The Correspondence and Enquiry Unit
HM Treasury
1 Horse Guards Parade
London
SW1A 2HQ
Sent by email to: SpendingReview.Representations@hmtreasury.gsi.gov.uk
Dear Sirs,
UKHCA response to HM Treasury - Spending Review 2015.
Thank you for the opportunity to submit this representation in reference to
the Spending Review, which I have the pleasure to do on behalf of United
Kingdom Homecare Association (UKHCA).
UKHCA is the professional association for providers of homecare including
nursing care. We represent over 2,200 homecare providers; the domiciliary
care sector employs over 500,000 people who provided care to over
883,000 people in their own homes last year.
In this representation we have given an overview of the market conditions
in the domiciliary care sector, the financial pressures the sector is facing
and the implications of the recent Budget, particularly the increased costs of
the National Living Wage and the underfunding of homecare services by
local authorities.
If you have any questions arising from the points made in this
representation please do not hesitate to contact me.
Yours sincerely,
Colin Angel, Policy Director
Tel: 020 8661 8188
Email: colin.angel@ukhca.co.uk
Alternative formats: If you would prefer to receive this representation in
another accessible format, including e-text, ‘clear print’, large print or audio
cassette, please contact us on 020 8288 5291 or accessibility@ukhca.co.uk.
Page 2 of 31
Key facts
The state funded homecare sector is running at a substantial deficit, and we
believe that insufficient care is commissioned to meet the actual needs of the
population. Grossly underfunded care will lead to market instability and large
scale market exit. This will impact greatly upon older and disabled people who
use homecare services, and will place further demand side pressure upon the
NHS.

883,000 people received homecare over the financial year 2013/14.

There are approximately 1.6 million adults with unmet social care needs.

500,000 people are employed as careworkers in the domiciliary care
sector.

86% of the workforce are aged 25 years or more and will be entitled to
the new National Living Wage from April 2016.

Homecare is generally purchased by councils in units of one hour, or part
thereof.

The recommended minimum price for homecare calculated by UKHCA at
the 2014/15 national minimum wage rate is £15.74 per hour.

Our calculation is that the minimum price for homecare will increase to
£16.70 per hour when the National Living Wage is introduced in April
2016.

Responding to questions under the Freedom of Information Act, local
councils (and the Health and Social Care Trusts in Northern Ireland)
admitted that the average price paid for homecare was £13.66 per hour.

UKHCA estimate that by the end of this financial year the state funded
homecare sector will run at a deficit of £514 million per annum. We
predict that this figure will increase to £753 million during the financial
year 2016/17 when the National Living Wage is introduced.

In a recent survey conducted 10 medium to large providers, delivering
36 million hours of homecare per year from 398 locations:
o
Local authority business accounted for 83.1% of the total hours of
care delivered.
o
Providers’ EBITDA margin on current local authority business
ranges from 2.0% to 8.1% (median 4.1%).
o
From April 2015, these providers predicted EBITDA falling to -5.3%
to 3.0% (median 1.3%), unless they received additional funding
from councils, reduce their loss-making contract business or find
further efficiencies.
o
We believe that large organisations operating in the homecare
sector should be able to expect an EBITDA margin in the region of
7.5%, that they will consider closing un-profitable branches at 5%
and exit from the state-funded market at 3%.
o
Expectations of smaller providers will generally be at higher EBITDA
margins than their larger competitors.

We estimate that the National Living Wage will add £0.93 per hour to the
wage costs of front-line homecare workers, equivalent to an additional
wage bill of £303 million in 2016-17.

On a sample day in June 2015 there were 810 people in hospital with a
delayed discharge awaiting homecare. This is an 81% increase compared
to the sample day in February 2014. Adequately funded homecare is part
of the solution to delayed discharges.
Page 4 of 31

In the financial year 2013/14 the NHS spent a total of £1.05 billion on
Non-elective Inpatient Excess Bed Days. This represents a unit cost of
£275 per day.

UKHCA estimate that in June 2015 the NHS spent £222,750 per day on
excess bed days for people awaiting homecare. This represents an annual
expenditure for the financial year 2015/16 of £80 million.

