Major cuts in government funding could make it hard to find the cash to give care workers the national living wage.
That’s the warning from a senior Tory in Portsmouth despite the government making a commitment salaries would rise to £9 an hour across the public sector by 2020.
Chancellor George Osborne is expected to reveal measures to cushion the impact of the policy on November 25 when he presents the Autumn Statement and Comprehensive Spending Review.
But in the face of cuts across the board in government grants, councils say that having to find higher wages will be tough.
Councillor Luke Stubbs, who is in charge of health and social care in Portsmouth, said there was ‘nothing set aside’ to give to agencies with care home and home-visit staff on the books to compensate for the rise .
And he is urging the government to help given the pressures local authorities already face thanks to the austerity programme.
He warned the council could be landed with a £2m bill if ministers do nothing – a crippling situation given the city’s health and social care budget is already overspent by £2.4m.
It comes as Portsmouth revealed plans to cut £2.6m from the health and social care budget this week to ease the pressure on the public purse.
Sexual health and public health services are at risk of being reduced and redundancies are on the cards.
Cllr Stubbs says: ‘There are threats creeping up, and the most significant is the rise of the national living wage.
‘This is something the council and wider parties welcome, but if it’s unfunded, it will cause a huge cost pressure. Many of the people who work in care homes and in domiciliary care, are provided on quite low rates of pay. It would cost a great deal of money to compensate the providers for the high rate of pay. We are hoping we will get something from the government.
‘The government said years ago that any new additional burdens on local government would be compensated for.
‘If we’re not, it will create a huge problem, because we have got no money set aside to make this possible.
‘I am worried about it. It’s something that could easily be £500,000 a year more from next year, and if the living wage steps up to £9 a year that could cost us £2m a year by 2020.’
Chancellor George Osborne announced in his summer budget that a new national living wage for all workers aged over 25, starting at £7.20 an hour, would be introduced from April 2016, and would reach £9 by 2020.
It comes as a survey of more than 1,000 employers shows the change would have an effect on the wage bills of half of them.
The new rate will have the greatest impact in the retail and hospitality sectors, the research by the Chartered Institute of Personnel and Development and the Resolution Foundation found.
Employers were most likely to say they will respond by improving efficiency or productivity, absorb costs or take lower profits, or make redundancies or slow recruitment. The CIPD said firms that have started to think about the consequences are looking at efficiencies rather than cost-cutting.
Fewer than one in 10 said they would cut pay for the rest of their workforce, reduce hours or scale down investment plans.
Mark Beatson, chief economist at the CIPD, said: ‘The national living wage was a bombshell for most employers when it was announced in July. It comes into force next April, which does not give employers a lot of time to prepare.’
Unions meanwhile warn government cuts are much to blame for council staff, contractors and school assistants being paid too little.
Jon Woods, Unison Portsmouth branch chairman, said low salaries are encouraging a high turnover of staff and poorer services.
And Mr Woods, who has campaigned in support of the living wage, condemned the cuts but said leaders need to look at the ‘bigger picture’ and realise taking workers off benefits and paying them an improved salary will drive down costs.
He said: ‘We haven’t implemented the living wage in schools; there are a lot of teaching assistants, non-teaching assistants and clerical staff who are on a very, very low wage who would benefit from a living wage.
‘The big one is the care agency staff. The problem is there is a high turnover of staff, carers are often to trying to get a better job and will move on elsewhere.
‘What we would like to see is vulnerable people getting two or three carers as well who they know, so they feel valued and get the right quality of care.
‘There are some very good carers who work for very little wages, but the system works against continuity of care.’