Scottish Government

REGULATION OF CARE (SCOTLAND) ACT 2001 REGULATION OF CARE AT HOME
CONSULTATION ON ASSOCIATED SUBORDINATE LEGISLATION

APPENDIX F

PARTIAL REGULATORY IMPACT ASSESSMENT

Title

Draft Regulation of Care (Fees)(Scotland) Amendment Order 2003.

Purpose and intended effect

Issue

1 This regulatory impact assessment is provided to assist public consultation on Scottish Ministers' proposals under the Regulation of Care (Scotland) Act 2001 for maximum fees which may be imposed by the Scottish Commission for the Regulation of Care (the Care Commission) from December 2003 related to the regulation of care at home services. The new fees would apply from December 2003, when regulation of care at home by the Care Commission is due to commence. The Care Commission is required under Section 24 of the Act to impose fees for applications for registration, for the annual continuation of registration, for any variation or removal of a condition in force, for cancellation of registration, and for issuing a new certificate of registration. Ministers are responsible for setting maximum fee levels and these were prescribed from 1 April 2003 in the Regulation of Care (Fees)(Scotland) Order 2003 for all the care services already regulated by the Care Commission.

2 The Regulatory Impact Assessment which accompanied the Regulation of Care (Scotland) Bill (now the Act) in December 2000 assumed an increase of 10% (or 10 per bed) in all fee levels in each year leading up to 2004-05 for all services already regulated. By that year the Care Commission was expected to recoup the entire cost of the Care Commission's regulatory functions from fee income. Services new to regulation were to pay fees reflecting full cost recovery from the start, with all services (with the exception of early education and childcare) paying fees at full cost recovery level by 2004-05. During the passage of the Bill, Ministers indicated that they would keep the policy on full cost recovery under review and would consider the effects of fee increases in the years to 2004-05 on the care services sector. It is also expected that Orders prescribing fees for future years will take account of the experience gained and the evidence collected by the Care Commission from the regulation process.

3 As care at home is new to regulation, they are to have their fees set at full cost recovery level from the start of regulation.

Risk assessment

4 The central purpose of regulating care is the protection of people using care services, particularly vulnerable adults and children, and a focus on continuing improvement. It is essential that the new national regulator is adequately funded to enable it to ensure that care services can deliver to all those using them the quality of care they expect regardless of where they live or the type of care they are receiving.

OPTIONS

5 3 options for fee levels were identified in 2000 and are still relevant:

Option 1 - full central government subsidy.

Option 2 - Short-term central government subsidy covering the regulatory functions of the Care Commission, as set out in the Bill's Regulatory Impact Assessment.

Option 3 - Set maximum fees for all services to be regulated from 1 April 2002 at a level which achieves recovery of the full costs of the Care Commission.

Option 1

6 An effective regulatory system is of benefit to providers of care services as well as to users. It is part of the total cost of providing a care service, and should therefore fall to providers in the first instance, so that it can be taken into account in setting charges for the service. If central government met the full cost of the Care Commission, there would be little incentive for the Commission to keep costs down or ensure that its procedures were seen to provide value for money by providers. And there is no good reason why the cost of regulating care services which include private doctors and dentists, or home care provided by a large private sector company, should be met by central government.

Options 2 and 3

7 The benefits of the Act were debated at length in the Scottish Parliament and are widely supported by providers, users and commissioners of services alike. Options 2 and 3 would ensure a transparent system. Both would help the Care Commission to deliver its key aim to encourage continuous improvement in the quality of care service provision and to make a better quality of life a reality for those who use care services.

8 Following option 3 and moving to full cost recovery from the outset would, however, have placed a considerable financial burden on services regulated immediately prior to 1 April 2002 in the short term. Some of the smaller services might have gone out of business if they unexpectedly had had to meet the cost of this as quickly as 1 April 2002 . Option 2, which proposed a staged approach to full cost recovery for those services, was therefore the preferred option. The additional costs to local authorities of paying fees to register those of their own services which were regulated but did not attract fees prior to April 2002 were taken into account in determining their resources for 2001-02, 2002-03 and 2003-04.

Quantifying and valuing the benefits

9 It is difficult in the short term to quantify the benefits of a strong regulatory system in financial terms. Many of the benefits to service users and the public will be in terms of protection, peace of mind, and reassurance. In the longer term the Care Commission will be expected to report to Ministers on any improvements to the quality of care. Fees for services not previously registered will need to meet the cost to the Care Commission of delivering its statutory functions and aims in respect of that service.

Business sectors affected

10 Care at home services are provided by the private and voluntary sectors and by local authorities. Services new to regulation will pay the proposed initial registration fee on application, and the proposed annual continuation fee thereafter.

