the rate they did in 2016/17.
We need to look at a variety of options ‘to bend the curve’, ie:
Looking at each of these in turn, none is a quick and easy fix, however best practice from other local authorities has shown there are ways to ‘bend the curve’ to ensure a more sustainable service. Systematic approaches to review activity and prices across the market is a critical starting point. If demographic trends and current costs of activity are modelled it gives us the data to establish a pro-active forward looking plan. Without this research authorities could be making short-term reactive decisions which may not give the best outcomes in the long term. The full cost of care and the different options in packages or placements need to be understood by those making the decisions. Outcomes are of course paramount but they do come with a financial impact.
It is crucial there is recognition that finance is not the sole burden of the accountants, it must also be understood and owned by those making care decisions within the operational or front line side of the business.
We also need to consider how we can increase capacity across the care sector. Many authorities are examining their current provision and through better commissioning and/or increasing in house facilities are seeing a more sustainable and pro-actively managed service. This in turn should equate to better outcomes.
It is interesting to note that in one authorities children’s social care service Ofsted reported on “the corporate failure to ensure there is sufficient capacity within almost all areas of the service”, with this lack of capacity and funding being “a significant underlying contributory factor to the deterioration in the quality of help that children receive.”
Bricks and mortar costs are an important aspect of provision, we need to continue to avoid arrangements where bricks and mortar are funded by providers seeking much higher financial costs than traditional borrowing. The 2018 NAO report on PFI showed that for many public sector builds this was between 2% and 4% more expensive than other government borrowing, and involve significant additional fees.
Mapping and understanding the data is critical. Data analysis which models options of different care packages can help authorities plan their activity in the most cost effective way to deliver the best outcomes. This may mean increasing in house provision at the expense of more costly agency or private sector care, this does however bring many challenges include affordability and resourcing as we ‘invest to save’.
CIPFA has recently undertaken analysis of the best performing councils for both adults and children’s social care. It is recognised that such an analysis has some drawbacks – as there can be pioneering work being undertaken outside the lists shown below – but it provides a useful starting point.
The children’s analysis drew on an analysis of the financial and performance data from the 36 councils ranked by Ofsted as good or outstanding. This suggests that the best outcomes for Children and Families and the best use of resources will be achieved through:
The adults analysis draws on the financial and performance information from examples of councils and council areas mentioned in from NHS England’s annual report, Public Health England’s Commissioning for Value Long Term Conditions pack, areas rated as outstanding or advanced for their sustainability and transformation plans. The evidence suggests the following deliver good value:
It is recognised that none of these are quick and easy fixes, it is however essential that data analysis is mapped and understood and that decisions made are based on robust information.
CIPFA is currently working with local authorities in reviewing adults and social care. This includes a range of areas, from the role of finance in supporting the social work side, enhancing the understanding of service managers on ownership of budget and the financial impact of decisions, data analysis of demographic trends and care needs, market analysis, gap analysis and financial modelling of options across the authorities’ boundaries.