Guidance

Market Sustainability and Improvement Fund 2023 to 2024

Updated 2 June 2023

Applies to England

This guidance is intended to support local authorities in administering the Market Sustainability and Improvement Fund. The guidance applies to England only.

Introduction

1.1. The Market Sustainability and Improvement Fund (‘the fund’) was announced at the autumn statement in November 2022. The primary purpose of the fund is to support local authorities to make tangible improvements to adult social care services in their area, in particular to build capacity and improve market sustainability.

1.2. Under section 5 of the Care Act 2014, local authorities have a duty to promote the efficient and effective operation of the market for adult care and support as a whole. The ambition of the Care Act 2014 is for local authorities to influence and drive the pace of change for their whole market, leading to a sustainable and diverse range of care and support providers, continuously improving quality and choice and delivering better, innovative and cost-effective outcomes that promote the wellbeing of people who draw on care and support.

1.3. The government considers that 3 vital target areas of improvement underpin the overarching objective of building capacity and improving market sustainability. These are:

• increasing fee rates paid to adult social care providers in local areas
• increasing adult social care workforce capacity and retention
• reducing adult social care waiting times

1.4. In total the fund amounts to £400 million of new funding for adult social care in 2023 to 2024. There is a further £683 million expected in 2024 to 2025. In 2023 to 2024, the new funding will be combined with £162 million of continued Fair Cost of Care funding. This will continue to support progress local authorities and providers have already made on fees, following their 2022 cost of care exercises.

1.5. In 2023 to 2024 the fund will be distributed using the adult social care relative needs formula. Full local authority allocations are available in the grant determination published alongside this guidance.

1.6. Although digital technology is not one of the specific target areas local authorities must directly aim to improve and report on for this fund, local authorities may want to consider how they can use it to support market sustainability and improvement. Annex B outlines what funding and support is available already for digitisation and suggests steps local authorities could take to encourage improvements in the adult social care sector.

Note on 2023 to 2024 social care resources

1.7. As set out in the Social care resources explanatory note, the 2023 to 2024 Local Government Finance Settlement sets a clear expectation that the additional funding being made available to adult social care this year, as announced at the autumn statement in November 2022, goes beyond meeting inflationary pressures and must deliver tangible improvements in adult social care services. Therefore, the funding within this grant is provided on the condition that it is used as part of a substantial increase in planned adult social care spending.

1.8. To monitor this, the Department of Health and Social Care (DHSC) will compare the increase in the 2023 to 2024 revenue account (RA) budget for adult social care with the 2022 to 2023 budget, having assumed (unless the local authority shows otherwise) that the following will be allocated to adult social care:

• an appropriate share of the local authority’s additional Social Care Grant allocation for 2023 to 2024, in line with aggregate use of this funding in previous years^{[footnote 1]}
• the local authority’s share of the new 2023 to 2024 discharge fund
• the resources raised in 2023 to 2024 from the adult social care precept

We also expect local authorities to make use of the increase in income from unhypothecated sources. We expect spending on adult social care will increase by a necessary share of this income.

Guidance on the grant conditions

1.9. The grant conditions that local authorities must meet have been set out in the grant determination letter, published alongside this guidance. Guidance to support local authorities in complying with the grant conditions is set out below.

Condition 1

1.10. This is a ring-fenced grant and each local authority must allocate its full grant allocation on adult social care.

1.11. In addition to the new £400 million element of the grant which must be used to make improvements in at least one of the target areas (see further detail from paragraph 1.19 to 1.39), local authorities must spend their allocation of the £162 million from the previous Market Sustainability and Fair Cost of Care Fund element of the grant on maintaining previously increased fee rates paid to adult social care providers. This should be achieved through sustained fee rate increases as opposed to non-recurrent fee uplifts.