Annual NHS expenditure on delayed discharges for people awaiting
homecare is equivalent to 4.8 million hours of fully funded homecare at
National Living Wage rates.
Page 5 of 31
Introduction
Homecare has the capacity to support older and disabled people to live at home
in comfort and dignity while taking an active role in their community. It also
supports family carers to remain in employment. Last year more than 883,000
people benefited from state-funded homecare in the UK.
There are over 500,000 people employed as careworkers in the homecare
sector, they are our most valuable resource. Careworkers deliver vital support,
care and companionship to people living with care and support needs.
Homecare offers its workforce a rewarding career and a flexible working life. In
this respect the homecare workforce is invaluable to the economy as whole, the
sector can help reduce the uptake of out-of-work benefits and reduce the
nation’s unemployment rate.
However, we are concerned that the persistent underfunding of homecare could
in the short term have catastrophic consequences for the people who use
services, their family, the homecare workforce and the efficiency of the NHS.
We believe that this submission demonstrates the depth of underfunding in the
homecare sector, and evidences the assertion that underfunding homecare is in
fact an inefficient use of public money, supported through the spending review.
Page 6 of 31
The deficient funding of frontline homecare
Local authorities are the largest purchasers of homecare in the UK, in the
financial year 2013/14 local authorities purchased approximately 247 million
hours of homecare from independent and voluntary sector providers.
Local authorities purchase homecare in hourly units or parts thereof, UKHCA
have costed the minimum hourly price for domiciliary care at the current
national minimum wage at £15.74 per hour.1 This accounts for:

Payment for the worker’s contact time;

Payment for the worker’s travel time;

Employer’s National Insurance Contributions;

Worker’s holiday pay;

Training and supervision time;

Pension contributions;

Mileage payments;

