Increases in the National Living Wage (NLW) above inflation have led to an increase in failed social care businesses, a reduction in care quality and insecure working conditions across the sector, according to new data.
The Low Pay Commission found that ‘business deaths’ in social care have increased “significantly” in the two years following the introduction of the NLW in April 2016, but that deaths in other low-paying industries, such as retail and hospitality, have been “reasonably flat” over the period.
Similarly, ‘business births’ in social care have fallen in the last year while they have increased in other low-paying industries, the 2019 report found.
This April, the NLW is set to rise by 6.2% to £8.72 in what the government says is “the biggest cash increase ever”.
One way for employers to mitigate the cost of the NLW is to pass some or all of it on to consumers through increased prices. But, adult social care employers have been vocal about their lack of ability to raise prices because they are heavily reliant on government funding, which in many areas has not risen in line with employers’ statutory costs, the commission found.
“Where possible, some adult social care providers have increased their share of private clients and raised rates for these places to ‘cross-subsidise’ losses on local authority funded place,” the report states.
Adult social care organisations continued to describe the sector as ‘in crisis’ in 2019, with the NLW continuing to “exacerbate” issues caused by funding and commissioning problems, the Low Pay Commission said.
Providers and their representatives lamented that the rates paid by local authorities for all types of care do not keep up with increases in the NLW, a major issue when wages are the largest cost for most providers.
A 2018 report by the United Kingdom Homecare Association (UKHCA) found that the national average fee being paid by councils to independent providers is £16.77. This is substantially below the UKHCA’s Minimum Price for Homecare, which was £18.01 per hour in 2017/18 and 18.93 per hour in 2019/20.
The Association of Directors of Adult Social Care estimated that £3bn is needed next year to meet the sector’s commitments and shortfalls.
A further complaint was the lack of a long-term funding solution in the absence of the long-delayed social care green paper.
Employers in the social care sector also recognised that quality of care had been affected by funding shortfalls and the cost pressure of the NLW in their evidence to the commission.
Moreover, the independent body heard specific examples of the stress providers are under affecting quality.
“A provider in Hertfordshire admitted that workers could be made to do back-to-back shifts either side of a sleep-in shift due to staff shortages,” the report noted.
Trade unions that the commission met with said that in many cases providers were still engaged in a ‘race to the bottom’ on price which was then reflected in their treatment of workers and quality of care.
The commission also heard extensively from worker representatives about the prevalence of underpayment of workers in the care sector.
“UNISON argued particularly strongly that the widespread failure of many employers in the sector to keep adequate records was at the heart of non-compliance in the sector and represented a major barrier to the enforcement of workers’ claims,” the report states.
The commission concluded that the government must take responsibility for the delivery of increased wages in sectors such as social care, where it is the main source of funding.
Agreeing with this statement, Professor Martin Green, chief executive of Care England, said: “If government fails to support this uplift then services may close, jobs will be lost and support to people in need will be reduced at a time when more people need social care. The social care system has endured chronic underfunding for many years and we call upon the government to fund not only the increases in the Living Wage, but the sector’s long term sustainability.”