‘Lack of funding for national living wage means poorer people will miss out on care’

By Jane Townson, CEO of Somerset Care

“Britain is able to afford a pay rise. Because, let me be clear, Britain deserves a pay rise and Britain is getting a pay rise,” George Osborne declared triumphantly, when he announced the national living wage policy in the summer 2015 budget statement.

“Fantastic” shouted the former work and pensions secretary across the House of Commons, grinning like a Cheshire cat.

Fantastic in principle, certainly. But how fantastic will the policy, which introduced a compulsory wage floor of £7.20 per hour for workers aged over 25, be in practice?

Somerset Care is a not-for-profit social enterprise, with a turnover of £72m. The organisation was formed 25 years ago when Somerset Council outsourced adult social care provision. As a company limited by guarantee, we have no shareholders and every penny we make is reinvested back into the business.

In residential care, 40-50% of our income is from local authorities across the southern counties; in home care it’s 90%; and in learning disabilities almost 100%.

‘Income falling fast’

We welcomed the proposed increases in the national living wage. In fact, we believe we need to go further as a sector and treat our care staff as professionals. They all need full employment contracts, annual salaries competitive with equivalent roles in the NHS, and a clear career structure based on qualifications and experience.

But right now, we’re caught in the jaws of a shark.

Our income is falling fast in real terms and our staffing costs, which represent 60-70% of our total costs, are rising rapidly.

Underfunding by central government means local authorities can’t afford to pay the true cost of care, so providers are forced to deliver care at a loss – or charge self-funders more money than council-funded customers, in order to make ends meet.

‘Heightened pressure’

Over the last year we’ve had to hand back four loss-making local authority contracts in Devon, Gloucestershire, Hampshire and the Isle of Wight, close a care home, and reduce management roles. This has caused considerable distress to clients and their families, who have had to be transferred to other service providers.

It’s also meant that some staff have had to move to other employers under TUPE arrangements and others have been made redundant. This has heightened pressure on remaining managers, with the same work being undertaken by fewer people.

We’ve also had to increase fees for self-funders, who already pay substantially more than councils for identical care in identical settings. We believe this is unfair and wrong. Many self-funders are not massively wealthy, have saved all their lives for old age, have already been taxed, and are now expected to subsidise local and central government for the cost of other people’s care.

Somerset Care has 4000 employees. To increase the wages of our lowest-paid staff by 7.5% and maintain appropriate differential in salaries between job grades will cost us £2.5m in 2016-17 alone.

To put that in context – Somerset Council estimates that the 2% increase in council tax will generate an extra £4m, so it’s clear the much-touted social care precept is wholly inadequate. Indeed, in Somerset there’s a £1.4m shortfall in meeting the national living wage commitments even after applying the precept.

On top of this, Better Care Fund monies are yet to reach us as a social care provider, from any commissioners we work with, despite political rhetoric to the contrary.

‘Shift in focus’

This year we’ve ensured compliance with the national living wage but have been forced to compress salary differentials even further than before. There’s now a difference of only 8 pence per hour between our lowest-paid domestic staff and the first level of professional care staff. Small differentials also occur further up the chain, which means that many staff no longer seek promotion.

To meet the care needs of our frail elderly customers, many with dementia, we’ve had to invest in new purpose-built facilities, each costing at least £6m. To cover staffing costs and achieve a return on investment, we have to charge more per resident than councils are willing or able to pay. This means we cannot accept council-funded clients in our newer homes, and have to charge fee top-ups in our older homes.

Without adequate state funding, we’ve no choice but to shift our focus on care of the poorest, who are funded by local authorities, to greater numbers of those able to pay directly for their own care. We have to do this to avoid further home closures, contract terminations and job losses for the very people who are supposed to benefit from the increase in the national living wage.

If Britain can afford a pay rise, Mr Osborne, please fund it.