Care home providers warn Chancellor that Living Wage will put them out of business

Owners of the UK’s five biggest care home businesses have written to Chancellor George Osborne, predicting that a major provider will fail in the next two years as a result of Living Wage commitments, due to come into force in April 2016.

The five providers are Four Seasons Health Care, HC-One, Barchester, Care UK and Bupa, who together operate more than 1,200 care accommodations and all agree that their businesses could go the same way as previous sector giant Southern Cross, which failed in 2011.

Despite their warnings, the groups insist their problem is not with the Living Wage itself, which they support, but with local authorities who are paying substandard rates for care home places and driving up private sector costs.

Care England chief executive offers his perspective, saying: “The care sector welcomes the National Living Wage and has long campaigned for it to be introduced.

“However, it is not sustainable for us to meet the increased cost of care when local authorities are already paying well below the true cost of delivery.

“We want to work with the Government to find a solution that will ensure the 400,000 people the care sector supports can continue to live in a safe and comfortable environment in their older years.”

RNHA chief executive officer Frank Ursell agrees: “We have believed for many years that care assistants are underpaid for the work they do and for the responsibility they carry in looking after some of the country’s most vulnerable and dependent people.

“But the costs of around two thirds of our patients are met by local authorities through government grants. So until or unless those grants are increased and are ring-fenced, we shall struggle even to pay the £7.20 figure identified by the Chancellor, let alone any higher figure.”

He added: “If there were any justice, then care workers would be paid around £9 an hour from next April. That, in our opinion, would reflect what they truly deserve. As things stand, however, that is way beyond our budgets. But were the government to reverse its draconian cuts and give local authorities sufficient funds for adult social care, nursing homes would be able to increase staff wages to an appropriate level.

“If we could do that, we are confident that the current recruitment problems faced right across the sector would be effectively addressed. Almost certainly we would be able to compete in our local economies and attract people who would like to make social care a long-term career.

“Staff turnover would be reduced and we would be better able to retain individuals who have gained a few years’ valuable experience. That, in turn, would have a direct impact on the quality of care being delivered on a daily basis. All these issues are irretrievably inter-connected.”

A Government spokesman responded: “The National Living Wage will benefit hundreds of thousands of care workers who will see their pay increase.

“The overall costs of providing social care will be considered as part of the Spending Review later this year and we are working with the care sector to understand how the changes will affect them.”