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Can we afford to care?

Laura Gardiner & Richard Humphries Resolution Foundation social care event slides.

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Can we afford to care?

  1. 1. Care to pay? Meeting the challenge of paying the ‘national living wage’ in social care Laura Gardiner November 2015 @resfoundation
  2. 2. • A £30 billion industry, in which demand for services is set to rise by as much as 60 per cent in the next two decades… • …But expenditure has been falling since 2010, reflecting sharp cuts to local authority budgets • At the heart of this conundrum sits the UK’s 1.4 million frontline care workers, who face: – Low (sometimes illegal) wages – Poor working conditions – Little training – Few employee benefits • A growing consensus that if we want a social care system that can meet the needs of our ageing population, we need to invest better in the workers who provide it 2 The adult social care workforce plays a vital role in society, but faces substantial challenges
  3. 3. • Between 51 and 64 per cent of the UK’s frontline workforce will be directly affected by 2020 = a pay rise for 850,000–1 million workers • And a big one! – Annual wage rise of £1,250 for those affected – Net household income increase of £825 after taxes and benefits accounted for • Other recent developments may provide a further boost to care worker terms and conditions (apprenticeship levy, EU ruling on home-to-work travel) 3 The National Living Wage is very welcome, directly affecting up to 1 million care workers
  4. 4. 4 But of course there’s a price tag attached £1.7 billion £2.3 billion Pre-existing payroll costs associated with above- inflation increases in the National Minimum Wage Additional costs associated with paying the National Living Wage to over-24s
  5. 5. 5 Where to find the money?
  6. 6. 6 Where to find the money? Productivity increases Long-term promise but limited potential within NLW phase-in period
  7. 7. 7 Where to find the money? Productivity increases ‘Trimming’ other costs or profits Long-term promise but limited potential within NLW phase-in period Limited given sector has already sought ways to ‘cut the fat’ in recent years. Further wage compression or minimum wage non-compliance deeply undesirable
  8. 8. 8 Where to find the money? Productivity increases ‘Trimming’ other costs or profits ‘Rationing’ services Long-term promise but limited potential within NLW phase-in period Limited given sector has already sought ways to ‘cut the fat’ in recent years. Further wage compression or minimum wage non-compliance deeply undesirable For example via further shortening of visits or tightening of eligibility criteria. Undesirable
  9. 9. 9 Where to find the money? Productivity increases ‘Trimming’ other costs or profits ‘Rationing’ services Increasing publicly funding Long-term promise but limited potential within NLW phase-in period Limited given sector has already sought ways to ‘cut the fat’ in recent years. Further wage compression or minimum wage non-compliance deeply undesirable For example via further shortening of visits or tightening of eligibility criteria. Undesirable Appears the most viable option…
  10. 10. £1.7 billion £2.3 billion 10 The public funding requirement to pay the National Living Wage to care workers £1.0 billion £1.4 billion Pre-existing payroll costs associated with above- inflation increases in the National Minimum Wage Additional costs associated with paying the National Living Wage to over-24s
  11. 11. • As well as considering the wider context for social care resourcing to ensure demand is met in the long term, a need to specifically address the cost of rising wage floors • No easy task in the context of £20 billion further cuts through to the end of the parliament. But an opportunity to think about the balance of support for different groups • And finding the money just the first step. Need to ensure funding reaches workers pockets, and not lose sight of broader goals of improving working conditions and training and progression opportunities across the sector 11 Imperative that the upcoming Spending Review sets out funding provisions
  12. 12. 65 75 85 95 105 115 125 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Index:2009/10=100 People aged >65 years Excluding transfer from NHS > 65yrs +14% Spending -17% Spending -10% Activity -30% ? * Authors’ estimate for activity in 2014/15 based on trend since 2009/10
  13. 13. Adult social care spending as a percentage of GDP* in England, 1994/5 to 2014/15 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1994-95 1995-96 1996-97 1997-98 1998-99 1999-20 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 PercentGDP Excluding NHS transfer Including NHS transfer Projection: Same annual reduction as 2009/10 - 2014/15 Projection: Same annual reduction as 2009/10 - 2014/15 *UK GDP pro rata for England (~85% UK GDP)

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