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While we are now all too familiar with the perilous state of the social care system, the latest report from Age UK makes for sobering reading. It estimates that as many as 1.2 million people aged 65 or above – equivalent to roughly one in eight – are not receiving the support they require for vital daily activities such as eating, bathing and dressing.  This new figure represents a startling 17.9% rise from the previous year, with the number of those without access to the support and care they need almost doubling since 2010.

The report suggests that the dire warnings and predictions we have become accustomed to in recent times have now become a reality. Indeed, it is now abundantly clear that the social care crisis is already upon us. When the basic human needs of the most vulnerable are so wilfully neglected, we can no longer claim to be a caring or compassionate society.

The report also reveals the vast sums of money that are needed to plug the funding gap, estimating that an extra £4.9bn is required to ensure those with one or more unmet need, receive the care they require. To put this into perspective, the government’s recent policy which allows councils to raise council tax by an additional 3% is expected to raise just £543m in additional revenue. In a sign of how desperate the situation has become, many councils have been forced to cut other vital services including child care, road repairs and libraries in an effort to maintain current levels of care.

As if matters could not get any worse, a new threat has emerged that could exacerbate the crisis in certain regions. In the most recently proposed reforms to business rates, local authorities will be able to keep the extra revenue they collect each year. But while the new policy surrounding business rates has been designed to incentivise local councils to grow their economies, for those that are unable to raise additional revenue – likely the vast majority – they are likely to face a further hole in their finances.

At a time when the system is already in deep crisis, the government should ensure that any additional revenue generated through the business rates reforms is ring fenced for social care, and distributed to where it is most needed. With millions of elderly people already struggling without adequate care, we simply cannot afford for the government to make matters worse.

With a referendum in Surrey on plans to raise council tax by 15%, it looked for a time as though we might see more localised funding solutions, with other councils indicating they might do the same. Since then, however, councils have backed away from the idea, and the Prime Minister’s controversial intervention meant the Surrey referendum was also cancelled.  Looking ahead to the spring budget in March, it is therefore clear that if the social care crisis is to be addressed, it is the central government who will need to find a long term funding solution.

A report from UK Homecare Association (UKHCA) published today raises the issue of local councils paying homecare providers less and less, putting the whole sector under enormous financial strain and limiting its ability to deliver high quality care to vulnerable adults.

The report finds that publicly-funded older people’s homecare is under threat of a £513 million shortfall in what councils are paying providers. The UKHCA estimates that in order for homecare services to function effectively, a council needs to pay a provider £16.70 an hour, to cover business costs, ensure staff are paid the new National Minimum Wage of £7.20 per hour and allow for 50p of profit. However, the report states that councils are on average paying providers £2 per hour less than this for their services. Some are paying as little as £12 on hour. This situation can only get worse as Local Government is already forecasting a £4bn shortfall in funding before 2020. The knock-on effect is the tremendous strain on providers’ budgets and their ability to deliver these critical services.

This is a very serious problem for all groups concerned. The UK’s ageing population means that demand for homecare services is only going to increase over the next few decades, with the country already looking after one million more over-75s than it was five years ago. However, funding for the sector is highly unlikely to rise in proportion to demand – Government reform of the social care sector has been put on hold, meaning even greater pressure on providers. Add to this the necessary increase in staffing costs in line with the  rise in the National Minimum Wage to £9 in 2020, and a perfect storm is brewing.

It is clear that as a society we need to find a 21^st Century solution to the social care-funding crisis, and soon If we are unable to do so, many providers will collapse, putting millions of vulnerable people at risk of having their care needs unmet – a grim thought. Providers are working hard to ensure they can care for their clients despite this shortfall, but asking them to absorb even more cost is unfair and impractical in the long-term.

Headlines were made last week by calls from Dr Dan Poulter – a former health minister – for an additional tax to fund health and social care in order to save it from collapse. Poulter’s experiences make him an astute judge of the sector’s performance. As well as serving as a minister in the Department of Health, he is a fully trained gynaecological practitioner and still continues to work as a doctor for the NHS on a part time basis. Furthermore, the fact that a former Conservative frontbencher, who is unlikely to be an enthusiastic proponent of higher taxes, is supporting a tax illustrates the magnitude of the challenges faced by the health and social care sector.

Poulter suggests that the sectors need a “special tax that will guarantee an income stream, rather than policies like the cap which are entirely dependent on the economic climate of the moment.” He goes on to suggest the government needs to appreciate the scale of the social care crisis and that the reality is at least a million people aren’t getting the basic care they need.

The social care sector is in dire need of a permanent and comprehensive funding solution if it is to be able to keep providing high quality care for the millions of people who require it across the country. The scale of the challenges faced are vast. Local councils have to manage a £1bn shortfall in their social care budgets, which has resulted in some alarming cutbacks; many have had to reduce the number of services they are able to provide, and visits have been shortening in length to the detriment of the quality of care provided.

The sector’s financial challenges now present themselves at every level of the social care system. Over the last parliament, it is estimated that the government cut more than £4.6 billion from its social care budget. The ramifications of which can be felt down the chain: as a result of council cuts, care providers subsequently see their revenues fall which risks lowering standards and even forcing operators out of business.

A recent BBC study reported that 25% of care homes are at risk of going out of business due to their precarious financial situation – which would have severe repercussions for society’s most vulnerable people. Furthermore, while employees in the sector are rightly benefitting from a deserved pay rise following the introduction of the increased National Minimum Wage (NMW), jobs will be at risk if providers go under.

While a health and social care income tax is not necessarily the best way of tackling the health and social care funding crisis, it is good to see policymakers at the highest echelons of government looking for innovative solutions, something that is quite clearly needed.

