To provide average rates over larger geographic areas, a demand weighted average has been used. This average is also used where no data is available (for example, for neighbouring unitaries where data was not received). This means that if increasing need is forecast in an expensive area of the county, and a reduction in need in a less expensive area, the average unit cost would adjust to account for this. The unit cost is the cost of a setting placement, or providing a service such as Home to School transport for one service user. As unit costs are forecast forward, there are several factors that have been considered to assess the impact of LGR summarised in Table 6.
Table 6 - Factors considered that influence unit costs
How have we considered the impact of this?
Factor
Hypothesis
Using both national and individual data returns will identify any correlation between unit cost and scale. If any strong trend is identified, an expected increase in unit cost rate will apply as a result.
That smaller authorities have less buying power and so will pay more for placements as they are outcompeted by larger LAs and the private market.
Scale
It is more expensive to deliver care in areas with lower population density due to increased travel time.
Population density
By modelling costs at a small geographic scale, these factors are controlled. As the underlying population changes (gets older, poorer or less dense), the aggregated cost will change to reflect this as there will be more service users with a higher average cost.
More complex cases have a higher associated cost of care and caseloads are increasing.
Complexity
Different areas of the county will have differing levels of self funders, which means that different unitary authorities will need to contribute differing percentages of the total cost of care.
Self funding
Out of county costs have been used where they have been provided, and an average cost has been used where they are unavailable. A compounding 3.328% inflation has been assumed in line with 10 year CPI & average earnings index. When taking the average cost of a place, historical costs have also been uplifted to account for inflation at a 5.81% rate.
It costs more to place service users outside an authority.
Out of area placements
Placement costs will increase in cost regardless of complexity or authority boundaries.
Inflation
Where an existing unitary authority is absorbing neighbouring MSOAs/districts and is paying a materially higher unit cost, and additional demand added to these contracts will be at this higher rate.
The expectation is for this not to impact many scenarios, but the unit cost of the existing unitary will be assumed where this is higher.
Equalisation of care rates within a LA
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