2016 was a year of surprises, not least for the British Government. With unprecedented international political challenges in the form of Brexit and Trump, it is perhaps inevitable that domestic policies have taken a back seat. Adult social care is a prime example. Playing second fiddle not only to Brexit but also, historically, the NHS, the adult social care sector has suffered from a lack of political attention that has slowly but steadily pushed it to the verge of crisis.
An obvious risk is the lack of funding. Despite reports that the Chancellor Philip Hammond was pushing for additional money for adult social care, none was forthcoming in November’s Autumn Statement. Instead, government decided to offer councils the option to extend the social care precept component of council tax, in a move that signalled a desire to shift the responsibility for social care even further away from the centre.
Stakeholders across government and the social care sector – of all political colours – are united in the view that the additional funding raised by the precept will be insufficient to cover the increasing costs of an ageing population and the pressure of the National Living Wage. The Better Care Fund, additional funding aimed at improving joined-up working between the health and social care systems, has also come under fire for being little more than a sticking plaster for the gaping hole in councils’ social care budgets.
Despite this, the government has given no indication that No. 10 will release additional central funding any time soon. Theresa May’s ability to withstand significant public pressure and criticism is evident, not least in No. 10’s response to concern over NHS funding from its Chief Executive Simon Stevens, which was to accuse him of being “unenthusiastic and unresponsive”. When questioned on the lack of funding for adult social care in the Autumn Statement, No. 10 said simply that “money alone is not the solution”, asserting that “many councils are providing high quality social care services within existing budgets”.
Compounding the situation is the recruitment challenge facing the sector. The introduction of the National Living Wage has done little to address this. As a cross-industry measure, the new wage has not prevented overworked, and often poorly treated, care staff from seeking an easier life in retail or hospitality. Indeed, it may have exacerbated recruitment difficulties by restricting the extent to which providers are able to offer higher rates to longer-serving staff.
Recruitment is also a challenge at the more skilled end of the workforce. Measures enacted by the Department of Health in an attempt to address the UK’s shortage of nursing staff, such as the creation of the nursing associate role and a new nursing apprenticeship degree, have been undermined by the decision to replace nursing student bursaries with the standard student loan. For those who still decide to go into nursing, the NHS remains the employer of choice, not the local care home.
Brexit presents significant additional risk. Overall, five per cent of the English social care workforce are non-British EEA citizens, although in areas such as London this proportion is far higher. 90 per cent of EEA workers in the social care sector do not have permanent British citizenship and will therefore be impacted by any change to Freedom of Movement rules. Non-nurse adult social care workers were removed from the Home Office’s shortage occupation list in 2013, and No. 10’s commitment to reducing net migration to the tens of thousands makes it unlikely that this decision will be reversed any time soon.
And yet, interest from investors in the adult social care sector continues. Amongst the myriad political risks, there clearly must be pockets of opportunity. The self-funder market, for example, is likely to continue to grow as demand from an ageing population with increasingly complex needs continues to outstrip the supply of state funded care. The outcome of the government’s review into the future sustainability of the sector could lead to innovative forms of delivering care, throwing up potential opportunities for investors.
Information, and the ability to navigate political risk and opportunity, remains essential to any investor looking to grow a business in adult social care. WA provides political due diligence, strategic advice and reputation management for investors and assets in sensitive and regulated markets. If your investments are subject to political risks, we can help.