Minimum wage hike ‘could be a disaster for care homes’

RAISING the national living wage could cause further pain for Britain’s beleagured social care sector, a report warns today.

The Low Pay Commission, the official advisory body for ministers, warned that the rise in the wage ‘presents challenges for employers’ across the country.

But it said that the social care sector, where workers in care homes are often paid the minimum wage, would be particularly hit. Many homes are struggling financially and there was considerable anger in the wake of the Autumn Statement over the Chancellor’s failure to supply any extra funding.

The warning came as the Organisation for Economic Cooperation and Development (OECD) said ministers should ‘carefully assess’ the impact of the living wage on jobs before pressing ahead with a further rise.

The living wage was introduced by former Chancellor George Osborne last year and Philip Hammond, his successor, last week said it would rise from £7.20 an hour to £7.50 in April. It is due to reach £9 an hour by the end of the decade – covering 3million workers compared with 1.6million now.

In today’s report, the Low Pay Commission says the policy ‘is delivering substantial gains in pay to workers but also presenting challenges for employers’.

‘Women, part-timers and younger workers particularly benefited,’ says commission chairman Sir David Norgrove in the report.

‘This is very welcome, albeit we do not yet know the wider effects. Early data do not so far suggest negative consequences for employment though employers in specific sectors highlight significant pressures.’

The report warns that care homes are at risk as a result of increased costs at a time when social care budgets are stretched. Pressure is mounting on ministers to find more money for social care – some of which could be used to pay higher wages to staff.

At the weekend, former Tory Health Secretary Stephen Dorrell said Mr Hammond had made a ‘mistake’ by failing to find extra funds in last week’s Autumn Statement.

The leaders of the Conservative, Labour, Liberal Democrat and independent groups of the Local Government Association also said the Government could not persist in ‘ignoring’ the crisis. The association has warned that services for the elderly and vulnerable are already at breaking point

The OECD said in its assessment: ‘Caution is needed with the implementation of the policy to raise the national living wage.

‘The effects on employment need to be carefully assessed before any further increases are adopted, especially as growth slows and labour markets weaken.’