Today, these local supply and demand imbalances are managed through there being a smoothing effect across a larger geography. Local authorities working across a large and diverse footprint in terms of demography, deprivation, and rural and urban mix are able to develop care supply in those areas where it is economically and practically advantageous to do so, to meet the demand from across the local authority. Where a county area disaggregates and multiple, smaller unitary authorities are created, this smoothing effect becomes more limited, with less scope to develop care provision in different locations to where demand originates. This creates both a short- term challenge in developing a credible proposal for reorganisation and preparing implementation plans, and a longer-term financial and service provision viability challenge. In the short-term, local authorities will have a significant transitional challenge, where those receiving care and support are doing so in an area which will form part of a different unitary authority to their original home address. Therefore, the change in footprint of authorities through LGR will create scenarios where the inherited demand responsibility of newly created authorities is distorted. The extent of imbalance between commissioned provision and originating demand may create challenging scenarios for new authorities, especially in a disaggregation scenario involving smaller unitary councils, where authorities could inherit a cost base that is inflated due to the location of commissioned provision.
The greatest potential impact of this distortion can be seen in the working age adult (WAA) residential cohorts. For these cohorts, demand, cost, and growth can be highly varied across a large county area. Some provision can be lower in volume and highly specialised, meaning it tends to be concentrated in smaller areas of a county area where the conditions are suitable. Finally, working age people are typically resident in care provision for long periods of time which extends the period for which this distorting effect would be felt. In the longer-term, local authorities will need to determine how care supply and demand are better balanced on new local authority footprints, and trade this off against the risks and costs of increased levels of out of area placements. This may result in provision needing to be developed closer to where demand originates, and where it is less economically and operationally viable to do so, which may result in higher costs of providing care. This effect has not been modelled in the anticipated unit cost impacts of local government reorganisation. A further consequence of this may then be excess care capacity in areas where less demand originates. This places significant importance on longer-term planning and commissioning strategies, to ensure enough provision for residents. An alternative approach would be for local authorities to continue to make use of the existing supply across the original county footprint, and in doing so increase their numbers of out of area placements.
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