I had been asked to prepare some proposals for funding around telecare for the then Health Minister, Stephen Ladyman. Now, finance is not my ‘thing’ but I made some back of the envelope calculations and submitted them. One Monday we heard that over the weekend the Treasury had approved a grant (un-named at that point) of £80 million. It was much less than my briefing had suggested and there was no justification for how they had come up with that figure.
I then received a primer in Government finance.
Something like this…
Me: Great! Is it ring-fenced for telecare?
Experienced Civil Servant: No. Councils will be able to spend it on anything they like.
Me: Oh…What’s the point then?
ECS: Well, you know that the thrust of Government policy is that councils should have as much local discretion as possible about how they spend their funding. That means there is no appetite to give them ring-fenced grants because that fetters their discretion.
Me: Yes, but…
ECS: So, what we do – or, rather, the Treasury does – is to put a dotted line around part of the funding councils would have got anyway in their baseline Formula Grant and say it is a grant for such-and-such purpose but that there are no restrictions on how they spend it.
Me: I can’t see that working!
ECS: Well, it will look like it is designated for telecare and we will be able to suggest to councils how it should be spent.
Me: Issue guidance, you mean?
ECS: Don’t be silly! We can’t issue guidance, but we will be able to publish something. [This became the Building Telecare in England document. PDF]
Me: So it’s not such good news after all.
ECS: Well, if it were ring-fenced, we could make sure it was spent on telecare, but the downside is that the grant would be extra funding and only limited to that amount.
Me: What do you mean?
ECS: Well, the good thing about it not being ring-fenced is that being part of baseline funding it goes on as part of the baseline funding forever. It’s just that the dotted line around it no longer exists.
In the end, the grant was formally announced in local government circular LAC(2006)5 (PDF), where it states that “The grant will be paid as a specific formula grant with no conditions attached.”
Searching for proof
To confirm the implications as set out to me one now has to start searching to find out what a ‘specific formula grant’ was in the context of the time.
This is difficult because it touches on aspects of local government finance that are so fundamental that they are largely assumed in Government and council documents and so go undefined. Moreover, the lack of definition in this area suits HM Treasury because it is one of the few ‘smoke and mirrors’ mechanisms it can exercise. (It does so less these days but that certainly applied in the era of the PTG.)
The best pointers I have been able to come up with so far have been:
- The Guide to the Local Government Finance Settlement (PDF) 2006, Office of the Deputy Prime Minister. See page 3, ‘Different types of revenue grants’. This says what an unfenced specific formula grant is, but it is not explicit about its relationship with the rest of a council’s funding. You have to infer it from the general description revenue expenditure on page 2.
- A 2007 consultation paper (PDF) from the Department for Communities and Local Government on possible changes to council funding. In talking about police grants, it gives a strong indication of the relationship between general council funding and special grants and that the latter can be ‘rolled’ into the former (because, if they were not, it would represent a cut in funding). See page 23 (#19) Option POL2.
My contention is that the PTG ‘rolled’ into baseline funding at the ‘end’ because that’s where it was all along. Or, to put it another way, if the Treasury can have its cake and eat it, telecare services should be able to eat the same cake and have it.
Steve
I think that many local authorities were not able to find any link to the PTG allocation being rolled into their own baselines after the grant finished.
What did happen is that DH allowed carry over of unspent money from Year 1 to Year 2 and from Year 2 to the following year. This meant that a lot of local authorities still had carryover money in 2008/9. As there was a recurring element to some of this expenditure some were able to get decent budget uplifts for the future.
Of course it all changed in 2010 when the Government announced the Spending Review figures for local government with major upfront savings required and no service immune or ring-fenced. This meant that most social care overall funding has been reduced and FACs criteria affected with many people losing services. These cuts in overall LA budgets go through to 2014 (at least). There are various debates on the actual net losses to social care and they will vary across local authorities. Where you are affected by significant local authority budget cuts, it becomes a little academic as to whether PTG got incorporated into baselines or not.
To counter these funding losses, DH has indicated that some NHS funding must be transferred to local authorities since 2010 to support winter pressures, hospital discharge etc. Reports back to DH indicate that some of this has been used for telecare as well as re-ablement, maintaining eligibility etc.
There is a lot of variation in how this NHS money has got through and been used by local authorities. Some telecare services have done quite well, others have got nothing.
A recent Select Committee Report covered how some of the transferred money has been used and there was a written answer to a Parliamentary Question on 13 March 2012 that indicated that 4% of a total of £648m had been or was being assigned to telecare. http://www.theyworkforyou.com/wrans/?id=2012-03-13a.99736.h&s=telecare#g99736.q0
Mike Clark
Twitter: @clarkmike
Mike, Thanks for the excellent update. Steve.