Costs of running the business; and

A 3% profit margin or surplus.
Separate research conducted by UKHCA found that the average price paid for
homecare by local authorities (and health and social care trusts in Northern
Ireland) in the UK is £13.66 per hour.2
1
Please see; UKHCA A Minimum Price for Homecare, Version 3.0. Available at:
http://www.ukhca.co.uk/downloads.aspx?ID=434
2
Please see; UKHCA The Homecare Deficit: A report on the funding of older people’s
homecare across the United Kingdom. Available at:
http://www.ukhca.co.uk/downloads.aspx?ID=458
Page 7 of 31
£13.66
£15.74
£16.70
Average price paid by local authorities (and health and
social care trusts in Northern Ireland) compared to
Minimum Wage and Living Wage rates
Average price paid
Price needed to meet 2014/15
National Minimum Wage
Price needed to meet National
Living Wage
Figure 1 Average price paid by local authorities and health and social care trusts in
Northern Ireland compared to Minimum Wage and Living Wage rates
This represents a deficit for the financial year 2013/14 of £514 million. Assuming
all other market conditions remain constant, this deficit will increase to at least
£753 million over the financial year 2016/17 when the National Living Wage is
introduced.
UKHCA have calculated that the minimum price for homecare from April 2016
when the National Living Wage is introduced will be £16.70 per hour.
(𝐴𝑐𝑡𝑢𝑎𝑙 𝑝𝑟𝑖𝑐𝑒 𝑝𝑎𝑖𝑑 − 𝑀𝑖𝑛𝑖𝑚𝑢𝑚 𝑝𝑟𝑖𝑐𝑒 𝑛𝑒𝑒𝑑𝑒𝑑) × 𝐴𝑛𝑛𝑢𝑎𝑙 ℎ𝑜𝑢𝑟𝑠 𝑜𝑓 𝑐𝑎𝑟𝑒 =
𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑒𝑓𝑖𝑐𝑖𝑡 𝑜𝑟 𝑆𝑢𝑟𝑝𝑙𝑢𝑠 (£)
(£13.66 − £16.70) × 247 𝑚𝑖𝑙𝑙𝑖𝑜𝑛 = £753 𝑚𝑖𝑙𝑙𝑖𝑜𝑛 𝑑𝑒𝑓𝑖𝑐𝑖𝑡
The deficit severely threatens market stability and diminishes capacity. This has
a negative impact on the health and wellbeing of people who use homecare
services and places unnecessary demand side pressure on the NHS.
Page 8 of 31
If this deficit is not addressed by Government market stability will suffer and the
quantity of homecare will diminish. However the size of the deficit is likely to
increase given the fact that local authority adult social care budgets are set for
further spending reductions.
The Association of Directors of Adults Social Services (ADASS) have forecast that
councils in England will need to find savings of £1.1 billion over 2015/16 from
their adult social care budget. Compared to £850 million in 2014/15. This
represents a 29% increase in planned savings for 2015/16 compared to the
previous financial year. Since 2010 ADASS have tracked the cumulative total of
cuts to local authority net adult social care budgets in England, this figure has
now reached £4.6 billion.3
Similarly, the finance ministers in the devolved administrations have issued a
joint public warning that further cuts to public spending would have a damaging
effect on the quality and sufficiency of public services. The letter read:
“The three devolved administrations share the view that the UK
government’s ongoing austerity plans, reflected in both the in-year
spending reductions announced on 4 June and in the Summer Budget,
continue to reduce public spending in the UK too fast and too far, and
present unnecessary risks to our public services.”4
3
ADASS, Budget Survey 2015, Final Report, p. 7. Available at:
http://www.adass.org.uk/uploadedFiles/adass_content/policy_networks/resources/Key_
documents/ADASS%20Budget%20Survey%202015%20Report%20FINAL.pdf
4
Please see, Scottish Government Press Release, Finance Ministers Trilateral. Available
at: http://news.scotland.gov.uk/News/Finance-Ministers-Trilateral-1bcc.aspx
Page 9 of 31
UKHCA have seen a rapid increase in the number of homecare providers who
intend to handback substantial volumes of state funded homecare packages on
the grounds of inadequate fees.
Handing back large numbers of care packages increases the workload and costs
of local authority commissioning and procurement services as each package of
care must be reassigned to an alternative care provider. In the case of a
significant planned market exit or provider failure the local authority will have to
conduct an entire re-procurement exercise.
Page 10 of 31
Market stability
In a recent letter to the Chancellor, of 27th July 2015,5 we raised our concerns
that the persistent underfunding of homecare across the UK, compounded by the
introduction of the National Living Wage in April 2016, would undermine the long
term sustainability of the care market nationwide and enforce structural change
without sufficient funding.
We have identified that the state funded homecare sector will run at a deficit of
£753 million over the financial year 2016/17 unless adequate funding is found,
and responsible commissioning practices are guaranteed within local authorities.
This is not sustainable and is likely to lead to market exit by providers of varying
sizes and capacity. Market exit by any homecare provider would impact most
acutely upon the people who use homecare services. Reduced market capacity
would also transfer considerable demand side pressure onto the NHS.
We surveyed 10 independent and voluntary sector organisations, representing
medium to large scale providers, across 398 branches and franchises and
employing a combined total of 40,029 workers.
The organisations provided a combined total of 691,322 hours of care per week,
equivalent to 36 million hours of care per year.
These organisations represent medium and large-scale providers and were
selected because they could provide a wide sample of statutory-sector business
across the UK and, as larger providers, are likely to benefit from economies of
5
UKHCA, Letter to the Chancellor, July 2015. Available at:
