Future Approach to inflation
Providers submitted inflationary rates and costs that varied significantly across cost lines including staff costs, Employer’s National Insurance (ENI) contributions, energy costs, training and insurance. These inconsistencies present concerns regarding the accuracy of the data. However, in the absence of clear guidance from the Department on appropriate benchmarks for these cost lines, and within the short timeframe allocated to local authorities to complete the exercise, Hounslow judged that it was not feasible to amend the figures to a single value that could be clearly evidenced. Therefore, Hounslow did not amend these cost lines, despite concerns about the accuracy of the information submitted.
For the ARCC homecare tool, providers did not have the option to uplift for 2022/23 costs as providers were asked to provide a cost as of April 2022. Therefore, costs submitted are considered to be in year at the point of collection.
There are several interdependencies that will significantly impact the costs of providing care. Since the deadline for data submissions closed, several new developments have emerged which are relevant to provider costs. These include:
- Energy costs: on 8 September 2022, central government announced a policy to provide financial support for households (“energy price guarantee”) alongside a new 6-month scheme for businesses and other non-domestic energy users. The details of the scheme are yet to be published.
- Inflation: rate of inflation is unpredictable and continuously changing. The inflation rate for 2022/23 is not a reliable benchmark for determining fees in future financial years; it is necessary to have a dynamic approach to working with providers to understand actual costs.
- London Living Wage: on 22 September, the Living Wage Foundation announced an uplifted London Living Wage rate for the 2022/23 financial year of £11.95.
Further consideration is needed to understand the cost-of-living pressures that will be impacting the rates submitted as part of this exercise.
Hounslow has a contractual inflationary uplift approach for the contracted providers (who account for in excess of 80% of commissioned home care hours), which relies heavily on individual input from each contracted provider. Spot provision has no contractual approach and is reviewed annually and uplifted where external benchmarking indicates. Hounslow’s strategic intention is to work more closely with their contracted providers. This may eventually lead to a wider gap in the market rates between contracted and spot provision whilst focusing on developing contracted providers.
Hounslow is considering future options on approaches to inflation for 2023/4 and 2024/25 as part of their ASC budgets and market sustainability strategies. These have yet to be finalised and may vary for differing ASC markets but are likely to include tracking and consideration of CPI, LLW, RLW, regional/local benchmarking or other indicators to provide assurance to both the contracted and non-contracted elements of the home care market.