Four in ten adult care providers reduced services last year due to cost pressures

Over four in ten adult social care providers closed parts of their organisation or handed back contracts last year because of cost pressures, driven in particular by staffing shortages, a survey has found.

Almost one in five said they were providing care to fewer people, while a similar proportion said they made redundancies in 2023, due to cost constraints, found the annual Pulse Check survey commissioned by learning disability provider Hft and representative body Care England.

Also, just under four in five reported that local authority fee increases were insufficient to cover last year’s 9.7% increase in the national living wage (NLW), amid widespread concerns that the same will be true of the 9.8% rise in the salary floor due in April 2024.

Increased funding for adult social care

The research was a test of the impact on providers of a 10% real-terms budgeted increase in adult social care spending by councils in 2023-24, on the back of significant extra government funding.

Several chunks of this funding, either in whole or in part, were focused on increasing the fees councils pay providers, including:

• The £562m market sustainability and improvement fund (MSIF), £162m of which was designed to help councils pay providers ‘a fair cost of care’ with the remainder earmarked for fee increases, bolstering workforce capacity or cutting waiting lists for care or assessments.
• The £365m market sustainability and improvement fund – workforce fund, which is for the same purpose as the MSIF but is particularly designed to bolster the workforce.

‘No impact’ from government cash boosts

However, most respondents (84%) reported that recent government funding rises, such as the MSIF workforce fund, had had no impact on their financial sustainability, with two-thirds saying the same about the fair cost of care work.

Providers reported that they struggled to meet funding conditions that differed between authorities and also said that, in some areas, domiciliary care was prioritised over residential services for resourcing.

The Pulse Check report also criticised the “short-term, sporadic nature of these government funding measures”, which only delivered “temporary relief”, rather than helping providers address financial challenges “root and branch”.

Service closures

As a result of these pressures, 43% either closed parts of their organisation or handed back contracts to commissioners, 18% provided care to fewer people and 19% made redundancies.

Workforce-related costs were, by far, the largest pressure on providers (cited by 81% of respondents) followed by utility bills (59%) and unrealistic expectations from commissioners, such as unfunded service costs (38%).

The most significant staffing pressure, reported by 87% of providers, was the need to increase pay in line with rises in the statutory national living wage (NLW) or the voluntary real living wage or London living wage.

The NLW rose from £9.50 to £10.42 per hour last year, a 9.7% rise that was the highest percentage increase in the salary floor since its introduction in 2016. However, 79% of respondents to the Pulse Check said increases in council fees were not sufficient to cover the rise.

Providers struggling to offer competitive pay

The report said this appeared to have had an impact on providers’ ability to offer competitive pay, with gap between the average wage respondents offered care workers (excluding senior care workers) and the NLW having narrowed from £1.02 per hour in 2022 to 77p in 2023.

Correspondingly, 86% of providers cited pay as their biggest recruitment and retention challenge, up from 75% in the 2022 study.

The NLW is due to go up by an even greater amount next year – by 9.8%, from £10.42 to £11.44 an hour – and council leaders have warned that the government has not funded them to deliver this increase.

“Unfortunately, as pay for care workers shifts closer to the NLW it is likely that recruitment will become ever more challenging as potential staff chose careers offering a more attractive salary,” the Pulse Check report warned.

Reliance on international recruitment

National data showed a small overall reduction in adult social care vacancies from 2022-23, from 164,000 to 152,000, driven by the government relaxing immigration rules to enable more recruitment from abroad.

However, while most respondents to the Pulse Check reported an increase in international recruitment (57%) in the previous 12 months, this was not true for domestic recruitment. For this, 43% of providers saw an increase in activity, but almost as many (36%) saw a reduction.

The study also found international recruitment was not viable for some organisations, with a quarter saying it was “not applicable” to them. It also warned that the government’s impending ban on allowing overseas care workers to bring family members over when taking up jobs in the UK would make the recruitment situation worse for providers.

Recommendations

On the back of the research, Hft and Care England called on the government to make international recruitment more accessible by measures including reducing visa fees and providing more support to guide providers through the process.

Other recommendations from the report included introducing national standards for commissioning – backed by statutory guidance – to reduce costs and complexity for providers and improve consistency, including in how councils allocated the funding they received.

They also called for changes to VAT rules to reduce providers’ tax liabilities.

Extra funding ‘not cutting through’

“For years, adult social care providers have absorbed increased costs and inflationary pressures without corresponding funding,” said Care England chief executive Martin Green.

“When money is made available it simply isn’t cutting through. Recent changes to immigration rules and an insufficient local government finance settlement this year further suggest a government that is heading in the wrong direction.”

The Association of Directors of Adult Social Services (ADASS), which welcomed the Pulse Check’s “practical recommendations to ease pressure on the sector”, issued a similar message on funding.

Investment ‘not keeping pace with need’

“The government has invested more, but it’s not keeping pace with increased levels and complexity of need, inflationary pressures including wages, and broader pressures on local government budgets,” said ADASS joint chief executive Anna Hemmings.

“We welcomed the increase in the living wage announced last autumn, but with no new money to pay care workers that increase, there can only be one result: fewer jobs and cuts in care.”

In response to the report, a Department of Health and Social Care spokesperson said: “To address the issues facing the care sector, we’re investing up to £8.1bn* to put the adult social care system on a stronger footing, enabling local authorities to buy more care packages, help people leave hospital on time, and reduce waiting times.”

Breakdown of extra government cash

Not all of the £8.1bn, allocated for 2023-25, will be spent on adult social care, with some destined for children’s services and another chunk dependent on council tax increases. It consists of:

• £3.2bn extra through the existing social care grant, with 60% expected to be spent on adults’ services and 40% on children’s services.
• £1.6bn to tackle delayed discharges, with the funding split between councils and NHS integrated care boards.
• £1.6bn through increasing the adult social care council tax precept by 2% and raising standard council tax by 3% in each year.
• £1.08bn through the market sustainability and improvement fund, designed to help councils increase provider fees, tackle waiting lists and boost recruitment and retention.
• £570m through a separate market sustainability and improvement fund – workforce fund, which has the same objectives but is particularly focused on tackling staff shortages.

New career pathway

With the Pulse Check having identified poor perceptions of social care as a career as providers’ second biggest recruitment and retention challenge, behind pay, the DHSC spokesperson also cited its announcement last week of funding for a new qualification, alongside the establishment of a career pathway, for care staff.

“Last week, we also announced a major boost to the care workforce through the creation of a new accredited qualification meaning for the first time, there will be a national care career structure, giving the profession the recognition it deserves,” they said.

However, sector bodies have warned that the pathway would not succeed without extra investment to enable providers to reward progression with additional pay.