Tag: costs of care calculator

Crises in health and social care. Who pays/who cares?

Crises in health and social care. Who pays/who cares?


Roy Lilley has recently blogged about the provision of social care for older people in the UK. The important point being made is that private providers, Saga in this case, are finding that they cannot make any money out of providing that service. If they cannot make any money then the business is worthless. The question then is who will take this on?


Marion Dakers, financial services editor for the Telegraph, reported (in January 2015) that Saga was selling its publically funded care home business. In 2011, Saga took-over Allied Healthcare. This is important because Allied claimed that 93% of local authorities contract with them.


The CEO of Saga, Lance Batchelor, said:


“…the margins were not enough to justify the investment needed to grow the business…


In May 2015, David Brindle reported:


“… the Saga group quietly slipped out preliminary annual results recording a loss of £220m on its ‘discontinued’ Allied Healthcare business, largely through writing down its balance-sheet value to nil.”


There was more:


“… this value has been determined by considering the current asset and liability position of the business; the future profit cash flows and the associated capital investment set out within the management’s five-year plan for the business; the risk attaching to the various cash flows and the costs of disposing of the business,”


Brindle also commented that:


“In so far as homecare featured in the (2015) general election campaign, it was in respect of the sector’s questionable labour practices: heavy reliance on zero-hours contracts and low, occasionally illegally low, pay. We heard little or nothing about the centrality of the sector to any hope of making our health and social care system sustainable”.


Saga said:


There are a range of ways of valuing the business and it is our expectation that an appropriate buyer will ultimately value the business higher than nil.”


So currently Saga’s homecare business is worth nothing, in a market worth £6 billion. They hope however that a future buyer will be able to value the business above zero. What confidence do we have that a private sector provider will want to enter this business without increased payments from the local authorities who buy the service, or without decreased costs coming from cutting provision, downward pressure on pay or selling off assets.


The wider context is that local authorities have faced budget cuts under the last government and therefore they have less money to pay for social care.  A possible way of meeting the shortfall between what the LA pays and the actual cost of provision could come from individuals or families, or private insurance schemes. Efficiency savings in providing care seem unlikely to reduce costs.  Will a private sector company want this business without government financial support? Brindle’s point remains: to what degree is the current system of health and social care financially sustainable?


Roy Lilly argues:


“Considering the margins and liabilities involved; loss of reputation and brand value if something goes wrong, bad publicity or a serious, sustained quality failure… this is a toxic business. No one in their right mind will touch it. The business is worth nothing”.


If this turns out to be the case, who is going to pay for the health and social care needed by an increasing number of older people in the community?


Margaret Thatcher once said:


there is no such thing as society, only individuals and families”


One way of reading this is to think that society will not and cannot provide care, because it does not exist, and so it is up to individuals and families to do so. This is rooted in Edmund Burke’s philosophical conservatism which is distrustful of a big state. It is also rooted in Hayekian free market economics that also sees little or no role for the state in many spheres of social life beyond providing a safety net. ‘Individual responsibility’ for health and social care is a lightning rod, it channels fears about big state socialism which is antithetical to conservative, and neoliberal thinking. The answer is of course for more private insurance schemes if individuals and families want to provide care. The main message being sent out by government since 2010 is that ‘the money has run out’. The implication is that now individuals and families will have to pay more for health and social care because the state cannot.


David Cameron, in a speech at the Lord Mayor of London’s Banquet on November 11th 2013, outlined the strategic objective: ‘austerity is here to stay’, he said:


“The biggest threat to the cost of living in this country is if our budget deficit and debts get out of control again…we have a plan…it means building a leaner, more efficient state. We have to do more with less”.


Efficiency savings will only get us so far. Part of the ‘more’ he refers to is ‘more social care for older people’ with ‘less’ meaning Local Authority spending cuts. Again, how will this be paid for?


A 2012 report by the Nuffield Trust and the Institute for Fiscal studies on ‘NHS and social care funding: the outlook for 2021/22’, suggested:

“…only a long term freeze in other public service budgets or large tax rises could enable a return to the 4.0% average annual growth to which the NHS has become accustomed”.

Health and social care are currently split in terms of funding, but care needs, be they social or health, are in reality are part of the same package. The NHS needs increases just to stand still. So we are facing further freezes in public service provision, this may include LA payments for older people in social care and care homes, as large tax rises were not promised by the Tory government in the 2015 election.


The recommendations of the Dilnot Commission on Funding care and Support called for major reforms that would, if accepted, increase costs to the taxpayer. So both Dilnot and Nuffield suggest tax increase might be needed. This is antithetical to Cameron’s ‘more with less’ and to the visceral loathing felt by many on the political right for taxes. Cameron and Osborne are not stupid men, they must have been briefed in detail on this issue.  One conclusion is that during elections and in public they talk ‘tax cuts’ but in private know they will have to raise taxes or face down those requiring health and social care?


Richard Humphries, at the King’s Fund, gave a stark warning to people in the UK regarding paying for social care:

“I think they can expect very little unless they are very poor or have very high needs, in which case they will get help both with arranging care and with paying for it. But for the majority of people they will be expected to pay for it themselves.”


The BBC has set up a ‘costs of care calculator’ – a first step perhaps in understanding in future liabilities for care costs.

And for balance – don’t expect the leadership of the Labour Party to be any more generous on this issue.

Skip to toolbar