Consultation outcome

Technical guide on the adult social care charging reform relative needs formulae 2023 to 2024

Updated 6 April 2023

This was published under the 2019 to 2022 Johnson Conservative government

Applies to England

Following an announcement by the Chancellor of the Exchequer on 29 July 2024, the planned adult social care charging reforms, which were inherited from the previous government, will not be taken forward in October 2025.

1. Introduction

The Department of Health and Social Care (DHSC) announced reform to the adult social care charging system in September 2021. This includes a new adult social care charging reform framework from October 2023 with increases in capital limits and a cap on personal care costs. The reform package includes £3.6 billion over 3 years to reform the adult social care charging system and enable local authorities to move towards paying providers a fair cost of care.

DHSC published a public consultation seeking views on proposals for distributing funding for the delivery of adult social care charging reform in 2023 to 2024. The proposals include various formulae for distributing the funding. These distribution formulae aim to divide a grant or budget between different local authorities according to the distribution of need for that grant or budget.

This technical guide sets out the distribution formulae and data sources used for the allocations in the consultation. This includes the DHSC-commissioned distribution formulae from the Adult Social Care Research Unit (ASCRU) at the Personal Social Services Research Unit (PSSRU) at the University of Kent. In addition, this guide includes the distribution formulae that made use of the Office for National Statistics’ (ONS) estimates of the care home self-funding population, and information relating to people aged under 65 for distributing the charging reform funding in 2023 to 2024. These relative needs formulae were specifically developed to account for additional needs of local authorities due to charging reform.

The following gives a summary of the consultation proposals for different charging reform funding streams in 2023 to 2024.

Funding for the extension to the means test for people aged 65 and over – ASCRU-PSSRU means test extension formula for people aged 65 and over:

• funding for the extension to the means test for people aged 18 to 64:
  • option 1 – ASCRU-PSSRU means test extension formula for people aged 18 to 64
  • option 2 – per capita (people aged 18 to 64) distribution formula
  • option 3 – ASCRU-PSSRU means test extension formula for people aged 65 and over
• funding for the cap on care costs – distribute the funding in the same way as the means test funding for people aged 18 to 64
• funding for implementation and additional assessments:
  • option 1 – ASCRU-PSSRU assessments formula (utilisation approach)
  • option 2 – ASCRU-PSSRU assessments formula (normative approach)
  • option 3 – ONS estimates of the number of self-funders

This technical annex does not cover the distribution formula for the Market Sustainability and Fair Cost of Care Fund.

2. The extension of the means test and the cap on care cost

The ASCRU-PSSRU developed 2 formulae to predict the additional relative needs from the extension to the means test.^{[footnote 1]} One formula is focused on people aged 65 and over and the other is for adults aged under 65. We are proposing to use the formula for adults aged under 65 to distribute funding for the cap. Both models use small area and individual level data and analysis. Please see below and the ASCRU-PSSRU report, Relative need formula allocation of additional funding to local authorities to meet social care charging reforms, for further technical details.

For adults aged under 65, we also present an additional relative needs distribution formula used for allocations based on the distribution of the 18 to 64 population.

ASCRU-PSSRU means test extension formula for people aged 65 and over, 2022

The ASCRU-PSSRU specifically designed a formula to predict the relative size of the new public expenditure required for the extension of the means test for adults aged 65 and over. The formula uses available data regarding care needs, income and wealth, and unpaid care to estimate the relative needs of local authorities.

The formula modelling uses information on individual characteristics (including on income and assets) of people aged 65 and over with care needs from the English Longitudinal Study of Ageing (ELSA), and data on utilisation under the pre-reform system in small areas. A combination of individual and small area level analyses are used as part of the modelling. It includes intermediate steps that estimate the relative additional number of people with care needs expected to become eligible for local authority support with their care costs due to the means test extension. This distribution in care homes is correlated with the distribution of self-funding people by local authority as reported by the ONS estimates.

