Policy paper

Social care resources explanatory note

Published 6 February 2023

Applies to England

On 4 April 2023 the government published the 2023 to 2024 grant determinations for the Social Care Grant, the improved Better Care Fund, the Market Sustainability and Improvement Fund, and the Discharge Fund.

Social care is a significant and important part of local authority spending. In addition to the grants provided by the government to support this spending, local authorities have discretion to raise additional funds to meet local needs. This year the government is increasing the Social Care Grant following the delay to adult social care charging reform and is also introducing two new grants specifically for adult social care.

This explanatory note sets out further detail on the Social Care Grant, Discharge Funding, and the Adult Social Care Market Sustainability and Improvement Funding to enable local authorities to plan for 2023/24.

Local authorities can make use of around £2 billion in additional grant for social care through the settlement for 2023/24 compared to 2022/23. This is composed of:

• An increase in the Social Care Grant allocations of £1.345 billion, before accounting for the rolling in of the Independent Living Fund.
• Discharge Funding of £300 million to be pooled as part of the Better Care Fund.
• Adult Social Care Market Sustainability and Improvement Funding of £400 million, which will be combined with the existing £162 million in Fair Cost of Care funding.

Local authorities with social care responsibilities will also be able to set an adult social care precept of up to 2% per year without a referendum, should they deem it appropriate to do so.

Given that the government has made available substantial additional resources to local authorities to enable them to commission higher quality adult social care, and to increase adult social care capacity, we expect local authorities to use the additional funding available for social care to go beyond meeting inflationary pressures, including those experienced in 2022/23, and to deliver tangible improvements in adult social care services. These improvements should address discharge delays, social care waiting times, low fee rates, and workforce pressures.

This funding is provided on the condition that it is used as part of a substantial increase in planned adult social care spending. The government expects local authorities to comply with the grant conditions for the Discharge Funding and Adult Social Care Market Sustainability and Improvement Funding, including reporting on performance metrics.

This funding is also intended to address important pressures on children’s social care services and local authorities should allocate resources according to local need.

The Department for Levelling Up, Housing and Communities (DLUHC) is setting up the Office for Local Government (Oflog), a data-driven body with the purpose of providing an authoritative source of information about the performance of local government. This will support improved transparency, foster accountability, and help drive the improvement of local government performance. Co-design with local government partners will underpin the development and success of Oflog. DLUHC will work with local authorities in the run up to the launch and implementation of Oflog later this year.

Social Care Grant

The government has listened to the concerns of local authorities and made the difficult decision to delay the rollout of adult social care charging reform. The funding for implementation of £1.265 billion will be made available to local authorities through the Social Care Grant to help meet the current pressures in social care.

The Social Care Grant, totalling £3.852 billion, will be ringfenced for adults’ and children’s social care.

The government expects local authorities to use their allocation for 2023/24 in line with aggregate use of this funding in previous years, other than where local needs have changed^{[footnote 1]}.

The government is rolling the Independent Living Fund into the Social Care Grant. The government therefore expects local authorities to use funding from the Social Care Grant to support disabled people with high support needs and enable individuals to live independently.

Discharge Funding

Local authorities and Integrated Care Boards will agree how to deploy the Better Care Fund - including £600m of additional discharge funding in 2023/24 - to maximise access to social care and drive down discharge delays, including fast access to domiciliary care and home-based reablement.

Local authorities will receive £300 million of the additional funding in 2023/24, which will have a focus on growing social care capacity in ways that have the greatest possible impact in reducing delayed hospital discharges; planning services sufficiently far in advance to enable providers to make appropriate workforce capacity plans; learning from evaluation of the impact of previous discharge funding and improving collaboration and information sharing across health and social care services.

Adult Social Care Market Sustainability and Improvement Funding

In November, as part of the Autumn Statement, the Chancellor announced that an additional £400 million of new ringfenced funding for adult social care would be made available to local authorities in 2023/24 to improve adult social care market sustainability and drive wider improvements in their areas. This will be combined with £162 million of continued Fair Cost of Care funding, totalling £562 million in 2023/24.

This explanatory note provides further detail on the Market Sustainability and Improvement Fund (MSIF), including our expectations of how the funding should be spent, the associated outline conditions of the funding and the required reporting mechanisms for local authorities. This is to enable local authorities to take this new fund into account whilst planning for 2023/24. A final grant determination letter and grant guidance will be published in advance of local authorities receiving this funding. We will work with local authorities and sector representatives in the coming weeks to finalise the details of the guidance.

