Progress | Centre-left Labour politics

A fundamental rethink needed

New funding, reformed commissioning and a proper industrial policy are the basic requirements of a resilient social care system, argues Matt Dykes

Social care matters. It is an essential service that all of us stand a high chance of requiring one day for ourselves or our loved ones. And it matters as a key component of our economy, a large-scale employer firmly rooted in our local communities.

But we must and we can do it better. Reforming the way we fund, commission, structure and deliver social care could enable us to promote innovative and empowering models of care while developing a high-productivity industry that delivers great jobs and prospects. Thereby forming a key part of an industrial strategy that maximises impact in the everyday parts of our economy that play a crucial role in every part of the country.

But to do this we need a fundamental rethink.

Rethinking funding

The short-term funding crisis in social care has become a regular feature of budget debates over the last seven years.The Care Quality Commission’s state of care report for 2017 talks of a system facing tipping point in the face of rising demand, falling capacity, increasing costs and providers struggling to recruit and retain staff and maintain quality standards.

A seven per cent reduction in local authority spending on care since 2009-2010 had led to 400,000 fewer people receiving state-funded support. Since 2015, the government has attempted to address the problem by allowing councils to add up to six per cent to council tax bills through to 2019-2020, by diverting funds from the New Homes Bonus, bringing forward Better Care Fund money and providing an additional £2bn over three years in the Spring budget this year.

Even so, analysis by the Health Foundation shows that this is failing to keep pace with costs and rising demand. While net funding has grown from £16.8bn in 2015-2016 to £18.6bn 2019-2020, costs will have grown to £21bn over the same period – leaving a funding gap of £2.4bn. There is no finer way of putting it, social care needs more money – and the chancellor needs to act.

And, of course, the need to find a longer-term sustainable funding solution remains unresolved. A self-imposed political and fiscal straightjacket has meant that successive Conservative-led governments have been unwilling or unable to engage with the issue in a meaningful way. First postponing then abandoning plans in the Care Act 2014 to implement a watered-down version of Andrew Dilnot’s commission’s recommended cap on care costs, then inserting a new policy of an asset floor in their 2017 election manifesto – famously abandoned within days.

A social care green paper on funding is now promised for next summer, informed by an impressive range of experts and, we hope, subject to full consultation. The conversation will no doubt focus on the achieving the right balance between state support, self-funding and private insurance, we believe that the starting point must be a system that socialises the risk.

The alarm that greeted the Tory manifesto highlights a fundamental problem with funding a system where risks and costs to the individual are unknown and almost limitless. While we talk about a social care system, what we actually have is a United States-style system based on a mix of harshly means-tested free care for the poor, luxury for the rich and ‘fingers-crossed, it won’t happen to me’ for everyone else.

The Trades Union Congress has long supported the concept of a tax-funded national care service, fully integrated with the National Health Service, as the best way of collectivising the risk. So we were heartened by the recommendations of Kate Barker’s review – the last comprehensive look at the funding of health and social care – which recommended ‘a single ringfenced budget for health and social care that is singly commissioned and within which entitlements are more closely aligned’.

A model of this kind, with provision of free social care covering moderate as well as critical and substantial care needs for the over-65s, would, according to a 2013 Kings Fund report, entail an increase of spending from the current level of around 9.7 per cent of gross domestic product to 11.3 per cent by 2025 – stretching but not out of line with many other European nations.

But this will require a serious and honest approach to the way that taxation will be used to lever the required resources. We believe that the current strong levels of support for tax increases as the preferred option for raising funds for the NHS would extend to a broader health and social care system if political leaders were able to have an honest and informed discussion with the public.

As Barker put it in her report ‘overall spending on the cost of care for older people will inevitably rise given the ageing population. The question is not whether this money is spent. It is about where the cost falls – on collective provision through public expenditure, or on those individuals and families who are unlucky enough to have very high care needs’.

Rethinking commissioning

Getting the funding right is a crucial part of the equation but it is not the whole answer.he way we commission services and the business models employed are also part of the problem. The structure of the market is failing to deliver value for money, passes risk from commissioners to providers and, ultimately, on to the workforce and it stifles innovation.

While there is a clear need to inject more funding into the system, local authorities also need to ensure that the investment is going in the right places and that care is commissioned in a way that supports innovation, quality and decent employment standards.

Both the home care and residential care markets are increasingly dominated by large chain operators, many hugely indebted to their private equity backers – relying on high turnover, low overhead models of care in order to finance extortionate repayments that are engineered through opaque and largely off-shored business models.

Analysis by Centre for Research on Socio-Cultural Change shows that a required return on capital of 12 per cent means that of the £776 fair price for a nursing care bed per week, £277 is accounted for by the cost of capital. Or as the New Economics Foundation found, £115m of every £2bn of public spending on social care is diverted into investors and shareholders of the five largest care home operators – what they term ‘leaky bucket syndrome’. That is cash extraction that could instead be funding training, wages and better care.

