Care sector issues second warning to government on costs of ‘living wage’ policy

The five largest residential care providers warn chancellor George Osborne that inadequate funding for the policy risks a major provider collapse

Picture credit: Monkey Business Images/Rex Features

A major residential care provider could collapse if the government’s ‘national living wage’ policy is implemented without an increase in social care funding, sector leaders have warned.

The UK’s five largest providers said a collapse could happen in the next 12 to 24 months.

This would lead to many older people being forced to seek support from the NHS, placing significant pressure on an already-stretched health service, the providers said.

The warning came in a letter to chancellor George Osborne and marks the second call from the sector to ensure the policy, announced in the summer budget, is properly funded. In July, the UK Homecare Association warned of a similar collapse in the home care market.

The policy will see the introduction of a compulsory wage floor of £7.20 per hour for workers aged 25 and over from April next year, rising to £9 per hour by 2020.

But with staffing costs representing over 60% of the total costs of care, estimates suggest the policy will cost the sector £1bn by 2020, the providers warned.

Martin Green, chief executive of provider organisation Care England and a signatory of the letter, said there was a “grave and very real possibility” that a provider would collapse.

“The care sector welcomes the National Living Wage and has long campaigned for it to be introduced. However, it is not sustainable for us to meet the increased cost of care when local authorities are already paying well below the true cost of delivery,” he added.

“We want to work with the government to find a solution that will ensure the 400,000 people the care sector supports can continue to live in a safe and comfortable environment.”

The UK’s five largest residential care providers are Four Seasons Health Care, Bupa UK, HC-One, Care UK and Barchester.

The government said social care funding would be considered as part of the spending review later this year.

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