The “catastrophic unintended consequences” of the Budget will be a disaster for hospitals in North Wales, say social care leaders.
That was the warning from Care Forum Wales (CFW), which represents more than 400 private and charity social care providers, as it launched a new campaign, Save Social Care, Save the NHS.
According to CFW, the combination of employers’ National Insurance Contribution (NIC) increases and the rise in the Real Living Wage will lead to a £40 million black hole in funding in North Wales and a £150 million gap across Wales.
Unless social care receives an NHS-style exemption from the increases or emergency financial support, there is a very real danger that care homes and domiciliary care companies will go bust, it said.
It added that the “inevitable result” would be vulnerable people “left high and dry”, which it said would pile more pressure on hospitals already struggling to cope and create even longer waiting lists.
CFW Wales chair Mario Kreft MBE has outlined the organisation’s stark warning in a letter to Welsh MPs, Senedd members along with First Minister Eluned Morgan and Cabinet Secretary for Health and Social Care Jeremy Miles.
A similar letter has gone to Prime Minister Keir Starmer and Chancellor Rachel Reeves.
The campaign is being supported by the Five Nations Group which represents care organisations from across the UK and Eire.
They say that third sector providers, including charities and hospices, will also be put at risk by the “ruinous measures” contained in the Budget.
In the letter Mr Kreft said:
“We have more than 400 members across the private and third sectors and they have reached out to us in alarm about the measures contained in the Budget.
“We have calculated that taken together this would amount to a £150 million funding gap across the sector Wales without an NHS-style “exemption” or additional financial support.
“Since 2020, 40 Welsh care homes have closed and if more of them are forced out of business, this will also place an additional burden on our hospitals which are already struggling to cope even before the onslaught of the added winter pressures.
“We are therefore urging you to support our campaign: ‘Save Social Care, Save the NHS’.
“The increase in employer National Insurance Contributions (NICs) by 1.2% to 15% and the reduction in the earnings threshold from £9,100 to £5,000 would impose a significant extra costs on providers.
“It represents a 37% increase in employer NIC for a member of staff earning £25,000 a year which equates to the Real Living wage.
“The combination of changes to NICs and increases in National Minimum and National Living Wages in the UK Budget represents a huge amount of unfunded extra cost that will affect all providers in a sector where staffing costs make up between 65% and 80% of total expenditure.
“Average size care homes tell us that they are facing extra costs of tens of thousands of pounds, with larger care homes facing even heftier bills amounting to hundreds of thousands. One of our third sector members has calculated that the changes will cost them over £1 million.
“This comes on top of years of underfunding that, combined with the lack of a fair, standardised toolkit for calculating care fees, left the sector in Wales fragile even before the havoc wreaked by the Covid pandemic.
“Since then, the gap between commissioned fees and the actual cost of care has grown ever wider, with many commissioners failing to follow the principles of the Welsh Government’s “Let’s Agree to Agree” guidelines.
“In 2024 we have seen commissioners increasingly impose fees based on flawed assessments of the cost of care, or on what they can afford, leading to a postcode lottery in terms of the fees paid by the 29 local authorities and health boards.
“At the same time, additional funding to meet Welsh Government’s momentous commitment to pay social care workers the Real Living Wage (RLW) has failed to reach a large number of providers and left them unable to pay without making a loss. As yet we await confirmation that Welsh Government will renew its pledge into 2025.
“The respected think tank, the Nuffield Trust, say the measures contained in the UK Budget could see ‘swathes of the social care market collapsing under these extra cost pressures’.
“They have warned that many businesses – especially smaller ones – are at risk of going out of business, disrupting or ending vital care for many older and disabled people.
“Another concern that’s been flagged up to us by members is the potential impact of the changes in Inheritance Tax on the care home market in view of the large number of family run SMEs and how this could affect continuity in the sector, especially in the rural, Welsh-speaking heartlands of Wales where these businesses enable people to remain in their own communities.
“Their assets are not accumulated private wealth, they are working capital assets – or tools of the trade – that provide for the continuance of the business and the jobs they provide.
“The former First Minister, Mark Drakeford, described social care as the ‘scaffold that holds up the NHS’ and losing care settings would be a disaster, not just for the vulnerable individuals for whom we care and our dedicated workforce, but also for hospitals across Wales.
“The changes, which amount to a tax on care, threaten to become a national emergency.”
Mr Kreft added:
“During the Covid pandemic the Welsh Government provided better emergency financial support than any other part of the UK and we need to see a similar level of support to overcome this potential national emergency.
“Local authorities and health boards need to be directed to play their part in ensuring this financial support reaches the frontline to ensure this tax on care does not cause a collapse of social care and create a hammer blow for the NHS.”
