Living wage increase to add ‘several hundred million’ to care costs

Promises by the chancellor to increase the National Living Wage (NLW) from next April could make the pressures on social care funding even more acute, health think tanks have warned.

Philip Hammond delivered the Autumn Statement to Parliament today, in which he announced that the NLW will increase from £7.20 an hour to £7.50 for workers over 25 from April 2017, following a recommendation from the Low Pay Commission.

The government introduced the NLW in April. Prior to the announcement, the LGA has produced research suggesting that the current NLW sum will cost council social care services at least £330m, less than the money they could raise from the social care precept.

Anita Charlesworth, director of research and economics at the Health Foundation, said that while the NLW increase was “welcome”, it would add “several hundred million” to care costs, as part of a “deeply disappointing” statement which contained no extra funding for health and social care.

“The social care system was already facing a funding gap of almost £2bn for next year, and that gap is now larger. The increase in the National Living Wage to £7.50 from April 2017 is welcome, but does add several hundred million to the cost of care,” she said.

“Lack of action to address the huge and growing gap between the need for care and funding is a false economy which is already hitting the NHS and will now hit harder. Hospitals are already under enormous financial pressures and coping with a significant increase in patients who can’t leave hospital because of a lack of social care.”

Prof John Appleby, chief economist of the Nuffield Trust, put the additional costs at around “a third of a billion”.

“The increase in the living wage announced today, whilst welcome for workers, will mean additional costs of around a third of a billion for social care providers from next year,” he said. “The Autumn Statement also underlines that the austerity measures affecting all public services will continue till the end of the decade

The lack of funding in the Autumn Statement comes despite pleas from the Health Foundation and Nuffield Trust for the government to address the unprecedented social care funding shortfall, which the LGA estimates will reach £2.6bn by 2020.

Research from the Resolution Foundation found that in its first three months, the NLW led to a pay increase of 9.2% for social care workers, over one third higher than the legal minimum. Laura Gardiner, senior research and policy analyst at the foundation, warned that the NLW could reach a “crunch point” where providers could no longer increase it.

In the Autumn Statement, the Treasury also confirmed it will implement recommendations from the Low Pay Commission to raise the national minimum wage to £7.05 for 21 to 24 year olds; £5.60 for 18 to 20 year olds; £4.05 for 16 to 17 year olds; and £3.50 for apprentices.

The government’s target is to raise the NLW to 60% of median earnings by 2020, subject to sustained economic growth. In addition, the Autumn Statement contained a commitment to invest an additional £4.3m a year in HMRC’s minimum wage enforcement.

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John Hull   24/11/2016 at 12:56

Basically we need people working below the poverty line, doing a responsible and difficult job, caring for the most vulnerable people in our society, for paltry wages.

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