'Social care buy-in for fair pay plan at risk after Budget tax hike'

By Simon Bottery, King's Fund

On the day before the Budget, I held a round table with social care leaders on the government’s ambition for a ‘fair pay agreement’ to raise care worker pay.

This would involve creating a negotiating body, bringing together care providers and unions, to agree higher wages and better terms and conditions for care staff.

"Will the plans happen?", I asked. The sector leaders were largely positive that they would.

The next day, the Budget loaded care providers with big new national insurance bills. I quickly got a text from one of round-table participants, who wrote: "I wonder what the responses would be if you re-ran that question now?"

From caution to alarm about government social care plans

Fair to say that much of that positivity might have evaporated. Some at the event – mainly social care providers – had already been very cautious, fearing they would be expected to bear the costs of a future increase in pay rather than – as they hoped – having the cost met in full by the Treasury.

So the way in which the Treasury loaded those same care providers with extra staffing cost from increased national insurance contributions (NICs), which, in the worst cases, will make their businesses uneconomic, will have turned up the dial from ‘caution’ to ‘real alarm’.

One large voluntary sector provider, employing 6,000 staff, said the increase in NICs would add £5m to its costs, against a budgeted surplus for the year of just £2.7m.

The owner of a small group of care homes told BBC Radio 4's Today programme that the measure would increase their costs by £200,000 a year, with the rise in the national minimum wage adding another £500,000.

Chancellor 'confident' care services can bear tax rise

The chancellor, Rachel Reeves, was unrepentant. Though "not immune to criticism", she told the BBC’s Laura Kuenssberg that, despite the costs increases, she was "confident" that care services would continue to operate properly.

She pointed to the Budget providing councils with a 3.2% real-terms increase in available resource in 2025-26, including a £600m grant for children’s and adult social care, as the route through which cost pressures could be met.

It is true that the 3.2% increase in spending power is better than it might have been, even if it doesn’t quite rise to the heights of the "significant rise" called for by the Local Government Association.

Councils 'staring at a financial precipice' 

However it still leaves many local authorities staring at a financial precipice and in no position to give care providers the sorts of increases they need to cover increasing costs.

Four in five councils are expect to overspend their adult social care budgets this year and directors fear the financial situation will be worse next year.  The 3.2% increase is also some way short of the 4% average annual funding increase for NHS England over the next two years.

That has left the sector – providers, local authorities, and people who draw on services – with a sense of dismay at the prospects of real change in social care.

Does the government 'get' social care?

The Budget has added to a strong sense that the government doesn’t ‘get’ social care - or, if it does, that it doesn’t see it as in any sense a priority.

They remember that virtually the first thing the new government did was to cancel the introduction of a ‘cap’ on a lifetime care costs and wider charging reforms that were due to be introduced in 2025, in the process saving £1.1bn - more than the £600m promised at the Budget.

Though this was part of a broad package of cutbacks and the cap was by no means universally popular – some councils had already argued publicly for it to be postponed – it was not replaced with an alternative vision for the future of social care.

The best the government could muster was a rumoured royal commission on social care, to report some time in the future.

Benefits of fair pay agreement come at a cost

The one concrete measure that government has promised is the fair pay agreement for care workers. It is a bold proposal and one that would meet an undoubted need – an increase in care worker pay so that the sector could compete for staff with other industries.

That would potentially allow social care to offer more and better support to people, an ambition that is widely shared by government, providers, local authorities and, of course, people who draw on care and support.

But it will come at a cost and, after the Budget, the government now has an even bigger job on its hands to convince the social care sector that they will not be expected to bear it.

Simon Bottery is senior fellow, social care, at the King's Fund