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Setting care home fees

28 March 2012

In a reflection of the current period of austerity, there has been a spate of recent decisions in judicial review applications brought by private sector residential care providers against local authorities. Those applications challenge the decisions by those local authorities to fix the standard weekly rate for residential accommodation at a given figure. Some applications have succeeded, others have failed. Not all the judicial comments are entirely consistent, and the judgements have been very fact specific. Nevertheless, this article draws together some common threads.

The decisions covered by this article are:

  • Forest Care Home Limited and others v Pembrokeshire County Council [2010] EWHC 3514
  • R v Sefton Council, Ex parte the Sefton Care Association [2011] EWHC 2676
  • R v Leicestershire County Council, Ex p East Midlands Care Ltd [2011] EWHC 3096
  • R v Pembrokeshire County Council, Ex parte Mavalon Care Ltd and others [2011] EWHC 3371
  • R v Neath Port Talbot County Borough Council, Ex parte Bevan & Clarke and others [2012] EWHC 236

Budgetary constraints

It is common ground that once a local authority has set its thresholds for eligibility, it cannot rely on budgetary constraints to justify refusing to provide care to someone who crosses that threshold.

However a local authority can take its own financial position into account when setting the level of fee it pays to residential care providers. It is one of the relevant factors. Other relevant factors include the continuing ability of service users to access care, and the quality of the care which can realistically be provided at a given fee level.

Overall a local authority needs to be able to demonstrate that the fee set is sufficient to enable the authority to meet the assessed care needs of residents. It will need evidence to show that at the proposed fee level, its local care market has the capacity to provide the number of places which it is reasonable to expect will be needed, and that the care will be of acceptable quality.


There is guidance relating to the setting of residential care fee levels which local authorities must follow unless there is good reason to depart from it. The published guidance differs between Wales and England. The Welsh Assembly Government published "Fulfilled Lives, Supportive Communities: Commissioning Framework Guidance and Good Practice" in August 2010. In England, local authorities need to refer to Local Authority Circular LAC (2004) 20, and also an Agreement entitled "Building Capacity in Partnership in Care" issued by the Department of Health in October 2001.

Both the Welsh and English guidance recognise the commissioning power held by local authorities, and talk of the concomitant duty which local authorities owe to ensure that the market can deliver the services which are required. Both versions of guidance say "Fee setting must take into account the legitimate current and future costs faced by providers as well as the factors that affect these costs, and the potential for improved performance and more cost-effective ways of working. Contract prices should not be set mechanistically but should have regard to providers costs and efficiencies, and planned outcomes for people using services".


Local authorities must ensure that when they take decisions in relation to fee setting they have before them a comprehensive set of information about and evidence relating to the different relevant factors which need to be taken into account. A key part of this is information about the actual cost of care. This information includes evidence of how much it actually costs in a given local authoritys area to provide care. It is very likely that in order to obtain that evidence, a local authority will need to consult with its private sector providers, giving them the opportunity to provide a full breakdown of the cost of services.

An authority should have clear systems for consultations, and the consultation should take place at the time proposals are still at a formative stage. Consultees should be given sufficient information, and sufficiently detailed proposals, to allow for intelligent consideration, and sufficient time must be allowed.

When gathering information about the actual cost of care, local data should be gathered, and local factors considered. National benchmarks, such as those found in published "toolkits", can only be a starting point. There is often local variation in staffing costs (in particular levels of wages), property costs and business rates. It is also important to consider the size of homes in a local authoritys area, and the geographical spread of the homes. Larger homes tend to be cheaper to run, but it may be that a local authoritys geography drives providers towards smaller homes.

It is also important not place too much reliance on the fees set by other local authorities. This is unlikely to be robust evidence of the actual cost of care in a given area. It may also be that the fee level in a neighbouring authority is itself vulnerable to challenge.


Setting fee levels remains a very difficult area for local authorities. While everyone, including care providers and judges, recognise the financial pressures on local authorities, it is still necessary for local authorities to tread very carefully as they move towards decisions on fee levels for the coming financial years. The assiduous gathering of relevant data, and its careful consideration, all fully reflected in an excellent audit trail, will be the necessary hallmarks of decisions which are able to withstand challenge.

This article was first published by www.localgovernmentlawyer.co.uk

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