With only 25 days until the pause in HMRC enforcement action is lifted on 2 October, Royal Mencap Society (Mencap) Chairman, Derek Lewis today (Wednesday) set out the major repercussions if Government fails to fund or only partially funds the £400 million ’sleep-ins’ back pay bill.
Sleep-in overnight care - commissioned and paid for by Local Authorities – is widely used to provide vital support to those with learning disabilities. A recent change in Government interpretation of National Minimum Wage law has resulted in a massive £400 million back pay liability which HMRC is demanding that charity and other care providers pay.
Mencap Chairman, Derek Lewis said:
“Learning disability care in the UK hangs in the balance. In 25 days’ time, the pause in HMRC action will be lifted and the demands for £400 million enforced.
“The last couple of weeks have seen desperate efforts by the Department of Health, which commissioned Deloitte to do some sample fact gathering on the extent of ‘sleep-in’ financial liability.
“No-one expected Government to sign a blank cheque. But the process was very late in the day and hurried. Scrambling to gather complex data in late August, when many people are away and tensions are running high, creates anxieties about the accuracy of information on which critical decisions will be taken.
“Trying to identify individual liabilities among the 100,000 personal budget holders, will be even tougher as Government has to rely on the 418 individual Local Authorities, who originally commissioned the care.
“The efficacy of the methodology, the strength and resilience of the sample sizes and the extrapolations that are eventually based on it are all unanswered questions. Concerns have been heightened by the Government’s surprising refusal to share the results of this exercise with providers.”
Turning his attention to the devastating impact that a Government failure to fund or a decision to partially fund will have, Derek Lewis added:
“As one of the major care providers in the sector, Mencap’s estimated back pay liability is £20 million and we have financial reserves of £19.6 million which have been built up through the contributions of generous donors over many years. Funding back pay would require highly damaging actions to sell assets, cut programmes and cancel investment. Our plans to improve the lives of those with learning disabilities could be set back by a decade or more, as we struggle to repair the financial damage that would be caused by this liability.
“If Government fails to fund or offers only partial funding Mencap would be forced to take emergency action to hand back care services that do not cover costs, to local authorities.
“Initially, this could result in the termination of care in over 200 residential care homes and services, affecting more than 2,000 people with serious learning disabilities. Between three and four thousand dedicated care workers could face displacement or redundancy.
“Investment would also cease and programmes such as the critical information and advisory service that we run for families would have to stop.”
Mr Lewis went on to explain that Mencap took the decision to pay its hard-working ‘sleep-in’ care staff the National Living Wage from 1 April 2017, although only 40% of local authority commissioners have still not agreed to pay the new rate.
Mencap CEO, Jan Tregelles, then shared the stories of three, learning disability care providers from different parts of the country, all struggling to come to terms with the havoc that unfunded sleep-in back pay has caused, their full identity has been concealed to protect them from aggressive HMRC enforcement action;
Peter, chief executive of a medium sized provider of learning disability care in the West Midlands, said:
“My organisation is a medium sized charity and has run care homes and provided supported living services in the West Midlands for over 20 years. We employ 300 staff to support 85 people in these services and another 65 in day opportunities and deliver 1100 hours of support and 27 sleep-ins every day. We turnover £5.5 million and have a net worth equivalent to 3 months turnover (£1.4m) of which about 40% is invested in properties for people we support and the balance is utilised for working capital. We pride ourselves on being a lean responsive organisation aiming to deliver best value services with the highest possible quality.
"However, the income we secure is predominantly via local authority tenders, so margins are always tight.
“About half of our staff undertake sleep-in duties and we started paying a top-up to the national minimum wage in May 2017. We estimate the annual cost of this to be £255,000 including on-costs which would put us in a loss-making situation unless funded. We have some interim arrangements with commissioners to cover costs in some areas, but unless converted into long term funding from all, our volunteer trustees would be forced to hand back the services. We have already been unable to respond to some requests to take on new work and we are concerned this issue will make sleep-ins unaffordable and precipitate a return to larger institutions. Small efficient services with small staff teams are the most at risk.