11 The Scottish Executive is committed to regulatory arrangements that are effective, transparent and accountable. It is important that regulatory authorities have sufficient resources to carry out their statutory duties, and that those duties are carried out in a cost- effective manner without imposing unreasonable burdens on providers. The Scottish Executive believes that the proposed fee levels are reasonable in that context.

Compliance costs for a typical business

12 The Act allows for fees to be prescribed for the following:

• initial registration - this is a one-off fee that is paid by providers applying to register a care service for the first time only;

• annual continuation, per registered place - this will be the biggest recurrent regulatory fee cost for existing providers;

• variation or removal of a condition of registration - unlikely to be a significant cost to the majority of providers as such variations occur infrequently;

• cancellation of registration - unlikely to be a significant cost; and

• issue of a revised registration certificate - also occurs infrequently.

13 Current fees for services already regulated are shown in the Regulation of Care (Fees)(Scotland) Order 2003 at Appendix E of the consultation paper. There is no previous experience of regulating care at home services to draw on, but it is known that local authorities all provide such services and may also commission them from the independent sector. Until the Care Commission begins regulation of this sector it is difficult to estimate its size. No up to date information on the number and size of services is available centrally. However, it is considered that, as care at home has similar characteristics to housing support services, the maximum fees should, at least initially, be set at the same levels, as follows:

14 Estimates of fees for care at home services, like housing support service fees, have been based on the length of time the Care Commission considered it would take to inspect them, times the cost of an inspector hour. The latter included all aspects of the regulation process, including activity on complaints and enforcement.

15 Care at home services will be deemed to be registered with the Care Commission pending receipt of an application within 6 months of regulation being commenced. The initial registration fee will be payable at the time the application is submitted to the Care Commission, and will cover the cost of regulation (including any inspection) in the first year after registration. The annual continuation fee will be payable one year after registration and every year thereafter. Different levels of fees are proposed, to lessen their impact - for small, medium and large services - based on the number of employees. In addition, and in recognition of the fact that many services are heavily reliant on volunteers, the number of WTE employees for the calculation is to exclude volunteers.

16 Care at home services are generally provided or commissioned by local authorities, but may also be provided by the independent sector through private agreements with individuals. It seems likely that independent providers will pass the extra cost of annual registration on to local authorities where the service is being commissioned by them, and to users where that is not the case.

Impact on local authorities and others

17 If the annual registration fee is passed on to the purchasers of care, then there will also be funding implications for local authorities, who provide and commission these services. There will also be implications for the independent sector as it will be providing these services through commissioning arrangements with local authorities or under private arrangements with users. The impact is likely to be small when divided among them. It is not possible at this stage, however, to estimate accurately the level of costs that will fall to the industry as a whole, or what proportion of that cost will fall to local authorities. Until the Care Commission begins to regulate these services, the scale of local authority services and how many registrations they are likely to generate is difficult to predict. It will be for the Care Commission to determine this, having discussed the relevant management and operational arrangements with each local authority. This is also true for the independent sector, whether they are providing care at home directly or through contracting arrangements with local authorities. The Department will ensure, however, that as hard data becomes available through the regulatory process, further discussions are held with the Care Commission and with the colleagues who have responsibility for care at home policy, on the appropriateness of the current fees and on future fee levels. It is recognised that some providers may be providing more than one type of service from the same location, for instance a housing support service and a care at home service. The Care Commission is already examining the scope for an integrated fees structure which reflects an integrating regulatory regime in such circumstances. This also opens up the possibility of using their powers to waive or remit one of the fees, minimising the impact on the sectors.

Issues of equity and fairness

18 The principle that providers should meet the reasonable cost of regulation is well established. Any costs that are passed on to users are likely to have to be met from the public purse through other initiatives (e.g. free personal care etc, direct payments etc). The current policy is that, by 2004-05, fees for all services are to be set at full cost recovery levels, achieving equal treatment .

Consultation

19 These proposals are included in a consultation paper on other subordinate legislation related to commencing regulation of care at home. This will be issued to care at home contacts, local authorities, and a wide range of contacts in the care sector with different perspectives on the maximum fees proposed.

Enforcement, monitoring and evaluation

20 The Care Commission will impose fees within the maximum fees prescribed. The impact of the fees on the market, along with the experiences of the Care Commission in the regulatory process, will be considered by Ministers in taking decisions on the levels to be prescribed for future years.

Timetable

21 The new fees will come into force from the date regulation starts, expected to be in December 2003.

Review

22 The content of this Regulatory Impact Assessment will be subject to review 12 months after the fees come into operation.

Conclusion

23 We would welcome the views of businesses on the potential impact on them of the changes set out within this document.

Care Standards and Sponsorship Branch
Scottish Executive Health Department
1 August 2003