Budget 2018 – what should the Chancellor do for healthcare?

26th October 2018

In the fourth of our thought leadership pieces ahead of the Budget on 29 October 2018, we take a look at what the Chancellor could do for the healthcare sector.

We sat down with Bishop Fleming Partner Tim Godfrey to get his thoughts on the forthcoming Budget.

Q1 – What services does Bishop Fleming provide to the healthcare sector?

Bishop Fleming provides strategic tax advisory, audit and accounting support to the sector. Our specialist advice covers the complexities of superannuation, succession planning through to buying or selling a care home or group of homes and merging a group of GP Practices.

The firm is a member of both the Kreston and ICAEW Healthcare groups, giving us access to a wide range of specialists as and when required.

Q2 – What are the key measures you would wish to see the Chancellor announce for the healthcare sector, and why?

The problem with healthcare funding is that it remains fragmented at both the primary and secondary care level.

Local authorities are struggling to meet their statutory duties, with budget deficits spiralling out of control.  Local authorities are likely to have a billion pound overspend this year on care services, with many councils dropping all non-core service delivery just to keep the lights on!

Greater coordination of budgets is crucial, with local authorities working more closely with the private sector to minimise bed blocking in hospitals over the winter period. It’s not about releasing those into care at end of life, but more about a properly-funded pathway developed to extend life in the right setting.

Staffing remains a key issue and with BREXIT the uncertainty over the supply of labour continues to remain at the forefront of the agenda. Immigration policy must reflect the need for a constant supply of staff who are qualified and willing to look after our ageing population.

Q3 – With the elderly and vulnerable population rising, what does the government and the sector need to do to manage the increase?

The lack of suitable housing is one of the key problems, but investors are deterred due to the viability of the sector. Funding needs to increase to encourage investment and the development of new care models.

The significant variation in local authority fee rates across the country is a contributory factor and the Chancellor should ensure that there is more consistency. It is essential that the right base fee is paid across the board and is not set based on a council’s budget deficit prediction.

Q4 – The government is undertaking a major spending review between April and June 2019 and health will be a key focus, along with education, police etc. Are there major reforms to the way health is funded that should be considered as part of that review?

Remove the cost of (not the responsibility for) social care from the local authority budget and look for a nationally/regionally funded children’s and adults social care provision which works with developers to unlock new models.

Q5 – In the absence of more funding, at least for the moment, what can care homes do to generate more income and be more cost efficient?

Quality will drive up the average fees that care home operators can charge. Day care services where residents come into the home for company and care can bring an additional source of income, whilst at the same time building a bond to the home for the future.

Q6 – How do you see the growth of care home groups progressing? Is it inevitable that single care homes cannot afford to keep going it alone?

The days of the super groups like Southern Cross are numbered as their ability to meet the ever increasing regulatory demands comes under scrutiny. New build homes providing high quality living will continue to attract private pay residents, but those councils with tight budgets will look to technology and home care to fill the gap in provision.

Those homes converted from old large Victorian buildings will fall into two camps; those that have the location and demographics to become boutique hotel style care homes charging high fees for high quality care, and those that have not invested and will chase residents accepting low fees and ignoring investment until eventually the regulators catch up with them.

Much like the rise of the branded hotel chains providing a quality product for a reasonable price, those B & B’s charging £25 a night will eventually run out of gimmicks to draw in the customers.

Q7 – Since April 2017 the IR35 legislation has forced public sector organisations that use contractors to establish if those workers are employees or self-employed. How has this affected the healthcare sector? 

This legislation has really affected the sector, with expensive agency workers filling the gaps where needed.

The point made earlier needs reiterating here that post BREXIT there needs to be an immigration policy that recognises the needs of the sector.

Q8 – How can evolving technology better help the sector to manage its administration and support patients/clients?

As more of our elderly population live at home, technology will become essential if we are going to meet their needs.

Loneliness is one of the biggest issues, so the use of video and skype plus robots will help to alleviate this issue. Sensors in the home will monitor health, allowing care to be delivered as needed and not on a diarised basis.

Q9 – What more can the government do to help prevent care homes from failing?

Rather than beating them with a regulatory stick, why not have a regulator that is working with care homes to up skill them?

New entrants should have to have a basic set of skills and understanding of the challenges, and not just hide behind a registered manager who has perhaps been in post for years.

Q10 – Should those running care homes receive more formal training in finance and management to enhance their skills or can more of this be outsourced to external professionals such as accountants?

Viability of homes and certainly larger groups is coming under review. At present only those entering the sector have to obtain a certificate of viability from a suitably qualified professional.

It would seem obvious that at the start most are viable otherwise why would you invest! More regular and consistent financial information certified by external professionals would give comfort.

Watch out for the Budget on 29 October!

Bishop Fleming will be covering the Budget on the day and will follow up announcements about the healthcare sector with Tim afterwards to see how well he thinks the Chancellor has done.


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