What can local authorities do to tackle social care debt?

Caroline Sanders and Jacky Edwards look at the growing issue of escalating debt in respect of unpaid care contributions and consider what local authorities can do about the problem.

The Government’s recent progress report on social care funding suggests that people who have money tied up in property and other assets should be able to borrow money from the Government to fund their social care needs, with the money paid back from their estates after they die. However, with local authorities (LAs) already being owed millions of pounds from social care debt, many are arguing that more needs to be done now to offer them a lifeline. 

An age old problem

Under the National Assistance Act 1948, all LAs are legally obliged to provide or arrange residential or domiciliary care to those who require it and who would not otherwise be able to access it. While LAs will initially fund these services, they are obliged to carry out a financial assessment of the person’s ability to pay and to recover any contribution from them that they are deemed liable to pay.

With an ageing population, an ever increasing demand for care and a difficult economic climate, it is perhaps not surprising that a growing number of LAs are reporting debt relating to unpaid care assistance. Earlier this year, The Times reported that councils in England are owed around £465m in unpaid residential care fees. What’s more, a recent report by the BBC discovered that 22 Welsh authorities are owed more than £17m. Even if someone receiving care refuses to pay the charges, it is still the LA’s duty of care to provide and finance the help that person requires. It is therefore, by no means rare for LAs’ aged social care debts to amount to millions, growing week by week.

Sensitive issues

All too often, LAs have shown a reluctance in the past to take positive steps to recover outstanding sums, as such cases are often viewed as too ‘sensitive’ or ‘difficult’. The sensitivities around dealing with vulnerable people and situations is understandable, however, this outlook can lead to copious sums being written off and debt figures rising to extortionate levels. On top of this, if LAs don’t take action to recover debt, then there is a risk that it could set a precedent and lead to a more widespread reluctance and/or refusal to pay outstanding fees.

With the current level of financial cut backs and job losses, LAs cannot afford to make such losses and the pressure to recoup any available public funds has brought the issue of social care debt to the forefront. There are steps that LAs can take to avoid escalating debt and to bring about settlement of outstanding arrears at the earliest stage possible.

Surrey County Council’s approach

Surrey County Council (SCC) has had notable success in actioning social care debt and provides a good example of what can be done to recover money owed for care. In 2008, SCC had approximately 10,000 people receiving residential and care support services. On paper, it had a debt recovery process in place to try and ensure that care bills were paid. As part of this, its credit control team would send out up to three letters in pursuit of payment, with the possibility of legal action being highlighted. While some money would be recouped through this process, in many instances there would be no further steps to refer cases to the Legal team and the sum would remain unpaid. At its peak, this resulted in the council being owed £14m in unsecured social care debt.

To tackle the issue, personnel from different departments were brought together as an Officer Task Group, lead by Jacky Edwards, Principal Lawyer in SCC’s Legal and Democratic Services. In tandem with this effort, the council’s specialist Debt Recovery Manager, Caroline Shotton, undertook a review of approximately 500 ‘problem’ cases, with £2m of non recoverable debt written off straight away. Simple cases were dealt with immediately by the council’s social care debt recovery team, while some cases of more substantial value or complexity were referred to the Legal team to take forward. In 2008, at the early stages of the project, DWF’s Caroline Sanders was brought in to assist the in-house Legal team with the first tranche of cases earmarked for court action. DWF has continued to work in conjunction with Surrey’s legal team since then, supporting them with those cases. This partnership approach has provided flexibility, knowledge sharing and mutual support.

The area was effectively ’new territory’; as so many authorities have historically been reluctant to get involved in litigating cases; and required a certain amount of ingenuity. SCC now has an integrated referral process for cases which reach the end of the debt recovery process and both SCC and DWF have acquired extensive experience as a result of the number and variety of cases handled to date. SCC also took the unusual step of recruiting a specialist lawyer, Agnes Krofah, who has been instrumental in supporting the debt recovery team to reduce the council’s debt.

Some £2.5m has been recovered from legal cases to date and, as a result of the other initiatives it has implemented, at the end of the 2011/12 financial year, the council’s unsecured debt figure had halved from £14m to £7m. Now, 89% of the debt is under two years old and 62% of charges are collected by Direct Debit. The Legal team has assisted with process improvement at all levels, identifying improvements as a result of issues raised in the cases referred to them and attention can now be given to newly arising debt, ensuring the debt levels remain manageable.

What can local authorities do?

Some LAs may be worried about the complexity of such cases, as well as the possibility of them attracting negative publicity. However, it is worth noting that in SCC’s experience, the majority of cases were resolved out of court and didn’t receive any negative publicity.  

“Surrey’s experience can show that the benefits can outweigh the negatives; and that the negatives often do not actually arise. Clear processes, good communication and services working in partnership has been the key to success, with the first fully contested case won at county court this year,” said Caroline Shotton, Debt Recovery Manager at SCC.

It is still important though for LAs not to see these as straightforward debt recovery cases. Frequently, they can involve complex legal and technical issues including mental health legislation, probate and estate administration, and NHS continuing healthcare funding reviews. Despite this, taking a flexible and sympathetic approach, with members’ support, clear processes, good communication and working in partnership with legal professionals, LAs can ensure that their social care debt is tackled effectively with cases being seen through right to the end, resulting in a marked impact on budgets. 

Caroline Sanders is a Senior Solicitor in the Insurance Team at DWF and Jacky Edwards is Principal Solicitor in the Litigation and Employment Team at Surrey County Council.