As well as residential care, the formula also includes a community setting element, which was not the case when the formula was originally developed in 2013 to 2014.^{[footnote 2]} This means it can better capture the relative needs of local authorities due to the capital limit changes

The ASCRU-PSSRU means test extension formula for people aged 65 and over is as follows.

The sum of:

1.282 plus

3.764 multiplied by the number of attendance allowance claimants aged 65 and over per person aged 65 and over, plus

7.754 multiplied by the number of people aged 85 and over with a significantly limiting condition per census person aged 65 and over, plus

1.908 multiplied by the number of homeowner households aged 65 and over per census household aged 65 and over

multiplied by the number of properties in Council Tax bands A, B, C, D and E per all Council Tax banded properties, plus

0.812 multiplied by the number of homeowner households aged 65 and over per census household aged 65 and over

multiplied by the number of properties in Council Tax bands F, G and H per all Council Tax banded properties, plus

-2.395 multiplied by the number of pension credit claimants aged 65 and over per person aged 65 and over, plus

-1.121 multiplied by the number of couple households aged 65 and over per census household aged 65 and over, plus

multiplied by the projected population aged 65 and over.

Each local authority’s allocation share is calculated as their formula result divided by the sum of the formula results for all 152 councils with adult social services responsibilities (CASSRs). The allocation amount for each local authority is calculated by multiplying a national quantum of funding by each local authority’s allocation share. See Annex A of the consultation for illustrative allocations. Data sources are set out in section 4.

No area cost adjustment (ACA) is applied because the formula modelling already incorporates the regional unit costs when estimating the relative size of new public expenditure.

ASCRU-PSSRU means test extension formula for people aged 18 to 64

The ASCRU-PSSRU developed a formula for the distribution of funding for the extension to the means test for people aged 18 to 64. There is limited data especially around care needs and income or wealth for people aged 18 to 64. Therefore, this formula is a simplified version of the modelling done for the extensions to the means test formula for adults aged 65 and over. The model predicts the relative size of the new public expenditure required for the extension of the means test for adults aged 65 and over first, and then uses a simpler 2-variable formula to measure the needs and wealth effects. Assuming the same need and wealth effects for younger adults, the ASCRU-PSSRU developed a younger adult formula using proxy need and wealth variables related to younger adults to better reflect their positions.

The ASCRU-PSSRU means test extension formula for people aged 18 to 64 is as follows.

The sum of:

0.2655 plus

3.5299 multiplied by the number of people aged 16 to 64 claiming personal independence payments per person aged 16 to 64, plus

3.2234 multiplied by the number of homeowner households aged 25 to 64 per census households aged 25 to 64

multiplied by the projected population aged 18 to 64.

Each local authority’s allocation share is calculated as their formula result divided by the sum of the formula results for all 152 CASSRs. The allocation amount for each local authority is calculated by multiplying a national quantum of funding by each local authority’s allocation share. See Annex A of the consultation for illustrative allocations. Data sources are set out in section 4.

No ACA is applied because the formula modelling already incorporates the regional unit costs when estimating the relative size of new public expenditure for adults aged 65 and over.

Per capita (people aged 18 to 64) distribution formula

There is limited data to describe the financial situation of the population aged 18 to 64, especially those with care needs. Given the limited nature of the data available we present a simple distribution formula which does not control for variation in need or financial eligibility of this population. This method assumes that additional demand is spread evenly across the population of people aged 18 to 64 and allocates funding based on the distribution of people aged 18 to 64 in each local authority.

The per capita (people aged 18 to 64) distribution formula for the extension to the means test for people aged 18 to 64 is as follows.

Projected number of people aged 18 to 64 multiplied by the area cost adjustment.

Each local authority’s allocation share is calculated as their formula result divided by the sum of the formula results for all 152 CASSRs. The allocation amount for each local authority is calculated by multiplying a national quantum of funding by each local authority’s allocation share. See Annex A of the consultation for illustrative allocations. Data sources are set out in section 4.

