How Austerity-Hit Councils Are Passing The Buck – At The Expense Of The Most Vulnerable

Illustration by Tracy Worrall

With public sector budgets having never truly recovered from the austerity cuts of the early 2010s, a growing dynamic in English public services is different organisations trying to push costs onto one another so they don’t have to pay up themselves.

At the epicentre of this are councils, arguably the biggest victims of austerity when funding cuts are set against rising demand. Local authorities are engaged in constant battles with other state entities – and indeed sometimes internally, in a kind of budgetary civil war – over who has to fund which needs, some of which are statutory requirements.

And often, it’s members of the public with the highest needs who lose out.

“It’s the problem of targets and budgets, not cost, because of course the public purse is going to have to pay for these costs,” says Luke Clements, emeritus professor of law and social justice at Leeds University. “And it’s two bodies cost-shunting between them.”

Housing

Fiscal buck-passing is most closely tied to Whitehall when it comes to housing costs. While councils are required to pay housing benefit to tenants, government regulations mean that Whitehall departments only cover a fraction of these housing benefit costs. Local government is therefore forced to absorb so-called subsidy loss on temporary accommodation (TA) and supported housing.

The Local Government Association (LGA) recently highlighted the subsidy loss councils face via TA for homeless people. TA tenants receive the full housing benefit they are entitled to from the council, but councils don’t get all of those costs refunded by the Department for Work and Pensions (DWP).

Instead, the housing benefit the DWP refunds to councils is capped at 90 per cent of the Local Housing Allowance (LHA) rates that applied back in 2011 – even though LHA, which sets the maximum housing benefit payable to tenants in private housing, is currently based on rent levels from 2023.

Given how much private sector rents have risen since 2011, the subsidy loss faced by councils is large and growing all the time as demand for TA rises, amounting to £360m in 2024-25 and – according to LGA forecasts – set to rise to £595m in 2029-30.

Subsidy loss in supported housing is knottier. Supported housing caters to disabled people, those with mental health problems or escaping domestic abuse, and some homeless people, among others. Again, residents who are eligible for housing benefit claim it from the council.

Where the supported housing is run by a housing association, councils can claim the entire housing benefit cost from central government – but where it’s run by another organisation, such as a charity, they can’t.

Instead, a rent officer from the Valuation Office Agency, part of HMRC, decides the appropriate rent level of a supported housing unit – taking no account of the cost of any support provided.

If a resident of supported housing meets the DWP’s definition of “vulnerable”, the council can claim housing benefit costs equivalent to 60 per cent of the difference between this “appropriate rent” and the actual rent charged. Otherwise, what councils can reclaim is limited to the appropriate rent.

Supported housing subsidy loss costs Leeds city council around £7m a year – the figure is now plateauing, but has risen from less than £1m in 2016-17. A Leeds council report from October said it had worked with a supported housing provider to encourage residents to apply for disability benefit where applicable so the council could “insert the vulnerable indicator for those that do qualify to maximise HB [housing benefit] subsidy”.

On top of this, three local supported housing providers are working towards becoming housing associations, which would enable Leeds council to claim full housing benefit and save it around £1m a year. Other providers are linking with housing associations who take a short-term leasehold interest in the properties, with the housing associations receiving a recurring weekly fee per tenant. This process, known as onboarding, also allows the council to claim full housing benefit, saving Leeds around £400,000 in 2024-25.

A government spokesperson says: “We recognise the pressures local authorities face with the increasing cost of temporary accommodation, which is why we have invested £950m in temporary accommodation stock upfront in the latest round of the Local Authority Housing Fund.

“We’re also tackling rising rents and the housing shortage with our commitment to build 1.5m homes – the biggest boost to social and affordable housing in a generation – backed by a record £39bn investment in affordable and social housing and over £1bn for homelessness services.”

Adult care

Friction often breaks out between councils and local NHS services. NHS trusts are both constantly under financial strain despite large injections of funding, and keen to discharge patients whose hospital treatment is complete in order to free up beds.

So-called “delayed transfers” of patients have long been a major problem for hospitals, as funding cuts to adult care services and supported housing, and lack of investment in community healthcare mean there is nowhere for patients to be transferred to. The result is lengthy – and often deadly – ambulance delays as they are stuck in queues outside hospitals waiting for beds to become available for patients needing admissions.

But many councils now report that hospital discharges are putting strain on adult care services, as patients are being discharged with higher and more complex care needs, requiring expensive provision such as two-to-one care.

