Scottish Government

SCOTTISH COMMISSION FOR THE REGULATION OF CARE: PROPOSALS FOR MAXIMUM FEES 2004-05

The Regulation of Care (Scotland) Act 2001- Regulation of Care Services
by the Scottish Commission for the Regulation of Care.
Proposals for Maximum Fees to be set by Scottish Ministers for 2004-05

Consultation Paper

Purpose

2. This paper sets out Scottish Ministers' proposals for the maximum registration fees to be applied from 1 April 2004 by the Scottish Commission for the Regulation of Care (the Care Commission) under the Regulation of Care (Scotland) Act 2001 (the Act).
4. Comments on the proposals in this paper are requested no later than 6 February 2004. All responses should be sent to Jane Martin, Care Standards and Sponsorship Branch, Scottish Executive Health Department, 2-E(S), St Andrew's House, Regent Road, Edinburgh EH1 3DG (E-mails to standardsandsponsorship@scotland.gsi.gov.uk).

5. Background

6. The Care Commission was established on 1 April 2002 to regulate a wide range of care services. It took over functions from local authorities and health boards, who had previously operated a variety of regimes with varying degrees of consistency against a range of standards (The recent research report "Standards of Care and Regulation of Care Services in Scotland" sets out the key features of the inspection of care services in Scotland prior to the Commission's establishment.) Some of the services to be regulated by the Commission were already regulated, some were only partially regulated (eg local authorities' provision of certain services at their own hand) and others had not previously been regulated at all eg housing support services and care at home. At the same time as the Commission was established the Scottish Executive published a suite of National Care Standards, which set out from the user's perspective the standards to be delivered by care providers. The Commission inspects care services against the standards; this involves gathering the views of users.
8. In summary, therefore, the Commission was set up to introduce a consistent national system of regulation of care services which covered more services than before and involved new work in relation to users. It is about to publish its first Annual Report, which will set out is achievements in its first year of operation. Its forward plans are set out in its Corporate Plan, published on the Commission's website in August.

9. Fees

10. In terms of section 24(1) of the Regulation of Care (Scotland) Act 2001 (the Act), Scottish Ministers prescribe the maximum registration fees which may be imposed by the Care Commission. The Commission imposes fees under section 24(1) for:

• applications for registration and for cancellation of registration;
• the annual continuation of registration;
• variation or removal of a condition of registration; and
• issue of a new certificate.

2. The current policy on registration fees has been followed since the Care Commission became operational in April 2002. It was originally set out in the Financial Memorandum to the Regulation of Care Bill when it was introduced in the Scottish Parliament in December 2000. Fees for services regulated immediately before 1 April 2002 (under the previous regulatory system) have been increased by 10% (or 10 per place) in 2001, 2002 and 2003. Services new to regulation have had their fees set from the start at a level considered to reflect the likely full cost to the Care Commission of their regulation.
4. The final stage of the stated policy on fees is that they should all be at full cost recovery level from 2004-05. In other words, the Care Commission was then to be self-funding. The reason for this is to ensure that there is transparency in the costs of delivering services. Regulation is part of the cost of providing a service, and so it should be met by that service. The only exceptions were childminding and day care of children, which were to continue to be subsidised by the Scottish Executive. During the passage of the Bill, Ministers indicated that they would keep the full cost recovery policy under review and take into account any effect which fee increases in 2001-02 onwards had on the care service market.
6. The current maximum fees for regulated services, and those for care at home when its regulation commences later this month, are set out in Appendix A. The current fee for a new certificate of registration is 72.

