The Brave New World & How Providers Can Survive
Michael Patterson tells us what has happened in the world of housing support and social care since we last put our Briefing pen to paper back in March. We thought it would be helpful to give readers a map of the territory within which you operate and some critical aides to navigating that map whether you commission or provide services for vulnerable people.
At the moment no-one can start a conversation about housing support and social care without acknowledging the economic crisis. As I write this I am mindful that the finishing touches are being made to the Government’s Comprehensive Spending Review. In fact, by the time you read this the Support Solutions team will have read, absorbed, interpreted and summarised the implications of the Comprehensive Spending Review for you and you can click here to read our Comprehensive Spending Review Briefing.
When Central Government has a problem with money it will effectively delegate that problem down to the statutory sector at local level. The statutory sector at local level will then decide how much, if any, of that problem it should absorb by cutting its own direct costs and how much it should simply delegate further down the line to the community. When it does this, it is Provider organisations and the people who use their services who are directly affected. A relatively recent example of this is the cutting of Supporting People Administration Grant. Some local authorities imposed the cuts on Supporting People administration at local authority level; others imposed the cuts on Providers.
We’ve had tough news from the Comprehensive Spending Review but even before the economic crisis which has given rise to the content of the Comprehensive Spending Review, the Government was aware of significant problems in funding the state.
The UK has a structural problem. Some people call it the “demographic time bomb”. Simply put: it’s getting more expensive to run the UK and there are fewer tax receipts coming in. The proportion of people dependent on intervention by the state (housing, health, pensions, welfare etc) is increasing whilst the proportion of tax payers is decreasing. Currently the ratio is about 1:2.5.
Changes to Funding & Commissioning Arrangements
As those of you involved in the Supporting People and other previously ring-fenced programmes will know, the last Government set about removing ring fences on budgets and pooling them. Why? Because ring fences cost money to maintain. Why have a Supporting People Team, for example, when you can pool its budget into a much bigger pot which includes lots of other previously ring fenced budgets?
This much bigger pot is known as Area Based Grant. It’s worth about £4.6bn nationally (It was £5bn but it took a 9% cut in the emergency budget of 22nd June) and it’s supposed to be used to fund Local Area Agreement targets.
For a list of local authority Area Based Grant allocations please click here and to download your Local Area Agreement please click here.
A WORD OR TWO OF CAUTION!! The Comprehensive Spending Review is abolishing Local Area Agreements and will replace them with a more streamlined system which we will brief you on as soon as the detail is known, but for now read on….
So whether your funding comes through Supporting People or some other previously ring fenced budget (Connexions funding, Mental Health Specific Grant, for example) the place to look is for the moment is Area Based Grant and the successor to the Local Area Agreement, details of which are yet to be worked at time of writing. This will If you haven’t seen your Local Area Agreement then you can download it from the link above. It’ll tell you how strategic relevance is defined locally at the moment. Local Area Agreements have to identify 30-35 critical targets (out of a Government list of 198: the “National Indicator Set”) on which they spend their Area Based Grant allocation. The more of these targets you can meet the more attractive you are to Area Based Grant funding. Even if you currently have Supporting People or other revenue contracts don’t assume they will last because they won’t. Providers, in looking at Local Area Agreement targets will realise the need to evolve, remodel and diversify. Not to be subject to Supporting People or other funding eligibility criteria any more. Use this information as a starting point for strategising over access to funding and definitions of strategic relevance in the light of the Comprehensive Spending Review.
So strategic relevance has come to be defined by Local Area Agreement targets – for now, but the Comprehensive Spending Review has abolished this structure and, as a new means of defining strategic relevance will now need to be devised at local level. Providers must follow these developments closely, not just to understand them, but to influence them if possible. it will necessitate Providers to offer a more diverse range of services and supports if they are to attract funding. They also need to get to know the current commissioning infrastructure called the Local Strategic Partnership (Google yours now and include your local authority name in the search; e.g. “Birmingham Local Strategic Partnership”). Remember this will change soon but the individuals and networks will still be there and probably still involved. Get to know them..
Change occurs at different paces in different places so some of you will continue to work with your Supporting People Team (for now). Others will see that their Supporting People Team has been absorbed into the Local Strategic Partnership or some other part of local authority infrastructure such as Housing or Adult Social Care, for others the Supporting People Team will have been abolished without trace. The point is, wherever you are, that strategic relevance is being defined, commissioned and funded differently. Get to know the new commissioning infrastructure, get to know local targets, evolve, remodel and diversify to meet them and keep a close eye on the terms of your existing revenue contracts: they won’t last for ever.
Public Sector Reform
So what happens to this as a result of the Comprehensive Spending Review then? The CLG has just announced the scrapping of the National Indicator Set from which Local Area Agreements take their 30-35 improvement targets (funded through Area Based Grant) and of Local Area Agreements. The National Indicator Set will be replaced by a single list of requirements for local government which have yet to be defined. As for Area Based Grant? Well ironically it was born from the pooling of previously ring fenced budgets and will itself probably be pooled within mainstream local authority/statutory sector revenue. And Local Strategic Partnerships? Well, as with Supporting People Teams, if you don’t have a budget sooner rather than later you’ll be deemed not to have a purpose.