Condition 2

1.12. The second condition is that the £400 million element of the fund must be used to make improvements in one of the target areas (as defined in the grant determination). The government has selected 3 target areas that, if improvements are made, will help contribute to increasing adult social care capacity overall, whilst providing some flexibility to local authorities to best address local sustainability and improvement needs. Local authorities can choose which of the target areas they want to focus on. As set out in the grant determination, the target areas are:

• increasing fee rates paid to adult social care providers in local areas
• increasing adult social care workforce capacity and retention
• reducing adult social care waiting times

1.13. Each target area is linked to specific metrics that DHSC will use to monitor performance. These are set out from paragraph 1.19. Though local authorities must only show improvement in one of these target areas, they may use the funding across more than one area. Local authorities should ensure that, to the best of their ability, other target areas do not worsen. As such, local authorities must report on all of the metrics to provide assurance of that. Local authorities should decide how they choose to focus the funding on the target areas, in line with local circumstances and priorities.

Local authority returns

Condition 3

1.14. Local authorities must provide the department with an initial and final 2023 to 2024 report to demonstrate that conditions and expectations of the grant have been met. Local authorities should use templates that are provided by DHSC.

1.15. As set out in the grant determination, the initial 2023 to 2024 report must be submitted by 11:59pm on 24 May 2023 and must include:

• confirmation that the local authority has allocated its share of the grant in full to adult social care, in line with condition 1
• confirmation that the local authority has used its share of the £162 million Fair Cost of Care component of the fund to maintain fee uplifts originally made as part of the 2022 to 2023 Market Sustainability and Fair Cost of Care Fund
• confirmation of which of the 3 target areas the local authority will aim to improve alongside planned spend on each
• reporting against all the metrics set out in the ‘Activities and metrics’ section from paragraph 1.19

1.16. The final report (2023 to 2024) must be submitted by 11:59pm on 22 May 2024 and must include:

• confirmation that the local authority has spent its share of the grant in full on adult social care, in line with condition 1
• confirmation that the local authority has used its share of the £162 million Fair Cost of Care component of the fund to maintain fee uplifts originally made as part of the 2022 to 2023 Market Sustainability and Fair Cost of Care Fund
• a completed ‘Spend return’ section of the final report template
• a record of all the performance metrics specified in this guidance (see the ‘Activities and metrics’ section from paragraph 1.19)

Condition 4

1.17. In addition to the initial and final 2023 to 2024 reports, local authorities must also submit a new annex to the market sustainability plans (published in March 2023). This annex will provide insight into local adult social care market capacity, and assurance that plans are in place to meet local need for different types of care. Local authorities will need to report quantitative and qualitative data on capacity by way of a capacity plan and must submit this update to DHSC by 11:59pm on 30 June 2023. The capacity plans will support local authorities in identifying capacity gaps and provide government with valuable insight into local challenges. As such, these will not be published. A provisional template is provided at Annex A.

1.18. Further information can be found from paragraph 1.45.

Activities and metrics

Introduction

1.19. This section provides further detail on the activities and metrics attached to the target areas: increasing fee rates, increasing workforce capacity and retention, and reducing waiting times. These 3 areas of improvement are closely linked and interdependent. For example, to increase adult social care capacity and reduce waiting times, it may be necessary to recruit additional staff and retain the existing social care workforce. The primary mechanism by which local authorities can support their providers to retain staff and recruit new staff is often by increasing fee rates paid to them, and managing their contracts with providers well, to ensure fee uplifts are being used to improve workforce pay and conditions.

1.20. Local authorities can choose how they focus their allocation of the grant, including distributing it across the 3 target areas. However, as set out in the grant conditions, they must evidence improvement in one of the target areas using the performance metrics that are below. The guidance on each target area below sets out the specific data that local authorities must provide. Local authorities must report on all target areas in the initial and final 2023 to 2024 reports to provide assurance that other target area metrics have not worsened. Additionally, reporting on all the metrics will capture any cross-cutting improvement as a result of the fund.

Increasing fee rates

1.21. As set out in section 5 of the Care Act 2014, local authorities have a duty to promote the efficient and effective operation of a market in services for meeting care and support needs, with a view to ensuring services are diverse, sustainable, and high quality for the local population, including those who pay for their own care. Section 4.31 of the Care and support statutory guidance states the following:

When commissioning services, local authorities should assure themselves and have evidence that contract terms, conditions and fee levels for care and support services are appropriate to provide the delivery of the agreed care packages with agreed quality of care. This should support and promote the wellbeing of people who receive care and support, and allow for the service provider’s ability to meet statutory obligations to pay at least the minimum wage and provide effective training and development of staff.

