Restricted budgets, restricted fees-A specialists view of the UK care sector

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Nigel Newton Taylor of HPC
Nigel Newton Taylor of HPC

 

As we enter the second quarter of the financial year, the majority of Local Authorities within England have now completed the Annual Fee Review. Analysis of elderly residential care fees carried out by specialist healthcare property advisors HPC indicates an average uplift in the region of 1.7%.

Whilst a number of councils have yet to complete the consultation process, this level of uplift at least seeks to give parity with rising costs. Having fallen significantly behind the Consumer Prices Index (CPI) over recent years, this average review level is broadly in line with the April 2014 CPI of 1.8%. Unfortunately, what the uplift fails to reflect is the forthcoming 3% uplift in National Minimum Wage (October 2014) coupled with a rising pension liability for many operators.

The research, carried out by HPC, is detailed in full on the consultant’s website www.healthcarepc.co.uk . It involved enquiry of all 152 English Local Authorities with responsibility for elderly care provision/placement and, with only a handful of local authorities failing to respond, the analysis reflects the fees set across 124 of the local authority areas. Councils not reflected in the survey results include those currently out to consultation, those negotiating each fee on an individual basis and a limited number of local authorities who review annually in autumn.

 

 

 

Last year the lowest average uplift, on a regional basis, was posted by Greater London and 2014 has proved no different. Indeed, the entire regional pattern remains relatively consistent year on year. The four regions awarding the highest average uplift in 2013 also do so for 2014, merely shuffling places between themselves. With the vast majority of fee reviews resulting in an increase of sub 2.5% throughout the country, there has been a bout of generosity across the Midlands. Awards of 13.7% and 16.5% by Rutland and Solihull respectively assisted heavily in securing the top two regional places for East and West Midlands.

With sector optimism on the rise, this fee review is a timely reminder of the continued financial restraints experienced by Local Authorities up and down the country. Although an improvement on 2013, analysis of confirmed fee reviews to date indicates that 63% of Local Authorities have awarded a fee uplift at a level below the April CPI. The elderly care sector within England has now experienced five consecutive years of sub inflationary Local Authority Fee Reviews resulting in what might be considered, in real terms, fee reductions.

Reflecting on the latest results, Nigel Newton Taylor (Director of HPC) warned “The additional pressure resulting from this level of uplift points firmly towards net bed losses in the short and medium term. The failure of Local Authority fee levels to keep pace with rising costs will test the viability of an increasing number of facilities. Coupled with a strengthening property market, many care homes proprietors will undoubtedly seek to exit through alternative use sale – akin to the situation we saw at the start of the millennium.”

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