In April, one of Britain’s biggest residential care providers, Four Seasons Care, reported an annual loss of £264 million – putting even more pressure on a company £500 million in the red. The collapse of Four Seasons would have severe fallout for its residents – the firm cares for 18,500 elderly people in 62 homes – as well as the wider social care sector. Worryingly, the brand is far from an isolated example; recent research from the BBC suggests a quarter of care homes in the UK are currently at risk of closure, and many face an uphill struggle when it comes to raising capital following debt downgrades.

The reason for the sector’s perilous finances is due to a perfect storm of funding issues. The Government cut more than £4.6 billion from the social care budget during the last Parliament, and many local councils are further reducing their budgets despite increased revenues raised from council tax. Care providers subsequently see their revenues fall, as local government reduces the amount it pays them – risking lower standards and even forcing operators out of business.

At the same time, social care providers face significantly increased cost pressures as a result of the increase to the national minimum wage. There are an estimated 1.45 million workers currently employed in the UK social care sector – many of whom earn the minimum wage.   On the 1^st of April, the creation of a ‘living wage’ increased this to £7.20 an hour for all adults aged over 25, leaving the sector with an enormous rise in staffing costs.  While social care workers provide a vital service and deserve to be well remunerated, the timing of this increase could not be worse from a financial perspective.

On top of this, providers have also had to face up to increased inspection costs from the Care Quality Commission (CQC), which add to the challenges the sector faces.

Unfortunately it seems that the government will do little to fix the state of the nation’s social care sector, which faces higher costs and less financial support. The recent budget provided the Chancellor with the opportunity to provide some relief – but problems were barely mentioned let alone confronted. With the purse strings unlikely to loosen over the next few years, councils must look to more affordable models like domiciliary care to meet the aging population’s needs.

Research from The King’s Fund revealed that one in five hospital finance chiefs believe the incoming cap on agency staff will damage the quality of care provision. According to the directors, the cap could directly affect their ability to keep enough nurses and doctors on their wards to meet the needs of patients, something that is totally unacceptable.

From April this year, the NHS will be able to pay no more than a 55% premium on the salary of a permanent doctor or nurse for a shift. The government and policymakers hope that this will end what they see as agencies ‘ripping off’ the system, and help to plug the enormous holes in the NHS’ finances.  Recent figures suggest that the health service is on track to achieve a deficit of around £2.3bn over the year 2015/16 – and the current regime believes that it can save £1bn over three years by bringing down the cost of locum staff.

However, while this may seem like a sensible way to reduce costs in the short-term, in reality these measures are unpractical and potentially dangerous to patients. The press are quick to portray agencies as being out to milk the taxpayer for as much as possible, but high costs are a reflection of the limited availability of specialists and are not the norm. With so few locum specialists available at a given time, and the NHS and agencies working in a market-driven environment, it is natural that the cost of procuring these professionals will carry a premium.

Another principle reason why agency fees are greater than those permanent employees are the additional costs that  providers incur. When people compare the fees paid for agency staff with permanent staff they are often not comparing life for like; agency charges often include costs like National Insurance and pensions, whereas these are excluded when quoting pay rates for hospital staff. Furthermore, agencies also have to cover their operating costs – meaning that many may struggle to stay in the black with reduced revenues. The resultant unavailability of staff following agencies going out of business would have a huge and dangerous fallout, leading to gaps in care provision to the most vulnerable, and risk patient safety.

Worryingly, the suppression of agency fees could also produce a situation in which specialist staff are also not significantly incentivised enough to perform locum work – particularly in rural areas – which would again cause enormous problems. By putting a cap on agency fees, policymakers are taking a gamble on agencies being able to operate on lower revenues – and turning their backs on framework agreements with agencies that have served the NHS well for the past decade

Reports in the Daily Telegraph suggest NHS bosses believe elderly patients are refusing to give up their hospital beds, for fear of the financial repercussions of going into a care home. This paints a very disturbing picture of the state of the nation’s elderly care provision, and the impact this has on wider health and social care services. According to health chiefs, the number of elderly people who are fit to leave hospital but choose to remain has increased by 15% over the past 12 months alone, an enormous jump in a relatively short space of time.

This steep rise illustrates just how concerned the elderly are about the cost of care to them and their families. Research from Prestige Nursing has repeatedly shown that these costs are getting out of control; average care home fees now reach as high as £34,000 in some regions, and the national average has risen by 2.5% in just one year. Worryingly, these costs are now rising at a faster rate than pensioners’ incomes – despite the fact care homes are already double the typical income.  Faced with such enormous costs, it is little wonder the elderly are reluctant to leave hospital. The government’s decision to postpone the cap on care fees until 2020 will do little to change this problem, irrespective of whether it is right or wrong.

Furthermore, these reports also signify the impact that a poorly funded social care sector can have on wider services. This past November 153,000 days were lost in NHS hospitals to “bed blockers,” whose needs could have been met through alternative means, such as social care. Not only does bed blocking reduce the availability of vital services to other vulnerable people, it also demonstrates that by trying to cut costs in one area of health and social care the government simply shifts the burden to another. Simply put, cuts to social care funding are directly responsible for a large portion of the NHS’ financial difficulties.

Unless the government is willing to provide solutions to the financially ruinous costs of care homes, or strengthen the provision of social care significantly, the number of elderly people reluctant to give up hospital beds is only going to increase. This is a lose-lose situation for all involved, with the health sector wasting resources, the elderly stuck unnecessarily – and most likely, uncomfortably – in hospitals, and other would-be patients denied full access to care.