Healthcare experts have sounded the alarm over Rachel Reeves’ Budget measures, predicting they will devastate care providers and leave vulnerable disabled and elderly people without essential services next year.
Industry leaders warn this looming crisis could bankrupt local councils.
The combination of rising employer national insurance contributions from April, alongside increases in the minimum and national living wages, poses an existential threat to care companies, says the Homecare Association, a key body representing care providers.
A report by industry analysts LaingBuisson has exposed a growing disparity in the financial health of providers reliant on private clients compared to those funded by the state or NHS. Care providers dependent on state funding are at greater risk, the analysis reveals.
The care sector’s acute sensitivity to wage increases stems from its reliance on low-paid workers. Statistics show care worker pay ranks among the lowest in the UK, making providers particularly vulnerable to increased employment costs.
In a stark warning, the Homecare Association cautions that a wave of care provider closures could trigger widespread service failures, leaving vulnerable individuals without support, overburdening family carers, and crippling NHS services.
The association, alongside Care England, addressed their concerns in a letter to Chancellor Rachel Reeves, Health Secretary Wes Streeting, and Deputy Prime Minister Angela Rayner.
They warned: “Local authorities cannot manage the fallout of contract terminations or the collapse of multiple care providers. Councils would have to step in to deliver services directly, which could drive them into insolvency.”
Even before these additional costs take effect, the care sector is in a precarious financial state. With local authorities and the NHS purchasing up to 80% of care services, the fees paid are reportedly too low to sustain operations.
Many small, local care providers, which deliver the bulk of services, operate on razor-thin margins and lack financial resilience.
Councils are already grappling with dire financial prospects. Local authorities in England face a projected funding gap of £54bn over the next five years, putting them at risk of insolvency.
Adult social care directors have also flagged that government pledges to increase social care funding fall significantly short of the estimated £1.8bn needed to address extra costs, largely driven by measures announced in the Chancellor’s October Budget.
The Homecare Association forecasts a minimum 10% rise in employment costs in the next financial year, further exacerbating the strain on the care sector.
Without urgent intervention, the consequences could be catastrophic for both care providers and the communities they serve.
