Care and Support (Business Failure) Regulations 2014

Baroness Wheeler Excerpts

Tuesday 3rd February 2015 Grand Committee

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)]

My Lords, I come before the Committee today to introduce the draft affirmative regulations under Part 1 of the Care Act 2014. The regulations before us relate to some of the most important elements of the Care Act, which consolidated 60 years of fragmented legislation into a single modern statute built around the needs and outcomes of a person.

Following Royal Assent for the Care Act in May 2014, the Government published final statutory guidance and laid those regulations subject to the negative procedure before Parliament in October and November, as well as laying these regulations in draft. In keeping with the collaborative approach that we have sought to maintain through the development of these reforms, over the summer the Government conducted an extensive public consultation on the guidance and regulations, including draft versions of the regulations that we will consider today.

The consultation engaged the full spectrum of stakeholders including: people receiving care and support and their carers; social workers and other front-line practitioners; local authority commissioners; social care providers; national representative groups; and NHS bodies. In total, the consultation drew more than 4,000 responses from many different sources. Responses were carefully analysed and, where appropriate, changes were made to regulations.

I will briefly introduce each of the four statutory instruments. I turn first to the Care and Support (Business Failure) Regulations 2014 and the Care and Support (Market Oversight Criteria) Regulations 2014. I will address these together as they form the two pillars of our broader strategy to protect people from provider failure. There is a diverse provider market in adult social care where entry and exit is a regular occurrence. Local authorities are currently able to intervene to meet needs in relatively rare cases where services are closed at short notice and individuals are put at risk—and historically they have done so effectively.

The Care Act places specific duties on local authorities in Wales and England, and their broad equivalents in Northern Ireland, to temporarily step in and meet needs where a provider is no longer able to carry on because of business failure. The business failure regulations set out the meaning of “business failure” generally by reference to different types of insolvency, for example administration and winding up. This approach ensures that people receiving services are protected in the event that their provider enters insolvency, without diluting the core responsibility of providers to deliver care services under normal circumstances.

The social care market includes large care providers, operating across much of England, whose financial failure, were it to happen, would cause local authorities considerable difficulty in carrying out their business failure duties without early warning. One such recent example was in 2011 when Southern Cross, then the largest provider of residential services in England, was threatened with insolvency. Local authorities had no prior warning of its financial position. While few people eventually had to change care home, the Government recognised that the degree of worry for people receiving care and their families was unacceptable.

The Care Act accordingly places new duties on the Care Quality Commission to assess the financial sustainability of certain registered care providers. The CQC will do this by collecting and analysing financial information. The CQC may respond to significant risks identified to the financial sustainability of a provider by requiring it to develop a plan to mitigate any risks identified, or ordering an independent review of the business. Should the CQC be satisfied that a provider is likely to fail, it will provide relevant local authorities with an early warning and the information that they need to prepare adequately to protect the continuity of care for individuals. Where the CQC is not satisfied that the provider is taking all the necessary steps to return to financial health, or it feels that it has not been given the necessary information to assess financial sustainability, it is able to take a range of regulatory actions, up to and including the deregistration of the provider in question.

The Care and Support (Market Oversight Criteria) Regulations set the entry criteria for the CQC’s financial oversight regime. Any provider meeting those criteria will be subject to the CQC’s regulatory activities that I have described. They have been designed to capture those providers that—because they are particularly large, geographically concentrated or operate in a large number of local authority areas—would be “difficult to replace” were they to fail financially. It is important to note that inclusion in the regime is a comment not on the likelihood of failure but rather on the risks that would be posed should the provider get into difficulties.

The Care and Support (Children’s Carers) Regulations 2014 relate to the power in the Act for local authorities to support carers of children in a similar way to that in which they support carers of adults, setting out how the rest of Part 1 of the Act applies in this situation. It is important to note that this power applies only in the limited circumstances where carers of children have received a transition assessment in preparation for beginning to receive support under the adult statute, but the transition has not yet actually taken place.

The broad principle at work will be that adult carers of children are supported under children’s legislation, while adults caring for adults will be supported under the Care Act. This instrument is merely an acknowledgement that some flexibility in this regard may be desirable around the time of transition. The instrument has been carefully drafted to ensure that it does not replicate the support for carers of children under other legislation, so ensuring that there remains a clear division of responsibility. These regulations allow for flexible and personalised approaches to support, without forcing local authorities into unnecessary changes to different, broader policies for carers of children and of adults, which exist for good reasons.

Lastly, the Care and Support (Eligibility Criteria) Regulations 2014 set out the national eligibility criteria for adult care and support and carer support. All local authorities will at a minimum have to meet this threshold and cannot tighten their criteria beyond it, although they will have a power to meet needs that were not considered eligible. The national eligibility threshold has been set at a level where the person’s care and support needs, and their inability to achieve certain outcomes as a result, have or are likely to have a “significant impact on their well-being”. This is intended to have a similar effect to the eligibility level that the vast majority of local authorities operate at present. Together with funding announced in the 2013 spending round, this will allow local authorities to maintain the level of access to care and support when the new system is introduced in April 2015.