It should also allow retention of staff commensurate with delivering services to the agreed quality, and encourage innovation and improvement. Local authorities should have regard to guidance on minimum fee levels necessary to provide this assurance, taking account of the local economic environment. This assurance should understand that reasonable fee levels allow for a reasonable rate of return by independent providers that is sufficient to allow the overall pool of efficient providers to remain sustainable in the long term.

1.22. As part of this fund, the government has maintained £162 million of the money local authorities received in in 2022 to 2023 to move towards paying a fair cost of care. Local authorities must spend their allocation of the £162 million element of the fund on maintaining the fee uplifts made under the Fair Cost of Care and Market Sustainability Fund 2022 to 2023.

1.23. We recognise and are grateful for the significant efforts of local authorities in meeting the Market Sustainability and Fair Cost of Care Fund 2022 to 2023 grant conditions. We also thank providers for their participation in the exercise and for supporting their local authorities to collect data and qualitative information. These exercises have supported local authorities to develop their understanding of their local markets and helped them build a transparent and open discourse with providers in their local area.

1.24. In addition to the £162 million element of the fund, local authorities could choose fee rates as one of the target areas to improve, by taking further steps to increase fees to a sustainable level using their allocation from the £400 million component of the fund.

1.25. If focusing on fee rates, the government expects local authorities to use their allocation from the £400 million element of the grant to increase local fee rates beyond planned inflationary fee uplifts. This may also include increasing fee rates in a wider range of adult social care service providers that were not originally in scope of the Market Sustainability and Fair Cost of Care Fund.

1.26. Local authorities should work with providers to ensure increased fee rates lead to improvements to providers’ operations, such as staff pay, benefits and retention; payment of travel time in domiciliary care; and improvements to service quality such as eliminating call-cramming, and the ability to invest in estates and technology.

Metrics

1.27. To assess whether improvement has been made on increasing fee rates beyond planned rises, local authorities must include their local average fee rates in the initial and final 2023 to 2024 reports to be shared with DHSC in May 2023 and May 2024. As with previous years, fee rate data will be published.

1.28. The proposed metrics are an expanded continuation of the Improved Better Care Fund (iBCF) local authority fee rate collection which started in 2017 to 2018 via the Better Care Team and was included as part of the fair cost of care collection in 2022 to 2023.​ The service types now additionally include 18 to 64 residential care home, 18 to 64 nursing care home and 18 and over supported living, to provide insight into those fee uplifts in the current inflationary environment. For each of the service types, we will ask local authorities to include the metrics set out below in their initial and final reports.

The initial 2023 to 2024 report (May 2023) must include the following metrics:

• average external provider local authority fee rate in 2022 to 2023 (in-year data was already provided as part of the fair cost of care collection, this is an opportunity to provide final or corrected data for 2022 to 2023 given that the financial year will have finished)
• average provisional^{[footnote 2]} external provider local authority fee rate in 2023 to 2024, from which we will calculate a percentage uplift from 2022 to 2023
• free text to provide additional context on the report if required

The final 2023 to 2024 report (May 2024) must include the following metrics:

• average external provider local authority fee rate in 2023 to 2024 (this is an opportunity to provide final or corrected data for 2023 to 2024 given that the financial year will have finished)
• average provisional^{[footnote 3]} external provider local authority fee rate in 2024 to 2025, from which we will calculate a percentage uplift from 2023 to 2024
• free text to provide additional context on the report if required

May 2023 and May 2024 fee rate data collections will cover the following service types:

• 65 and over residential care home
• 65 and over nursing care home
• 18 and over home care
• 18 to 64 residential care home
• 18 to 64 nursing care home
• 18 and over supported living

Workforce capacity and retention

Increasing fee rates for providers can support local authorities in working closely with providers to make improvements in staff pay and benefits. However, local authorities could choose to use their allocation of the £400 million element of the fund to deliver other measures that address local workforce capacity pressures in adult social care through retention activity. This includes, but is not limited to, investment in measures to support staff and boost retention of staff within social care - for example:

• using measures other than increased fees to improve workforce terms and conditions
• bringing forward planned uplifts relating to pay in advance of the new financial year
• occupational health and wellbeing measures
• incentive and retention payments

1.29. If focusing on this target area, government expects local authorities to work closely with adult social care providers to determine how to best use the funding to make improvements. Local authorities should consider supporting the full range of adult social care providers on workforce capacity and retention, regardless of whether the local authority already commissions care from them.