http://www.ukhca.co.uk/downloads.aspx?ID=473
Page 11 of 31
scale which may enable them to trade more efficiently in what is typically 'high
volume, low margin' business available from local authorities.
There is evidence of high dependence of these businesses on local authoritycommissioned services, with 83% (574,513 hours per week) of all care delivered
purchased by councils.
The extreme commercial sensitivity of the data we requested means that we are
only able to report the following financial and contractual information in
aggregated and anonymised format.
The providers currently operate on a gross margin between 21.2% and 42.2%
(median 30.4%). This would support UKHCA's assumption of 30% gross margin
used in our calculation of the Minimum Price for Homecare at current statutory
wage rates. Gross margin covers the costs of running the business and the
profit/surplus element (if any).
At present, providers calculated their EBITDA margin on local authority business
ranged from 2.0% to 8.1% (median 4.1%).
On the assumption that providers do not receive uplifts on current local authority
business and are unable to make additional cost savings (including handing-back
business to councils or reducing staff numbers) the organisations estimated that,
following the introduction of the National Living Wage in April 2016, their
EBITDA margin on local authority business would range from -5.3% to 3.0%
(median 1.3%).
We note that one provider stated that they already operate on negative EBITDA
margin and would be further affected by the introduction of the National Living
Wage. Our survey design does not enable us to analyse the reason for the
Page 12 of 31
organisation being able to do so in a sustained way. We assume that it is the
result of cross-subsidy from other revenue streams, which may or may not be
from homecare (or indeed from social care) services. As a result, their figures
have not been included in the above calculations.
We believe that the following summary of EBITDA margins within the homecare
sector provide reasonable working assumptions for likely industry expectations
and behaviours:
Large provider
Small provider
Multi-branch,
operating >10,000
hours per week
Single branch,
operating c2,000
hours per week
Industry expectation:
7.5%
10.0%
Providers consider closing un-profitable
branches:
5.0%
8.0%
Potential exit from state-funded
market:
3.0%
7.0%
We asked the providers in our survey to provide us with examples of contracts
which they believed were at risk of becoming commercially unsustainable
because of the rates paid by local authorities.
54 examples of contracts at risk were provided, totalling 93,633 hours of care
per week. Asked what they would do if the authority did not increase rates to
cover the additional costs of the National Living Wage (and the provider was
unable to make additional cost efficiencies), the providers told us that they were
likely to terminate at least 33 of those contracts, totalling 55,125 hours of care
per week.
Page 13 of 31
While this is an incomplete sample, and cannot be generalised-up to present
national figures for comparative purposes, the risk to market stability in the
North East, North West and East and West Midlands in our data is stark, as are
the number of service users likely to be affected and the resources that local
councils would need to employ in order to re-provide services in the event of
market withdrawal:
Government region
Weekly hours at risk
Contracts at risk
23,025
7
North West
7,850
7
East Midlands
7,600
5
West Midlands
6,400
5
Yorkshire & Humber
3,400
2
Northern Ireland
3,150
1
London
1,200
2
Wales
1,100
2
South West
1,000
1
400
1
55,125
33
North East
East of England
Grand total
We offer the following extracts from providers’ responses to questions in our
survey.
Two major providers commented on the significant volumes of work they would
hand-back to their local authority purchasers, if the additional costs of the
National Living Wage were not recognised:
Page 14 of 31
“We plan to exit from all non-contributing contracts, which we
estimate to be around 39% of our current local authority
business.”
“We intend to exit from all loss making contracts, around 45% of
current volumes. Contracts making up a further circa 50% of
our business are being reviewed to assess viability for continuing
services, by taking actions such as merger of branches or other
cost cutting actions… We expect that if substantial new funding is
not made available our organisation will shrink to less than 50%
of its current size.”
Providers also commented on the implications for quality and innovation as a
result escalating costs pressures, including the National Living Wage:
“All costs associated with non-mandatory functions will be cut
altogether, so that we focus only on meeting minimum legislative
requirements.”
“Technology and efficiency savings will be used to extend and
improve profitability, but its impact is almost negligible. There is
very little head room left to improve margins without
compromising on the quality of the service to our customers.”
“We will withdraw from certain geographical areas and local
authority contracts. We will be unable to support new contract
changes or bear any risks from contract which require front-end
investment. We have subsidised the care sector in many areas
for some time now; our ability and willingness do this no longer
exists.”
“We will be able to afford existing management overheads and
our existing teams will be increasingly stretched in just managing
basic care delivery rather than driving the innovation, creativity
