On taking care - cautionary tales and lessons to be learnt

Social care iStock 000007701832XSmall 146x219A growing number of local authorities have lost court cases with care home providers over the fees they are prepared to pay. Stephen McNamara analyses why.

Councils need to make significant savings to maintain basic services (or even to survive) and for social services authorities a major expense is the level of fees in care homes.

Query: if a council needs to make a saving then it must be fair for a proportion of that to be passed on to the providers; and surely if the local homes are just more expensive than the benchmarked equivalents then it must be fair to decrease fees; and surely, any challenge would be on Wednesbury reasonableness grounds and if the council have had a reasonable go at doing it right then the challenge will fail.

Well… No, No and No.

The recent eight High Court challenges – Providers 7, Councils 1 (with Pembrokeshire losing twice) – act as a reminder that risk taking can be dangerous and that it can pay to take care. They should remind all local government lawyers as to how useful they can be in protecting their councils from horrendous expense and damage to reputation. This article sets out the law and describes what went wrong. Some of the recommendations are not complex (but are easily forgotten), and some of the principles apply to any council decision making (and are relevant to all local government lawyers).

The law (necessarily simplified) plus some dicta

The law is based upon statute, directions, statutory guidance and non statutory guidance (and there are subtle differences between Welsh and English law - which I will not set out here) together with a significant injection of case law.

  1. S. 21 National Assistance Act 1948 enables councils to make provisions for residential accommodation for persons who by reason of age, illness of disability are in need of care;
  2. S. 47 National Health Service and Community Care Act 1990 requires assessments of needs, when appropriate, and the provision of care;
  3. The National Assistance Act 1948 (Choice of Accommodation ) Directions 1992 sets out the core obligation: where a council has assessed that a person needs residential care then it shall make arrangements for that accommodation. But the cost will not be more than the council would "usually expect to pay" i.e. the council will pay the "usual cost";
  4. The Local Authority Circular (2004) 20 (i.e. statutory guidance) states: In setting and reviewing the usual cost , councils should have due regard to the actual costs and to other local circumstances (Hint: read this requirement twice);
  5. Building Capacity and Partnership in Care (DoH 2001) (i.e. non statutory guidance): "Providers have become concerned that..[fees are held down, or driven down].. to a level that recognises neither the costs ..not the inevitable reduction in the quality of service provision. This..may put individuals at risk ..and..destabilise the system. ..Contract prices should not be set mechanistically", there should be "clear systems for consultation with all (and potential) providers", but NB providers should ensure that they are "able to provide a full breakdown of the costs of the services";
  6. s. 149 Equalities Act 2010 imposes a general duty for a council to have due regard to the need to (a) eliminate discrimination, (b) advance equality of opportunity and (c) foster good relations etc. It is an onerous duty and must be exercised with rigour and an open mind;
  7. Pembrokeshire [2010] 3514: Para 28 - "Following guidance is not mandatory: but an authority can only depart from it for good reason"; Para 29 "..the more the proposed deviation from guidance, the more compelling must be the grounds"; Para 79 it is "important that the authority makes a rational and reasoned decision to use a particular criterion in the context of the model it has adopted, and is able and willing to share that reasoning with interested persons, including providers";
  8. Sefton [2011] 2676: Para 70 - "In my view..the statutory [and non statutory] guidance do not contemplate that there will be any significant imbalance between the usual cost of care and the actual cost";
  9. Newcastle [2011] 2655; Para 49 - "Where the local authority has asked itself the right question, has used an evidence-based system to ascertain the actual cost of care and has then made a difficult decision about the allocation of resources the court will support it";
  10. Redcar and Cleveland [2013] 4: Para 57 " Whilst.. benchmarking is likely to provide useful information to a local authority wishing to ascertain the actual costs of care it will need to be combined with some information which relates specifically to its own area before it can be said to have reliably established what the actual costs of providing care are likely to be".

What this means and my diagnosis of some cautionary tales

Councils will typically have framework agreements with a number of providers. When the agreements come up for review then it will be possible to review fees and, possibly, make savings - as long as the law is followed and principles of good administration are applied. But only Neath Port Talbot survived a judicial review challenge.

Pembrokeshire [2010] EWHC 3514: Lose

There was no proper record keeping by the council. There are no minutes of critical meetings and no record of reasons for decisions. There is no record of proper notification of critical decisions (the council "understatedly described its [discussions] as informal").

The methodology and data used erred in the way it used the "capital costs adjustment factor" (a rather technical point this but it amounts to: make sure that your figures can be justified under rigorous challenge).

Sefton [2011] EWHC 2676: Lose

Although the homes claimed that there was an underfunding, the council failed to pursue the question of what was the actual cost of care. Whilst the fees were not out of line with other authorities, that did not mean that the fees reflected the actual cost of care.