3. Implementation and additional assessments

The ASCRU-PSSRU produced 2 formulae designed to predict the relative demand for new assessments resulting from charging reform. Both formulae calculate additional assessments as the difference between the estimated total number of people seeking assessments post-reform and the number already assessed. Both also take the number of people already assessed to equal the current number of local authority supported people accessing care.

Two different approaches, either a utilisation or normative (needs proxy) based approach, are taken to quantify the number of assessments. The formulae modelling used small area and individual-level data and analyses. This includes using data based on the characteristics of older people, including on assets and disability, from ELSA. For further technical details, please see the ASCRU-PSSRU report.

We also present a third distribution formula which uses the estimated self-funding residents in care homes as a proxy to the distribution of self-funding users who may come forward for an assessment under charging reform.

ASCRU- PSSRU assessments formula (utilisation approach) 2022

This formula uses a utilisation-based approach. This approach estimates the total demand for assessments to be equal to the number of people that would satisfy the current needs test for social care. This is estimated using small area modelling based on individual level data from ELSA and small area utilisation data.

At the local authority level, this potential eligible need is multiplied by the population, and then the number of people currently receiving local authority support is subtracted to estimate extra assessments to local authorities due to reform changes.

This approach estimates the expected number of people who would pass a needs eligibility assessment in the current system using statistical modelling. However, there are uncertainties associated with these estimates. In addition, this approach might underestimate additional assessments from people with a lower level of need, which varies locally.

The ASCRU-PSSRU utilisation approach assessments formula is as follows.

The sum of:

0.113 plus

0.028 multiplied by the number of attendance allowance claimants aged 65 and over per person aged 65 and over, plus

0.009 multiplied by the number of people aged 65 and over with a significantly limiting condition per census person aged 65 and over, plus

0.025 multiplied by the number of homeowner households aged 65 and over per census household aged 65 and over

multiplied by the number of properties in Council Tax bands A, B, C, D and E per all Council Tax banded properties, plus

0.020 multiplied by the number of homeowner households aged 65 and over per census household aged 65 and over

multiplied by the number of properties in Council Tax bands F, G and H per all Council Tax banded properties, plus

-0.022 multiplied by the number of pension credit claimants aged 65 and over per person aged 65 and over, plus

-0.028 multiplied by the number of couple households aged 65 and over per census household aged 65 and over, plus

multiplied by the projected population aged 65 and over

multiplied by the area cost adjustment.

Each local authority’s allocation share is calculated as their formula result divided by the sum of the formula results for all 152 CASSRs. The allocation amount for each local authority is calculated by multiplying a national quantum of funding by each local authority’s allocation share. See Annex B of the consultation for illustrative allocations. Data sources are set out in section 4.

ASCRU- PSSRU assessments formula (normative approach) 2022

The second ASCRU-PSSRU assessments formula is based on a normative approach, which calculates the total demand for assessments using an estimate for ‘potential eligible need’. This is measured by the number of people in the population with 3 or more activities of daily living (ADLs) difficulties such as washing, dressing and feeding.

At the local authority level, this potential eligible need is multiplied by the population and then the number of people currently receiving local authority support is subtracted to estimate the number of extra assessments to local authorities due to reform changes.

This approach offers a more expansive and uniform definition of need which is not tied to the current needs-eligibility test. Focusing on a person’s ADL difficulties (rather than potential care services used), it is not affected by the availability of unpaid care. Data on ADLs is not routinely available, and so this is estimated using data from ELSA.

The ASCRU-PSSRU normative approach assessments formula is as follows.