and pro-active changes that the future social care market
requires.”
A provider commented on a number of recent tender exercises mounted by local
councils:
“There is an apparent disregard by councils for pricing new
business sensibly and a lack of understanding of what an
acceptable charge rate can be in an environment where the
National Living Wage is £7.20 per hour, before travel time and
on-costs. We have received a number of tenders in the last 6
weeks at under £12 per hour, running as low as £10.50 an hour.”
The move away from local authority purchase to supporting people who fund
their own care occurred frequently:
Page 15 of 31
“We no longer tender for local council work, as the margins are
too low.”
“We do not intend to submit a tender for work at [a named
authority] as the overheads required to properly manage such a
contract at the quality standards we expect would make it
difficult to maintain. We will seek to grow the business through
more private work.”
“With the volume of new recruits difficult to find in the South of
England the use of scarce labour will be committed to the most
profitable work.”
The impression of councils’ ability (or willingness) to respond to providers’ costs
are illustrated, as follows:
“We have written to 78 local authorities about their rates. To
date we have received 28 responses. One council has increased
rates already in view of the October increase to National
Minimum Wage and agreed to a further 2.7% increase in April
2016. However, the remaining responses have all been the
same: The councils understand the cost pressures on homecare
providers, but find themselves unable to meet the demand on
funding due to the overall cost pressures and constraints of their
own funding.”
A provider commented on the behaviours of a number of London Boroughs:
“All authorities in this area are looking to labour from the new EU
countries to fill the employment gap at low cost. One is looking
at schemes to bring in carers from Hungary, Poland and Bulgaria.
Another is now giving language lessons within their training
program. They have no present idea on how they are going to
purchase care at prices that give the workforce a decent
income.”
One provider offered the following comment to Government:
“Government will be aware of the proportion of work already
outsourced to the independent sector and the savings that this
has already delivered to the public sector spending. The risk of
market failure is high, as there are few in house options left”.
Page 16 of 31
Cost of the National Living Wage
UKHCA welcomed the announcement in the Budget that a National Living Wage
would be introduced as it will see careworkers better remunerated and their
skills become more highly valued. However, without increases in the fees paid
for services by local authorities it will have a detrimental impact upon market
stability and the sustainability of the care sector.
The National Living Wage represents a sizeable challenge to the homecare
sector. There are approximately 500,000 careworkers in the domiciliary care
sector in the UK, 86% of whom are aged 25 years or above and will therefore be
eligible for the National Living Wage from the 1st April 2016.
The homecare sector is currently under funded, and ran at a deficit of £514
million in the financial year 2013/14.
This is unsustainable for the sector as a whole. The workforce, commissioners
and people who use homecare services need a funding enhancement to meet the
requirements of the National Living Wage and to assure long term quality within
the sector.
There is no single data set on the wage rates currently paid to careworkers in
the independent and voluntary domiciliary care sector. We are strongly
disinclined from using the wage rates captured in the National Minimum Data Set
for Social Care as we believe that the data does not adequately distinguish
between data where workers’ travel time is or is not included.
We have modelled the actual hourly wage bill of a careworker which accounts for
minimum rates to meet statutory requirements, including compliance with the
National Minimum Wage, this is detailed below.
Page 17 of 31
The impact of the introduction of the National Living Wage, without accounting
for workers who are paid above the prevailing minimum wage rates, is to add
£0.93 per hour to of state-funded homecare, once providers’ on-costs are taken
into account.6
If we assume that workers in the sector receive flat-rate National Minimum
Wage, then implementing the National Living Wage add £303 million to the
2016-17 wage bill alone.7 This figure assumes that the October 2015 NMW
increase is already funded, and excludes the need to make-up the shortfall of
funding of previous years.
In practice a proportion of the workforce will receive pay rates above the
national minimum. Employers will need to decide how they maintain their
workers’ pay differentials in order to remain competitive within their local labour
market. Without maintaining these differentials, recruitment and retention of
careworkers in our sector is likely to be further impacted.
6
We have assumed that local authorities purchase and pay for care on the basis of
“contact time” (the time spent in the service users’ home), but that employers must also
pay workers for the applicable travel time, in order to comply with National Minimum
Wage regulations. We have excluded reimbursement of careworkers’ mileage costs from
this calculation.
7
Assumes 326 million hours of care per year with an increase of £0.93 / hour for the
costs of the National Living Wage compared to the October 2015 National Minimum
