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LGA - Funding needed to avoid National Living Wage pushing social care services closer to breaking point

The introduction of the National Living Wage (NLW) this week will push services caring for our elderly and disabled towards breaking point and a care provider crisis closer to reality without new social care funding being provided, council leaders say today.

The Local Government Association said councils support the new NLW – which comes into force on April 1 – but warns it risks destabilising the care provider market by adding a significant cost to the social care system. Councils have already had to close a £5 billion funding gap in social care since 2010 and are continuing to struggle with major ongoing pressures. 

The LGA has previously estimated it could cost councils an absolute minimum of £330 million in 2016/17 to cover increased contract costs to home care and residential care providers but warn the true cost is likely to be much higher. 

Previous LGA analysis indicated council tax rises to increase funding specifically for social care will bring in around £372 million in 2016/17. The LGA is warning that, for some councils, all of this extra money will be swallowed up by covering the cost of the NLW. For others, it will not be enough to cover increased care provider costs let alone cover the cost of other pressures within the system and protect social care services from any further cutbacks.

The LGA is calling for the Government to – as a starting point – bring the £700 million of new funding earmarked for social care through the Better Care Fund by the end of the decade forward to this year. 

It will also be organising urgent talks with care providers to tackle growing concerns that the ongoing social care funding crisis and the introduction of the NLW will see care providers pulling out of the market or going bust. 

Cllr Izzi Seccombe, Community Wellbeing spokeswoman at the LGA, said: 

"Councils fully support proposals to introduce a National Living Wage to help ensure care home staff receive a fair day's pay for a fair day's work. However, the cost of implementing it will significantly add to the growing pressure on services caring for the elderly and disabled which are already at breaking point. 
 
"Social care remains in crisis. Recent measures announced for social care will help but the immediate challenges remain. Councils will continue to do all they can to maintain the services that older and vulnerable people rely on but extra council tax income to pay for social care in 2016/17 will not bring in enough money to plug growing funding gaps and prevent the need for further cutbacks to social care services. 
 
"There is a real risk that councils will struggle to cover the increased contract costs to care providers as a result of the NLW. A lack of funding is already leading to providers pulling out of the publicly-funded care market and shifting their attention towards people who are able to fully fund their own care. We know that care home and domiciliary care providers cannot be squeezed much further and we will be organising an urgent summit with them to unite our concerns that a care home crisis is creeping closer to reality and behind calls for urgent additional funding. 
 
"With people living longer with more complex health conditions, we must move away from just trying to make sure people are able to eat, drink and get dressed. The Government needs to bring forward desperately-needed social care funding to allow councils to ease the pressure on care providers and protect the services which ensure our loved ones enjoy the dignified and independent quality of life they deserve."

Notes to editors

1. All councils can raise council tax by up to 1.99 per cent in 2016/17 to fund local services without the need for a referendum - most district councils can increase by £5 at Band D level. 

Councils have long called for greater flexibility in setting council tax. As a result, the Government announced as part of the Spending Review that England's 152 social care councils – responsible for caring for the elderly and vulnerable - can increase council tax by up to a further 2 per cent (up to 3.99 per cent in total) in 2016/17. Income from this extra precept must be spent on social care services.

Research published by the LGA last month found nine in 10 councils in England are considering or have approved plans to raise around £372 million for underfunded social care services in 2016/17 by using new powers to increase council tax by 2 per cent.

Council tax rises will not fix social care funding crisis

2. Currently 95 per cent of the local government workforce earns above the proposed £7.20 National Living Wage. There are 92,820 mostly part-time council employees, which would equate to just over 30,000 full-time staff, earning less. These include street cleaners, school crossing patrol and school dinner staff. 

Previous LGA analysis estimated that increasing their pay to meet the new rate in 2016 would cost £6.8 million. The LGA also estimated an additional £330 million at a minimum would be needed in 2016 to initially cover increased contract costs to home care and residential care providers. 

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