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DH underestimated cost of Care Act to councils, warns NAO

The National Audit Office (NAO) has warned the Department of Health that it "may have underestimated the cost to local authorities” in introducing the first phase of the Care Act.

In a new report examining the implementation, the NAO said that while it had gone well, there were uncertainties over the level of demand that councils would face.

The report said phase one implementation would cost £2.5bn between 2013-14 and 2019-20, of which £1.2bn was for the new entitlement to carers’ assessments and services. The sum was calculated by the DH based on the number of people receiving carer’s allowance.

But the NAO said people eligible for that allowance, but who currently receive alternative benefits, were equally likely to seek assessments, and the auditors estimate a risk of £27m (26%) in extra assessments and services.

The report warned: “If demand or costs exceed expectations, pressures will fall first on individual local authorities. The department may not have sufficient information and does not have a contingency fund to avoid impacts on services.”

Amyas Morse, head of the NAO, said: “The first phase of the Department of Health’s new approach to adult social care has been implemented well. But this places new responsibilities on local authorities whose core funding is being significantly reduced. They may not have enough resources to respond if, as could be the case, demand for care exceeds expectation. This could result in their having to delay or reduce services in the short term. This risk to value for money needs to be managed.”

The Local Government Association said that the report supports what councils had already been warning regarding councils being left underfunded and exposed to additional costs.

Cllr Izzi Seccombe, chair of the LGA's Community Wellbeing Board, added: “Councils are implementing the Care Act at a time when rising demand and escalating costs means that the adult social care system is already under immense stress. While councils have long called for a reform of the care system, and have worked hard to be ready for the Care Act with the support of the LGA through the Programme Management Office, many still have serious concerns about there not being enough money in the system to cover these changes.”

A Department of Health spokesman said: “We are pleased the NAO has confirmed that we are implementing the Care Act well and that 99% of local authorities were confident about bringing in our changes.

“We will continue to work with local authorities to ensure our improvements to care are funded.”

Also published today is the NAO’s report on Local government new burdens, which says that government must be open about the financial impact of new responsibilities imposed on struggling local councils or risk council tax increases and further cuts in services.

“The Department for Communities and Local Government has taken steps since November 2014 to improve its understanding of new burdens on local authorities.  But it needs to use intelligence from the new burdens regime to improve its understanding of the pressures affecting authorities’ financial sustainability,” said Morse.

The report identified flaws in the government’s implementation of the “new burdens doctrine”, which says local authorities must be properly assessed and fully funded by the relevant department.

It was also critical of the lack of transparency in the failure to publish identified burdens and any assessments of significant ones.

The report argued that there was no reason not to publish them and that keeping them secret undermined relationship with councils.

Cllr Claire Kober, chair of the LGA's Resources Board, said: "As this report rightly recognises, it is wrong for councils to have to reduce spending on vital services, such as caring for the elderly, collecting bins and fixing our roads, to meet the costs brought about by changes to national policy.

"Funding for recent new burdens, such as the increase in Deprivation of Liberty Assessments and the new Local Government Transparency Code, was not received by councils before they incurred new costs. This has added significant pressure on local services.

"The NAO's helpful recommendations would improve the new burdens process and address the lack of transparency which has been a source of frustration among local authorities. We would urge the government to go further and ensure new burdens are properly assessed and paid to councils before they incur any new costs in order to avoid other local services suffering as a result."

A DCLG spokesman said: “The NAO rightly recognises our proportionate approach to minimise administrative burdens on departments while ensuring financial burdens on councils are scrutinised.

“The government draws intelligence from a wide range of sources across Whitehall and beyond – including bodies like the LGA, Ofsted and the Care Quality Commission as well as local auditors - to fully understand the impact of new burdens on town halls.

“Ministers also regularly meet with council leaders, councillors and council officials to discuss local governance issues.”

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