15/07/2015 07:01 BST | Updated 14/07/2016 06:59 BST

Good News for Care Workers Means Tough Choices for Local Authorities

On the face of it, the budget was good news for care workers; the Chancellor committed to a higher minimum wage for over 25s, rising to £9 an hour by 2020. It's not a Living Wage - which is calculated on a measure of living costs - but the higher rate will be welcome relief to the 40% of people working in social care who earn less than £7.50 an hour. Research published today shows that paying a real living wage, currently £7.85 an hour, is the most important benefit to employees in the care, retail and hospitality sectors.

But the higher minimum wage also presents the care sector, and those who fund it, with challenges. Because so many care workers are paid the minimum wage, raising it increases the cost of care that both private individuals and local authorities must pay. The Local Government Association (LGA) has estimated that local authorities face an additional £1 billion from the increased minimum wage, mostly coming from care. As well as paying higher wages to directly employed care workers, local authorities face higher prices of services they commission from the third and private sectors - now providing the bulk of state-funded care.

IPPR's analysis suggests that last week's budget has hit local authorities not only with the higher wage, but also another £3 billion of savings to find by 2020. This leaves state-funded care with a perfect storm of higher costs, rising demand and lower budgets. The sector will now need to think hard about how to respond. A pessimistic view would look to ever decreasing time spent with clients, and squeezing already low wages by not recognising breaks or travel time (in an sector that mostly delivers care at home). But there's little to suggest these measures increase real productivity. Instead, low wages and squeezed time slots both lower quality of care for people with care needs and quality of life for care workers.

Eroding the provision of care isn't inevitable or necessary; there are better options to explore. Digital services can help care workers access and share information so that they can provide better and more personal care, and there are many examples of such services already in use. Patchwork is an app that makes it easy for care workers to communicate with other professionals across different agencies, meaning more time with the client and less time writing emails. ADL's SmartCare service helps care workers access high quality, relevant information to assess clients' needs. Local authorities are rethinking their own digital services to help people access services and assistive technology that can help them self-manage care needs.

The workforce itself is central to high-quality care. Continuity of care and relationship-building skills are vital to quality, but at the moment the care sector struggles to attract and retain enough skilled and committed care workers. The higher minimum wage should go some way to correcting this, but other conditions are important - such as flexibility to allow for personal caring responsibilities and ongoing training opportunities to increase the value and status of the profession. Travelling from house to house to provide domiciliary care can be particularly isolating, often low-paid and particularly high-pressured. But in the Netherlands, an organisation called Buurtzorg has created a new model of care which offers the Dutch government savings of 40% while topping the tables for staff and client satisfaction. In Buurtzorg's model, home care is provided by skilled nurses, working together in small teams without management and supported by an innovative IT system.

Ultimately, high-quality care also requires proper funding. The Chancellor's budget hit local authorities with two pressures on social care budgets - through the higher minimum wage and cuts to local government grant. But the Resolution Foundation calculates that almost half of the public cost of raising care wages to the higher rate - over £1 billion by 2020 - would come back to the Exchequer through higher tax and National Insurance receipts, and lower benefit payments. So while the higher national minimum wage means that local authorities will spend more on care, some of that spending will return to the Treasury. The Chancellor should redirect some of that increased revenue to help stem the deepening crisis in the care sector.