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Disability charities could become insolvent due to government demands

A number of leading disability charities could be driven to insolvency following government demands for £400m in back pay for overnight carers. Mike Smith, director at debt advice provider Company Debt, explains the issue.

Mike Smith
Director at Company Debt

Charity chiefs have warned the result could be the loss of vital care for vulnerable people with serious learning difficulties.

The HMRC bill will be split between around 200 disability charities after new guidance was issued on the payment of night-time carers. Many of the charities affected currently support vulnerable people who risk being majorly impacted by the changes, with some potentially losing all the support they currently receive.

Fortunately, the government has said it will waive financial penalties levied on disability charities by HMRC and suspend enforcement action for two months until it has worked out how to ‘minimise’ the impact of the bill.

Charities and firms offering at-home help now have until October this year to figure out how to pay the bill £400m. However, the charity sector said this announcement doesn’t go far enough and warns of a ‘collapse in care’ if the back pay bill remains in place.

What changes have been made?

When the minimum wage was first introduced in 1999, the government issued guidance to disability charities that carers looking after someone with learning difficulties overnight should be paid a flat rate ‘on call’ allowance. This payment of between £25 and £35 would cover the period while they slept.

However, following two tribunal cases in 2015 and 2016, that guidance has now changed. In October last year, the Department for Business, Energy and Industrial Strategy said charities must pay the minimum wage for the whole shift. That means, rather than being paid £25 or £35 for an overnight stay, those aged 25 and over would earn the minimum wage of £7.50 an hour, equating to £60 for an eight-hour sleep.

Rather than making the changes applicable from October 2016, the government has decided charities will face a bill of £400m for six years’ back pay. That’s a cost few charities can afford and one that could potentially push dozens towards insolvency.

Charities support the new guidance

The charities affected by the new guidance are largely in support of the changes, with many believing their staff should receive the higher pay levels demanded by the business department. It is the unexpected demand for back pay by HMRC that has caused the consternation, with many smaller care providers around the country likely to struggle.

Research shows that 99.7 percent of overnight carers sleep peacefully and are not disturbed at night. However, the service they provide is still invaluable and can make the difference between someone with serious learning disabilities being able to stay at home or spend their lives in hospital.

The multiple insolvencies likely to result from HMRC’s enforcement action will be devastating for the sector and for those people who rely on the care provided to maintain their quality of life. With no alternative providers available, the Care Quality Commission is understandably concerned.

Politics is getting in the way

The charities are understandably extremely keen to start talks with the government and prevent what could be a disastrous situation, but at the moment discussions are stalling with the Parliamentary Recess and Brexit thought to be getting in the way.

If no solution is found, there are an estimated 178,000 people with learning difficulties in the UK who could lose the at-home care they need to continue living in their homes and communities. Clearly, it’s vital carers should be paid properly for the incredible job they do, but any action taken by the government should be fair and considered and not put this vital service at risk.

Posted on 2nd August 2017 by Marcel LeGouais



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