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Services by the Scottish Commission for the Regulation of Care. Proposals for Maximum Fees to be set by Scottish Ministers for 2005-06: Consultation Paper

Appendix C

PARTIAL REGULATORY IMPACT ASSESSMENT

Title

1. 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 2005-06 in respect of services regulated under the Regulation of Care (Scotland) Act 2001.

Purpose and intended effect

Issue

2. 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. In December 2003, regulation of care at home services commenced and from 1 April 2004, adoption, fostering and those offender accommodation services currently unregulated. A consultation on the commencement of regulation of school care accommodation services is expected to recommend that these services should be regulated from 1 April 2005. 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.

3. The Care Commission is required under Section 24 of the Act to impose fees within the maximum limits prescribed by Ministers 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.

4. This Regulatory Impact Assessment (RIA) is provided to assist public consultation on the proposed maximum fees to be prescribed by Scottish Ministers for 2005-06.

5. 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 that the Care Commission recouped the entire cost of regulation from fee income (the timetable for achieving this has since been extended until 2006-07). 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 (2006-07 since the timetable for achieving full cost recovery has been extended) on the care services sector.

It was also expected that Orders prescribing fees for subsequent years would 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 in line with the policy stated in the Financial Memorandum to the Regulation of Care Bill. All services new to regulation have had, or (for school care accommodation services) will have, their fees set at full direct cost recovery levels from the start of regulation also in line with the stated policy.

7. Fee levels required to achieve the full cost recovery policy in 2006-07 have been set taking account of the experience of and the best information available from the Care Commission. As the Commission's experience grows the process of identifying the cost of regulation will be refined. This will help inform the determination of future maximum fee levels.

8. The Care Commission is currently gathering detailed information on the regulatory activity required to regulate care services. Possible options for fee structure and charging are being considered as part of this work. However, this work will not be completed in time to inform fee levels for 2005-06. However, the outcome of this work will be taken into account by Ministers and will inform the consultation on fee levels and structures for 2006-07.

9. The current fee levels are set out at Appendix A to the consultation paper of which this RIA is also an Appendix. This RIA covers proposals for maximum fees from 1 April 2005.

Risk assessment

10. 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.

11. The cost implications of the full cost recovery policy were set out in the Financial Memorandum to the Bill in 2000 and have not changed significantly since then. The policy that there should be a move to full cost recovery fees was carefully considered by Scottish Ministers prior to setting fees for 2004-05. The Care Commission's experience of inspection activity and related costs at the time when fees for the current year were being consulted on was limited as it had only been in existence since April 2002. To set full cost recovery fees for those services already subject to fees based on this limited data was considered to be inadvisable. (For those services not previously regulated, different considerations applied.)

12. The decision to extend the timetable for achieving full cost recovery fees (for the services already subject to fees) recognises the significant increases in fees that would have been needed to deliver it in 2004-05. The implication of this revised timetable was and is that similar increases in registration and continuation fees in the current year and the next two years would 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). Phasing the move to maximum fees that reflected the cost of regulation over the 3 years to 2006-07 was therefore decided to be the fairest option. This would allow time for the Care Commission to amass more extensive and reliable hard data. 2005-06 is the second year of this re-stated policy.

13. It is proposed that services not currently at full cost recovery levels continue to have these increases spread evenly over the next 3 years. It is proposed to increase fees for childminding and day care of children to levels considered to be reasonable (and which were set out in the Financial Memorandum to the Bill), but they would still be heavily subsidised. For registration and continuation fees only for those services already at full direct cost recovery levels, it is proposed that the current maximum fee levels will increase by the rate of inflation (except in the case of care at home, where the fees have been brought into line with those for housing support services to reflect the integrated delivery of many of these services). Fee levels for these services in 2006-07 and beyond will be considered alongside those for other services in light of the work being undertaken by the Care Commission on actual activity required to regulate these services.