The need to extract high returns based on maximising bed occupancy or home visits while reducing management overheads leads many operators to tend towards 60-bed or larger residential homes and relying on the notorious 15 minute home care visits.

In turn this is exacerbated by unimaginative and lowest cost commissioning by local authorities. The use of framework agreements and payment per bed or hour focusses the market on a production line of ‘tasks to time slots’ and passes all the risk, through unpaid travel time and zero hours contracts, on to the low paid women who make up most of the workforce. The scope for developing the kind of personal relationships that should form the basis of a humane or high quality care system is squeezed out at every stage of the process.

The Care Act 2014 requires local authorities to ‘facilitate a diverse, sustainable high quality market for their whole local population’. The Public Services (Social Value) Act 2012 and the public contracts regulations offers scope for more local authorities to become ‘ethical care councils’. Using the elements of ethical care charters promoted by trade unions Unison and the GMB to inform their commissioning practice. Uptake has increased but remains is good practice out there with councils like Monmouthshire, Wiltshire and Cornwall commissioning for outcomes rather than tasks, encouraging long term relationships that deliver innovative care, enable more investment in the workforce and better employment standards.

These might be small steps but they demonstrate the art of the doable. In each case, existing assumptions about ‘point value’, increased competition and measurable time and task commissioning have been challenged. The national conversation on funding must be accompanied by a similar discussion about the structure of care and how we provide it – with a strong focus on local, social innovation.

Rethinking industrial strategy

As well as delivering better care and a better offer for care workers, a new approach to social care could reap economic dividends too. Social care is a key economic sector, employing 1.4 million people and contributing over £40bn a year to the UK.

It is a major part of the ‘foundational economy’ defined by CRESC as ‘mundane production of everyday necessities … that part of the economy that creates and distributes goods and services consumed by all (regardless of income or status) because they support everyday life’.

Rooted in local communities, they add enormous value, if designed and delivered in the right way. It is this potential that makes social care as relevant for an effective industrial strategy than more headline grabbing and obvious sectoral targets such as high-tech manufacturing.

The independent Industrial Strategy Commission launched in November this year, highlighted health and social care as priority sector for an industrial strategy, stating that the ‘mix of scale, expertise, supply and demand issues and major political/public policy challenges that characterise the United Kingdom’s health and social care system makes it an obvious focus for industrial strategy’.

As well as identifying the procurement and productivity opportunities that health and social care can provide for the wider economy, the report goes further, arguing for reform of commissioning in order to support innovation – learning from good practice overseas – develop a highly skilled and better paid workforce and to provide a better value and more stable financial business model.

While many of the solutions lie with central government, most obviously funding, there is a crucial role to be played at the local level here, particularly through the influence and economies of scale that combined authorities can play.

The New Economics Foundation have set out a seven step plan for local authorities to stimulate inclusive growth through using commissioning powers to shape a market characterised by smaller, high quality and innovative local providers – the logic being that these are more likely to maintain money flow in local economies and have a local focus in their recruitment and spending decisions. If local authorities were able to borrow at sub-market rates through the Public Works Loan Board in order to build new care facilities, this could stimulate construction employment as well as offer value for money rental space to local providers who could make the market more resilient and less reliant on the financialised chain operators.

There are clearly huge opportunities here and further thinking is required. It is not always evident that smaller operators are well placed to deliver rapid growth nor provide the best employment standards. A diverse and fragmented provider market poses real challenges for trade union organising and collective bargaining coverage – by far the best way to secure decent jobs in the sector.


Undoubtedly, our social care system is not in a good place right now. But the crisis could and should provide the opportunity for a national rethink about how we fund, provide and structure social care. And with that comes the opportunity to design a service that provides wins for all through a better value for money and more sustainable funding system, better models of care that focus on personal relationships and social innovation and investment in the pay, productivity and skills of the workforce.

But this will require a significant shift in culture and political decision making and brave leadership. And we will need to answer the questions in much more detail. For us in the trade union and labour movement, we need to consider honestly where we stand on all the issues.


Matt Dykes is senior policy officer for public services at the Trades Union Congress. He tweets at @mattdykes


The December 2017 edition of Progress magazine has a Beveridge at 75 focus. Read other articles in the series, including on the other four ‘giants’ and how they fair today, now.

Photo: Mosman Council

Progressive centre-ground Labour politics does not come for free.

It takes time, commitment and money to build a fight against the forces of conservatism. If you value the work Progress does, please support us by becoming a member, subscriber or donating.

Our work depends on you.

Print Friendly, PDF & Email

Matt Dykes

Add comment

Sign up to our daily roundup email