Leicestershire [2011] 3096: Lose

The homes drew to the attention of the council the gap between actual costs and the banded rates. "Once the matter had been raised, it was…incumbent upon the council to ascertain what the actual cost of care was. So long as it remained in ignorance of that cost, it could not possibly pay due regard to it".

"[There] was.. an imprecise and unfocused approach … [they ] were not a substitute for asking and answering, the question--- what does it now cost to keep someone in a residential care home in Leicestershire?"

Pembrokeshire [2011] EWHC 3371: Lose

The model previously used entailed a 12% return on capital. There was a drop in value in the market value of care homes and so the council decided upon a 6% return. But the decision letter did not provide compelling reasons for the departure from the previous figure.

Neath Port Talbot [2012] EWHC 236: Win

The report to the Cabinet Board is well argued and clear. Relevant facts were set out, a "toolkit" was used but not mechanistically. There was evidence available to justify reasoning.

Newcastle [2012] EWHC 2655: Lose

A report went to the management team which warned of possible litigation. The judge found that "The report stressed the importance of consultation, bur more with a view to avoiding litigation than any other motive "

"..the Defendant has used the PWC report as the means to ascertain the actual cost of care but has populated it in a misleading way, by using figures for inflation which are inaccurate, by making a deduction for efficiency savings which was not justified and by completely striping out or almost stripping out return on equity .."

Devon [2012] EWHC 2967: Lose

This is an equality duty failure. The judge found that the duty to have due regard was not met by the council. It failed to take into account the risk that the proposed fees would impact adversely upon the quantity and quality of care given to some residents and failed to consider mitigation.

Redcar and Cleveland [2013] EWHC 4: Lose

The council undertook benchmarking and discovered that its fees were higher than neighbouring council. "The [council] had regard to both the 2011/12 fee rates and the benchmarked figures it did so not with a view to calculating the actual costs of care but more with a view to calculating what reduction might be possible to negotiate from or impose upon providers without the risk of expensive litigation".

Three legal points worth remembering

  1. It was argued forcefully in Redcar and Cleveland that JR should not apply to a private law contract between a council and a care home provider. The court in Redcar rebutted this: "The price is set pursuant to public law powers ..there is [therefore] a nexus between public law powers and private rights" i.e. fee setting is a public law function.
  2. The courts are clear that whether or not due regard has been had to the actual costs (or the equality duty) is to be determined by reference to the facts rather than Wednesbury unreasonable i.e. did the council as a matter of fact give due regard rather than did the council behave in a manner which could reasonably be construed as having given due regard.
  3. The Devon case has clarified that the general equality duty applies in its full splendour - and cannot be disappeared under an argument that the duty will be considered in individual assessments and care plans.

Some recommendations: or how your council may take care

  • Record what is relevant: "Good administrative practice demands that decisions, including essential reasons for decisions , are recorded" (Para 83 Pembrokeshire 1). This is simple but basic. On occasion the failure to record is merely bad administration. On occasion it is because of a misunderstanding of FoI - the fear of a FoI enquiry does not justify a failure to record what is relevant. But a corollary is that non relevant issues may be better not recorded.
  • Do not record the irrelevant. In Newcastle the judge inferred, perhaps harshly, that the council wished to consult not because it desired the views of the homes but to avoid litigation. It did this on the basis of a, perhaps, unhappily phrased report. It is essential that all reports are clear that the council is committed to proper decision making and that it wants to get it right not merely to go through a show to escape litigation.
  • It is essential that officers (both junior and experienced) are familiar with the legislative framework (and caselaw). It is essential that at meetings with providers nothing is said that could give the impression that there is any motivation other than to act in good faith in line with the legislation (NB this does not prevent there being robust and challenging conversations about actual cost within the context of the council seeking savings). Perhaps the expression "due regard to the actual costs" should be engraved in appropriate places within the council curtilage.
  • It may be helpful at the start of meetings, or within reports, to set out the legislative framework and to explain what " due regard" and "actual costs " mean. (In the same way that it is worth setting out the equality duty in reports where it is significantly engaged).
  • Local authority lawyers should be involved early in the process to advise, support and remind. They should assist as a critical friend in reviewing reports and decision making lines. After all, better they than a court.
  • The consequences of getting a fee setting decision wrong are acute and grievous. There is the cost, the reputational damage and the unjustified worry and concern given to residents. So: help your councils take care.

Stephen McNamara is a consultant at Veale Wasbrough Vizards and a former head of legal Services at Bristol City Council. He can be contacted on 0117 314 5449 or by This email address is being protected from spambots. You need JavaScript enabled to view it..