Wage.
Page 18 of 31
Item
From October
2014
From April
2016
£6.50
£7.13
£1.24
£1.35
£7.74
£8.48
9.50% of gross pay
£0.73
£0.81
12.07% of gross pay
£0.93
£1.02
1.73% of gross pay
£0.13
£0.15
1% of gross pay
£0.08
£0.08
On-costs:
£1.88
£2.06
Total wage costs:
£9.61
£10.54
£1.40
£1.40
£11.01
£11.94
Workers’ contact time:
Travel time:
Assumption
See note8
11.4 minutes per hour of contact time
Gross pay:
National Insurance:
Holiday pay:
Training time:
Pensions:
Mileage costs:
£0.35 per mile at 4 miles/hour of care
Total wage costs, including mileage
Table 1 Breakdown of the hourly wage bill for careworkers in the domiciliary care sector.
8
In October 2015: Assume that 100% workers receive NMW of £6.70/hour.
From April 2016: Assume that 13.7% of workers are <25 years and continue to receive £6.70/hr and that 86.3% are entitled to the new NLW of £7.20/hour
We also urge Government to ensure that local authority commissioning of care
services should be placed under the oversight of an independent regulator. This
will ensure that public money reaches frontline care services and benefits people
with care and support needs and careworkers.
A system under pressure
One impact of underfunding homecare is that far fewer people are in receipt of
care, as local authority needs based eligibility thresholds have risen. We believe
that is primarily a cost saving measure.
Total Local Authority Funded Homecare Recipients Sample Week
Service Users (Thousands)
500
475
450
452
434
410
400
393
390
350
England
Scotland
300
250
Wales
200
Northern Ireland
150
Total
100
50
0
2009
2010
2011
2012
2013
2014
Figure 2 Total local authority funded homecare packages, sample week
2009 - 2014
Figure 2 illustrates an 18% decrease in the number of people to receive
homecare services at any given time between 2009 and 2014.
This is to the detriment of people with care and support needs, and potentially
undermines their health and wellbeing.
The Association of Directors of Adult Social Service’s (ADASS) budget survey
revealed that service reductions will be the primary means to achieve saving
Page 21 of 31
targets. It is reported that in the financial year 2015/16 directors of Adult Social
Services in England plan to find £71 million in savings via service reduction.9
Local authority Directors responding to ADASS’ survey reported that their
confidence in finding further savings over the coming years was low, with only
4.8% of respondents reporting that they were ‘fully confident’ of finding savings
in the financial year 2017/18.10
This is likely to destabilise the provider market and removes the incentive to bid
for local authority contracts.
If the costs of care continue to rise without a sufficient Government funding
settlement for local authority commissioners of adult social care there will be
significant consequences. If local authority homecare contracts remain
uneconomical we can predict large-scale exit from local care markets and
potentially provider failure.
Signatories to UKHCA’s open letter to the Chancellor provide over 47 million
hours of homecare per annum. If one such organisation were to exit the market
the implications for the commissioning body, their employees and the people
who use their service would be costly and damaging.
9
ADASS, ADASS Budget Survey Report 2015, p. 10. Available at:
http://www.adass.org.uk/uploadedFiles/adass_content/policy_networks/resources/Key_
documents/ADASS%20Budget%20Survey%202015%20Report%20FINAL.pdf
10
ADASS, 2015, p. 11.
Page 22 of 31
An ageing society
The need for homecare services in all forms will continue to rise as the
population continues to age. An adequately funded homecare will enable citizen’s
expectations to be met. A poll conducted by Saga and Populus found that 9 out
of 10 people aged 50 years or over would prefer to receive care at home.11 While
Dying Matters found that 7 out of 10 adults would prefer to die in their own
home.12
In the last financial year 79% of all homecare was delivered to people aged 65
years or over.13 An ageing population will have a greater need for care services,
the majority of adults want to remain at home, this is cost-effective and
promotes the wellbeing of people with and care support needs. Figure 3 below
shows the rate of ageing across the UK.
≥ 65 Population Projections (UK)
20
18
17
People (Millions)
16
16
14
12
10
14
12
10
13
11
14
13
12
65-84
≥ 85
8
Total
6
4
2
2
2
2
3
2015
2020
2025
2030
3
0
2035
Figure 3 65 years of age an over population projections 2015-2035
11
Saga/Populus Poll, 2013. Available at: http://www.saga.co.uk/newsroom/sagapopulus-survey-results.aspx b
12
Dying Matters/ComRes 2014. Available at: http://comres.co.uk/wpcontent/themes/comres/poll/NCPC_Dying_Matters_Data_tables.pdf
13
UKHCA, An Overview of the Domiciliary Care Market, p.14. June 2015. Available at:
http://www.ukhca.co.uk/downloads.aspx?ID=109
Page 23 of 31
Between 2015 and 2035 the number of people aged 65 years or over in the UK
will increase by 48%. During the same time frame the working aged population
under 65 years of age will increase by 3.9%. People aged 65 years or over will
account for 24% of the population by 2035.14
This means that the need for homecare services will grow in real terms and the
proportion of the population who can actively meet those needs will decrease in
relative terms. This will require investment in the workforce through proper
remuneration and investment in training. As it stands the homecare workforce
are a valuable asset, but as needs increase so must their numbers. Investment
in the homecare workforce will:

Increase the spending power of the workforce;

Decrease national unemployment rate;

Reduce the number of people receiving out of work benefits; and

Support family carers to stay in work.
The annual public expenditure costs of people leaving work to become full time
unpaid carers has been estimated to be £1.3 billion per annum based on the
costs of Carer’s Allowance payments and lost tax revenue, excluding other outof-work benefits.15
14
The Office for National Statistics, 2012 based population projections. Available at:
http://www.ons.gov.uk/ons/interactive/ppu-2012-v2/index.html
15
Carers UK & Employers for Carers, Support working carers: The benefits to families,
business and the economy p. 11. Available at:
file:///C:/Users/Jonathon%20Holmes/Downloads/1_Supporting_Working_Carers_FINAL_
REPORT_Accessible_version__CORRECTED_1.pdf
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We believe that the level of need for care and support will increase. If the
homecare sector and the social care sector as a whole is not funded
proportionally to meet this growing need then that need will go unmet.
This will inevitably transfer demand side pressure onto the NHS, for people who
require community based social care a hospital setting is usually inappropriate
and from a cost perspective, a desperately inefficient means to meet needs. We
cover this issue is greater detail in the subsequent section.
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Efficient public services
Underfunding homecare is an inefficient use of public money. To deny people
effective homecare services and to reduce community capacity to meet the
health and care needs of the population is inefficient.
Homecare can prevent people from developing more acute needs and can serve
to re-able and rehabilitate people following a hospital admission. We believe that
the homecare sectors diminished capacity has impacted greatly upon the NHS,
most notably in the form of delayed discharges. This is illustrated by figures 4, 5
and 6 below.
People with a delayed discharge date awaiting
homecare - Midnight on the last Thursday of the month
900
758
800
People
700
600
500
447
475 480
521
484
543
621
583 598
663
692
778
717
753
787 810
400
300
200
100
0
Figure 4 People with a delayed discharge date awaiting homecare at Midnight on the
last Thursday of the month
Figure 4 shows that between the sample day in February 2014 and June 2015
the number of people with a delayed discharge date awaiting homecare
provision grew by 81%.16
16
NHS England, Delayed Transfers of Care Data, Monthly Situation Reports. Available at:
http://www.england.nhs.uk/statistics/statistical-work-areas/delayed-transfers-of-care/
Page 26 of 31
Total people with a delayed dishcharge date- Midnight
on the last Thursday of the month
6
People (Thousands)
5
4.28 4.33 4.21
4.52
4.36
4.61 4.70
5.22
4.96 4.93 5.06
4.48
4.95 4.95
4.74
4.97 5.00
4
3
2
1
0
Figure 5 Total number of people with a delayed discharge date – Midnight on the last
Thursday of the month
Figure 5 shows that between the sample days in February 2014 and June 2015
the total number of people to experience a delayed discharge increased by
17%.17
People with a delayed discharge awaiting homecare as a
% of total delayed discharges
100%
90%
80%
Awaiting
homecare
70%
60%
50%
40%
Remaining
delayed
discharges
30%
20%
10%
0%
Figure 6 People with a delayed discharge awaiting homecare as a % of total delayed
discharges
17
NHS England, Delayed Transfers of Care Data, Monthly Situation Reports. Available at:
http://www.england.nhs.uk/statistics/statistical-work-areas/delayed-transfers-of-care/
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Figure 6 shows that the percentage of delayed discharges due to people awaiting
homecare increased as a proportion of the total delayed discharges. In February
2014 of all delayed discharges 10% were due to a person awaiting a homecare
service. This figure had increased to 16% of total delayed discharges on the
sample day in June 2015.18
These figures suggest a worrying and persistent trend that is impacting upon
NHS efficiency. The root cause of this inefficiency is a lack of capacity in
community based social care, which in turn is due to the funding shortfall in that
sector. We noted earlier that UKHCA estimate the homecare deficit in the next
financial year will be £753 million in the first year.