7. Proposed increases in current fees maxima

8. The Care Commission has been operating for just over 18 months. During that period it has amassed information on inspection activity and associated costs. This data points to a likely need for a very significant increase from 1 April 2004 in the current registration fees for those services not yet at full cost recovery if the policy set out in paragraph 6 is to be achieved. The estimates are, however, based on quite a short period of the Care Commission's operations, and at a time when it was establishing entirely new systems. Experience over the next year or so should be much more representative of the true costs of regulation for each type of service.
10. Ministers recognise the difficulty in moving to full cost recovery fee levels in 2004-05 for these services. They do however wish to deliver the original policy intention, the reasons for which still hold good. It is therefore proposed that the move to full cost recovery is staged over the next three years.
12. The fees proposed for 2004-05 are set out in Appendix B. For services already regulated when the Commission was established, the level of increase from 2003-04 varies from service to service. This reflects the fact that the different services are at different levels in relation to the full costs of regulation, in turn reflecting the widely varying fee levels set in the past. In line with the stated policy, a subsidy will continue to be provided by the Scottish Executive to enable fees for childminding and day care services for children to be kept at the low levels indicated (which represent only about 4% of the cost of regulation). For services new to regulation, the fees proposed for 2004-05 for registration and continuation are unchanged (although they have now been rounded) as the Commission currently has only limited experience of regulating those services. The Executive will keep these fees under review in the light of experience of emerging regulatory practice. The fees for variation or removal of a condition of registration, and cancellation, have, however, been rationalised with those for other services.
14. Adoption and fostering services will be regulated for the first time from April 2004, and the fees proposed for them in Appendix B are at a level which it is considered will recoup the full direct cost of regulation based on estimates provided by the Care Commission.
16. As for offender accommodation services, some of these are already being regulated because they were regulated under the previous regime and the rest are to be regulated from April 2004. It is proposed that, in the interests of equity, all offender accommodation services should pay the same fees from that date, set at full direct cost recovery levels.
18. It should be noted that, for some services, different fee levels are proposed for different sizes of service, related to the number of staff. As at present, the calculation would be made on the number of whole time equivalent staff numbers, discounting volunteers.
20. It is proposed that the maximum fee for a new certificate of registration should be increased from 72 to 75.
22. For all services, except childminding and day care of children, it is proposed to continue and simplify the current pattern of fees for variation or removal of a condition of and cancellation of registration. The proposed fee levels are intended broadly to reflect the move towards full cost recovery for the other types of fee.

23. Regulatory Impact Assessment

24. A partial Regulatory Impact Assessment is attached at Appendix C. The full regulatory impact will not be known until the conclusion of the consultation exercise.
26. Views on these proposals are invited by 6 February 2004. Responses to this consultation should either be sent to Jane Martin, or E-mailed, as set out in paragraph 2.
28. We are unlikely to be able to reply to you personally, but will consider your comments in reaching our decisions.
30. Please note that as normal we will make your response publicly available through the Scottish Executive library, unless you ask us not to do so.

Care Standards and Sponsorship Branch
Scottish Executive Health Department
December 2003

Appendix A

Maximum fees from 1 April 2003 and to be applied for care at home from December 2003

*Not yet in place - proposed for application from start of regulation in December 2003.

Notes

1. For support services, day care of children, housing support services and limited registration services, a "small" service is one with up to 3 whole-time equivalent staff (WTE) and "other" services are those with more than 3 WTE staff.

2. For housing support services and support services (care at home), a "small" service is one with up to 3 WTE staff, a "medium" service one with over 3 and up to 15 WTE staff, and "other" services those with more than 15 WTE staff

Appendix B

Proposed fees from 1 April 2004

1. Rates for care at home services are provisional as they will not be regulated until December 2003. The rates applied from December 2003 would not be increased in April 2004, apart from those for variation or removal of a condition and for cancellation of registration.

2. For support services, day care of children, housing support services and limited registration services, a "small" service is one with up to 3 whole-time equivalent staff and "other" services categories are those with more than 3 WTE staff.

3. For housing support services and support services (care at home), a "small" service is one with up to 3 WTE staff, a "medium" service one with over 3 and up to 15 WTE staff, and "other" services those with more than 15 WTE staff.

Appendix C

PARTIAL REGULATORY IMPACT ASSESSMENT

Title

Consultation on a draft Order in which Scottish Ministers prescribe the maximum fees which may be imposed by the Scottish Commission for the Regulation of Care for 2004-05 in respect of services regulated under the Regulation of Care (Scotland) Act 2001.

Purpose and intended effect

Issue

1. The Regulation of Care (Scotland) Act 2001 (the Act) requires any person seeking to provide a care service as defined therein to apply to the Scottish Commission for the Regulation of Care (the Care Commission) for registration of that service. Some types of care services have been regulated since 1 April 2002. Housing support services and child care agencies have been regulated since 1 April 2003 and limited registrations for adults with incapacity from October 2003. From December 2003, care at home services are to be regulated and from April 2004, adoption and fostering services and those offender accommodation services currently unregulated. Other services will follow later from dates still to be agreed. Providers of regulated services can also apply for variation or removal of a condition of registration, for cancellation of registration, or for a new certificate of registration.

