Council warns of £1.5m cost burden after care home fees ruling

Pembrokeshire County Council has warned that a High Court judgment ruling that the authority's approach to setting care home fees was unlawful will cost it an extra £1.5m this year.

The case of Forest Care Home Ltd and Ors, R v The Welsh Minister and Anor [2010] EWHC 3514 involved claims brought by the owners of four residential and nursing care homes for older people and people with dementia.

They argued that Pembrokeshire was not paying the correct weekly fees for its residents. The claimants also raised five sub-grounds in relation to the methodology used in the assessment of the costs of care home providers.

Mr Justice Hickinbottom said the council had been fully entitled to take into account its own financial position when determining the level of accommodation and care services upon the minimum required by section 21 of the National Assistance Act 1948, and in setting the fee rate for those who provide the services.

“However, it erred in law in failing properly to take into account other factors which I have identified in this judgment, such as the potential adverse consequences of the decision for providers and residents, which it was required to balance against the constraints on its own resources.”

The judge added: “The manner in which the council dealt with capital costs for the purposes of setting the rate was simply methodologically wrong; but the other sub-grounds succeed because the council failed to take into account matters other than its own financial resources in a proper and lawful way.”

Mr Justice Hickinbottom outlined a catalogue of errors made by the council in calculating the appropriate fees, including:

• an unlawful approach to the assessment of providers’ capital costs for the purposes of setting the fee rate
• a failure to consider local factors in relation to staffing costs
• a failure to recognise that different sized homes have different costs, with larger homes clearly benefitting from the economies of scale
• a failure to take into account inflation.

The council is raising its payment from £390 a week per resident to £448, backdated to the start of the financial year with an additional payment reflecting the loss of interest which could have been earned if the new fee had been paid since April.

Pembrokeshire County Council Leader John Davies said: “This new fee means an additional cost to the council of almost £1.5m. This will inevitably result in a significant challenge to the council in ensuring that it continues to meet its statutory obligations to vulnerable individuals who have been assessed as requiring support."

Ed Archer and Philip Hoult