Rt Hon George Osborne MP. Chancellor of the Exchequer. HM Treasury. 1 Horse Guards Road. London. SW1A 2HQ. 27th July 201
Rt Hon George Osborne MP Chancellor of the Exchequer HM Treasury 1 Horse Guards Road London SW1A 2HQ 27th July 2015 Dear Chancellor, National Living Wage in the Homecare Sector As major providers in the homecare sector, delivering together over 47 million hours of homecare care a year, we welcome Government’s commitment to low-paid workers through a new National Living Wage. However, unless the additional costs are fully-funded, there is a serious risk of catastrophic failure to support people who receive state-funded care at home. While many business sectors will be able to pass on additional wage costs to their customers, local councils, who purchase over 70% of all homecare consistently use their dominant purchasing power to push rates paid for services well below their real cost. We estimate that to address the existing under-funding of homecare and implement the National Living Wage will require an increase of at least £753 million from councils and the NHS in the first year alone.i As evidence for this we can find no simpler illustration than our recent use of the Freedom of Information Act, which revealed that councils paid an average of £13.66 per hour for older people’s homecare.ii After accounting for Government’s proposed changes to National Insurance Contributions and Corporation Tax, we estimate that the new National Living Wage will require councils to pay at least £16.70 per hour, including careworkers’ travel time and all other costs.iii Government has charged the Low Pay Commission with overseeing the National Minimum Wage. The Commission has repeatedly warned that risks to meeting the existing Minimum Wage in the social care sector are exacerbated by reductions in local authority budgets and constrained fee levels. The Commission most recently stated compliance with the Minimum Wage in the social care sector was only likely to be resolved when action was taken to address the commissioning practices of councils.iv
Without urgent action from Government and local councilsv to address the deficit in funding, continued supply of state-funded homecare 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 careworkers. To ensure that Government’s policy can be implemented without destabilising an increasingly fragile homecare sector, there are a number of solutions which we urge you to implement urgently, in conjunction with your colleagues, where appropriate, in England and the UK’s devolved administrations:vi 1.
Address the increase to the social care wage bill through the forthcoming Spending Review, ensuring that local authorities are sufficiently resourced and that monies are actually used to fund frontline homecare services.
2.
Ensure that statutory regulators in all four UK administrations are empowered to oversee the commissioning practice of local authorities, with particular reference to their impact on the stability of local care markets.vii
3.
Change the VAT exemption for welfare services to ‘zero-rated’ status. This would ensure that councils and private individuals continue to purchase homecare services without paying VAT, but would enable homecare providers to reclaim VAT on the costs they incur.
4.
Consider tax incentives for private individuals funding their own social care or for members of their family where they do not meet the financial eligibility criteria for state-funded social care.
Our workforce is our greatest asset and we are committed to ensuring that careworkers are rewarded for the immense contribution they make to the lives of over 883,000 older and disabled people each year.
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Resolving this issue now is critical and it will only happen through a commitment to proper funding of care services. Yours sincerely,
Mike Padgham, Chairman United Kingdom Homecare Association
Bridget Warr, Chief Executive United Kingdom Homecare Association
Raina Summerson, Chief Executive, Agincare Group Darryn Gibson, Chief Executive, Allied Healthcare Group Claude Suppiah, Managing Director, ANA Nursing Russell Oakden, Chief Executive, Ark Home Healthcare Ltd Duncan Berry, Chief Operating Officer, Bluebird Care Group Kevin Lewis, Chief Executive, Caremark Limited Scott Christie, Chief Executive, Carewatch Care Services Ltd Craig Rushton, Chief Executive, City & County Healthcare Group Jonathan Vellacott, Chief Executive, Direct Health Group Ltd Mary Cotterell, Director, Everycare UK Ltd Steve Allen, Chief Executive, Friends of the Elderly Nicola Mewse, Group Managing Director, Hales Group Health & Social Care Trevor Brocklebank, Chief Executive, Home Instead Senior Care Peter King, Managing Director, Kemble Care LLP Narinder Singh, Managing Director, MiHomecare Wayne Rees, Managing Director, Nightingales Lesley Megarity, Chief Executive, Optimum Care Lynda Gardner, Chief Officer, Oxford Aunts Care Jonathan Bruce, Managing Director, Prestige Nursing Ltd Deepesh Patel, Director, Radis Community Care Ken Deary, Managing Director, Right At Home UK Ravi Bains, Chief Executive, Sevacare UK Ltd Jane Townson, Chief Executive, Somerset Care Dominique Kent, Director of Operations, The Good Care Group Richard Smith, Company Director, Way Ahead Care Sushil Radia, Managing Director, Westminster Homecare
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i
Assumes no other changes in demand, such as an ageing population, meeting social care needs which are currently un-met, or introducing additional services aimed at early intervention. ii
UKHCA (2015) The Homecare Deficit, page 7. See: www.ukhca.co.uk/downloads.aspx?ID=458. Our calculation that the minimum price needed to cover the current National Minimum Wage, including careworkers’ travel, was £15.74 per hour at the time. iii
Angel, C (2015) A Minimum Price for Homecare, Version 3. See: http://www.ukhca.co.uk/downloads.aspx?ID=434. iv
Low Pay Commission (2014) National Minimum Wage Report 2014, paragraphs 4.49-4.62. v
Our reference to councils also includes the five Health and Social Care Trusts in Northern Ireland which commission homecare services. vi
While the National Minimum Wage and National Living Wage apply across the UK, social care policy is a devolved matter, managed independently by government in Wales, Scotland and Northern Ireland. vii
In response to the collapse of the Southern Cross residential care home network, a market oversight regime is already in operation by the Care Quality Commission in England (See: http://www.cqc.org.uk/content/market-oversight-adult-socialcare). A similar system has been proposed in Chapter 7 of The Regulation and Inspection of Social Care (Wales) Bill (See: http://www.assembly.wales/laid%20documents/pri-ld10106%20%20bil%20rheoleiddio%20ac%20arolygu%20gofal%20cymdeithasol%20%28cymr u%29/pri-ld10106-e.pdf). However, these regimes monitor the financial health of individual providers, rather than the commissioning practices of councils or the NHS.
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