UK care home sector 'could lose 10% of beds in five years'

Almost one in 10 beds in Britain’s care homes will disappear in the next five years because of the financial crisis facing the sector, leaving the NHS to pick up a £3bn bill, a damning new report predicts.

As many as 37,000 beds, the equivalent of about 1,500 care homes, could be lost by 2020, according to the think tank ResPublica.

Elderly residents would have to stay in hospitals instead, the report says, where they would take up one in four beds.

The findings underline the scale of the problems facing the care home sector and the potential cost to the NHS. Leading operators have already said they will close or sell homes if the chancellor fails to provide more funding in his autumn statement.

Care homes are being squeezed by a fall in the fees that local authorities contribute to residents’ care and a rise in staff costs. The latter will increase further when the “national living wage” comes into force next April.

The ResPublica report, which is backed by the GMB trade union, says the care home industry will have a shortfall in funding of £1.1bn by the 2020/21 financial year, with £382m linked to the costs associated with the introduction of the national living wage.

It says the industry can no longer cope with the failure of a major operator, as it did in 2011 when Southern Cross, the country’s biggest care home group, collapsed and rival operators took control of its homes.

ResPublica’s director, Phillip Blond, said: “When Southern Cross failed, the private sector stepped in and cared for those left homeless.

“Now, however, with the sector losing money for every funded resident, there is no provider of last resort. We fear the worst case scenario is the most likely, that these residents will flood our local general hospitals costing £3bn per year by 2020.

“The national living wage must be brought in. It is essential working people are paid a proper wage. At the same time it will damage the residential care sector, which is already under extreme pressure, and it could collapse as a result.”

Trade unions and care home bosses have also urged the government to take action. Over-65s currently make up 18% of the population, but the figure will rise to 25% by 2050, putting more pressure on the system. The report says local authority spending on social care for older people has already fallen by 17% in real terms in the last five years.

Justin Bowden, the GMB’s national officer, said: “It is one minute to midnight for the care sector. Just as GMB warnings that Southern Cross would collapse were ignored again and again by government, history looks set to repeat itself unless George Osborne acts now. 

“This time, however, we are not just talking about the largest care home provider collapsing, but the entire publicly funded care home and domiciliary care sectors.

“This is not some unexpected, overnight phenomenon catching everyone unawares. This has been a slow motion collapse and somebody’s mum or dad or granny, our elderly and vulnerable, will be the biggest victims.”

There are currently 425,000 people in 18,000 care homes across the UK.

Writing in the Guardian, Guy Hands, the chairman of the private equity group Terra Firma, warned of the “potentially disastrous collective impact” of government policies such as the national living wage and funding cuts for local authorities.

Terra Firma owns Four Seasons, now the country’s biggest care home group, which is £500m in debt. Hands said, however, that the company could cope, and that the crisis facing the sector was not the operators’ fault.

“More elderly people who could enjoy their last years of life in comfortable and caring surroundings will instead be forced into hospital, which is distressing for them and expensive for the taxpayer,” he said.

“We are also going to see, as is already happening, a growing divide in quality between those homes providing private care – where fees have increased by 10% over the last five years – and those largely caring for residents financed by local authorities.

“It will make it much harder, for example, for businesses like Four Seasons, which offers an industry-leading dementia programme, to remain in the vanguard of improving care.

“Continuing to squeeze residential fees will prove to be a false economy and cause anguish for those who need care. Correcting the economics of residential care must be high on the chancellor’s agenda for the autumn statement.”