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National Living Wage: Social Care

Volume 771: debated on Thursday 5 May 2016


Asked by

To ask Her Majesty’s Government what assessment they have made of the effect of the national living wage on providers of social care.

My Lords, across the sector higher productivity, staff retention and better-quality care will benefit employers and care home residents. The national living wage rewards the valuable contribution made by care workers. Out of an estimated 1.52 million adult social care jobs in England, up to 900,000 people are expected to benefit. The department continues to work in collaboration with care providers and commissioners to support effective commissioning, recruitment and retention in adult social care.

I thank the Minister for his response, but it is a response rather than an answer. Is he not conversant with the BBC research published yesterday, showing that there are 5,000 care homes at risk of closure over the next three years, the recent Moore Stephens report, showing a 34% increase in care home insolvencies over the past three years, or indeed the LGA estimate of a £2.9 billion funding gap in adult social care by the end of the decade? In the face of these figures, why do the Government continue to assert the incredible proposition that it is possible to increase wage costs and regulatory burdens but not increase real-terms per capita funding? When will they end this dangerous fantasy and start addressing the serious crisis in adult social care?

My Lords, the increase in the minimum wage from £6.70 to a living wage of £7.20 has been universally welcomed, I think, including by most Members of this House. Care workers and people who work in care homes do an incredibly difficult job and £7.20 does not seem a small fortune to pay them. It will increase the costs for people in the care sector and there is some evidence that some care homes are closing. The figures I have are that in the past two years 2,000 beds have closed in the care sector, but during that time 600 domiciliary care agencies have opened—so I think that there is going to be a switch in the way that care is delivered from residential care to domiciliary care.

My Lords, I must say, it is very difficult to know sometimes what planet Ministers live on. That was an extraordinarily complacent answer. The survey yesterday showed that a quarter of all care homes are facing closure because of the financial squeeze. The Minister’s Government decided unilaterally to postpone—probably for ever but certainly for four years—the introduction of the Dilnot care cap. This proved massively disappointing to many people. The Government have put £6 billion into forward programme spending plans. Why not use some of that money to help the viability of the care home sector?

My Lords, if I sounded complacent, I did not mean to. I recognise that there is tremendous pressure on many providers of adult social care, particularly those funded by local authorities. It is for that reason that—disappointingly, frankly—Dilnot has been postponed. We wanted to bring in Dilnot but we decided that the cost of bringing it in was too great for local authorities to finance in the short term, although we are committed to doing it in the long term. The Government have allowed local authorities to raise a 2% precept and will be increasing the better care fund by £1.5 billion at the end of the period, bringing the total to £3.5 billion. It is a tough settlement—no one is making any bones about that—but tough choices have to be made.

My Lords, related to this is the whole issue of the better care fund. I think that Ministers will accept that while the better care fund is quite right, the delivery of it has not been properly thought through. In which case, what steps are the Government now taking to ensure that the better care fund is directed towards innovation in social care provision, to stimulate more cost-effective care in the community?

My Lords, the better care fund should be seen in a longer-term context of bringing together health and social care. The sustainability and transformation systems that are now being developed are the logical extension of the better care fund. Until prevention, healthcare and social care are brought together in a single budget, it will be extremely difficult to ensure the right allocation of resources.

My Lords, if a huge number or even a fairly large number of care homes close down—we have been reading about this in the papers—there will be huge pressure on the NHS. That will be the effect. What plans have the Government put in place to deal with what might be a really big crisis in the NHS?

My Lords, the Government are putting £10 billion of new money into the NHS over the five-year period. Clearly, if there is a crisis in social care, that will have a direct knock-on effect on the NHS. We fully recognise that. The CQC has an obligation to keep a very close eye on this and to produce early warnings if a major, hard-to-replace provider looks as if it is getting into financial difficulty. It is an area that we are acutely conscious of and are keeping a very close eye on.

My Lords, when these situations have arisen before and there has been a crisis with care homes, there has been a lack of response which has resulted in old and frail people being virtually turned out of the door. This is a crisis and there is going to be a crash—the care sector has warned us that it is coming. The Government have made concessions—the precept and so on—but will they put contingency plans in place so that when the crisis actually hits, old and vulnerable people are not suddenly thrust into a crisis that they do not know how to deal with?

The noble Baroness is absolutely right. Our whole focus must be on the residents of these homes rather than the owners. There are a number of very highly leveraged providers in this sector, which have high levels of debt—often very expensive debt—for historical reasons. The CQC is keeping a very close watch on them. When there are early-warning signs of difficulties, the CQC and the local authorities will put in place alternative plans.

My Lords, talking to a charity recently I was told that some care homes have already raised fees by £100 a week since the introduction of the national living wage in April this year. What plans do the Government have to look at the relationship between the cost of care homes and the cost to the individual of the economic viability of care homes, in light of the fact that the target for 2020 is to have a national living wage of £9? We need social care and care homes to be economically affordable.

The living wage will go up over this period of time. The better care fund and the social care precept will of course go up, too, over this period. Clearly there will be some fee increases. Local authorities have an obligation under the Care Act to have a sustainable and diverse market in their area. There will be fee increases to private providers but the main squeeze—the main concern which we in this House should have—is over local authority-funded care.