“There has… been an increase in demand for two-to-one care packages,” a Blackpool council financial monitoring report noted in October. “People who need the assistance of two carers rather than one will typically be the most complex or unwell and this increase in turn drives the increase in care hours. The gradual rise in this area of demand is also fuelled by people leaving hospital earlier in their recovery journey – due to no longer meeting criteria to reside in hospital [meaning they do not need the clinical services of a hospital].”

Or, as Leeds city council reports: “Our older adult services continue to struggle with high rates of service users being Clinically Ready for Discharge (CRfD), with limited specialist providers to discharge from hospital. There remains challenges to admit to care home provision, particularly for people who need provision for more specialist complex and challenging behaviour.”

North Yorkshire council warns: “Support to manage the increased demand for discharge is increasing pressures on reablement, discharge hubs and brokerage.”

And in Barking and Dagenham: “There is currently significant pressure on the NHS which is having an impact on adult social care, especially in the discharging of patients [many with complex needs/mental health] into the care system. High-cost transition cases and ongoing challenge of health funding for packages of care within this service area can have a significant impact [on] the budget.”

The reference to “health funding for packages of care” is an indication of the problems councils are facing with the NHS’ increasing reluctance to grant Continuing Healthcare (CHC) funding for patients. CHC provides free health and social care for people with long-term complex health needs, arranged and funded solely by the NHS – and not councils.

But local NHS bodies have become less and less willing to assess patients as eligible for CHC funding, which can lead to battles between councils and NHS Integrated Care Boards (ICBs) over who funds an individual’s care needs.

It’s the problem of targets and budgets, not cost, because of course the public purse is going to have to pay for these costs

Research by the Nuffield Trust found that, over time, the percentage of people assessed for ‘standard’ CHC who were found eligible fell from 31.2 per cent in April to June 2017 to 18.6 per cent in the last three months of 2024. NHS England data cited by Healthwatch puts the figure at 17 per cent in the first quarter of 2025-26.

The number of people assessed for “fast track” CHC – where almost everyone is found eligible – has risen in that time, but fast track CHC is reserved for those with rapidly deteriorating health nearing the end of their life, “potentially indicating that patients are being referred at a later stage in their condition” according to the Nuffield Trust report.

The upshot of all this is that more patients are being discharged into council care services with higher levels of need but with less funding from the NHS. A budget management report from Brighton and Hove council noted “increasing [adult care] demand due to changes in funding arrangements including clients no longer being eligible for Continuing Healthcare”, while a similar report from Worcestershire county council warned that “clients [with learning disabilities] receiving Continuing Health Care funding from our NHS partners have also decreased”. Lancashire county council has described the reduction in NHS-funded cases as a “key factor” in its forecast overspend on adult services this year.

A report from Stoke city council in November flagged “a decrease in the number of patients being assessed as eligible for funded nursing care following hospital discharge and an increase in negative continuing healthcare assessments”, which “have contributed to residential care capacity challenges, which in turn have increased [adult care] unit costs”.

Since 2022, NHS rules have stipulated that patients should not remain in hospital waiting for their long-term care needs to be assessed. Instead, they should be discharged either to a short-term care placement or to rehabilitation in their own home. Once they have recovered more, and their day-to-day abilities are clearer, their longer-term care and support are assessed – potentially including a CHC assessment.

“Directors of adult social services are increasingly concerned about what happens at this stage,” says Jess McGregor, president of the Association of Directors of Adult Social Services (Adass) and Camden council’s executive director of adults and health. “We are hearing that it is becoming harder for people to access assessments for Continuing Healthcare, and fewer people are being found eligible.”

Adass’ most recent survey found that nearly three-quarters of councils are seeing more cases where someone who might previously have qualified for CHC is now being judged ineligible.

“For families, this can mean a difficult and confusing experience at a time when they are already dealing with illness or recovery. People who are entitled to free NHS care should receive it. Decisions about funding should follow the person’s needs, rather than becoming a disagreement between different parts of the health and care system.”

Children’s Care and SEND

Similar problems are hitting children’s continuing care, which is effectively the CHC system for under-18s. Research by charity Contact found that more than half of families referred for support were turned down by their local ICB.

“The NHS has decided that it’s going to cut what it spends on,” says Clements. “They cut the number of people getting support. They’ve been doing that for the last six or seven years, and effectively saying, ‘this isn’t our responsibility, it’s social services’ responsibility’, and social services, I think unsurprisingly, are saying, ‘no, it’s not our responsibility, you’ve always funded this, this person’s condition hasn’t changed very quickly’.