The sum of:

-0.004 plus

0.064 multiplied by the number of attendance allowance claimants aged 65 and over per person aged 65 and over, plus

0.022 multiplied by the number of people aged 65 and over with a significantly limiting condition per census person aged 65 and over, plus

0.004 multiplied by the number of homeowner households aged 65 and over per census household aged 65 and over

multiplied by the number of properties in Council Tax bands A, B, C, D and E per all Council Tax banded properties, plus

0.011 multiplied by the number of homeowner households aged 65 and over per census household aged 65 and over

multiplied by the number of properties in Council Tax bands F, G and H per all Council Tax banded properties, plus

0.006 multiplied by the number of pension credit claimants aged 65 and over per person aged 65 and over, plus

0.013 multiplied by the number of couple households aged 65 and over per census household aged 65 and over, plus

multiplied by the projected population aged 65 and over

multiplied by the area cost adjustment.

Each local authority’s allocation share is calculated as their formula result divided by the sum of the formula results for all 152 CASSRs. The allocation amount for each local authority is calculated by multiplying a national quantum of funding by each local authority’s allocation share. See Annex B of the consultation for illustrative allocations. Data sources are set out in section 4.

ONS estimates of the number of self-funders

The ONS published estimates of the number of self-funding care home residents in England on 30 May 2022. We used information from this report to estimate the number of self-funders in 2021 to 2022 in care homes by local authority. This self-funder distribution represents another option as a basis for distributing the implementation and assessment funding. This is because the charging framework changes will generate additional demand for assessments from existing self-funders with care and support needs. This method assumes that the uptake of assessments among self-funding users is the same across local authorities.

This method uses the ONS estimates of the local authority level proportions of self-funded care home residents and the number of Care Quality Commission (CQC) registered care home beds at the local authority level. The ONS estimates used information from the provider information returns (PIR) collected by CQC in 2021 to 2022, which includes information on the number of care home residents who self-fund their care. As the data used by ONS was collected in 2021 to 2022, the estimates would include some effects of the COVID-19 pandemic.

For further information on the ONS methodology, see Care homes and estimating the self-funding population, England: 2021 to 2022 (30 May 2022) and the associated methodology paper.

The 30 May 2022 ONS publication estimates only cover residential care settings, not care provided in the community. Therefore, this method assumes that the relative patterns of self-funder distribution for community care settings is the same as in residential settings, an assumption with limited evidence. The ONS published estimates of self-funders in the community in July 2022. However, we have not used these estimates in our allocation calculations due to a combination of quality issues mentioned in the publication, and because the underlying data only includes the location of the community care providers not the people supported by the services.

The assessments formula using the distribution of self-funded care home residents based on the ONS publication is as follows.

Percentage of self-funding residents in care homes multiplied by the number of CQC registered care home beds

multiplied by the area cost adjustment.

Each local authority’s allocation share is calculated as their formula result divided by the sum of the formula results for all 152 CASSRs. The allocation amount for each local authority is calculated by multiplying a national quantum of funding by each local authority’s allocation share. See Annex B of the consultation for illustrative allocations. Data sources are set out in section 4.

The ONS estimates combined some CASSRs together when reporting on the proportion of the self-funded care homes residents. Where this was the case, we assumed that the proportions for the separate CASSRs were the same as the combined proportion.

The ONS report did not report percentage of self-funding residents in care homes for some CASSRs due to small numbers. Values for these local authorities were suppressed on quality grounds and to avoid disclosure issues. In these local authorities we assumed the percentage of self-funding residents in care homes at local authority level is the same as the regional percentage. For the illustrative allocations in Annex B, this assumption applies to the allocations for Tower Hamlets and Westminster.

The City of London has no CQC registered care home beds. For this local authority a proxy value for the number of self-funding residents in care home beds was calculated as follows.

Percentage of self-funding residents in beds in care homes in region multiplied by the number of CQC registered care home beds in region per regional population (aged 18 and over)

multiplied by the local authority population (aged 18 and over)

multiplied by the area cost adjustment.