1.30. This grant is binding on local authorities - they need to ensure it is spent in line with its purpose, including where funding is transferred directly to providers. To support this, local authorities will need to put effective processes in place to ensure they can collect the data required for DHSC assurance, and that funds can be recovered efficiently in cases of misuse.

Metrics

1.31. To assess performance on improving workforce capacity and retention, local authorities must submit:

• total number of recruits in local authority commissioned care providers in the local authority area (in the month of April 2023 and in the month of April 2024). For the purposes of fund reporting, ‘new recruits’ means a member of staff that is directly employed by an adult social care provider. This does not include agency staff
• number of staff leaving a job with a local authority commissioned care provider in the local authority area (in the month of April 2023 and in the month of April 2024)

1.32. In addition to the quantitative returns above, the reporting template includes a free text box that gives local authorities the opportunity to provide additional context to their return, such as activities undertaken to boost workforce capacity and retention. Further information can be found in the ‘Reporting’ section, below.

Waiting times

1.33. Local authorities could choose to use their allocation from the £400 million element of the fund to undertake activity that improves adult social care waiting times, including the length of time people are waiting for:

• Care Act assessments
• a care or support package to begin
• annual care package reviews

1.34. Local authorities will be aware that setting fee rates is one part of the wider market shaping and commissioning process. We would encourage local authorities to also consider the benefits of outcomes-based commissioning practice when undertaking such activity in line with the ambition for market shaping and commissioning published in the adult social care ‘People at the Heart of Care’ white paper.

Metrics

1.35. To assess whether improvement has been made on waiting times, local authorities should submit, as part of the initial and final 2023 to 2024 reports, the mean waiting time (average number of days) between the initial contact or referral to the local authority, and for either support, a care package, or a direct payment to begin.

This should be the mean waiting time elapsed from initial contact or referral for any person for whom support, a care package or direct payment commenced during the final quarter of 2022 to 2023 (1 January to 31 March 2023) and then similarly in 2024 for the second submission.

Alternative metric

1.36. However, if and where local authorities are unable to report on the above metric, they must submit, as part of the initial and final 2023 to 2024 reports, an alternative waiting time metric and provide raw data in a ‘table’ format with separate accompanying free text to provide context.

1.37. Please note that local authorities will need to report again on the same metric in May 2024, and should collect and report consistently to allow for comparability.

1.38. The government recognises the need to streamline reporting as local authorities implement the new client level data (CLD) collection. We will work with local authorities, ahead of 2024 to 2025, to identify a suitable waiting times metric that satisfies the above criteria, and can be extracted from their CLD returns.

1.39. The government also recognises that local authorities will take different approaches to providing suitable metrics as set out above. As such, for 2023 to 2024, the data local authorities submit will only be used to track improvement within individual local authority areas, and is not intended to be used for comparisons between different local authorities.

Reporting

1.40. The following section provides details on the reporting requirements that local authorities must meet as part of the conditions of the fund. The reporting requirements aim to be proportionate to the fund and other reporting requirements that local authorities will need to meet in 2023 to 2024. However, the government recognises the added burden that completing returns in relation to the fund creates. As set out in the grant determination, to assist with the additional cost of completing the reporting requirements, local authorities may use a limit of, and must not exceed, the highest value of, either of the following:

• £10,000 of their overall grant allocation
• 0.3% of their overall grant allocation

Local authorities will be required to declare the amount spent on administrative costs in the spend return section of the final 2023 to 2024 report.

