Firms supporting 880,000 older and disabled people have warned that the costs of introducing a “national living wage” could trigger “catastrophic failure” in the homecare market.
Without increased funding to meet the increased staff costs of the national living wage (NLW), businesses caring for people in their own homes could go bust, the UK HomeCare Association (UKHCA) warns in a letter to the chancellor George Osborne.
Under plans announced by the chancellor in the budget, workers aged over 25 will be paid a minimum of £7.20 an hour from April 2016, rising to £9 by 2020.
The UKHCA says meeting the living wage bill will require a £753m increase in funding from councils and the NHS in the first year alone. It says local authorities currently pay homecare providers an average of £13.66 an hour, but estimates that the new arrangements will cost it £16.70 an hour.
The letter states: “As major providers in the homecare sector, delivering together over 47m hours of homecare care a year, we welcome [the] government’s commitment to low-paid workers through a new National Living Wage.
“However, unless the additional costs are fully funded, there is a serious risk of catastrophic failure to support people who receive state-funded care at home.”
It warns that without urgent action from the government and councils to address the funding gap, continued supply of state-funded homecare will become “unviable” at a time when the NHS looks to at-home care services to enable people to leave hospital.
It adds: “Market exit by providers would cause considerable distress for people who use homecare services and their families; create a significant burden for local councils who would have to find replacement providers and provide uncertain employment prospects for trained and committed careworkers.”
UKHCA policy director Colin Angel told the BBC: “Providers are particularly concerned that they’re not going to be able to deliver services to people who are funded by local authorities.
“There is certainly anxiety that providers will be going out of business and that those providers won’t be there to carry on delivering services to some of the most frail and vulnerable members of society.”
The Local Government Association has said the NLW meant social care contracts would have to be renegotiated. It estimated the extra cost would be about £330m in 2016 alone.
A government spokesman said: “The National Living Wage will benefit hundreds of thousands of care workers who will see their pay increase.
“The overall costs of providing social care will be considered as part of the spending review later this year, and we are working with the care sector to understand how the changes will affect them.”
