Section 4 explored the variation in demand, demonstrating the link between disaggregation, authority scale and demand variation. To provide a full understanding of service costs, this programme has also considered the impact on unit costs of commissioned care across adult social care, children’s services and SEND.
However, it would be incorrect to analyse a simple correlation between scale and unit cost across different local types or sizes without controlling for deprivation and median income. Average unit costs across local authority types or sizes will also fail to recognise regional difference in labour and property costs, particularly within northern metropolitan boroughs. That analysis would conflate these different factors and produce conflicting and misleading results on which to base savings projections or judge financial viability of people-based services. For example in city regions, populations tend to be smaller but deprivation higher; these factors will have conflicting effects on the unit cost of care. Conversely, large county councils will have larger populations but a higher median income, and again these factors will conflict. It is only through a robust regression analysis where all other factors can be held constant that the true impact of population scale can be isolated and used to estimate the potential impact on unit cost.
6.1 Disaggregation and unit costs
The potential impact of disaggregation on the unit costs of delivering people services is an important consideration when developing, assessing and implementing proposals for reorganisation. This is particularly the case where any analysis is used to inform potential savings projections as a result of reform, including transformation savings, alongside the future financial sustainability of services. Analysis undertaken to inform savings projections in both adults and children’s social care contained within some published business cases appears to have relied on analysis which has suggested that there is no evidence that county councils or larger unitary councils are achieving lower unit costs because of greater buying power in the market as a result of population size. 10
6.2 Regression analysis
In order to anticipate the impact of disaggregation on unit costs, regression analysis has been carried out to determine the impact of the multiple factors which affect unit costs. Analysis was conducted on the rates currently paid for care by upper tier authorities, and the impact of multiple different factors was isolated and explored.
This analysis appears to be based on simply comparing the average unit cost of different local authority types and by population size, with the suggestion that metropolitan and unitary authorities serving a population of
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between 250,000 to 350,000 are able to deliver lower unit costs. In one business case, for example, a reduction in unit costs to the average within this population bracket has then been used to calculate potential efficiency savings. 12
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