1.41. Local authorities must submit the following documents to: msifcorrespondence@dhsc.gov.uk within the following timescales:

• initial report by 11:59pm on 24 May 2023
• final report by 11:59pm on 22 May 2024
• capacity plan as part of an updated market sustainability plan by 11:59pm on 30 June 2023

1.42. Paragraphs 1.15 to 1.16 specify what local authorities must submit in both their initial and final 2023 to 2024 reports. A provisional reporting template (which will be updated) for all returns is available at Annex A.

1.43. The reports templates will also include free text boxes where local authorities can provide additional data and context to their returns. Local authorities may choose to use this as an opportunity to explain the trends in each of the target areas.

1.44. DHSC reserves the right to amend the relevant dates for submission, update the means by which returns are submitted, and may provide alternatives in future, including a web-based system for greater efficiency.

Market sustainability plan update - capacity plan

1.45. In addition to the initial and final 2023 to 2024 reports, local authorities must submit an update to the market sustainability plans that they shared with the department in March 2023, as a requirement of the Fair Cost of Care and Market Sustainability Fund (2022 to 2023). The update is for local authorities to provide a capacity plan (see provisional template at Annex A). Local authorities must share this by 30 June 2023. The capacity plan is designed to support local authorities in identifying potential capacity gaps in their areas and challenges they may face as a result, as well as establishing where increased activity may be necessary to meet population needs. The service types included as part of the capacity plan are designed to match up closely with those that the local authority reports as part of the existing annual Short and Long Term (SALT) data collection, with exemption of ‘community’ support, which has been split between homecare, extra care and supported living to enable more accurate capacity reporting.

1.46. Local authorities will need to input the following into the capacity plan for each of the service types and their applicable unit of measurement:

• annualised commissioned totals for 2021 to 2022 and 2022 to 2023. For each service type we will ask local authorities to report a) the number of clients accessing long term care during the year and b) the number of ‘units’ of each type of care commissioned during the relevant year. The former matches closely with what local authorities already report as part of the existing SALT data collection and provides information in a ‘common currency’ across service types. The latter provides information on the actual commissioned units specific to each service type. For accommodation-based services, this will look at the number of beds commissioned per year; for homecare this will be the number of contact hours commissioned. For extra care housing (sometimes referred to as ‘flexicare’), local authorities should report the number of commissioned placements. It is recognised that some local authorities will have references to ‘beds’, ‘packages’ or ‘placements’ for extra care housing commissioning
• best estimate of 2023 to 2024 annual commissioned total to meet population need. Similar to demography work, local authorities will be asked to report their best estimate of how much of each service type is needed across the 2023 to 2024 financial year to meet the needs of their population. For each service type, local authorities are again asked to report their best estimate of both the number of clients accessing long term care during the year and the number of ‘units’ of each type of care commissioned as set out above. We will also provide space for comments and explanatory notes around any assessments of potential capacity gaps and/or contingency planning for how these might be addressed
• current capacity. For each service type, we will ask local authorities to report a) the maximum number of potential clients they could support during 2023 to 2024 (for the purpose of direct comparison to the estimated level of need) and b) a snapshot of the total number of available units of care as of April 2023. For accommodation-based services, this will be the number of available and admittable beds, that is, the beds currently occupied, plus the usable vacancies available at fee rates in line with local authority commissioning practises. For homecare capacity, this will be the total number of contact hours per week that are currently available and affordable, within the market to the local authorities’ best knowledge using the intelligence available to them. For extra care, this will be the total number of placements that are currently available and affordable at fee rates in line with local authority commissioning intentions

1.47. Local authorities will need to report on the following qualitative information through the capacity plan:

• detail of what measures the local authority put in place during winter 2022 to 2023 to ensure sufficient capacity across its social care markets, and an assessment of how successful these measures were

• an assessment of any current capacity gaps within the local authority’s markets for a) long term nursing care, b) long term residential care and c) long term community care (split into homecare, extra care and supported living). This will include details on what the required capacity is, the available capacity in the market, and the level of capacity that is currently affordable

• an assessment of any future capacity gaps within the local authority’s markets for a) long term nursing care, b) long term residential care and c) long term community care with a focus on winter 2023 to 2024, including a detailed plan on how these capacity gaps will be addressed (that is, detail of any contingencies in place)

Monitoring

1.48. Once the fund is implemented, the government will continue to work closely with local authorities to ensure the appropriate support is in place for meeting the grant conditions. To assess whether all conditions have been met, the department will formally review local authority returns.