My initial point in this Briefing was that Government believes that the welfare state and the public sector are not affordable as they stand. The last Government believed that too, certainly under Mr Blair if not Mr Brown. The removal of ring fences and the abolition of infrastructure such as Local Area Agreements and Local Strategic Partnerships are but small examples of greater rationalisation and reform to come. With the introduction of the Personalisation Agenda, which is universal across health and social care, we could very well see the merging of health and social care budgets and infrastructure. The Government has already announced the abolition of Primary Care Trusts and the delegation of 80% of the health budget to GPs who will then commission services for their patients. More about that later. I also made the point at the start of this article that central government delegates problems to the public sector at local level – in this case expenditure cuts. The public sector at local level, especially local authorities, pass those cuts onto Providers who then struggle to provide preventative, enabling services. As a consequence we may well see central Government concluding that the problem lies with the public sector at local level. The public sector, Government will claim, is clearly too big, top heavy and unaffordable. To quote Eric Pickles of the CLG when he announced the abolition of the National Indicator Set: “I’d much rather councils were tackling local issues. The money being spent on form fillers and bean counters could be far better spent helping elderly people stay in their homes”. So we should expect significant reform and downsizing of the public sector.
How Should Providers respond?
I just mentioned the term “preventative, enabling services”. These are what most readers of The Briefing either provide or commission. These are the services which are the fence at the top of the cliff which reduce the need for ambulances to be rushed to the bottom of the cliff. They take the pressure off expensive statutory services, they cost far less money and they improve the quality of life of vulnerable people and the communities within which they live. Many of you will be familiar with the Cap Gemini report which shows that for the £1.55bn of costs (they didn’t include all client groups: the original national Supporting People budget was £1.8bn) there is a net financial benefit of £2.77bn. Furthermore, the higher the level of need Providers meet, the greater the level of cost benefit.
In a time of revenue scarcity it is important that Providers can show they are strategically relevant and that they provide cost savings through the delivery of preventative, enabling services to vulnerable people. It is important to be able to evidence this and to remodel, evolve and diversify.
Of course, being able to show all of the above is good but it’s not quite enough. Providers also need to be innovative in reducing their unit cost for support, which is the primary measure upon which Commissioners will base their commissioning decisions in these challenging economic times. Even as recently as 5 years ago, Providers could submit unit costs for support in excess of £20 per hour without much challenge (depending, of course, on the client group). Now £13-£17 per hour is more the norm and Commissioners are increasingly tempted to commission generic (i.e. non-specialist) services from fewer, larger Providers who might be able to use economies of scale to compete more aggressively on price. The elephant in the room, the Personalisation Agenda, has historically trumpeted the need for diversity of specialist provision, however. So how do we deal with pressure on costs and the need to retain a diverse sector which includes smaller specialist providers?
Let’s look first at the way Commissioners are increasingly looking to commission services. The traditional means of competitive block contracts is still around and will be a feature for some time to come, although different approaches are emerging. Support Solutions does a lot of work in assisting Providers to bid for these contracts. It is really important that, as Commissioners move to less secure contractual arrangements, Providers of emergency access services (domestic violence, homelessness, drugs and alcohol etc) make the case for continued block funding. The alternative is chaos: plenty of ambulances at the foot of the cliff as the fence at the top will have gone.
Some authorities and Providers are looking at “core and flex” contracts wherein the bulk of the contract is for core funding but a percentage can be used flexibly so that people being supported under one of these contracts can have more choice over how some of the money is spent. In other words, a more personalised service can be delivered.
Increasingly the contract model of choice is the Framework Contract. These will work slightly differently from one local area to another but in essence a Framework Contract is a contract which includes a number of Providers. It’s a bit like an approved Provider list and it doesn’t guarantee a predictable revenue stream but it does mean that you’re in the frame for business if you are accepted onto a Framework Contract. Framework Contracts give Commissioners (and personal budget holders) a range of choices within a single contract with a range of outcomes and a range of unit costs. Providers get a degree of revenue predictability although obviously not as much as would be the case within block or core and flex contracts. Providers therefore need to get into as many Framework Contracts as they can.
It’s quite possible that this is the means by which the Personalisation Agenda will be contractualised. For a detailed explanation of this, please click here. The idea behind Personalisation in its pure form is that vulnerable people get cash to spend on services and supports which reflect the outcomes of their care and support plans and that they would choose to buy in a diverse range of supports from lots of different sources and not necessarily from the traditional Provider sector. This may happen for some personal budget holders but the reality is that most personal budgets will be spent through Framework Contracts. Local authorities, Providers and some potential personal budget holders are fearful of the perceived complex bureaucracy associated with the Personalisation Agenda: who will manage and oversee a situation where tens of thousands of personal budget holders have contracts with tens of thousands of Providers and individuals to provide millions of hours of support and social care? Who will regulate what happens? As always in the UK, we’ll have a compromise: Framework Contracts. These will give personal budget holders more choice than they currently have but less than the Personalisation Agenda said they would have. They will give Providers less revenue certainty than they currently have but more than the Personalisation Agenda implied they would and they will give local authorities a more easily managed social care economy than pure Personalisation would allow. That said, some personal budget holders may still choose to spend their budget outside of a Framework Contract.
