It’s no secret that the care market for older and working-age adults is under pressure. Providers face rising costs, including increasing wage bills, while local authorities are struggling to meet their statutory duties with limited and shrinking funds.

With both providers and local authorities facing cost pressures, understanding each other’s position can help inform productive conversations. At one end of the equation, councils have a finite pot of money, at the other end are adult care providers who want to provide quality, sustainable care and still remain viable in a difficult market. In this article we speak to the representative body for the adult social care sector, Care England, to understand providers’ pressures and to Bristol City Council, a local authority which provided around 5,500-plus adults with adult social care in 2022/23, including funding around 1,400-plus care home places.

The issues in the care sector are many and complex. The cost-of-living crisis has put a squeeze on providers, with the cost of essentials such as food and fuel increasing. A further hit has come from the recent second consecutive National Living Wage (NLW) increase, which although undoubtedly positive for employees, has pushed operating costs up significantly without a commensurate change in social care budgets.

Richard Ayres, Social Care Advisor at Care England, says the biggest challenge for providers is currently pay related:

“The National Living Wage moving from £10.42 to £11.44 for those aged 23 and over means care providers will need to try to respect the £1.02 uplift across the board to maintain the differential between support and senior staff. Income from local authorities does not reflect this increase. Providers would need an uplift of eight to nine per cent just to maintain the status quo, but we are seeing uplifts of between five and seven per cent, with some going even lower, down to zero,” he says. Additionally, he points out that two or three years ago the cost of food per resident was around £35 per week, now it is £50.

“Prices soared and have come back a bit but won’t drop back to where they were. This is the same with insurance. Medical consumables were affected by the energy crisis and now the manufacturers are being affected by a rise in the NLW for their workers, so prices aren’t going to come down, they are just not going to increase at the rate they were previously.”

From the council’s standpoint there is a finite budget, and care must be commissioned to meet the assessed eligible needs of the population and allocated as fairly and equitably as possible.

Jonathan Wright, Strategic Commissioning Lead at Bristol City Council, says:

“Most providers want to do right by the people they support and be sustainable and we should be able to buy enough care within the available budget, that’s the riddle, yet we are always up against budget pressure. It is because nothing is equitable in the current market – there are some providers charging over the odds and some charging under. We do have some providers that are trying to maximize, they aren’t always in it for the right reasons. We want to make sure everyone has what they need and that resources are used equitably across the sector.”

Wright points out that, although many providers come to the council and say that they are not being paid enough, external data sources such as ADASS and the Local Government Association highlight that Bristol is consistently one of the highest outliers in terms of spend.

“We were working with a big provider last week with about two per cent of our market which is quite large given how fragmented the market is – around 150 people –and they were saying they were not paid enough. In a few cases they were right, but a few were well over. It is impossible to rebase spend unless you bring down those that are above a reasonable rate. Trying to move spend equitably is not always possible.”

Ayres says he has sympathy for the local government position but believes the current levels of funding in the older age adult market are unsustainable and that these issues are even more exaggerated in the working-age adult market where there is no ability to cross subsidise with private customers.

To this point, he says Care England took part in the recent Fair Cost of Care (FCoC) exercise carried out for older persons and this found that there was a “few hundred-pound gap per week” between what was being paid and what the FCoC was being shown as. The solution, Ayres says, would be for central government to increase local government funding. He recognises this is unlikely to happen, partly because local government can show they can buy care from providers at the rate they have set personal budgets at.

“Theoretically, if every provider said ‘I am not taking residents at a loss anymore’ then the personal budgets would have to be raised, but unfortunately it is a market with one buyer and lots of suppliers who are all worried about the cost of empty beds. Less is perceived as better than nothing for an empty bed,” he adds, “We need money put in by central government and the NHS to fund care at the FCoC level. What local authorities need to do is pay the cost of care for older persons which could push them toward financial challenges – however, that is the only way central government is going to act. We have a huge amount of underfunding in the older persons and working-age market, however, local authorities don’t have sufficient funds to pay the FCoC which is the challenge we need to overcome.”

The situation in the working age adult market, Ayres says, is even more dire because a far greater proportion of the care is labour based:

“When we see fee uplifts less than the eight or nine per cent, we need to cover pay increases then losses are even greater. We hear of a lot of working-age adult packages being handed back as they are no longer sustainable, and we are seeing more providers closing. Margins for working age is the lowest it has ever been as there is no ability to cross subsidise.”

The funding issues on both sides are clear and with no extra money in the pot, local authorities are increasingly looking at ways to work with providers to ensure sustainability and fair pay. The interlinking of commissioning of adult and children’s social care services is becoming a greater focus in some areas, including Bristol.

“While we take a very considered view of spend, we are still subject to inherited packages of care that are way in excess of those rates. Transitions from children’s services and health funding cessation. Our commissioning models have to factor in that we inherit some cases where there are no other options for care than what is in place. As with a lot of councils, the fragility of the children’s market and the existence of predatory providers within it is a problem. Adult services in Bristol have broadly been stable in the last two years, even in these difficult times, but the overspend is still high from other areas. We will be increasingly commissioning more jointly in the coming months and years with children’s and the NHS. At the end of the day, children become adults and adult services inherit those cases,” Wright explains.

Another potential way to bridge the gap is using the CareCubed tool. Ayres recommends the solution but advises that it should be used with caution:

“Local authorities and care providers need to work together. I am a big advocate of CareCubed because what we need is a common currency to allow care providers and local authorities to talk consistently using a common currency and language with respect to care provision. With 65 per cent of councils using CareCubed, we need to get providers using it too but there is a duty to ensure the tool is used correctly and not a stick to beat providers with. We need to get more providers using it, holding firm, and using it as an evidence base.”

Hugh Evans, Executive Director of the Adults and Communities Directorate at Bristol City Council, agrees:

“Councils have limited budgets and a host of providers asking for uplifts. Without a tool such as CareCubed we have no way of evidencing whether requests are fair and reasonable. On the provider side, there are rising costs and that it why it is important for both parties to be using data that is up-to-date and reflects what is happening in the real world to support these conversations. Otherwise, a provider can go to the council and say the cost of ‘X’ has gone up, but the council has no way of knowing whether it should be £50 or £150 a week. It is about quantifying that and having consistency between the parties as a common currency for them to work collaboratively and get to that point of shared understanding more quickly.”

Explore the CareCubed website to find out how CareCubed is working towards ensuring a sustainable and fair care market.

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