The care sector risks “catastrophic collapse” if government plans for a national living wage for staff are brought in, industry providers have warned.
Five of the UK’s largest care organisations have written to chancellor George Osborne claiming the plans could lead to a major provider closing within one or two years if funding from local councils is not increased.
“It is not sustainable to meet the increased cost of care when local authorities are already paying well below the true cost of delivery”
In Mr Osborne’s budget earlier this summer, he announced a new “national living wage” for people over the age of 25 that would rise from the current £6.70 an hour to £7.20 in 2016, and then to £9 by 2020.
But the firms Four Seasons Health Care, Bupa UK, HC-One, Care UK, Barchester and the over-arching membership organisation Care England said the additional impact on the sector could reach £1bn by 2020.
They said staff wages currently account for over 60% of the costs of care, and in more complex cases this can rise to 80%.
The care sector wants to pay its staff more, but the government must increase funding to help close the gap between what the local authority pays and the cost of providing care, they said.
Professor Martin Green, chief executive of Care England, said: “The care sector welcomes the national living wage and has long campaigned for it to be introduced.
“However, it is not sustainable for us to meet the increased cost of care when local authorities are already paying well below the true cost of delivery,” he said.
He added: “We want to work with the government to find a solution that will ensure the 400,000 people the care sector supports can continue to live in a safe and comfortable environment in their older years.”
Professor Green told the BBC: “Without adequate funding to pay for the national living wage, the care sector is at serious risk of catastrophic collapse.”