The Road Ahead
So how are Providers to respond to this state of change and uncertainty? Well I mentioned the need to evolve, remodel and diversify and to understand how strategic relevance is defined locally and therefore how attractive they are to Commissioners. I mentioned the need to get to know a wider range of Commissioners currently within Local Strategic Partnerships but probably not for much longer. Then there is the need to promote the financial and social benefits of preventative, enabling services and to evidence those arguments with both quantitative and qualitative data. Think about how to respond to the Personalisation Agenda and the new era of pooled budgets and diverse purchasing. The hard bit is often getting to have conversations with Commissioners who may not know what you do or understand the economic and social benefits of preventative, enabling services. They’d begin to understand if they don’t invest in your preventative and enabling services and then have to spend a fortune on emergency statutory interventions as a consequence whilst nervously looking at a Government which has just been handed on a plate a justification to reform the public sector by the sector itself, albeit unintentionally. By then it will be rather late though.
I mentioned that 80% of the NHS budget is being devolved to GPs. What are they going to spend it on? Their patients are also the people you support, so what can you do to get them to spend money on your service? Well prevention is better than cure and if you do things which reduce the need for a GP to see and treat a patient and costs them less then it’s a no brainer isn’t it? This is what preventative and enabling services do. The trick is to persuade Commissioners, GPs and others of the truth of this argument.
Despite the theory behind Personalisation, smaller Providers, especially those which are not also landlords are in a harder place right now than many RSLs which accommodate and support vulnerable people. For smaller Providers there is an absolute need to think about collaboration and consortium type arrangements. I commented earlier that current commissioning patterns favour fewer, larger Providers but there are now many examples of successful consortia (we should know, we spend a lot of time helping to set them up) which include a diversity of services and shared overhead costs. Consortia do need careful consideration and clarity of role and purpose but they work and are attractive to Commissioners. They also help to preserve the identity and independence of smaller Providers.
Collaboration can take other forms as well. RSLs and support Providers have worked together for years using Management Agreements but these collaborative arrangements are potentially threatened as RSLs think about separating “Intensive Housing Management” from support and taking the former in-house (please see our Briefing article: “RSLs and Intensive Housing Management: Securing the Future?“). As that article shows, there are strong reasons why RSLs are thinking about this: enhanced revenue, insulation from risk and the ability to honour contractual obligations to vulnerable tenants irrespective of what happens to the support Provider. Support Providers may feel threatened by this given reduced funding for support and the blurred distinction between support and Intensive Housing Management. It is also the support Providers which are having to evolve, remodel and diversify without the relative security of Intensive Housing Management income and in the knowledge that other revenue is hard to find. Of course, we can’t tell RSLs not to make a contractual separation between Intensive Housing Management on the one hand and support on the other. What we can suggest, however, is that when they do so, they sub-contract both back to the support Provider as collaboration is important as is the continuing viability of the provider sector in all of its diversity.
Another factor which gives RSLs and other not for profit housing and support Providers an advantage is their ability to reallocate costs from support into Intensive Housing Management, which is funded by Housing Benefit. It reduces the unit cost for support without reducing the budget or services provided. Indeed, it often enhances both. You can read more about that in our Revenue article from Briefing 10 and in our “RSLs and Intensive Housing Management: Securing the Future?” article in this Briefing.
Finally we have to consider he recently announced Government intention to reform the welfare benefits system with the proposed Universal Credit. The critical question here is what will be the impact of these reforms on vulnerable people and the revenue streams of the organisations which support them? At this stage the detail is unclear, not just at Commissioner and Provider level but also at central Government level as well. In the past 2 weeks I have had the benefit of conversations with a senior figure within the sector who has a non-party political role and access to Government thinking and with a civil servant within the DWP who has responsibility with others for shaping Universal Credit. Both confirmed to me that there is no detail yet. Our response at Support Solutions is to lobby at the highest political and civil service level we can to put the case for continued, even enhanced investment through the benefits system, especially the proposed Universal Credit, for vulnerable people. The arguments we are using are exactly those we have advised Providers to use with Commissioners: preventative, enabling services cost less, improve the lives on individuals and communities, relieve pressure on statutory services and are the fence at the top of the cliff which reduces the need for ambulances at the bottom. It’s a no brainer really!
We’ll be looking closely at these issues at the Support Solutions National Housing Support & Social Care Conference on November 26th 2010. Join us.
Michael Patterson email@example.com