In the financial year 2013/14 the NHS spent a total of £1.05 billion on Nonelective Inpatient Excess Bed Days. This represents a total of 3,812,377 days at
a unit cost of £275 per day.19
If we take £275 as representative of the cost to the NHS of one excess bed day,
then we find that the cost to the NHS of delayed transfers of care due to an
insufficient supply of homecare on the last Thursday of June 2015 was
£222,750.
In June 2015 the NHS lost a total of 24,199 days to delayed discharges for
people awaiting homecare.20 This represents a monthly expenditure of
£6.7 million. Giving a predicted annual expenditure for 2015/16 of £80 million
18
NHS England, Delayed Transfers of Care Data, Monthly Situation Reports. Available at:
http://www.england.nhs.uk/statistics/statistical-work-areas/delayed-transfers-of-care/
19
NHS Reference Costs 2013/14, National schedule of reference costs: The main
schedule. Available at: https://www.gov.uk/government/publications/nhs-referencecosts-2013-to-2014
20
NHS England, Delayed Transfers of Care Data, Monthly Situation Reports. Available at:
http://www.england.nhs.uk/statistics/statistical-work-areas/delayed-transfers-of-care/
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on delayed discharges of care for people awaiting homecare. Figure 7 below
shows the rate of increase in expenditure.
Annual NHS Expenditure on delayed discharges for
people awaiting homecare - based on 2014 cost
90
79.86
80
£s (Millions)
70
60
50
45.71
42.30
40
35.95
37.80
2012/13
2013/14
30
20
10
0
2011/12
2014/15
2015/16
Figure 5 Annual NHS Expenditure on delayed discharges for people awaiting
homecare – based on 2014 cost
(𝑈𝑛𝑖𝑡 𝑐𝑜𝑠𝑡 × 𝑀𝑜𝑛𝑡ℎ𝑙𝑦 𝑑𝑒𝑙𝑎𝑦𝑒𝑑 𝑑𝑖𝑠ℎ𝑎𝑟𝑔𝑒 𝑑𝑎𝑦𝑠) × 12 = 𝐴𝑛𝑛𝑢𝑎𝑙 𝐸𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒 (£𝑠)
(275 × 24,199) × 12 = £80 𝑚𝑖𝑙𝑙𝑖𝑜𝑛
Figure 7 shows that NHS expenditure on delayed discharges for people awaiting
homecare will increase by 75% in the financial year 2015/16.
This annual expenditure is equivalent to 4.8 million hours of fully funded
homecare at National Living Wage levels.21
21
Where £80 million is annual NHS expenditure on delayed discharges for people
awaiting homecare, assumes minimum price for homecare at National Living Wage rates
is £16.70 per hour. See A Minimum Price for Homecare v 3.0:
http://www.ukhca.co.uk/downloads.aspx?ID=434
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A homecare sector that was appropriately funded diverts demand side pressures
from the NHS, delays and prevents people’s care needs and allow people with
care and support needs to remain at home and in their communities.
At present, the growing deficit coupled with very low rates paid by councils and
the NHS have impacted upon the capacity and sustainability of the state funded
homecare sector. This has wider repercussion on the nation’s health economy
and the efficiency of the NHS.
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Conclusion
We have identified three principal issues in this representation.
1. The implications of a persistent and growing deficit in the homecare
sector, including threats to market stability.
2. The cost implications of introducing a National Living Wage.
3. The consequences for NHS efficiency when homecare lacks the funding
and the capacity to meet the actual care and support needs of society.
We have noted a sector that continues to run at a deficit, estimated to rise to
£753 million over the financial year 2016/17 unless sufficient funding is found.
We have also seen the number of people to receive state funded homecare drop
by 18% since the financial year 2009/10. This runs contrary to what
demographic trends would suggest, an ageing society should have a growing
acuity of need; the number of people receiving care should in fact be rising.
The reality suggests a growing amount of unmet need, which in turn compounds
demand side pressure on the NHS. This is evidenced by the 81% increase in
people experiencing a delayed discharge because they were awaiting homecare
between the sample day in June 2015 compared to the sample day in February
2014. Delayed discharges of care cost the NHS £1.05 billion in the financial year
2013/14.
Given this it is our firm conclusion that to under-fund community based social
care is irresponsible and represents a wildly inefficient use of public finances.
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