On Wednesday 30th October, Rachel Reeves delivered her first Budget as Chancellor. And whilst at a high level, her “£22 billion increase in total health and social care revenue and capital funding as part of a two-phased spending review” may seem like a win, the reality for the social care sector couldn’t be further from the truth. As an HR expert specialising in the third sector, and the CEO of an adult social care provider, the Budget’s impact on social care organisations from both a staffing and financial perspective is a subject very close to my heart.
An unmatchable increase in business operating costs
As expected, a number of revenue-raising measures were announced to help fund this figure, including changes to the rates and thresholds applicable to employers’ National Insurance contributions (NICs), most notably:
- The rate of employer NICs rising from 13.8% to 15%
- The individual salary threshold beneath which no employer NICs are chargeable reducing by 45%, from £9,100 to £5,000 per annum
Don’t get me wrong, I don’t think there’s a provider/employer around who was surprised to hear about the requirement to pay more tax; nor were they surprised about the increased NICs. And no employers that I’ve spoken to begrudge the increase in minimum wage also announced by the Chancellor (especially in the current cost of living crisis).
Where the problem lies is the change to the employer NIC salary threshold. That’s where it’s going to hurt the most. And for some companies, it might even be the final straw in their ability to stay solvent.
In rough terms, the reduction in threshold to £5,000 a year – when combined with the rise in minimum wage and the employer NIC percentage contribution increase – will result in an additional cost to a company of around £600 per employee per year (for someone on minimum wage). For small businesses, especially those operating in the social care sector, this is a huge cost; one that organisations won’t receive any additional funding for. And of course, for those in senior roles, the cost to the employer will far greater, depending on their salaries.
Whilst some providers have diversified to open up new revenue streams, many will fail to stay afloat in the hugely challenging market that is adult social care. Social care is by its very nature focused on people, with business costs relating to workforce averaging around 80%. Cutting employee headcount also means diminishing the quality of care and in many cases, it’s simply not possible operate with less staffing to run safely. To increase the people cost for businesses further puts a lot of providers in serious jeopardy.
Unlike many other sectors where a product or service can increase their cost to the buyer, social care (and specifically our sector, learning disabilities) relies solely on Local Authority Funding. Social Care employers won’t get additional funding to afford the higher wages and NICs they now need to pay. There are learning disability providers that I’m aware of who genuinely don’t know if they’re going to be able to pay their staff wages for the rest of the year, let alone operate at any kind of profit – a situation that will prove catastrophic for the social care industry. Many are already sharing that they are considering closing altogether.
An ongoing lack of focus on the social care sector
Despite the figure of £22 billion being earmarked for “health and social care funding”, when it comes to practical application, the bulk of the money will be directed towards much-needed investment in the NHS. The amount quoted within the Budget for social care was a fraction of this, at £600 million. To put some context around this figure: the 2024/25 Budget ringfenced £680 million for adult social care – so this latest Budget is in fact a 12% reduction in social care investment for the forthcoming year. The £600 million promised by the Chancellor for social care is not new funding, nor is it an increase on the previous Budget period.
There’s no extra spend planned for social care. Yet the NHS have a £22.6 billion “cash injection”. This is a huge disparity, especially when you take into consideration the fact that social care saves the NHS hundreds of thousands of pounds each year, through the provision of support and reablement services to those leaving hospital. Social care providers are capable of bringing even more saving to the NHS, were funding directed more proportionately.
The potential risk is that the NHS becomes overwhelmed with people who should be under the provision of social care, but may end up being bed blockers in the absence of places to live. Does this then lead us back to an institutional model that we have worked so hard as a culture to move away from? What happens to independence for people in care, the campaign for people living in the community to have their ‘own front door’, to seek to have a degree of equality? The NHS may be able to afford it with their extra funding, but it will result in more clogged-up systems, and delays that could be avoided.
It’s a huge shame that, yet again, we’ve had a Budget where social care hasn’t been prioritised. It’s short sighted, and further fuels a situation whereby social care providers are constantly having to operate on the back foot. Everyone’s going to need social care; it’s an investment not an expense. Something needs to change. And soon.
Author: Hannah Millsted-Bowdery