Care home providers are taking legal advice after many councils failed to offer fee increases that would cover the cost of paying staff the new living wage, LGC has learned.
Care England, which represents independent residential care providers, said a significant number of its members had been offered between 0 and 1% fee increases this year, despite councils raising additional funds through the 2% social care precept on council tax. Care England’s calculations suggest a rise of 5% is required to pay staff the living wage of £7.20 per hour for over 25s.
The body is so concerned about fees being offered it has instructed law firm Anthony Collins Solicitors to advise its members “facing increasingly unrealistic and unsustainable” rates.
The UK Home Care Association also said a significant number of councils had imposed a rate-freeze or only a small increase, with some yet to confirm their offer despite living wage requirements coming into force on 1 April.
Colin Angel, policy director at the United Kingdom Home Care Association, said there is an “increased appetite” among providers to legally challenge fee offers.
Mr Angel said: “The approach of some councils seems to be a concentration on their own internal financial procedures, rather than addressing costs which they have known would hit their local provider market since [the national living wage was announced in] July 2015.”
He added a “realistic understanding” of costs would help stabilise care markets.
Statutory guidance on the Care Act 2015 (Section 4) states that local authorities must “assure themselves and have evidence” that providers’ staff are remunerated to comply with national minimum wage, alongside obligations to maintain a sustainable workforce and market.
One legal expert told LGC this leaves councils who refuse to negotiate over fees vulnerable to successful legal challenges.
Ann Mackay, Care England’s director of policy, said fee offers vary across the country, but as adult social care had been historically underfunded, the introduction of the social care precept had “concentrated minds”.
Chancellor George Osbourne announced councils with social care responsibilities could impose a council tax precept of up to 2% to ease cost pressures at his Autumn Statement in November. However, the Local Government Association and others argued this would fall well short of plugging the overall funding gap.
The LGA estimates councils raised £372m by applying the precept, but faced a £2.5bn overall reduction in revenue support grant.
Ms Mackay said: “There is a general anxiety [in the residential care sector] that [fee offers] will not meet increased costs, which makes maintaining services much more difficult and providers will have to consider the viability of services.
“Older people’s services is the area where we [could] see possible closures more quickly. Action needs to be taken to ensure the precept gets through so extra costs can be managed.”
David Pearson, director of adult social care at Nottinghamshire CC and past president of the Association of Directors of Adult Social Services, said councils should work closely with providers to understand their costs and whether they have the capacity to absorb extra pressure.
He said: “In Nottinghamshire the combined effect of all our cost pressures is 21.9m and the precept raises £6m, while the living wage bill this year is £9.5m
“The process of increases to fee levels can be handled in two ways: at the contract stage and at the point of local government and providers working together to understand all the costs of care in an open book and transparent way.”
Cllr Izzi Seccombe, community wellbeing spokeswoman at the LGA, said councils supported the introduction of a national living wage, but warned care services were at “breaking point”.
*This story was updated on 26 April to include a comment from David Pearson