Elderly care crisis 'will get much worse'
- 28 June 2011
- From the section Business
The government is set to begin a major review of the funding of elderly care in England. But in the face of massive financial pressures and an increasingly elderly population, what is going to be the true cost of balancing the books?
New figures seen by the BBC reveal struggling care homes are facing average real term cuts of 2.5% in fees from local councils.
Experts have warned this could mean many more face the same fate as Britain's biggest care provider Southern Cross, which this month narrowly avoided being forced into administration.
Preliminary figures from leading health economist William Laing reveal the extent of the squeeze across the sector.
Mr Laing carries out an annual survey of the fees councils pay to care homes. This year, there has been an average rise in fees across the UK of just 0.5%. This equates to a real terms cut of 2.5% after inflation is taken into account.
Most councils have completely frozen their fees, which means a 3% real terms cut.
Mr Laing's figures are based on 70% of the 200 councils in Britain. They show widespread cuts across England in the current financial year, with the deepest in Wirral, which is proposing to take 9.5% off its fees.
Just over half of elderly care home residents are paid for by local councils.
Mr Laing said on average, local authorities were paying about £100 a week less than the true cost of care for each resident, with privately run homes staying in business by charging those who pay for their own care more than the market rate.
With most councils cutting back on the number of beds they provide themselves, the squeeze could lead to a shortage of beds in future, he said.
"It is going to be difficult at these fee levels to get investors to invest," he said.
"At the end of the day, the local authority puts a figure on the table and says that's it - take it or leave it."
The president of the Association of Directors of Adult Social Services, Peter Hay, said 80% of councils had kept their fees at the same level as last year or given a small increase, despite the pressure on budgets.
"We are giving every priority to the sector in a very difficult context, so councils aren't embarking on this recklessly, they are doing their very best," he said.
"We have got to ask questions about trying to work together to manage this very difficult financial climate. That means looking at what use we make of residential care, how much of it we want and how to deliver good quality care of the type and volume that we need."
In Wales, one care home owner, Mike Davies, has taken his local authority to court to force it to pay a fee which will cover his costs.
Mr Davies was nearly forced to close the Woodfield nursing home in Pembrokeshire last December after his bank told him he had breached a profitability clause attached to a business loan.
Pembrokeshire was paying him £390 per week for each resident it placed there - but his business could only break even if the fees were £480, he said. The council has now been forced to raise its fee to £464 after a court ruling.
"The bank wouldn't have put the homes into receivership, because technically they were full.
"They were good homes and if we couldn't make them work, who would want to buy them? So they would have had to close.
"It was coming up to Christmas, so it would have been pretty bad," he said.
Mario Kreft, the chief executive of Care Forum Wales, which supported Mr Davies' case, said many more homes were facing closure across England and Wales because of the squeeze on local authority fees.
"We've got prices rising, [an] interest rate rise around the corner and very low fees. Put that together and you have the perfect storm," he said.
"Nobody can be sure how many homes we're going to lose in a short space of time."
In Wales, where Mr Davies' won his landmark judgement, many local authorities have actually put fees up.
In Scotland, all local authorities have frozen their fees, as has the Health and Social Care Board in Northern Ireland - in real terms, a cut of 3%.
One of the biggest cuts is being made in Suffolk, where the council has cut private care fees by 4%. The council has also announced it plans to sell off the 16 homes it owns, leading to fears that elderly people in need might not be able to find care places near their homes in future.
Audrey Fife, 91, was told she could go home from the West Suffolk hospital in June, even though she had a broken ankle and could not stand up. She persuaded the NHS to send her to one of Suffolk's homes instead, but fears the sell-off will affect provision in future.
"I feel it's the most appalling thing to be happening. I hope to get back to my home, but many people can't. What is there in the future? Where would these poor folks go?" she asked.
As well as cutting fees and selling off homes, many councils are cutting back the care they provide to elderly people in their own homes. In Birmingham, where fees are not yet finalised but where a 7% cut is expected, the council is cutting £50m from its social care budget.
Among those affected is Doreen Greenhill, aged 74. She has cerebral palsy, failing eyesight and kidney problems, and she cannot walk unaided.
"I had my teeth cleaned for the first time in two weeks yesterday," she said. "I feel I am not living, just barely existing really, and I don't know how long I can put up with it."