Reeves’ Budget Will Bleed Social Care White – and the Vulnerable Will Pay the Price

Alexander Bowen is an MPP-MIA student at SciencesPo Paris and St Gallen specialising in public health, and a policy fellow at a British think tank.

Year after year we hear of the need for a joined-up approach between health and social care – a true care service capable of moving patients from highly resource intensive hospital beds into cost-effective community care.

Labour’s own manifesto called for a National Care Service, and just two months ago Streeting was insisting that “We can’t fix the crisis in our NHS without fixing the crisis in social care”.

So It is great to see then that Rachel Reeves has devised a budget that is indeed joined up; indeed, it’s so committed to joining up health and social care that it proposes to tax the latter to fund the former.

Two measures in particular – a 6.7 per cent increase in the minimum wage (though between 16-18 per cent for under 21s) and the employer-side national insurance hike (that on a salary of say £15,000 means an overnight 84 per cent hike in the employer’s NI bill) – risk devastating social care.

Just to maintain the historic ratio of the median care workers wage being six per cent above minimum wage, median hourly wages will have to rise from £11 to £12.94: a 17.6 per cent hike. Coupled with the national insurance hike, the cost of employing the median social care worker had just risen by some £3,500 a year.

Even more delightfully for Reeves and her neo-Corbynite lesson in creative accounting, that higher minimum wage will trigger even higher national insurance contributions, meaning the Treasury will get to double-dip from the same social care tax.

This wage and tax spiral would be one thing if the Government was sincerely committed to upskilling the sector and make at least some effort to create a better-paid and more productive workforce.

Yet the first thing that Stephen Kinnock, Labour’s social care minister, announced in office was the scrapping of a £50mn adult social care training and development fund meant to provide qualifications and skills to care workers (these qualifications will now somehow be provided for free).

The health think tank world, in particular the King’s Fund and Nuffield Trust (who are, shall we say, not exactly likely to be taking out a £39 Conservative membership any time soon) knows this, and their statements on the budget have been frankly damning.

The Nuffield Trust’s review of the budget is perhaps the most brutal, stating that “With no specific support to cover these costs (the hikes in minimum wage and national insurance), care providers are likely to face financial collapse” or at best face “difficult choices to pass higher costs on to people who pay for their own care”.

It is of course hardly surprising that they have drawn this conclusion from a budget that hikes the costs of providing social care by double digits whilst providing councils only 3.2 per cent more funding. This despite social care, the sector most impacted by the Reeves-budget, consuming 65 per cent of the average council’s managed budget.

Reeves’ national insurance and minimum wage hikes won’t just swallow up that 3.2 per cent budget increase – they will cannibalise other essential council services, given the legal duty to provide social care. The King’s Fund’s Review makes that as clear as it could ever be, using the rather diplomatic line that the funding increase is “of course welcome” but will be almost “almost completely eaten up”.

Even putting social care to one side, the King’s Fund’s budget commentary is damning, noting that the capital expenditure increases for the NHS are insufficient to even cover maintenance costs and that the £22.6bn is only enough to “maintain services amid rising demand”.

It’s good then, I suppose, that in the months prior to the budget Labour ditched its manifesto commitment to spend £1bn on capping the cost of social care at £86,000 to fill its magical “black hole”. After all the sector needs to find its revenue from somewhere.

It’s just a shame Labour seems to believe that revenue ought to be found from people with severe disabilities.

Readers may remember 2017’s dementia tax debacle. But they should know this: the bipartisan policy proposed by the Dilnot Commission, and adopted by Theresa May, remains far more sincerely equitable than Labour’s new dementia tax.

Worst still, now that assisted dying (the word presumably being used here given Kim Leadbetter has vigilantly refused to publish her bill in anything like an appropriate time frame needed for even basic scrutiny) is on the table and would presumably be free on the NHS, Labour has created a situation whereby choosing life and social care could cost people their entire life’s work… whilst choosing death will be state-subsidised.

It makes a change, at least, from the Johnson-era policy of granting 381,200 health and social care visas that instead of plugging workforce gaps (given vacancy rates did not budge) simply suppressed wages – yet in such a way that the lifetime cost of granting said visas would be far greater than simply paying a better wage in the first-place.

That was a foolish policy, and anyone who had read any of the literature on sectoral displacement (including Nobel Prize-winning economist Esther Duflo) could have told you so. Yet the Chancellor seems now intent on running her own foolish experiment in social care.

Fundamentally it seems that Labour, and Reeves in particular, do not believe that their policies can have negative consequences. They seem to believe that every policy is a Pareto improvement, despite this never being the case.

We’re seeing it in social care, where “new funding” will disappear back to the Exchequer, and we’re seeing it in childcare, where nurseries are already warning that “increased costs threaten to negate the benefits of the proposed funding, even if it’s indexed to inflation”.

You are left wondering then one thing. Is this dishonest cost-shunting (seeking to force councils into making the choices Reeves doesn’t want to make) the kind of bold-faced lie we might expect of someone who, say, claimed to be a national chess champion whilst coming 29th in said championship?

Or is it incompetence? Given the state of the Labour frontbench more broadly, it’s anyone’s guess.