Restricted budgets – restricted fees
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Research carried out by specialist healthcare property advisors HPC suggests fees paid by local authorities for residential care in England have shown an average uplift in the region of 1.7%. The figure is derived from an audit of the Annual Fee Review which most local authorities in England have now completed as we enter the second quarter of the financial year.
HPC says that, while a number of councils have yet to complete the consultation process, this level of uplift at least seeks to give parity with rising costs. Having fallen significantly behind the Consumer Prices Index (CPI) over recent years, this average review level is broadly in line with the April 2014 CPI of 1.8%.
What the uplift does not reflect is the forthcoming 3% uplift in National Minimum Wage (October 2014) coupled with a rising pension liability for many operators.
The research, detailed in full on HPC’s website – www.healthcarepc.co.uk – involved enquiry of all 152 English local authorities with responsibility for elderly care provision/placement and, with only a handful of local authorities failing to respond, the analysis reflects the fees set across 124 of the local authority areas.
Councils not reflected in the survey results include those currently out to consultation, those negotiating each fee on an individual basis and a limited number of local authorities who review annually in autumn. Last year the lowest average uplift, on a regional basis, was posted by Greater London and 2014 has proved no different. Indeed, the entire regional pattern remains relatively consistent year on year. The four regions awarding the highest average uplift in 2013 also do so for 2014, merely shuffling places between themselves.
With the vast majority of fee reviews resulting in an increase of sub 2.5% throughout the country, there has been a bout of generosity across the Midlands. Awards of 13.7% and 16.5% by Rutland and Solihull respectively assisted heavily in securing the top two regional places for East and West Midlands. Although an improvement on 2013, analysis of confirmed fee reviews to date indicates that 63% of local authorities have awarded a fee uplift at a level below the April CPI.
The elderly care sector in England has now experienced five consecutive years of sub inflationary local authority fee reviews resulting in what might be considered, in real terms, fee reductions. HPC director Nigel Newton Taylor said that, with sector optimism on the rise, the fee review was a timely reminder of the continued financial restraints experienced by local authorities up and down the country.
“The additional pressure resulting from this level of uplift points firmly towards net bed losses in the short and medium term,” said Mr Newton Taylor.
“The failure of local authority fee levels to keep pace with rising costs will test the viability of an increasing number of facilities. Coupled with a strengthening property market, many care homes proprietors will undoubtedly seek to exit through alternative use sale – akin to the situation we saw at the start of the millennium.”