14. For school care accommodation services the fees proposed for registration and continuation are the levels considered necessary to recover the full direct cost to the Care Commission of regulation (taking account of the joint inspection process for these services with HMIE). It is also proposed that different fee levels are set for small medium and large services. Fees for variations and cancellations are in line with those proposed for other services. A small number of services under this definition are already registered since they were regulated under a previous regime when the Care Commission came into operation. It is proposed that all fees for school care accommodation services already regulated are brought into line, in the interests of equity.

15. All the fees proposed from 1 April 2005 are set out in Appendix B to the consultation paper to which this RIA is Appendix C.

Business sectors affected

16. 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, and any other new service providers, will pay the new initial registration fee on application and the new annual fee thereafter.

17. 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.

18. 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 2003-04. 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. These changes continued in the Fees Order for 2004-05, applying equally to care at home and adoption and fostering services. This will be continued for 2005-06.

19. 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 - 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

20. Information obtained from the Care Commission's Practice Management System 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:

(Care Commission Practice Management System, 23 November 2004)

21. For existing registered providers of care home services, the total compliance cost will be the increase in the annual continuation fee (40 per place) multiplied by the number of registered places they have. For example, a care home registered for 20 places would pay an additional 800 per year (which works out at around 15.38 a week). Those providing new care home services would be incurring fee costs (as shown at Appendix B) for the first time.

22. 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 355 per place per week for residential care and 417 per week for nursing care. The proposed increase of around 77p per place per week is a small proportion of that, as is the whole new continuation fee at 3.17 per week. Provision for further 94m of local authority expenditure has been included in the overall GAE settlement to cover increases in the level of care home fees in 2006/07 and 2007/08.

23. Local authorities delivered 245m of services through the voluntary sector in 2002 and the trend towards third party delivery continues to grow. To provide for an increase in the quality of service and the workforce, arising from increasing regulation by the Care Commission and the Scottish Social Services Council, increased provision of 10m and 13m for local authority expenditure in this area has been made in the overall GAE Settlements for 2006/07 and 2007/08.

24. 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

25. 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 15 for other day care services are likely to have a significant impact.

Users of care services

26. 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 77p a week, ie 40 per year.

Issues of equity and fairness

27. The principle that providers should meet the reasonable cost of regulation by the Care Commission is well established. For services already regulated at April 2002, This year's proposed increases are the second of a 3 stage increase and are based on the Care Commission's estimated activity levels for each particular service. They will ensure that any increased costs that may be passed on to users of those services are spread over a 3-year period.

Costs and benefits

28. The impact of the cost of regulation was set out in the Financial Memorandum to the Bill. 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 reduce the cost to the taxpayer of the Care Commission. Any remaining shortfall will be met through subsidy.

Unintended consequences

29. It is possible that some smaller providers may have to close. That risk must be balanced against the expected benefits of the new regulatory regime for users.

Consultation

30. This consultation paper is being issued to a wide range of contacts who will have different perspectives on the maximum fees proposed.

Enforcement, monitoring and evaluation

31. The Care Commission will work within 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 maximum fee levels to be prescribed in 2006-07 to achieve full cost recovery levels for all care services (see also paragraphs 7 and 8 above).

Compliance

32. 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 event of non-payment of fees.

33. The Care Commission is aware of, and sympathetic to, the burden of fees on providers. The Commission has introduced a direct debit scheme for paying annual continuation fees in excess of 100, which may help a provider's cash flow. It is also applying an integrated fee regime where a provider is delivering more than one type of care service alongside each other and where there economies of scale reasons for doing so (e.g housing support services and care at home services). The Executive is keeping a close eye on all the Care Commission fee levels and their impact.

34. The Commission is also gathering detailed evidence of regulatory activity to underpin forthcoming work to identify and deliver efficiency savings. This includes groundwork to enable it to implement a risk assessment-based proportionate inspection regime. Also as a result of the work, future consultations may include consideration of whether the current size definitions for care services or indeed the charging structure are still appropriate. This work will inform the fees proposed for 2006/07 onwards.

Review

35. The content of this Regulatory Impact Assessment will be subject to review before fees are set for 2006-07.

Conclusion

36. The Scottish Executive 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 2004

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