Home care provider Mears has pulled out of contracts with Liverpool and Wirral after the two councils proposed rates the provider said were “extremely irresponsible and possibly illegal”.
Liverpool council is currently consulting on a new hourly rate of £13.10, an increase on last year’s rate of £11.88. Wirral is offering £12.92 per hour, also an increased rate.
The rises reflect the introduction of the national living wage on 1 April, a new salary floor of £7.20 an hour for workers aged over 25, above the national minimum wage for those aged 21-24 of £6.70.
Mears said the new offers were “nothing short of encouragement to providers to breach the national living wage” and would lead to “unworkable pay and conditions” for care workers.
Liverpool and Wirral councils highlighted the huge pressures on adult social care budgets, but maintained the rates they were offering were high enough to enable providers to pay staff the national living wage.
A spokesperson for Liverpool council said the proposed rate would cost the local authority an additional £2m a year, which “completely wipes out” what it is able to raise through the social care precept, a 2% council tax levy ring-fenced for adult care introduced in the 2015 spending review.
Wirral’s adult social care director, Graham Hodkinson, said: “Earlier this year, Wirral invested an additional £3.35m in increasing fees to the care sector to help meet the growing gap between the money they receive and the care they need to deliver. This was more than £1m over the figure the government allowed us to raise via the adult social care precept.”
The national living wage was announced in last year’s summer budget statement, with the intention of the rate rising to £9 an hour by 2020. It was welcomed by the sector, but councils and providers have warned more funding is needed to implement the policy.
An analysis by the Local Government Association last July predicted the national living wage would cost councils an extra £1bn a year by 2020 above 2015 levels. The United Kingdom Homecare Association (UKHCA), which represents providers, has said the policy will require councils to pay providers at least £16.70 per hour.
Mears said the national living wage had already increased costs to providers by 11%.
A recent report by market experts Laing Buisson also warned major home care providers were withdrawing from council-funded social care due to “severe fee squeezes”. The report pointed to the exit of large providers Care UK and Saga, and the operating losses tabled by the home care divisions of Mears and Mitie, as evidence of the issue.
‘Must be challenged’
Alan Long, executive director for Mears Group, said: “Our top priority is to provide a quality service to people requiring care, with well-deserving staff being paid a decent wage.
“As such, the new offers by Liverpool and Wirral councils represent extremely irresponsible – possibly illegal – action that we and others will have to challenge at every level.”
He added that Mears had contacted the two councils on several occasions to discuss the issue, but both had refused to accept that they were simply not paying enough.
“This is the first time Mears Group has ever had to take action of this nature, but we will not operate in an illegal way and we do not see how any other provider can do so either,” he said.
“We will support any transition of services to new providers, but have major doubts that any provider could operate legally and effectively at this rate. It will be hugely unsettling for service users and staff, and would not be required if the councils deliver on their responsibilities.”
Colin Angel, policy and campaigns director at the UKHCA, said that councils did not seem to understand the additional costs that providers faced to deliver care besides wages.
“We are struck by the lack of understanding shown by some councils of the difference between hourly rates and the total cost of a care service. In addition to wages for the time spent delivering care, employers must cover care workers’ travel time, reasonable travel costs, employers’ national insurance and accrue for statutory holiday pay, sickness and pensions,” he said.
“We estimate that the costs of the care worker alone at the national living wage are almost £12 per hour, before taking into account the costs of running the service and meeting regulatory requirements.”
Paul Brant, cabinet member for adult social care and health at Liverpool council, said the council had offered to work with Mears to help reduce their overheads, and was sorry the provider had instead decided to pull out of the region altogether.
He said: “We have contracts with 11 home care companies and are working positively with them. The proposed rate, which will cost the council an additional £2m per year, reflects the new national minimum wage and allows firms to make a reasonable profit on top.
“Mears are a company based outside the city region without the long experience and economies of scale of many of our local providers. They only provide a small share of local provision, but we will continue to work closely with them to ensure a smooth transition.
“Their staff will simply transfer across to other providers in the city, meaning there will be no disruption in the home care provided.”
Brant added that the council was facing “huge challenges” due to funding cuts and had looked closely at the amount paid by other local authorities in the region when calculating its rates.
The statutory guidance under the Care Act states that councils should assure themselves that their fee levels allow providers to pay at least the national minimum wage or living wage, provide effective training of staff, promote retention and make a reasonable rate of return to ensure a sustainable market. This falls under councils’ duty under section 5 of the act to promote an efficient and effective market with a variety of high-quality services. As part of this they must have regard to the importance of ensuring a sustainable market and a workforce whose members are able to deliver high-quality services.
Angel added: “Councils have a legal responsibility to meet people’s assessed eligible needs under the Care Act 2014. Faced with widespread provider withdrawal from a contract, we would expect to see a rapid increase in direct payments being offered to as many people as would be willing to accept them.
“Councils might also need to deliver services in-house. This is a sobering thought for cash-strapped authorities, bearing in mind that, on average, in-house services cost 2.5 times more than independent and voluntary sector provision.
“Many councils no longer have in-house home care teams, and neither Liverpool nor Wirral currently retain in-house provision.”