Under pressure: the Social Care Sector

Social care policy has long been neglected by Government when compared to acute, hospital care. The current Government is no exception, with David Cameron focusing on a 7-day NHS policy, and fulfilling the headline financial objectives of the Five Year Forward View. While the funding gap for hospitals looks to have been plugged for now, a combination of policies designed to improve the choice and quality of care for service users, accelerated demographic change, and cuts to local government spending will likely bring the social care sector to crisis point relatively soon.

The Coalition Government’s Care Act 2014 saw emphasis placed on personal budgets, requiring local authorities to offer personalised care. Whilst celebrated as a positive initiative for service users, councils now have to shoulder much of this policy burden, without additional resources. The Government’s reductions in financial support for councils have made providing adult social care more difficult, with local authorities averaging 2.2% cuts to spending on adult social care since 2009. The Better Care Fund has seen some money flow from the NHS to local government, but not at a level needed to keep pace with demand.

The recent Spending Review continued this trend, with the introduction of the National Living Wage in April 2016. Acknowledging councils’ financial difficulties, the Chancellor announced that councils will be allowed to raise council tax by up to 2%. However, the Local Government Association (LGA) insists that the 2% is barely adequate in absorbing wage increases, let alone continuing demand from an ageing population.

The residential care home market is, where it depends heavily on public funding, at greater risk. Recent research for Radio 4’s You and Yours programme has found that more than a quarter of UK care homes are at risk of closing within the next three years. The research found that individual homes were borrowing on average around 61% of the value of the business, amounting to £4bn across the industry. Of the 20,000 UK care homes operated by 5,871 individual owners, only approx. £60,000 profit a year is being made by operators. These figures are very discouraging and have already seen some providers struggling financially and/or exiting the market.

For those providers attempting to weather the storm, National Living Wage costs will add to current struggles, along with existing recruitment challenges. There is currently a shortage of qualified and experienced carers within the UK, a shortage that could be exacerbated by a UK exit from the EU. Currently much investment for care homes comes from private equity firms and US real estate companies. For councils this situation presents little comfort or security; such investors are likely to want a reliable and often substantial return, and concerns continue to be raised regarding quality of care and the long-term sustainability of care homes in the shadow of the collapse of Southern Cross in 2011.

The main consequence is likely to be that pressure on social care services will lead to pressure on the wider NHS. Unless the Government shifts the balance of policy towards investing in social care soon, it is likely to find itself requiring a more radical solution later, which could produce wide-ranging risks and opportunities for the social care market.

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