2. 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. The Commission is required to have regard to its reasonable expenses in fixing fees, but it can charge a nominal fee or remit the fee altogether if it considers that to be appropriate.

3. Also under the Act, Scottish Ministers prescribe the maximum registration fees which may be imposed by the Care Commission. This Regulatory Impact Assessment (RIA) is provided to assist public consultation on the proposed maximum fees to be prescribed by Scottish Ministers for 2004-05.

4. The RIA which accompanied the Regulation of Care (Scotland) Bill (now the Act) at its introduction in December 2000 assumed increases of 10% (or 10 per year per bed) in annual continuation fees for services already registered under the previous system in each of the years leading up to 2004-05. Increases in fees in 2004-05 were to be at a level which would ensure the Care Commission recouped the entire cost of registration and inspection from fee income. The RIA also said that services new to regulation would be expected to pay fees reflecting full cost recovery from the start. Early education and childcare were to be excepted from full cost recovery and would continue to be subsidised by the Scottish Executive. 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.

5 It is also expected that Orders prescribing fees for subsequent years will take account of the experience gained and the evidence collected by the Care Commission from the regulation process.

6 In 2001-02, 2002-03 and 2003-04, 10% increases (or 10 per place) were effected. All services new to regulation have had, or (for care at home services and adoption and fostering services) will have, their fees set at full direct cost recovery levels from the start of regulation.

7. The current fee levels are set out at Appendix A to the consultation paper of which this RIA is an Annex. This RIA covers proposals for maximum fees from 1 April 2004.

Risk assessment

8. The central purpose of regulating care is the protection of people using care services, particularly vulnerable adults and children. It is essential that the Care Commission 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

9. A number of options were considered for the funding of the Care Commission in 2004-05. The preferred option is to effect an increase that year and the two subsequent years which will ensure that fees are at full cost recovery from 2006-07(except for childminding and day care of children, which will continue to be subsidised). It is proposed that services not currently at full cost recovery levels will have these increases spread evenly over the next 3 years. Childminding and day care fees would also be increased to levels considered to be reasonable, but they would still be heavily subsidised. For registration and continuation fees only for those services already at full direct cost recovery levels, the current levels (although these have now been rounded) would continue to apply. Care at home fees from the start of their regulation later this month were recently put in place. For registration and continuation fees only for care at home, no changes are proposed from April 2004. Fees for variation and removal of a condition of registration and for cancellation of registration for all services would be increased and simplified. Finally, for the services to be regulated for the first time from April 2004 (adoption and fostering services and those offender accommodation services not already regulated), the fees proposed for registration and continuation are the levels considered necessary to recover the full direct cost of regulation, while those for variations and cancellations are in line with those proposed for other services. It is also proposed that all fees for the offender accommodation already regulated are brought into line, in the interests of equity. All the fees proposed from April 2004 are set out in Appendix B to the consultation paper to which this RIA is Appendix C.

10. Leaving fees at current levels is not an acceptable option, given that the Commission was set up on the basis that it would ultimately be self-funding through fees. The policy that there should be a move to full cost recovery fees from next year was carefully considered. However, the Care Commission's experience of inspection activity and related costs is limited as it has only been in existence since April 2002. To set fees based on this limited data is considered to be inadvisable. Also, moving to full cost recovery next year may well be a step too far for many providers, even though they have been aware of the policy for some time. Other options would entail reaching full cost recovery over a longer or shorter period. Doing this over 3 years is, however, considered to be the fairest option, allowing time for the Care Commission to amass more extensive and reliable hard data, and giving providers fair warning about future increases.

Business sectors affected

11 . Care services are provided by the private and voluntary sectors and by local authorities. All services currently registered will be required to pay the relevant increased annual fee when it next falls due. Services new to regulation will pay the new initial registration fee on application and the new annual fee thereafter.

12. 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.

13. In response to concerns expressed by some of those (particularly from the voluntary sector) who responded to the previous fees consultation, some changes were made in the final version of the Fees Order for 2003. These ensured that, for the purposes of calculating the number of staff for working out whether the service falls within the "small" category for fees purposes (support services - day care, housing support services, day care of children, child care agencies and limited registrations for adults with incapacity), only whole-time equivalent staff are counted, and volunteers are discounted altogether. This will continue in the Fees Order for 2004 (and will apply equally to care at home and adoption and fostering services).