1.49. The list below contains examples of a breach of the grant conditions:

• inappropriate use of funding, or no evidence of the funding having been spent on the specified purpose
• failure to submit one or more of the documents specified at paragraph 1.41, and/or submission of incomplete documents, and/or documents that are not submitted by the deadline
• no improvements evidenced in any of the target areas using the metrics outlined in the ‘Activities and metrics’ section of this guidance - DHSC will also consider information provided by local authorities through free text boxes
• an updated market sustainability plan that does not include a full capacity plan as required by the relevant template

1.50. If local authorities do not meet the grant conditions, the department will take steps to engage with them to better understand why, and to request further context about the activities undertaken in relation to the fund. To assist local authorities with explaining their activities, the reporting templates will include free text boxes that local authorities could choose to use to provide additional context to their returns.

1.51. Should local authorities remain unable to meet the grant conditions, future funding from the Market Sustainability and Improvement Fund may be reduced, suspended or withheld.

Annex A: example reporting templates

An example report template is available as a separate PDF attachment alongside this guidance.

Annex B: digitisation

In addition to working towards improvements in the target areas listed in the in the ‘Activities and metrics’ section above, local authorities may want to consider how they can use digital technology to support market sustainability and improvement.

When technology is integrated into care and support it can be transformative, improving the safety, quality and personalisation of care while enabling people to remain independent in their own homes for longer. It also enables wider benefits, with improvements in productivity, information sharing and user experience that help to support and release care capacity.

Local authorities are at different stages of digitising services, and we encourage these efforts being made across the system. We know work is underway to digitise assessment, commissioning and provision of adult social care services in line with the government’s ambitions for system reform set out in People at the Heart of Care. A separate grant of at least £130,000 per local authority in March 2023 can be used to improve productivity and service capacity, including by purchasing digital efficiency tools. The following digital approaches can serve to enhance capacity and sustainability in care.

The NHS Transformation Directorate has provided £25 million in funding this year to integrated care systems to deliver matched funding and implementation support for providers to adopt DSCRs and to test other care technologies that meet local needs, scaling those with proven benefits. The Better Security, Better Care programme is also supporting providers to become compliant with the Data Security and Protection Toolkit to improve cyber resilience. When negotiating new contracts and frameworks with care providers, local authorities can consider commercial levers to incentivise or otherwise encourage providers to digitise, for example: specifying that providers should adopt digital social care records, be compliant with the Data Security and Protection Toolkit; and use a secure email service (such as NHSmail) to receive discharge summaries.

Online services and automation provide further opportunities for digital technology to improve efficiency in commissioning and market shaping, while increasing care quality and mitigating the risks of provider failure can be achieved through dynamic data collection, analysis and reporting tools, offering insight into spend and activity, capacity and availability, and predictive capacity for future demand. The Care Data Matters roadmap considers data opportunities and the forthcoming What Good Looks Like framework for adult social care will provide additional guidance to local authorities and care providers on digitisation.

1. Revenue Outturn Data for 2021 to 2022 shows that out of all local authority expenditure on social care, 63% was on adult social care and 37% on children’s social care. The government will use this data as an assumption when modelling expected spend on social care by local authorities. Source: Local authority revenue expenditure and financing England: 2021 to 2022 individual local authority data - outturn. ↩

2. We define ‘provisional’ as follows. At the time of data collection in May 2023, external provider fee uplifts should have been decided by each council but may not yet have flowed through into actual care packages commissioned, or actual payments made to care providers. Councils should report a fee rate that best reflects the actual average fee rate (including uplifts) that they expect for the 2023 to 2024 financial year. ↩

3. The definition of ‘provisional’ is similar to that given in footnote 1, above, but data will be collected in May 2024 and relate to the 2024 to 2025 financial year. ↩