The Blog

The Straw That Broke the Care Camel's Back?

Friday 1 April is a notable day for many low paid workers, as the national minimum wage becomes the national living wage. It will rise from £6.70 an hour to £7.20 an hour for workers aged 25 and over.

Friday 1 April is a notable day for many low paid workers, as the national minimum wage becomes the national living wage. It will rise from £6.70 an hour to £7.20 an hour for workers aged 25 and over.

This is great news for many workers on low pay, particularly women working in jobs like childcare and eldercare.

What will be the impact on sectors like care where many staff will get an overnight pay increase of almost 8%? What are the likely consequences? And will it be the straw that breaks the care camel's back as some doom-mongers are warning?

Firstly the national living wage will lead to a big increase in most providers' costs. Staffing is the biggest part of care providers' costs and the rise in pay also comes at a time when employers are grappling with implementing pensions for their employees.

Secondly how will providers pay for this increase in costs? There are several options. They could cut staff numbers. This would be easier to do in eldercare where there are no fixed staff ratios in care homes for example, unlike for childcare. But care providers are already hard-pressed delivering quality care for older people with high level needs such as dementia.

Alternatively care providers could employ less experienced, younger staff. But that is likely to have a knock-on in terms of quality as well as continuity of service.

Providers could turn to public funders and seek more funding. But with local authorities already tightly squeezed, it's unlikely that there will be significant extra funding from councils to pay childcare providers offering free places to two, three and four year old children. And despite most councils increasing council tax by 2% from April to fund care, much of this has already been accounted for by cuts in government grants.

Thirdly, providers will be reviewing who they provide care for. In eldercare, this will mean fewer care providers undertaking local authority and NHS funded placements. Instead they will target self-funders - older people and their families, who increasingly will be expected to pick up the tab for care and will be asked to pay more for their care. For those who can't pay, there are real worries of a two tier system developing as under-funded care providers struggle to deliver quality care for older people who are either very frail or have dementia or both.

In childcare, as the government prepares for the introduction of the free thirty hours a week entitlement for three and four year olds from 2017, many providers are saying they will withdraw from delivering the free offer because they will no longer be able to cross-subsidise the shortfall from councils.

Instead childcare providers are looking at focusing on providing childcare for children aged under three and putting up their fees to parents using these services for younger children. So the national living wage could lead to overnight fee increases of up to 10% for a lot of parents, as well as a crisis in the government's free entitlement strategy. The recently announced delay in implementing childcare tax breaks until autumn 2017 will increase the pressure on parents facing higher childcare bills.

Finally, some providers will decide enough is enough and close their doors. This is still a big unknown but it would precipitate a massive crisis in care.

With many care services near breaking point, it's not surprising that there are warnings that 1 April marks crunch time for all those who need care, whether it's children or older people and their families. At this stage the government seems to be watching from the side-lines, waiting to see what will happen.

Before You Go