National Minimum Wage

Views on Competitiveness
Prices
Chapter 2: The Impact of the National Minimum Wage
2.131 In our last report we noted the continued difficulties faced by providers in the social care
sector attempting to negotiate the price paid for their services by public sector
commissioners. We thought it timely and appropriate to repeat a recommendation we had
made in similar form in previous reports: that the commissioning policies of local authorities
and the NHS should reflect the actual costs of care, including the NMW. The Government,
as with the previous recommendations, accepted it.
2.132 In its evidence the Government reminded us that it does not directly employ care workers;
the Government allocates resources to local authorities who make decisions on what
proportion of their budgets to spend on adult social care. In deciding overall funding from
central government the Government makes an evaluation of likely cost pressures on the
adult social care system, including wages, as well as an assessment of the efficiencies that
can be achieved in the sector. A similar arrangement operates for assessing overall funding
from central government for care commissioned through the NHS from social care providers.
The overall social care funding for local authorities is allocated to them through the
Department for Communities and Local Government Formula Grant. This allocates funding
on a formula basis to each local authority in England, taking into account differences in
demography and other factors such as labour costs. It is then for local authorities and care
providers to negotiate care fee levels to reflect local circumstances. However, we again
received evidence of the continued challenges faced by care providers.
2.133 The United Kingdom Home Care Association (UKHCA)
said that its own survey on commissioning found that “This has been the worst year
58 per cent of councils had cut the price they paid to on record for care providers.
the independent and voluntary sectors for homecare. They are being affected by
The Registered Nursing Home Association (RNHA) the commissioning practices
said that by the time of any funding reforms following of local authorities. Every
the Dilnot Commission in England (which it thought
week there is another case of
not likely before 2014) many local authorities will have
providers being expected to
reduced fees payable for residential and nursing care
take a cut, and margins are
by a total of 10 per cent below the levels paid in
2010/11, which it estimated could cause a shortfall
already tight. Local authorities
of income over expenditure of around 20 per cent. were not honouring price
It claimed that this would cause many care homes to increases in contracts, and
close. UKHCA said it still saw no evidence to suggest providers were ‘taking a hit’ on
that the Government was moving to implement the their bottom line.”
Commission’s recommendation on commissioning.
UKHCA/RNHA oral evidence
2.134 The annual Laing & Buisson UK-wide survey of local
authority baseline fees for older people in nursing and
residential care (Laing & Buisson, 2011) found the
average fee increase was 0.3 per cent in 2011/12, down from 0.7 per cent in 2010/11 and
2.6 per cent in 2009/10, with many local authorities freezing or reducing their fees.
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