The government has announced an extra £150m for patients to receive care at home rather than in hospital.

Health secretary Andrew Lansley said the money had been freed up thanks to efficiency savings in his department’s central budget.

Another £20m is also being made available for the disabled facilities grant, which helps people live independently at home.

The move follows a warning from charity Age UK that cuts to local authority funding are creating an “absolute crisis” in social care for the elderly.

The influential King’s Fund thinktank has also cautioned that old people are often taking up valuable hospital bed space unnecessarily.

In a report last week, it urged the NHS to cut the number who arrived as emergency cases, but stayed for more than a fortnight - even after they had recovered from the crisis. Failure to tackle the issue could prevent the health service from achieving its target of £20bn in efficiency savings by 2015.

The £150m is in addition to the £648m the government had already earmarked for primary care trusts to support social care services in 2011-12.

PCTs and local authorities will be able to decide how best to spend the cash to relieve pressure on hospitals over the busy winter period.

Mr Lansley said: “Savings have been made in the Department of Health’s budget which we are investing to help people leave hospital as quickly as they can, when they are ready, and to receive support at home.

“Older people often need particular support after a spell in hospital to settle back into their homes, recover their strength and regain their independence. This money will enable the NHS and social care to work better together for the benefit of patients.

“This additional investment for health and care services is the result of determination to deliver savings, maintain quality and invest in services that matter to patients and their families and carers during the critical winter season.”

Responding to the announcement David Rogers, chairman of the Local Government Association’s Community Wellbeing Board, said: “Extra money is good news and this investment will help more elderly and vulnerable people get the care they deserve.

“It’s a recognition that the current system is underfunded, but the real issue remains the need for root and branch reform.

“As a society we cannot continue just papering over the ever-expanding cracks.

“For those entitled to taxpayer-funded care and support, councils are having to balance the long-term triple pressures of insufficient funding, growing demand and escalating costs.

“Alongside that are the ever-growing numbers of people who must pay the costs themselves, but still need information and advice to help them make the most appropriate choices.”