14. 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.

15. Information obtained from the Care Commission's Practice Management System earlier this year showed the number of services of each of the types regulated since April 2002 and currently set at levels lower than the full costs of regulation as follows:

16. For existing registered providers of care home services, the total compliance cost will be the increase in the annual continuation fee (30 per place) multiplied by the number of registered places they have. For example, a care home registered for 20 places would pay an additional 600 per year (which works out at 11.53 a week). Those providing care services new to regulation would be incurring fee costs (as shown at Appendix B) for the first time.

17. Fees for continuation of registration are usually a small part of the total cost of providing the care service and it is expected that at least some of the increase can be absorbed. For instance, care homes are currently being funded by the Scottish Executive and local authorities to the extent of 346 per place per week for residential care and 406 per week for nursing care. The proposed increase of 58p per place per week is a small proportion of that, as is the whole new continuation fee at 2.40 per week.

18. For those providers offering services in the private sector, eg independent healthcare, it is up to the sector to determine how much of the extra costs are absorbed and how much passed on to the users. This must be balanced against the improvements which effective regulation will make, through time, to the services which these providers offer. The extra annual cost should not be a significant proportion of the total annual cost of providing the service.

Childminders and day care of children

19. These services are currently heavily subsidised and that will continue. It is not considered that the proposed increases of 2 in the annual rates for childminders and small day care services and 37 for other day care services are likely to have a significant impact.

New fees for adoption and fostering services

20. The fees should not be significant for local authorities in their role as adoption agencies but they may be for voluntary agencies. However, the levels of charges set reflect the amount of regulatory activity necessary to ensure that the organisation is providing the service required. By comparison, the cost for a small or medium agency is roughly equivalent to the fee charged for a home study. Overall these levels of fees should not adversely affect the overall solvency or threaten the continuation in business of voluntary agencies.

New fees for offender accommodation services

21. Criminal justice services are currently centrally funded. This means that the cost of registration fees will inevitably be met by that funding, whether provided by local authorities or the independent sector.

Users of care services

22. It is up to providers to determine their own charges, in negotiation with purchasers or commissioning authorities where appropriate. But even if the entire increase in fees is passed directly on to the purchasers of care in full, the amounts involved would mean only a very small rise in existing care bills. For example, a person in a care home paying his/her own care bills should pay a maximum of an extra 30 per year.

Issues of equity and fairness

23. The principle that providers should meet the reasonable cost of regulation is well established. Ministers' policy up till now has been that, by 2004-05, fees for all services will be set at full cost recovery levels, achieving equal treatment. This year's proposed increases are based on the Care Commission's activity levels to date for each particular service. They will ensure that any increased costs that may be passed on to users are spread over a 3-year period.

Costs and benefits

24. As stated in previous RIAs about these fees, it is difficult 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. Increased fees and new fees for services not previously registered will create additional fee income to assist the Care Commission in carrying out its duties. The shortfall will be met through subsidy.

Unintended consequences

25. It is possible that some smaller providers may have to close. It was always accepted that this might happen, but that risk must be balanced against the expected benefits of the new regulatory regime for users.

Consultation

26. We are issuing this consultation paper to a wide range of contacts who will have different perspectives on the maximum fees proposed.

Enforcement, monitoring and evaluation

27. The Care Commission will implement the maximum fees prescribed. Scottish Ministers will monitor the fees charged by the Care Commission. 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. The Commission is still a young organisation and development of its data systems will refine assessments of the full cost of regulation over the next two or three years.

Compliance

28. Each year the Care Commission sets fees within the maxima set by Scottish Ministers, and advises the Scottish Executive of the fee levels set for each type of regulated service and the circumstances in which it plans to charge only a nominal fee or remit the fee altogether. Each application for registration, for variation or removal of a condition of registration, and for cancellation of registration, will only be considered by the Care Commission if accompanied by the relevant fee. The Commission also issues annual bills for continuation fees and takes appropriate steps in the even of non-payment of fees.

Review

29. The content of this Regulatory Impact Assessment will be subject to review before fees are set for 2005-06.

Conclusion

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

Care Standards and Sponsorship Branch
Scottish Executive Health Department

December 2003