Government Budget could push some social care charities to the brink

National Star’s Chief Executive says the announced Government Budget could push some social care charities to the brink.

The increase in National Living Wage and in employers’ National Insurance contributions could prove to be too much for many charities, says Lynette Barrett, Chief Executive Officer of National Star.

National Star provides long-term residential care as well as specialist education to young adults with complex needs.

The majority of those young adults are funded by education, health and/or social care. National Star works with more than 48 local authorities across the country.

“Charities, like National Star, are dependent on local authorities which fund care places. Those authorities are already struggling financially and are unable to keep up with the cost-of-living increases in social care,” says Mrs Barrett.

Unlike a private company that will have profit margins, charities run on a break-even budget. They already work on incredibly tight margins.

Impact of National Living Wage Increase and National Insurance

“A 6.7% increase in the National Living Wage plus the increase in employer National Insurance contributions and lowered threshold will have a huge impact, even more so if those costs cannot be passed on to the local authorities which fund the places,” says Mrs Barrett.

“What the Government needs to do is provide additional social care funding that can be passed on to local authorities so that they can, in turn, support voluntary social care providers with this increased cost.”

National Star is still working out the cost implications of the Budget announcements. It has 1,260 employees.

“As a charity we welcome an increase of pay for those who are lowest paid and do life-changing work every day,” says Mrs Barrett. “However, these increases without mention of how local authorities are covering this cost in the fees they pay to providers is alarming.”

Early calculations indicate it will cost the charity near on £1 million to cover the minimum wage increase and extra employer NI contribution.

“It could be more as the level of NI will increase for those on higher salaries,” says Mrs Barrett. “It will have huge implications for the charity.

Lack of investment in social care is a concern

“The significant investment in health services is welcomed, however, the lack of investment in social care is a major concern. The Government can’t solve the NHS crisis without incorporating the social care crisis into their plans for reform. The lack of mention of social care was stark today.”

While Mrs Barrett welcomes the increase of £1 billion for special educational needs and disabilities (SEND) she says it is not enough to tackle the crisis.

“That additional funding does not address the deficit of more than £4bn that has built up in local authorities. Add to that the fact that we will now have to charge local authorities VAT as we are classed as a private school even though we are a charity that is publicly funded to provide specialist education and care,” says Mrs Barrett.

“While local authorities can reclaim that VAT they are working at deficits and simply don’t have an additional 20% available to be able to cover that increase in cost from January 2025. This is likely to cause extreme cash flow difficulties at local level and for providers.

“The sad fact is that the young people with disabilities and their families will be the victims in this and will suffer most as more services are cut.”