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Cutting edge? By Paul Gosling

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01 July 2005

Councils are targeting social services as prime areas to achieve Gershon efficiency gains. But can these 'Cinderella services' really live on less? Paul Gosling reports

With local authorities' first annual efficiency statements now in, it is clear where English councils expect to achieve the first bite of the yearly 2.5% savings required by Sir Peter Gershon's efficiency review. And it is surprising. The Cinderella services of adult social care and children's services together contribute almost a quarter of the predicted efficiency improvements, according to an analysis of more than half of the statements by the Institute of Public Finance, CIPFA's support services company.

What is more, for the most part these are assumed to be real financial reductions, not efficiency gains of nominal value. Of the cash savings element, adult social services are expected to contribute 15% and children's services a further 8%.

This is despite widespread scepticism about the possibility of cutting social care procurement costs in line with Gershon. The government's focus on care and personalisation in social services – stressed in both the Department of Health pre-election green paper, Independence, well-being and choice, and in the Labour Party election manifesto – had been expected to increase costs, not reduce them.

One of the most important mechanisms for providing choice is direct payment to individuals, which allows them to pay for their own care. This is likely to reduce the potential for aggregating care contracts and achieving economies of scale, yet politicians want a faster take-up. New social care minister Liam Byrne said in a recent speech that while an 80% increase in use of direct payments sounded good, the total number using them – 17,300 – was still a drop in the ocean compared with the total 1.7 million social care clients.

'It doesn't feel that that's rapid enough progress,' said Byrne.

The green paper described its package of measures – to be phased in over ten to 15 years – as cost-neutral, including more use of direct payments. But some procurement specialists believe that the latter offer opportunities for significant savings, especially if clients assess their own care needs. This would greatly reduce social workers' paperwork, freeing them for more direct work with clients. Such personal assessments could also prove less costly than a local authority's more generalised assumption of needs.

Moreover, direct payments would effectively provide a budget cap for each client. Transaction costs might be further cut through better administrative systems. Kent County Council is currently developing a 'client card', enabling service users to pay for their care needs using a special debit card, with the fees taken from the council's bank account.

Direct payments are not only contentious in terms of their potential for savings, but come with major practical problems – as identified in a recent joint report by the Cabinet Office and the DoH. In any case, their savings potential is marginal in the short term as they are currently used by so few people that they have little impact on total budgets. The vast majority of savings identified by local authorities are cash savings, not the notional efficiency gains to be achieved by reduced administration. To see where the bulk of the predicted cash savings will come from, we have to look elsewhere.

The DoH's Care Services Efficiency Delivery Programme is understood to have come up with six recommendations for better quality commissioning, which should lead to both lower costs and better services. However, the department is not releasing any information on these.

There is information  aplenty in the King's Fund's report on the London social care sector, which was published on June 27. The business of caring makes far-reaching recommendations on how to improve the care market. It concludes that it is not fully functioning and, in particular, that the supply side needs strong stimulation from local authorities, backed up by greater investment – in many cases also from the public sector.

Penny Banks, King's Fund fellow in health and social care policy and author of the report's background paper on commissioning care services for older people, says that while London has specific problems, the report's concerns and recommendations will be relevant to almost all of the UK. Above all, local authorities need to be more active in their role as 'market managers' of social care, encouraging providers to increase levels of supply, diversity of provision and more personalised care.

'More market investment is needed to build small care providers to provide more flexible services, which older people want,' says Banks. 'It is not just about blaming commissioners. It's about more investment to produce more imaginative provision.'

She suggests that it might be practical for the Department of Trade and Industry to take on some of the responsibility for boosting the social care market across a wider geographical area, rather than expecting local authorities to do this. She adds that public money needs to be used to lever in private sector funding in long-term investment. One example might be signing long-term block contracts for extra and intermediate care with social housing providers, to enable housing associations to borrow on the commercial market.

Gordon Murray, procurement programme manager at the Improvement and Development Agency, is also heavily critical of the way the social care market works. In many cases, he asserts, there are too few providers and several have a virtual monopoly in services. One solution, he suggests, is for local authorities to work more with the voluntary and community sector and social enterprises to stimulate the supply side. In some instances, local authorities might even need to re-enter markets as suppliers, to ensure adequate diversity.

But one of the best ways to bring down costs is to adopt basic procurement procedures, says Murray. 'There is a need to aggregate demand, not buy individually. The use of contracts via tenders is not the norm.' Suppliers have held too much power in the commissioning relationship and buyers too little, he believes. Often – because of the shortage of suppliers – the concern has been about getting hold of services, rather than driving down prices and forcing up quality.

Sheffield City Council is one local authority that has been successful in paring back costs. John Randall, head of policy and performance, explains that there can be a long lead-in time between policy decisions and eventual savings. Five years ago, the authority began a contentious programme of closing residential care homes as part of a shift to supporting people at home. After spending almost £10m in 2000 for service reconfiguration, it took at least two years before the council began to record savings, says Randall.

To carry through the shift requires a sharp increase in both the quantity and quality of services provided at home. 'Previously the council provided minimal support, assuming that people would move into residential care later,' recalls Randall. Support for living at home must also be backed by good service and contract monitoring to ensure people get what the council is paying for.

Another important reform has been moving from being a big spot purchaser (buying care as you need it) to block buying (buying in quantity). By aggregating commissioning, the council is cutting its home care unit costs by 30% – although these price reductions have fed into the commissioning of more hours, rather than budget savings.

Sheffield is also moving towards the use of a GIS – geographical information system – to provide a map of which providers operate in which areas. The outcome will be area rationalisation, so that future block contracts will be awarded on an area basis, to provide greater efficiency of operation and lower costs.

The council will achieve other major savings by changing the way it deals with children taken into care. Young children will be placed in adoption sooner, reducing the use of more costly residential care and fostering.

Teenagers who have left home after family breakdowns will be allocated to 'crash pads' – short-term specialist accommodation where their behavioural problems will be addressed. This will aim at returning children to their own homes, saving the thousands of pounds a week the council has to spend for each child living in a residential care home.

But Tony Hunter, president of the Association of Directors of Social Services, appears less positive about achieving the savings projected by councils, while recognising the political reality of the squeeze facing his members.

'From a local authority's point of view, it's very difficult to see where to go to achieve savings in Gershon's terms,' he concedes. 'A lot of other expenditure is committed. So I am not surprised about this leaning on social care. But the green paper is about choice and personalisation. What we have to work out is how that highly person-centred approach sits alongside solutions around big block contracts. This potential tension is really very important.'

So can we trust the figures in the annual efficiency statements? Probably not, says the IDA. Murray explains: 'We have seen a lot of annual efficiency statements where figures do not stack up. I would like to know how many councils have put a risk management strategy behind those statements. I would have to be honest that my experience is that, of those I have seen, relatively few have done this.'

'There is a certain amount of creative accounting going on,' agrees one senior local government figure. 'Everybody has a vested interest in quoting big sums.' Ian Johnston, the director of the British Association of Social Workers, is even more forthright. 'We don't expect savings to be achieved,' he says.

John Tench, IPF's lead adviser for CIPFA's Improvement and Quality Network, is also concerned about the veracity of the councils' returns on social care spending. 'The answer is counter-intuitive,' he suggests. 'You would not have expected savings of that scale after a decade or more of conversations about under-investment in social services. I was surprised at the result.

'Having said that, those sections of the returns were the most coherent of all. There were some surprising authorities saying the time has come to be radical in the way we commission social care.'

PFjul2005

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