4. Data definitions

This section contains the definitions and sources used for the calculation of the allocations based on the charging reform relative needs formulae in the previous section. Where possible, the indicator names correspond to those used within the formulae.

Note that the small area modelling used in part to estimate the ASCRU-PSSRU formulae is based on layer super output areas (LSOA) level data. Therefore, we used Census 2011 data because LSOA level for Census 2021 are not yet published.

Data from the Office for National Statistics

Couple households aged 65 and over

The number of household reference persons aged 65 or over living in a couple on 27 March 2011.

Source: Census 2011, ‘Age: age 65 and over; living arrangements: living in a couple: total; measures: value’ from Living arrangements by age – Household Reference Persons.

Census population aged 65 and over

The number of resident population living in households aged 65 and over on 27 March 2011.

Source: Census 2011, sum the ‘Age: age 65 and over; residence type: lives in a household; sex: all persons; measures: value’ from: Residence type by sex by age.

Census households aged 25 to 64

The number of household reference persons aged 25 to 64 on 27 March 2011.

Source: Census 2011, ‘Age: age 25 to 49, age 50 to 64; living arrangements: all categories: living arrangements; measures: value’ from: Living arrangements by age – Household Reference Persons.

Census households aged 65 and over

The number of household reference persons aged 65 or over on 27 March 2011.

Source: Census 2011, ‘Age: age 65 and over; living arrangements: all categories: living arrangements; measures: value’ from Living arrangements by age – Household Reference Persons.

People with a significantly limiting condition aged 65 and over

The number of people aged 65 or over with a long-term health condition or disability which limits day-to-day activities on 27 March 2011.

Source: Census 2011, ‘Sex: all persons; age: age 65 and over; disability: day-to-day activities limited a lot; general health: all categories: general health; measures: value’, from: Long-term health problem or disability by general health by sex by age.

People with a significantly limiting condition aged 85 and over

The number of people aged 85 or over with a long-term health condition or disability which limits day-to-day activities on 27 March 2011

Source: Census 2011, ‘Sex: all persons; age: age 85 and over; disability: day-to-day activities limited a lot; general health: all categories: general health; measures: value’, from Long-term health problem or disability by general health by sex by age.

Homeowner households aged 65 and over

The number of household reference persons aged 65 or over who own their accommodation outright on 27 March 2011.

Source: Census 2011, ‘Age: age 65 and over; tenure: owned: owned outright; ethnic group: all categories: ethnic group; measures: value’ from: Tenure by ethnic group by age – Household Reference Persons.

Homeowner households aged 25 to 64

The number of household reference persons aged 25 to 64 who own their accommodation outright on 27 March 2011.

Source: Census 2011, ‘Age: age 25 to 49, age 50 to 64; tenure: owned: owned outright; ethnic group: all categories: ethnic group; measures: value’ from: Tenure by ethnic group by age – Household Reference Persons.

Population aged 16 to 64

The number of people aged 16 to 64 mid-2019.

Source: ONS mid-year 2019 populations summed over age categories 16 to 64 (inclusive) from: Estimates of the population for the UK, England and Wales, Scotland and Northern Ireland.

Population aged 65 and over

The number of people aged 65 and over mid-2019.

Source: ONS mid-year 2019 populations summed over age categories 65 to 89 (inclusive) and age category 90+ from: Estimates of the population for the UK, England and Wales, Scotland and Northern Ireland.

Projected population aged 18 to 64

The projected number of people aged 18 to 64 in 2023.

Source: 2018-based subnational population projections for 2023 summed over age categories 18 to 64 (inclusive) from: Population projections – local authorities: SNPP Z1.

Projected population aged 65 and over

The projected number of people aged 65 and over in 2023.

Source: 2018-based subnational population projections for 2023 summed over age categories 65 to 89 (inclusive) and age category ‘90 and over’ from: Population projections – local authorities: SNPP Z1.

Proportion of self-funding residents in care homes

Proportion of self-funding residents in care homes in 2021 to 2022.

