Please ensure Javascript is enabled for purposes of website accessibility

20th Apr, 2022

Helen Clark
Helen Clark
Job Title
Divisional Director - Health & Care

The recent 1.25% rise in national insurance contributions marked the beginning of increased investment in the health and social care sector. This will be formalised in April 2023, with this payment split out from national insurance and renamed the ‘health and social care levy’, with national insurance returning to its previous level.

This new tax, combined with an increase in dividend tax, aims to raise around £12 billion a year to help clear the backlog of NHS treatment that built up throughout the pandemic and to address the issues facing the social care system. Is it enough?

A vicious cycle undermining efforts to fix social care

When the government announced its plan to resolve the challenges faced by the social care sector last September, the environment was very different from the one employers and staff face now. The rapid increase in the cost of living has added another element to an already vicious cycle that the levy will struggle to alleviate.

With the sector already in crisis, the costs of the levy may become a bigger impediment than any money social care providers receive. The decision to raise funds through taxes on both employers and employees means that cash-strapped providers will also be required to pay into the levy, further squeezing budgets that don’t go far enough as it is.

The increase in the price of energy and other goods also eats into providers’ existing budgets. Keeping vulnerable people safe and well is their number one concern, but the cost of heating care settings and providing high-quality nutrition and support has spiralled, creating even greater financial pressure.

Workers in the sector are also feeling the strain. As well as paying more for fuel, energy and other essentials, the increase in national insurance means their take-home pay is squeezed even further.

We’re already seeing the impact of this; the shortage of workers in the sector is becoming even more acute. With cash-strapped care providers unable to raise salaries in line with inflation, care professionals are voting with their feet. Despite plans for mandatory vaccination being dropped - the exodus many predicted if that policy had remained in place hasn’t materialised - there is still a steady stream of professionals still leaving the sector.

Many are choosing to take on roles as delivery drivers or in supermarkets. While this may be less fulfilling work, it is also less stressful and better rewarded at present. Fulfilment isn’t its own reward when people have bills to pay.

Support for employers and workers won’t go far

While the national insurance rise and its eventual transformation into the health and social care levy will provide greater funding to address the systemic challenges in the sector, the cost of fixing these problems will be significant.

Over the first three years following the levy’s introduction, the government has allocated £500m of the money it expects to raise to workforce funding in the social care sector. This forms part of the £5.4bn overall which has been promised to the sector as a whole – although much of this will go towards funding the cap on individuals’ care costs.

To be blunt: £500m isn’t nearly enough to address the staffing challenges the sector faces.

NHS Pay Review Body has estimated that it’ll cost £1.2bn to bring remuneration for the lowest paid of the 1.52m people working in the sector in line with their counterparts in the NHS.

The current funding allocation is £700m short of just being able to ensure the sector can stand still. Far more will be needed to address the long-term workforce challenges in social care, with the shortage of staff encompassing at least 112,000 vacancies.

Navigate the present, look to the future

However, there are two reasons for hope that the introduction of the levy can help to resolve structural issues in the sector.

The first is that £9.1bn of the money raised in the first three years of the levy is currently unallocated. While there will be competing demands for this funding given that it covers the entire health and social care sector, using some of it to top up the £500m already going to the social care workforce will significantly ease the short-term pressure on providers and professionals.

The second factor is the money the levy will raise for the sector beyond the initial three years. While it is impossible to know the government’s plans for allocating levy funds, over half (£15.8bn) of the £30.3bn being raised in the first three years is being spent on supporting the NHS with its Covid recovery and clearing the backlog in non-emergency procedures which built up through the pandemic.

If all goes to plan and the backlog is successfully managed, that should free up much greater funding for the social care sector. This could deliver the reform the sector needs and address the systemic problems it faces.

However, without an increase in the initial tranche of funding, this could be a moot point. Care providers and professionals are facing a squeeze right now. The promise of more money in three years will not prevent people from leaving the sector to pay their bills, or stop providers from closing care settings or even going under due to unsustainable costs.

The initial funding provided by the levy is a start, but it isn’t enough to meaningfully address the challenges the sector faces. More action needs to be taken now to safeguard the future of social care.

If you’re looking for skilled health and care professionals, find out how Reed can support you.