Living wage plan will put providers in deep financial trouble, says West Midlands Care Association
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Care home operators in the West Midlands say they face a bleak and uncertain future following living wage budget reforms announced by George Osborne. Debbie Le Quesne, chief executive of West Midlands Care Association (WMCA), which represents private sector care providers, warned the industry was at “breaking point.”
An impact survey by the association suggests any benefits found with reductions in Corporation tax – a fall to 19% in 2017 and 18% in 2020 – will not plug an ever-widening chasm between realistic operational costs and fees paid for care by local authorities. Under the Chancellor’s plans, workers aged over 25 will get a minimum of £7.20 an hour from April next year, rising to £9 by 2020. The Government says this will mean a direct pay rise for 2.5 million workers of an average of £5,000 by 2020.
But although Ms Le Quesne and her members welcome initiatives to bring in better pay rates for carers, they estimate it will add £23 per week to the care cost of every Midlands person in a residential care setting.
“It will also mean there will be no pay differential between domestic staff with little responsibility and experienced NVQ Level 2 carers,” said Ms Le Quesne.
For those businesses offering homecare, the association says there will be an additional £1.50 per hour cost for each member of staff. This figure does not include the additional expenses of travel time, which is not funded in the local authority rate.
“Mr Osborne’s Budget has done no favours to the care industry in the Midlands,” said Ms Le Quesne.
“Most domiciliary providers are on set local authority contracts which have seen next to nothing in increases over the past five years. They are still trying to work out how to find funds to pay travel time and now a second increase in outgoings looms.
“Calculations do not include external price rises we expect to see from our suppliers, who will also need to pass on their increased production costs.”
Along with other representative bodies, WMCA is calling on government for a financial lifeline to keep the industry afloat.
“It’s a hugely complex situation with most of my members having local authorities as primary income generators in their businesses,” said Ms Le Quesne.
“Under the terms of which they work they are allowed to return profit margins on council contracts of between only five and seven per cent.
“There simply isn’t anywhere for extra savings to be made. Years of austerity have taken their toll and the creative thinking is through.”
Addressing living wage increases for council workers, the Local Government Association, which represents more than 400 authorities in England and Wales, said the cost of implementing the policy should be taken into account when council funding levels are set in future. WMCA is making the same plea.
“Our calculations regarding the timing of and potential savings on corporation tax just don’t stack up as an offset to this extra expenditure, over which members have no control,” said Ms Le Quesne.
“We’re in deep financial trouble and we know local councils are too. Central government must now heed the care industry plight if it wishes to see a diverse sector survive the next two years. We are at breaking point.”