“We’re seeing profoundly disabled children, children with really significant nursing needs, being told that the NHS doesn’t think that you’re their responsibility any more, and then suggesting that social services will do things like peg feeding, really quite complex tracheostomy care and things like that, or even a ventilator.

“And if you talk to [council] disabled children’s teams, senior social workers in those teams, they’ll say, ‘yes, we’ve got lots of cases like this’.”

A Department of Health and Social Care spokesperson says: “We know how important NHS Continuing Healthcare funding can be for individuals and families facing complex and often distressing care needs.

If you talk to practitioners, they’re just saying this makes no sense at all financially

“Decisions about eligibility are made by local Integrated Care Boards based on an individual’s assessed needs, and cost pressures should never affect whether someone qualifies for support.

“NHS England provides oversight of these decisions, including monitoring referral and eligibility rates across the country and investigating any variation.”

Issues between local authorities and NHS services have also frequently arisen in the special educational needs (SEND) system. While most coverage of SEND has focused on the rising number of children requiring statutory Education, Health and Care Plans (EHCPs) and special school placements – and the impact on council finances – a recurrent sticking point has been the absence of health and care provision in EHCPs.

An investigation by Schools Week last year found that EHCPs are often drawn up without any input or contribution from health and social care professionals. It quoted an Ofsted report into Hillingdon’s SEND provision which found that “too often health and social care professionals were not invited, did not attend, or did not submit updated advice for annual reviews [of EHCPs]”. In addition, cuts to school nursing services have meant that school staff often have to carry out medical procedures for SEND children.

While many areas remain unclear, the government’s proposed SEND reforms unveiled last month appear to shift legal and financial responsibilities for SEND provision away from councils, with schools taking on responsibility for meeting most SEND needs, and national government apparently taking on the large financial costs built up around EHCPs for children with the highest needs.

“As things stand, if a school is unable to deliver the provision that’s detailed within an EHCP, then the local authority is on the hook to remedy that failing. That would change through the [Schools] white paper, and it would in fact be the school that would be responsible,” says Matt Keer of the Special Needs Jungle website.

“A missing part of the piece as well, I think, would be the extent to which schools and academy trusts will be able to or expected to commission SEND provision from health services themselves, or whether the local authority would do that for you. If it’s the former, how would even big academy trusts marshal influence or commissioning power against much, much bigger integrated care boards, or whatever those end up morphing into? Would even the local authority have sufficient power?

“We already know through the system that exists right now, through local area inspections, that all too often that relationship between the local authority and the ICB is completely dysfunctional. And you can see from the NHS’ own strategic priorities that they’ve got multiple other fires within their own sector that they’re trying to tamp down, and special educational needs really does not sit within any of those priorities.”

Perhaps unsurprisingly, local government bodies have largely welcomed the plans. And in a move plausibly related to government taking on the SEND financial responsibilities that have driven councils to despair, the plans would see parents’ legal rights curtailed, including the right to ask tribunals to mandate often expensive special school placements for children with complex needs.

“Throughout the [Schools] white paper, there’s a very clear philosophy. Children with SEND – especially those with the most complex and unique needs – will need to fit a plan for a cohort.

The era when a child’s individual needs would determine what provision was appropriate for them, and what provision they were lawfully entitled to – if this legislation goes ahead, that era is now ending,” Keer says.

It’s questionable whether the public sector saves any money overall. Clements says that different teams in different public organisations defend their budget lines above all else, even if it means higher costs elsewhere.

“Each of the individuals within the NHS, the senior leads, their main job is to stay within their arbitrary budget. And you can see that over and over again. I think if you talk to practitioners, they’re just saying this makes no sense at all financially, but we’re doing it because we’ve got to stay within budget and we’ve got to hit that target.”

Ultimately all this has consequences – be it for organisational budget lines or families at the receiving end of bean-counting decisions. “It’s utterly traumatising mothers – often it is mothers having other children to care for – giving up sleep, giving up work, putting huge pressure on relationships and so on,” says Clements. 

“The family are in an impossible situation because they know that what is required is required, but they don’t know all the niceties of which authority is to blame, and often it’s just a straightforward failure of the two bodies to work together, but in practice what’s happening is they are defending their budget as their number one, two and three priorities.” 

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