UKHCA’s Open Letter To Chancellor On National Living Wage

Open Letter to Chancellor of The Exchequer on National Living Wage

Leading homecare providers, who deliver over 47 million hours of homecare each year today warn the Chancellor of the Exchequer that the additional costs of the new National Living Wage could lead to a catastrophic failure of home-based care services, unless there is urgent action from Government and local councils to address underfunding.

While highly supportive of Government’s announcement of a new National Living Wage, representatives from the homecare sector publish today an open letter to the Chancellor of the Exchequer, Rt Hon George Osborne MP.

UKHCA’s Policy Director, 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.”

Text Of Open Letter To Chancellor, Rt Hon George Osborne MP

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. 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. 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.

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.

Without urgent action from Government and local councils 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:

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 front-line 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.
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.

Resolving this issue now is critical and it will only happen through a commitment to proper funding of care services.

The letter is signed by 28 CEOs of care companies