Source: Table 4 from the ONS publication Care homes and estimating the self-funding population, England: 2021 to 2022. We also used regional level information from Table 2.

Data from the Department for Work and Pensions

Department for Work and Pensions (DWP) data is accessed via the Stat-Xplore tool.

Attendance Allowance claimants aged 65 and over

The number of Attendance Allowance entitled cases averaged over the 12-quarter period from May 2017 to February 2020.

Source: Statistics at DWP: Stat-Xplore, under ‘Attendance Allowance (AA): cases with entitlement’.

There is no need to filter for age as claimants must be aged 65 and over to claim Attendance Allowance. The small number of clients with an unknown age can be assumed to be aged 65 and over.

Pension Credit claimants aged 65 and over

The number of people claiming pension credit aged 65 and over averaged over the 12-quarter period from May 2017 to February 2020.

Source: Statistics at DWP: Stat-Xplore, under ‘Pension Credit’.

Filter age categories from 65 to 69 to 90 plus (inclusive) for all quarters that fall within May 2017 to February 2020 (inclusive).

Personal Independence Payments (PIP) claimants aged 16 to 64

Number of personal independence payment entitled cases averaged over the period May 2017 to February 2020.

Source: Statistics at DWP: Stat-Xplore, under ‘PIP cases with entitlement’.

Filter age categories 16 to 19 to 60 to 64 (inclusive) for all months that fall within May 2017 to February 2020 (inclusive).

Data from other sources

Care Quality Commission registered care home beds

The number of registered beds in care homes (non-dormant) in February 2022.

Source: CQC care directory data February 2022 The sum of non-dormant care home beds by location local authority.

Using CQC data

Properties in Council Tax bands A, B, C, D and E

The number of properties in Council Tax bands A, B, C, D and E at 31 March 2020

Source: Table CTSOP1.0: number of properties by Council Tax band and region, county and local authority district from Council Tax: challenges and changes in England and Wales, March 2020. Sum across Council Tax bands A to E.

Properties in Council Tax bands F, G and H

The number of properties in Council Tax bands F, G and H at 31 March 2020.

Source: Table CTSOP1.0: number of properties by Council Tax band and region, county and local authority district from Council Tax: challenges and changes in England and Wales, March 2020. Sum across Council Tax bands F to E.

All Council Tax banded properties

The number of properties in Council Tax bands A to H at 31st March 2020.

Source: Table CTSOP1.0: number of properties by Council Tax band and region, county and local authority district from, sum across all Council Tax bands: Council Tax: challenges and changes in England and Wales, March 2020.

Area cost adjustment

The cost of delivering local government services varies across the country due to differences in the cost of labour and business rates. The ACA is a tool used to account for this variation in costs for local authorities in England.

Source: Department for Communities and Local Government (a predecessor of the Department for Levelling Up, Housing and Communities) ACA 2013 to 2014.

Since the publication of the ACA 2013 to 2014, there have been changes to some CASSRs. We made the following assumptions regarding the ACA of the CASSRs with updated geographies:

• Bournemouth, Christchurch and Poole unitary authority (April 2019) has an ACA of 1 as their predecessor councils of Bournemouth, Poole, and Dorset County Council all had an ACA of 1
• Dorset unitary authority (April 2019) has an ACA of 1 as its predecessor CASSR Dorset County Council had an ACA of 1
• North Northamptonshire and West Northamptonshire (April 2021) both have an ACA of 1.0077 as their predecessor council of Northamptonshire County Council had an ACA of 1.0077 and we have assumed there is no variation in costs between North Northamptonshire and West Northamptonshire

1. From October 2023, the lower capital limit will increase from £14,250 to £20,000 and the upper capital limit will increase from £20,000 to £100,000. ↩

2. See Review of adult social care relative needs formulae for the formula originally developed in 2013 to 2014. ↩