The Better Care Fund: do the sums add up?

Andy McKeon comments on sources of funding for the Better Care Fund.

Blog post

Published: 08/05/2014

Yesterday's Guardian reports that the Government’s plans for the Better Care Fund have been put on hold as the Cabinet Office demand that the Department of Health do more to explain how the savings needed to pay for it will be secured. Government sources have been quick to dampen speculation that this signals trouble for the plans.

But the question reportedly asked by the Cabinet Office is exactly the right one, albeit at an odd time, as the Bill to set up the Fund is going through its very final stages in the House of Lords.

The fund is scheduled to start next financial year. It pools £3.8 billion for local authorities and clinical commissioning groups (CCGs) to spend jointly on social services and community services. Most of the money comes from the NHS. None of it is ‘new’.

About half is already being spent on these services. The rest, £1.9 billion, will come from the NHS, with the money being withdrawn from acute hospitals on the basis that better services in the community will result in fewer people being admitted to hospital.

I would be surprised if the Fund didn’t go ahead despite the obvious risks. Too much has been invested in it politically

Getting closer integration between health and social care is a good thing. But the arithmetic is truly heroic. NHS England says emergency admissions will have to reduce by 15 per cent to pay for the investment in the Fund. Some are even more ambitious. One CCG plans for a 30 per cent cut in emergency admissions from an already relatively low base to pay for extra community nurses.

I have no doubt that the plans being made by CCGs and local authorities will show the necessary savings. The Department will be able to demonstrate this to the Cabinet Office if that is what they are required to do. But then, any plan can be made to add up. The issues are how reliable are the assumptions and what happens if they prove to be wrong.

Emergency admissions have been rising inexorably for several years. Even holding them steady would be a major achievement, let alone cutting them by 15 per cent. There is no evidence from pilot schemes or even larger experiments that a shift of this size can be achieved across the country in the time available. Indeed, quite the contrary.

Acute hospitals are already struggling to meet their financial duties. Over a third are in deficit with the numbers rising year on year. They are finding it increasingly difficult to meet their existing annual four per cent efficiency target which the Better Care Fund would increase to eight per cent, if the entire Fund comes from the acute hospital sector.

The most likely scenario is that a significant amount of current investment will be rebadged as being part of the Better Care Fund: more will be invested in community services, there will be little impact on emergency admissions and more acute hospitals will go into the red with inevitable consequences for the service they can provide.

Perversely this could result in emergency admissions dropping, but through bed and staff cuts not through better care community services, which is not the outcome patients and the public would want.

I would be surprised if the Fund didn’t go ahead despite the obvious risks. Too much has been invested in it politically. Ministers use the existence of the fund to argue that pooling budgets between health and social care will result in major savings, so easing if not removing entirely the financial squeeze on the service. Opposition front bench spokesmen take a similar view.

If the Fund were not to go ahead both would have to find different, and much better, answers in the short term (i.e. pre-election) to how services can be maintained and even grow during the next five years of austerity in the face of rising demand.

Local authorities see this as a way of plugging some of the gaps appearing in social care following five years of cuts in funding. It is also an opportunity to demonstrate their credentials for taking over more of the NHS budget, as favoured by some politicians.

Some in the NHS see this as their opportunity as well to get more investment in their service after a period of cuts.

But, as ever, it’s easy to attack the flawed arithmetic and much harder to identify a way forward. So what should happen next? There are potentially very positive contributions extra investment in community and social services could make.

First, it could focus on extended stays in hospital. Second, it could become a pump-priming fund for the redesign of primary care. But any switch in funding from one health sector to another isn’t going to quickly produce a saving of the magnitude required to make it pay for itself.

There is much riding on the plans for the Fund going ahead and many arguing for it. Whether anybody will want to own it quite as much after its first year of operation is another matter.

This blog was first posted on the Public Finance website.

Suggested citation

McKeon A (2014) ‘The Better Care Fund: do the sums add up?’. Nuffield Trust comment, 8 May 2014.