Given the critical importance of the eligibility criteria, the Government have been especially careful to ensure that they have taken account of the full views of all relevant stakeholders. The Department of Health carried out an extensive engagement to gather views on an initial version of the regulations from June to December 2013, and engaged the Personal Social Services Research Unit at the London School of Economics to evaluate the draft regulations against current practice. These findings informed the second version of the eligibility regulations that were consulted upon in summer 2014.

Alongside the consultation, the department asked PSSRU to evaluate the second draft of the regulations, working with 27 local authorities to compare the draft regulations with recent cases. We made a number of changes to refine the criteria on the basis of feedback and independent research. We have also worked closely with stakeholders to test the approach. I am confident that the final version before us fulfils the Government’s commitment to replicate the current access to care and support in setting the national criteria.

These regulations are required to meet fully some of the central aims of the Care Act: protecting people from the reality of provider failure and the extreme worry caused by its spectre; providing flexible and appropriate support for carers; and ensuring more consistency in people’s rights to care and support. I commend these statutory instruments to the Committee.

[Baroness Wheeler (Lab)]

I thank the Minister for his comprehensive introduction to these four important affirmative regulations. As he knows, I also have a take note Motion tabled for next week on the negative regulations on implementing the Care Act. Inevitably, there will be overlaps between today’s debate and next week’s but I hope that we can clear off some of the major issues today. The four SIs cover a number of important issues so, while we were happy to have them taken together to expedite the business of the Committee, I hope that the Committee will bear with me since there are a number of areas to cover in relation to implementation of the Care Act and the individual SIs. I also thank the Minister for the very helpful briefing meetings that he has had with Opposition Front Bench health team members on the regulations. He will know that both the Opposition’s health and local government teams are keeping a close watch on how the Care Act is being implemented, so we were grateful for the time that he took on this.

We believe strongly that this first phase of implementation has to be viewed across both the local government and health departments, and considered in the context of the huge funding pressures on local authorities, with a 40% cut in their funding since this Government took office. The Minister, of course, disputes this figure and others from independent bodies on the scale of local government cuts cross the piece and their devastating knock-on impact on social care. Whether the figures are from the King’s Fund, the Nuffield Trust or Age UK, they all put the scale of cuts to social care budgets in terms of billions of pounds.

Recent figures from the Association of Directors of Adult Social Services, with which the Department of Health has worked closely on the Care Act’s implementation, point to this year being the third year of continuing cash reductions and the fifth of real-terms reductions in spending on social care. It points out that, since 2010, social care spending has fallen by 12% while the number of those looking for support has increased by 14%. Social services departments have been forced to make savings of 26% in their budgets—the equivalent of £3.53 billion over the last four years. Compared to 2009-10, almost 300,000 fewer people over the age of 65 are receiving state-funded care.

On many previous occasions, the Minister has set out the additional funding being made available for Care Act implementation—and, despite the challenges, the recent DH stock-take shows encouraging overall progress in local authorities’ readiness for the phase 1 implementation from April 2015. Like the department, we commend the role of the joint LGA/ADASS/Department of Health programme management office. We fully recognise the scale and extent of the work that has gone into consultation exercises with stakeholders, the drafting of the regulations and guidance and the joint working on implementation with local authorities.

However, the same stock-take also makes clear councils’ continuing concerns about the adequacy of funding in the face of modelling which shows increasing support needs for local authorities around IT, workforce, information advice, carers and market shaping. Workforce capacity is a particular concern. The LGA view is that these aspects of implementation of the 2015-16 reforms may be underfunded by as much as £50 million.

Before moving on to the regulations, perhaps I may refer quickly to the Government’s plans to close down the Independent Living Fund in June 2015. We seek reassurances from the Minister that the funds transferred to local authorities from that fund will continue to be used to provide vital support for the disabled people who currently depend on it to be able to live independently in the community and have the same rights, choices and chances as any other citizen. My understanding is that it will be for individual authorities to make decisions on how the resources from the fund will be applied. Will the Government issue guidance to help protect the thousands of disabled people currently receiving ILF support who are affected by this decision? How will they ensure that the money is not just diverted into helping to fund the Care Act implementation or into general funding support for social care services?

The care and support regulations on the market oversight criteria, the interlinking negative regulation on market oversight information—covered by my take note Motion next week—and the business failure regulations are about trying to prevent the sort of problems witnessed in 2011 with the collapse of Southern Cross Healthcare, as set out by the Minister, by empowering the Care Quality Commission to monitor and obtain financial information from providers to check their financial stability and spot the early warning signs of potential difficulties and failure. The aim is to protect vulnerable people and their families if there is provider failure, to ensure that local councils have both early warning and support to be able to maintain vital continuity of support and to ensure that no one depending on the service will suffer.