Care worker with elderly woman

A National Care Service will mean big changes and challenges for Scottish council funding

Published on 11 August 2022

Plans for a Scottish ‘National Care Service’ would centralise over £4 billion of spending and may not lead to more consistent services.

The National Care Service (Scotland) Bill currently going through the Scottish Parliament will allow Scottish Ministers to transfer adult and children’s social care services from councils to a new, national service. The aim of this is to provide more consistent (as well as higher-quality) social care services across Scotland – although, at a local level, the plan is for services to be delivered by new ‘Care Boards’, rather than a single national agency.

Whether it will achieve its aims is far from clear – the National Health Service, where regional ‘Health Boards’ deliver services locally but are accountable to Scottish Ministers in a similar way, still sees notable differences in performance and outcomes across the country. The plans would represent a big change in Scottish councils’ responsibilities, and require the reallocation of billions of pounds in funding, potentially posing challenges.  

A big change for Scottish councils’ funding arrangements

In 2022–23, councils are budgeting to spend £4.3 billion on social work and social care, roughly one-third of their overall spending, and more than ten times what they spend on roads and transport. Shifting responsibility for adult and children’s social care services from councils to new ‘Care Boards’ would therefore require transferring around one-third of councils’ budgets. Education spending would then account for almost 70% of councils’ net expenditure on services, up from 47% this year. Council tax would pay for 31% of councils’ net service expenditure (and over 100% of net non-education expenditure), up from 21% (and 39%) currently.

Importantly though, councils have a degree of discretion over how much they spend on social care services. In particular, they can choose to raise more or less through council tax, and they can choose to allocate more or less of their budget to social care services relative to other services. For example, councils’ Band D tax rates this year vary from £1,206 in the Shetland Islands to £1,443 in Midlothian. And social work and social care spending varies from 25.5% of net service expenditure in relatively affluent East Renfrewshire to 37.9% in relatively deprived Dundee.  

These choices pose a challenge for centralising the funding of social care services, as we have discussed before in relation to England’s social care system.

The challenge of unwinding local discretion in social care spending

Consider first how much each council’s funding should be reduced by when social care responsibilities are transferred to the National Care Service. It might seem obvious that it should be the amount it is projected to spend on social care services, because that is the amount it will no longer need to spend. But suppose that a council had set higher-than-average council tax and spent less on other services so as to provide a better-than-average standard of social care services in its area. Simply deducting what it was projecting to spend on social care would mean that residents of this council would continue to pay this higher council tax and see less spent on other services. But over time as social care services in their area converged to the standards set out by the new National Care Service, they would no longer be benefiting from better-than-average social care services. That could easily be seen as unfair. 

An alternative would be to reduce each council’s funding by the amount that the Scottish Government’s local government spending needs formulas suggest it needs to spend to deliver an average standard of social care services. That would avoid permanently penalising residents of councils that spent more than this, and benefiting residents of councils that spent less than this. However, it could pose an immediate challenge to those low-spending councils: the amount subtracted from their funding would be greater than what they actually spend on social care. This would require them to rapidly reduce spending on other services or increase council tax, which might be practically and politically difficult.

The best approach might therefore be to begin by subtracting projected social care spending to avoid prompting immediate changes to tax or spending on other services. But then, over time, to transition to funding reductions that are based on assessed spending needs, to avoid penalising (or benefiting) residents of councils that historically spent relatively more (relatively less) on social care services. This would require careful planning. 

Less discretion does not necessarily mean more consistency

As highlighted at the start of this observation, one of the key aims of the planned National Care Service is greater consistency in service provision across Scotland. If the Scottish Government is able to accurately assess the relative amounts of funding different parts of Scotland need to deliver a consistent standard of social care services, centralising funding should make it easier to deliver greater consistency.

However, assessing the relative funding needs of different places is notoriously difficult. Funding needs cannot be directly observed and must instead be inferred from different places’ socio-economic characteristics, and past patterns of service utilisation and spending. The resulting funding formulae can then end up reflecting past funding allocations, rather than genuine differences in funding needs. Even if this problem is avoided, needs assessments are unlikely to be perfect. Some areas’ assessed needs are therefore likely to be lower than their true needs, and others’ higher than their true needs.

In this context, the local discretion councils currently have to vary council tax rates or shift funding between services may actually facilitate greater (rather than less) consistency in service provision. In particular, councils can use their discretion to offset flaws in the centralised spending needs assessments – spending more or less than the centrally assessed amount if that is what is needed to effectively deliver the services expected of them.

In the absence of such local political discretion, it becomes even more important than now that funding needs assessments are as accurate as possible. Using neighbourhood- or even individual-level data on service utilisation and expenditure helps overcome some of the challenges in assessing spending needs – which would be made easier by the Bill’s plans for integrated and nationally consistent individual-level health and social care records. In the context of social care spending of over £4 billion a year (and rising), spending a couple of million on developing the most robust and accurate funding needs assessment possible would be a worthwhile investment, helping achieve the Scottish Government’s aim of more consistent care standards. 

Concluding remarks

It is worth noting that the scale of the challenge facing Scotland is not as great as it would be if centralisation were attempted in England. This is firstly because council tax varies by less across councils in Scotland, meaning councils have made less use of discretion to vary spending levels. And secondly, the fact that business rates continue to be pooled and allocated in line with needs in Scotland means other services would be much less exposed to revenue risks and volatility post-centralisation of social care spending than they would be in England. However, centralising around one-third of Scottish councils’ spending would still be a big deal and careful consideration would need to be given to how to transition to new centralised social care funding allocations.

A National Care Service would also represent a significant reduction in local spending discretion in Scotland. While this may enable a more consistent standard of service to be delivered across the country, it may not – a lot will be resting on how well the Scottish Government is able to assess the spending needs of different parts of Scotland, as well as the performance of the accountability and monitoring regime put in place.