The adult social care sector in the UK is in crisis. The increase in employers’ National Insurance contributions (ENICs) (1.2 percentage point increase, bringing the rate to 15%) and the lowering of the NI earnings threshold (from £9,100 to £5,000) announced in the Autumn Budget Statement, combined with a larger than expected increase in the National Living Wage (NLW) (6.7% increase, taking it to £12.21), quite simply dwarf the insignificant uplift in funding earmarked for social care.
In addition, Government’s provisional local government finance settlement for 2025/26 offered little in the way of reassurance for local authorities who will struggle to meet the increased costs that providers will face as a direct result of the Budget. Analysis from the Nuffield Trust found that the 18,000 independent organisations providing adult social care in England will be faced with increased costs of an estimated £2.8bn next year. While only a small fraction of this has been allocated by Government via the Social Care Grant next year.
Concerns falling on deaf ears
As the Chief Executive of a provider operating 48 care homes and 10 homecare branches catering mostly to publicly-funded care users, it is deeply frustrating when I see yet another Government kicking the proverbial ‘social care can’ further down the road, leaving care providers struggling to attract and retain valued committed staff; reward them fairly for the incredible work they do; equip them to do their jobs; and deliver the care our ageing population needs and deserves.
The raising of the NLW is of course welcome and a large number of our colleagues will clearly benefit. But let’s not kid ourselves. The funding made available to local authorities does not adequately fund this and does not address the growing funding shortfall. Moreover, there remains enormous inequity between how we reward those working in social care and those working in the NHS.
In the period immediately following the budget, I wrote to the 39 MPs in whose constituencies we deliver care, urging them to challenge Government’s refusal to exempt social care providers from the double ENIC contribution hike and support immediate action to mitigate the risks posed to this essential industry. Six acknowledged, two took action and two agreed to meet – although too late for any chance of challenging the legislation to be possible. Frankly if that is the extent of interest amongst MPs in the situation facing social care, the sector is in more trouble than I even dared to think.
Not all care providers are alike
Our sector is extremely diverse, with different operating and funding models. We each cater to different parts of the market and achieve widely varying economies of scale across our homes. In short, we are affected very differently by changes to costs that are beyond our control as well as by our clients’ ability to meet the costs of care. Any operator with a business model that is heavily geared towards NHS and local authority provision will have margins that are already cut to the quick, particularly following the challenges of COVID-19, the staffing crisis that followed, a significant hike in energy prices and a period of high inflation. But one thing has not changed – for many years, the rates paid for publicly funded social care have failed to keep pace with changes in the costs of delivering care. In 2024, Care England estimated the ‘in year’ shortfall to be in excess of £2.1bn. Even this ignores the cumulative shortfalls of prior years.
Like many social care providers, Healthcare Homes has shown creativity and innovation in addressing these pressures. Even in a difficult recruitment climate, we have dramatically reduced reliance on expensive agency staff; we have invested in improving retention; and we have utilised opportunities to attract international workers. We have also invested in technology that improves the effectiveness of our teams and our ability as a business to manage costs. These are ‘business as usual’ measures for any care provider. In a market characterised by razor-thin margins we have to work extremely hard to keep costs as low as possible as we fully recognise that care is a significant and unwelcome cost burden for whoever funds it.
Implications of the latest ENI increase
The announced changes to the ENI rate and earnings threshold in Government’s Autumn Budget Statement places an additional financial burden on an already overstretched social care sector. It will represent a significant and unbudgeted increase in operating costs. The changes will directly affect a provider’s ability to invest in staff development; invest in systems and technology; and in the fabric of their services. It is also likely to impact take-home pay for those earning above the NLW.
Being a regulated sector, whilst staffing levels are not fixed by law, the Care Quality Commission may quite rightly challenge services that cannot demonstrate adequate levels of care as a direct result of staff shortages. Ultimately, the Budget’s measures risk pushing many care providers into making difficult, but unavoidable, decisions about maintaining some services altogether.
Recruitment and retention are already two of the biggest challenges faced by the sector. It has been argued for many years that without a robust workforce strategy that professionalises care, funds fair pay and promotes training and career development, the sector will never be in a position to deliver the quantity and level of care that an ageing population will require. Skills for Care’s Workforce Strategy for Adult Social Care in England contains valuable recommendations and represents the minimum that Government should implement.
Financially prudent for the public purse
Government’s decision to increase ENICs contributions aims to bolster funding for public services and the NHS and naturally, the NHS is exempt from the increase. However, the decision to further tax the social care sector to deliver this funding flies squarely in the face of the stark reality that without a healthy social care sector, the NHS will still fail. The social care sector plays a critical role in relieving the pressure on hospital beds. The social care sector offers the public purse far better value for money in terms of caring for older people who are frail but are medically fit to be discharged from hospital. Not only is the cost of a care home bed less than one third of the cost of a hospital bed, a stay in a care home (following discharge) comes with a private room, unlimited visiting, social interaction, a full activity programme that fosters wellbeing and even free parking! Importantly it also carries a significantly reduced risk of cross-infection.
Every year, when winter pressures are reported by the NHS, care home admissions would normally increase. However, in the past couple of years, outside of London at least, this has been less and less the case, with care home beds remaining vacant whilst hospitals struggle to clear their beds. Even as I write, we as an organisation are finding it extremely hard to reconcile the dramatic headlines about hospitals declaring ‘states of emergency’ with the mere trickle of requests coming from integrated care boards and local authorities to access the available beds that we can offer.
Given the challenges that the health and social care system faces and the growing demands of an ageing population, we need to be creating more jobs in care, not less, and we need to be encouraging greater investment. None of the actions taken by Government reflect this ambition and the social care sector is being forced to do the exact opposite. The consequences for the health and social care system, for communities and the emotional and financial strain on families struggling to find and fund the right care for older family members are dramatic.
A vision for the future
The recent changes to ENICs are just one in a series of setbacks for an embattled adult care sector. They place providers like Healthcare Homes at a crossroads, facing mounting costs, workforce challenges and inadequate funding. Without immediate Government action, the consequences for many providers, their staff, and the people in their care could be significant. The dedication of all those who work in social care is unwavering, both on the frontline and in the boardroom. Their commitment deserves to finally be met with equal resolve from policymakers.
Government’s recently announced reforms and independent commission to transform social care, including a stated commitment to better integrate health and social care, is a welcome step in the right direction. However, integration will only succeed if social care is funded and valued as an equal partner. This requires a shift in perception – from viewing social care as a cost to seeing it as an investment in the country’s health and wellbeing.
How has your organisation responded to the impact of the measures announced during Government’s Autumn Budget Statement? Leave a comment on this feature or join the conversation to share your thoughts.
Gordon Cochrane is Chief Executive Officer at Healthcare Homes. Email: [email protected]. Linkedin: Search ‘Healthcare Homes’