“None of our commissioners will commit to funding back pay. Our trustees have already discussed the impact of a significant liability for back pay. We have estimated the full 6 years’ back pay liability to be in the region of £1.5m - our total reserves are £1.4m including the 2 properties. This would make the charity insolvent and they would act immediately to hand the charity to administrators to avoid illegal insolvent trading. This would be a catastrophic step not only for the people we support, who are amongst the most vulnerable in society, but also for our staff and their families. It is difficult to imagine just how traumatic this would be and for what purpose.
“To ensure the independent future of people with serious learning disabilities the Government should pay back-pay liabilities in full.”
Ruth, who runs a small family business providing support in the North West, said:
“My two daughters and I run 3 small residential homes that support 14 adults with complex needs and learning disabilities. 11 of the 14 people have been with us over ten years. We have worked to create family type relationships for nearly 30 years allowing our residents to live independently. My family became involved in this work because we wanted to give a better chance of a fulfilling life for those with a learning disability, and providing sleep-in care is a major part of this.
“We currently employ 12 support workers and have really struggled to get Local Authorities, who commission this essential care, to make funding available to pay the new national living wage rate for sleep-in shifts. In the end, we have had no choice but to sell one of our care homes to be able to afford to pay these new wages and keep the other two homes running. The threat of 6 years of back payments from HMRC would totally wipe us out. We’ve worked this out to be in the region of £100,000. The family business would cease to trade and we would be personally bankrupt. And the people we have supported for the past 30 years would have nowhere to live and be reliant on either social services aimed at elderly care where they will struggle to meet their specific needs and manage their behaviours or the NHS to find them somewhere to live.
“Sadly, if back pay is enforced or Government only partially fund it, the options would be few and the quality of care would be diminished. My daughter's and I cannot sleep at night, worrying about the future. We know none of the residents would want this to happen. I dread to think how we will break it to them, if it comes to that.”
Robert, chief executive of a medium sized provider in the South West, said:
“Our firm has been operating in the sector for over 25 years and employs just over 250 support staff caring for more than 100 vulnerable adults. A major part of business is the provision of overnight ‘sleep-in’ support to be sure that care is available should it be needed.
“Like many other providers we have seen our fees from commissioning Local Authorities rise by less than 1% in the last eight years. The implications of the current issue regarding sleep in shifts, historic back payment demands for unfunded hours plus on-going unfunded top-up current payments at living wage rate all threaten the financial stability of many of our services. The firm is already struggling to cover costs and has had to draw on financial reserves.
“The impact of the back payment bill would require us to make serious decisions on non-viable parts of the service and would also impact on our ability to offer competitive wages in a market where there is already a critical shortage of social care staff. This impact would be most felt by the people we support, their families and the staff we employ.”
Mencap CEO, Jan Tregelles concluded:
“What comes through very clearly is the speed at which years of dedicated learning disability care will start to unravel as the impact of no funding or partial funding hits and irreversible decisions are made.
“Charities like Mencap are simply unable to subsidise statutory, social care.
“And it will be the over-burdened National Health Service, already about to face one of its toughest winters, that will have to pick-up the pieces.
“As charities and business providers ponder a very uncertain future, the Government might wish to consider its role in this particular tragedy."
For further information or to arrange interviews, please contact the Mencap press office on 020 7696 5414 or firstname.lastname@example.org or for out of hours 07770 656 659.
Notes to editors
- Cordis Bright research on sleep-ins found back-pay claims could total £400 million
There are 1.4 million people with a learning disability in the UK. Mencap works to support people with a learning disability, their families and carers by fighting to change laws, improve services and access to education, employment and leisure facilities. Mencap supports thousands of people with a learning disability to live their lives the way they want.
For advice and information about learning disability and Mencap services in your area, contact the Learning Disability Helpline on 0808 808 1111 (9am-5pm, Monday-Friday) or email email@example.com.
What is a learning disability?
A learning disability is a reduced intellectual ability which can cause problems with everyday tasks – for example shopping and cooking, or travelling to new places – which affects someone for their whole life.
People with a learning disability can take longer to learn new things and may need support to develop new skills, understand difficult information and engage with other people. The level of support someone needs is different with every individual. For example, someone with a severe learning disability might need much more support with daily tasks than someone with a mild learning disability.
Learning disability is not a mental illness or a learning difficulty. Very often the term ‘learning difficulty’ is wrongly used interchangeably with ‘learning disability’.