Roundtable discussion: Local authority funding and its impact on the future of social care

Images: Seb Wright Media

For a roundtable event held in July 2024, hosts Hannah Haines (Head of Healthcare Consultancy, Christie & Co), Michâela Deasy (Head of PR & Comms, Compass Carter Osborne) and Lizzie Wills (Senior Partner & Head of Private Equity, GK Strategy) were joined by some of the biggest female names in the UK social care sector.

The roundtable brought together operators, lawyers, investors and sector experts, all of whom share a passion for quality healthcare and for driving an increased awareness of the challenges faced by operators as a result of funding challenges across the country.

Below are some of the key highlights from what was discussed around local authority funding and its impact on the future of social care.

According to the Local Government Information Unit, 50% of local authorities (LAs) have reported that they are likely to be bankrupt in the next five years, with 9% predicting they would be bankrupt in the next 12 months. This is already the case for a number of LAs, including Birmingham. These struggles are not going to be resolved without fundamental reform - of how services are delivered at a local level, or how they are funded.

To address the funding challenges they are facing, most LAs have identified areas to make direct cost savings. For example, many have confirmed that they will make budget cuts relating to parks and recreational spaces. Although this may not directly impact the social care sector, it could end up affecting the mental health of the communities that rely on these facilities. Meanwhile, 16% of LAs said they are looking to reduce spending in adult social care, 12% in children’s care services, and 10% in SEND, though statutory services will be better protected from funding cuts.

The impact of Local Authorities’ financial pressures on our care services

The funding situation is getting noticeably worse, with ADASS reporting that waiting lists for assessments, reviews and care packages had fallen from 470,576 at the end of August 2023 to 418,029 as the end of March 2024, largely due to the rise in operational costs.

“Fees are not keeping pace with the costs for operators.” The costs of operating as a care provider continue to rise significantly, with uplifts received from LAs unable to cover extra costs. Private rates can be amended to reflect the increased costs but, should you be a provider that has a majority of LA-funded places, this won’t address the problem in its entirety. There is also a real lack of communication between LAs and operators, particularly where LAs are publicly struggling (such as Birmingham). A lack of guidance about what comes next for providers, and a lack of support from LAs to allow providers to plan strategically, are also key issues, which may create the risk of having to hand back services. 

“Standards that the LA are operating at are just not good enough.” While LA efforts should focus on providing the best quality care and services for their area, the quality of services has been varied and there is inconsistency around what LAs are choosing to prioritise when funding is squeezed, with many across the country pulling services. Anecdotal evidence also suggests there is an issue with discrimination in care, with the level of funding provided depending on the person’s age. It appears a common theme that more is being allocated to younger people to help “build their lives”, with less given to older people, even where they have a similar need profile.

The increasing demand for high-acuity care across the country needs to be met by an increase in capacity, with better support for providers to open new care homes. However, what we’re seeing is that only people who can afford to pay get good quality care through private funding or top-up fees to pay for the “hotel” element which comes with the care home lifestyle. As the Labour government discusses using private services to support the bed-blocking and waiting list crisis, the same should be considered with residential and social care services. However, with this, twin-tracks with the need for services to be well funded, encouraging investment and service development, to meet the increasing need and demand.  

“Social care services aren’t here to prop up the NHS, but if it was properly funded then it would work hand in hand with and support the NHS.”

Social care is a service that benefits the whole nation when run effectively. It’s vital to ensure the different parts of the health and care system are properly integrated and working closely together to allow individuals to be discharged from hospital when ready, and moved swiftly to appropriate provision, whether this is residential, supported living, or their own home. There are too many blockages in the current system, with a lack of communication and long-term strategic cross-service planning.

What should the newly elected Government do to address the financial health of the sector?

With the dust having largely settled following the General Election, the new Government – with its large parliamentary majority - has an opportunity to address challenges across social care. As the previous Government found, this will be easier said than done. Labour has inherited a health and social care system from the Conservative government that it says is “broken”, and with a challenging economic and fiscal backdrop, will not be able to spend endless sums plugging gaps in services. It will also have to make difficult decisions about which parts of the service to prioritise, and where to spend its political capital. Already we have had the announcement that the government has scrapped the planned £86,000 cap on care costs, due to be introduced in October 2025, on the grounds of affordability.  

This isn’t to say that the new government hasn’t got its eyes on social care reform. The King’s Speech was thin on legislative plans for health and social care, so expect to see more incremental changes brought forward via secondary legislation or regulatory updates for Labour’s first year in office, with potential for more radical shifts later on in the parliament, if economic conditions allow.  

Despite the legislative agenda being fairly thin, Labour is looking at other levers to try to support local Authorities, including by committing to multi-year funding settlements. The hope is that giving LAs additional visibility over their budgets will allow them to plan strategically to meet local need and to spread the cost of investment over a longer, multi-year period. The extent to which multi-year settlements will allow LAs to budget more effectively is up for debate, particularly with external factors impacting the demands on services. Any settlement would need to be linked to take account of wage increases and inflationary pressures to ensure they adequately reflect the financial demands on councils.

The Government has been clear that it is keen to work with private providers to help meet its policy objectives. There is a recognition amongst the new Labour team that many of the structural problems faced by the health service cannot be addressed solely through public sector means. The Health Secretary Wes Streeting has been particularly vocal in setting out his thinking in this area – that addressing the imbalance between demand and supply is only achievable by leveraging private capital and expertise. This is an important opportunity for the private sector to demonstrate how it can provide solutions to ongoing challenges faced by a government wanting to make headway against its manifesto commitments. Labour doesn’t yet have all the answers – it knows where it wants to get to but creating a programme for change that is affordable and deliverable will require the private sector to crowd in and provide workable, cost-effective solutions. One of our round-table participants who recently spoke with Wes Streeting confirmed that he wants wider engagement from providers to input on how to best address challenges in social care.

Social care has become both a political football and a poisoned chalice in the UK. Governments that set out ambitious reform plans often find themselves very unpopular (just ask Theresa May), and governments that kick the issue into the long grass inevitably leave office with issues in the sector having got worse rather than better. The relatively short five-year parliamentary terms do not lend themselves well to long-term strategic thinking on social care, and the politics of Opposition often mean it’s easy to pick holes in any long-term plan to address the challenges the sector faces. The Labour manifesto commits the new government to address a sector it acknowledges needs “deep reform”, but there will inevitably be limits on how far resources and political capital can stretch to realise this ambition.  

Key areas for action and attention to ensure the sustainability of our essential services

To ensure the sustainability of our essential services throughout the UK, the following needs careful consideration and action:

• Commission for quality and the standardisation of training, grades, and qualifications so people can more freely move jobs but within social care. We should be encouraging people to stay within social care and give them the support they need to be proud to work in social care.
• Smash down the siloed P&L workings, starting with what the best thing is for the service user, rather than where the system can find the next available and affordable place.
• Prioritise getting people back into work, with accessible and affordable childcare places, proper training and support for additional workers to join the sector, and the right support mechanisms, pay and working conditions to retain and develop the workforce.
• More work needs to be done to look at the talent in the current leadership chain, succession planning for the next generation of leaders, and how leadership skills across the sector can continue to be developed.
• Recognise the vital services of the sector and professionalise it by putting it on an even kilter with the NHS.
• Funding needs to be available for specialist mental health providers - there are minimal psychiatric beds available, and preventative treatment has never been so important.

To find out more about the health of local authority funding, or to join the team’s next roundtable event, contact Hannah Haines: hannah.haines@christie.com