Should the Government devolve Attendance Allowance?
Author: Jack Airey |
Research Fellow, Jack Airey, considers the implications of the Government’s plans to devolve Attendance Allowance to local authorities.
When the then Chancellor announced last year that local authorities would fully retain their business rates income by 2020, he was widely praised for pulling a decent sized rabbit out the hat – albeit with the caveat that regional differences in tax bases would rightly need to be accounted for.
Less remarked upon was this policy needed to be cost neutral to the Treasury. In other words, the Government needed to find around £12.5 billion worth of responsibilities to devolve to local authorities to balance out the money the Treasury had just lost from its balance sheet. Given £12.5 billion is bigger than most department’s annual budgets (e.g. the Home Office, Justice, Foreign Office, DCMS, DFID, Transport, DEFRA and what was then the DECC), changes in how we distribute it won’t pass by unnoticed.
Achieving neutrality
The Government is currently consulting on devolution and one option being considered is the transfer of responsibility for the Attendance Allowance.
Attendance Allowance, first introduced by Ted Heath’s Government and administered by the Department for Work and Pensions, is a tax-free benefit for over 65s whose ability to care for themselves is hampered by disability. Claimants either receive £55.10 or £82.30 per week, depending on whether they need care in the day or night, or both day and night respectively. Around 1.4m people are in receipt of the Allowance and it is estimated to cost £5bn annually.
Sectoral concerns
The Local Government Association and a number of charities, including Age UK, oppose the devolution of Attendance Allowance. Because Attendance Allowance is demand-driven, local authority cost pressures could increase sharply without a corresponding uplift in business rates income growth, which takes a longer time to generate and is by no means guaranteed.
Claire Kober, Leader of Haringey Council and Chair of the LGA Resources Board, has said that “Transferring responsibility for administering attendance allowance to local government would account for nearly half of additional business rates income.”
What would devolution of Attendance Allowance mean?
If Government devolves Attendance Allowance, local authorities will need to fund their local claimants’ needs through their own means (which, after 2020, will not include any central grant). Given claimant counts are highly varied across the country, this means that some local authorities will be responsible for a lot more claimants than others.
Based on the latest estimates of claimants by local authority area from DWP (from February 2016), we have calculated the ten authorities with the highest and lowest costs respectively.
Ten local authority areas with the highest estimated cost of administering Attendance Allowance
| Local authority | Estimated number of AA higher rate claimants | Estimated number of AA lower rate claimants | Total estimated number of AA claimants in area | Total cost |
| Essex | 22,200 | 14,200 | 36,400 | £135,692,960 |
| Kent | 20,300 | 13,900 | 34,200 | £126,702,160 |
| Lancashire | 21,800 | 11,400 | 33,100 | £125,958,560 |
| Hampshire | 15,800 | 12,600 | 28,300 | £103,719,200 |
| Norfolk | 15,000 | 10,200 | 25,200 | £93,419,040 |
| Birmingham | 14,300 | 8,600 | 22,900 | £85,839,000 |
| Surrey | 13,100 | 10,100 | 23,200 | £85,001,280 |
| West Sussex | 13,200 | 9,500 | 22,700 | £83,710,120 |
| Hertfordshire | 13,800 | 8,600 | 22,400 | £83,699,200 |
| Staffordshire | 13,200 | 9,400 | 22,600 | £83,423,600 |
Ten local authority areas with the lowest estimated cost of administering Attendance Allowance
| Local authority | Estimated number of AA higher rate claimants | Estimated number of AA lower rate claimants | Total estimated number of AA claimants in area | Total cost |
| City of London | 100 | 100 | 200 | £714,480 |
| Shetland Islands | 100 | 100 | 200 | £714,480 |
| Orkney Islands | 400 | 200 | 600 | £2,284,880 |
| Rutland | 500 | 400 | 900 | £3,285,880 |
| Clackmannanshire | 500 | 400 | 1,000 | £3,285,880 |
| Eilean Siar | 600 | 300 | 900 | £3,427,320 |
| Merthyr Tydfil | 1,000 | 500 | 1,500 | £5,712,200 |
| Moray | 600 | 1,100 | 1,700 | £5,719,480 |
| Hammersmith and Fulham | 900 | 700 | 1,700 | £5,857,280 |
| Bracknell Forest | 900 | 700 | 1,600 | £5,857,280 |
Estimated cost has been calculated by multiplying the estimated number of claimants in each local authority area of both higher and lower rates of Attendance Allowance by the yearly amount received by claimants (higher rate: £4279.60, lower rate: £2865.20). Source of figures for estimated claimants by local authority area: DWP, Benefit Payments – 5% Data, February 2016.
Another tax credits moment?
With many local authorities already facing huge cost and demand pressure delivering social care services, it’s understandable they‘re nervous about Attendance Allowance. Local authorities fear it will hamper the place-shaping role that greater financial independence allows, while charities fear it could put future funding for the elderly disabled at risk. For government, this technical issue could quickly escalate into a broader political problem, much like the tax credits changes did.
We support devolution and greater financial independence for local authorities. But on this there is room for the Government to think again.