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.
Page 2 of 4
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
Page 3 of 4
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.
Page 4 of 4