Home care providers warn of human cost of implementing 'living wage'

Leading home care providers have written to the Chancellor of the Exchequer to warn of the implication of extra costs on home care services unless the Government or local councils assist with additional funding to cover the costs of paying the new Living Wage.

George Osborne announced the decision to introduce a mandatory Living Wage for people aged 25 and over as part of the Summer Budget. This will see the national minimum wage of £6.50 increase to £7.20 in April 2016, rising up to £9 per hour by 2020.

In his speech to the House of Commons, he said: “Britain deserves a pay rise and Britain is getting a pay rise. I am introducing a new National Living Wage. We’ve set it to reach £9 an hour by 2020. The new National Living Wage will be compulsory. Working people aged 25 and over will receive it. It will start next April, at the rate of £7.20 The Low Pay Commission will recommend future rises that achieve the Government’s objective of reaching 60 per cent of median earnings by 2020.”

However, the move has caused a lot of anxiety in the home care sector, with representatives expressing their concerns in an open-letter to the Chancellor.

Director of Policy at the United Kingdom Home Care Association (UKHCA), Colin Angel, said: “Care providers leaving the state-funded market would cause considerable distress for people who use homecare services and their families; create a significant burden for local councils and increase the problem of people being unable to leave hospital promptly.

“We are asking the Chancellor to bring about changes in the funding of homecare to ensure that workers benefit from Government’s policy, while still enabling these vital services to remain economically viable.”

Home care providers deliver more than 47 million hours of home care annually to more than 500,000 older people – providing help with washing, dressing and household tasks.

The UKHCA has welcomed the proposed introduction of a living wage, but stressed the need for extra financial support by local councils and the Government in order to make the decision viable for care providers.

Many home care services rely heavily on local council funding, yet say this is not enough to allow for Living Wage changes.

Many home care providers may be forced out of business

The UKHCA has stressed the introduction of the National Living Wage will result in councils being required to pay a minimum of £16.70 per hour for care services.

Costs are calculated, taking into account of running a care service, travel costs for staff and pension contributions.

Currently, local councils pay an average of £13.66 per hour for home care services for old people, a figure the UKHCA argues is not enough to cover the current minimum wage requirements – before the introduction of the Living Wage.

The letter stresses the need for extra funding or ‘there is a serious risk of catastrophic failure’ as many care providers may be forced out of the market due to insufficient financial support.

The UKHCA raised concerns of the need for an additional £750m to help the current home care system cope with the new Living Wage requirements in 2016–17.

The letter states: “Without urgent action from Government and local councils to address the deficit in funding, continued supply of state-funded home care will become unviable, at a time when Government looks to social care services to support an over-stretched NHS, particularly supporting people to leave hospital promptly.

“Market exit by providers would cause considerable distress for people who use homecare services and their families; create a significant burden for local councils who would have to find replacement providers and provide uncertain employment prospects for trained and committed care workers.”

'Crisis in care is not the result of the rates of pay staff receive, it is the product of chronic underfunding'

The letter further recognises the importance of the need to change welfare services to ‘zero-rated’ for VAT exemption purposes, to ensure home care providers reclaim VAT on costs they incur and allow councils and private individuals to purchase home care services without facing additional VAT costs.

Finally the letter raises the issue of tax incentives for individuals privately funding their social care as they do not meet the current requirements for state funded social care – making suggestions for ensuring those who provide care are rewarded for the work they do.

Speaking on behalf of the GMB, the union for care staff, Justin Bowden, national officer for the GMB said: “The dire warning from the care sector comes as no surprise to GMB.

“The crisis in care is not the result of the rates of pay staff receive. It is the product of chronic underfunding by successive Governments and society’s failure to face up to its responsibility to care for those who paid tax and national insurance all their lives in their times of need.

“GMB has been warning of the crisis in care since before the collapse of Southern Cross in 2011. Something is badly wrong with society’s priorities, when the important job of stacking shelves in a supermarket is valued more highly than the vital job of caring for our elderly and vulnerable.”

“We repeat it is not the Living Wage that is the problem it is the total lack of proper funding to ensure high quality care is available. It is high time for all of us to face up to the real cost of caring for the ones we love and for ourselves in later life.

“If the money being thrown at corporation tax cuts and uncollected taxes on property incomes going to tax havens went into social care the country could start looking itself in the mirror again. We need action from the Chancellor on this.”