Purpose of the Fund

The government expects that the £400 million element of this new funding will enable local authorities to make tangible improvements to adult social care and in particular, to address discharge delays, social care waiting times, low fee rates, workforce pressures, and to promote technological innovation in the sector. The maintained £162 million element of the MSIF is expected to continue to support the progress local authorities and providers have already made in 2022/23 on fees and cost of care exercises.

This contributes to our fundamental objectives of increasing capacity within the adult social care sector across different types of care and contributing to the reduction of delayed discharges. Local authorities will have flexibility to use the MSIF to drive improvements across a range of priority areas, to best address local sustainability and improvement needs. These are:

• Increasing adult social care capacity
• Reducing waiting times
• Increasing workforce capacity and retention
• Increasing fee rates to close the cost of care gap in an area

Grant conditions

Local authorities will need to meet specific conditions governing the use of the additional funding provided. The following list outlines at a high level the conditions local authorities will be expected to meet in 2023/24. Full grant condition wording will follow in the subsequent grant determination letter and final guidance.

1. The Market Sustainability and Improvement Funding is provided on the condition that every local authority allocates its full funding allocation on adult social care. The 2023/24 Local Government Finance Settlement sets a clear expectation that the additional funding being made available to adult social care this year goes beyond meeting inflationary pressures and should 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.

To monitor this, the Department for Health and Social Care (DHSC) will compare the increase in the 2023/24 revenue account (RA) budget for adult social care with the 2022/23 budget, having assumed (unless the 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 2023/24, in line with aggregate use of this funding in previous years;
  • The local authority’s share of the new 2023/24 discharge fund;
  • The resources raised in 2023/24 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.

2. Local authorities must evidence improvement in at least one of the target areas using DHSC performance metrics. The target areas chosen should support the most pressing needs in the local authority area.

3. Local authorities must provide an initial report and a final report on spend and progress. Both reports must record all DHSC target area metrics: capacity, workforce, waiting times and fee rates.

4. Local authorities must submit an update to their Market Sustainability Plans ahead of winter 2023. This will include an additional section in relation to adult social care capacity planning.

The conditions make it clear that the new funding must be spent on improving the DHSC specified target areas in addition to providing a substantial increase in planned adult social care spending. Each target area will have a specified activity/activities that local authorities will be expected to report on, which are further explained under ‘Metrics and monitoring’.

Local authorities will be able to decide how they choose to focus the funding, in line with local circumstances and priorities. As per the conditions, local authorities must show improvement in one of the target areas. We will also expect local authorities to provide assurance that other target areas have not worsened. To ensure this, local authorities will be required to report on all target areas through detailed metrics.

Through reporting DHSC will assure itself that the funding is being used in line with the grant conditions and, as a last resort, ultimately reserves the right to withhold future funding until satisfied that all fund conditions have been met. DHSC will provide local authorities with the opportunity to explain how they have used the funding and any additional context through challenge sessions before considering further measures.

Metrics and monitoring

In the final guidance, we will set out example activities that local authorities can undertake in relation to the target areas for the fund. These will be linked to specific metrics that will be used to monitor performance. As specified in the grant conditions, local authorities will be required to show improvement in at least one of these areas but will be required to report on all of the metrics to provide assurance that other target area metrics have not worsened.

We are continuing to engage with local authority and sector stakeholders on the metrics and reporting mechanisms to ensure that the final set are suitable and do not add unnecessary, additional burdens on local authorities where possible. The metrics will be finalised in the grant guidance.

In addition, there is an expectation on local authorities to support wider government digitisation and improvement priorities that will contribute to the improvement of care quality and successful discharges into the community. For example, this could include activity such as using commercial levers to require adult social care providers to adopt digital care records. We will engage with the sector on specific areas of digitisation and current processes for improvement. These will be finalised in guidance.

Reporting

As set out in the proposed grant conditions, local authorities will be expected to provide two reports which record performance in each of the finalised metrics.

Local authorities will also be required to submit an update to their Market Sustainability Plans in due course, completing an additional section to set out their plans to improve local adult social care capacity.

Final dates for submission of the reports will be confirmed following engagement.

Funding distribution

The government proposes to distribute 2023/24 funding using the Adult Social Care Relative Needs Formula as is used for the Social Care Grant and Improved Better Care Fund. Local authority allocations have been published alongside the Local Government Finance Settlement 2023/24.

For 2024/25 funding, we will work closely with local authorities to determine appropriate grant conditions, national guidance, and distribution mechanisms for funding allocations.

1. Revenue Outturn Data for 2021/22 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. ↩