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Wage negotiation – Labour’s plans for social care reform

We know that whatever else 2024 may hold in store, it will include a General Election, and while social care may not be a major battleground (although in any society which values human dignity, it should be), perhaps we should consider what’s on offer from each of the major parties. 

Given the trail of empty assurances and back peddling on funding commitments (see November’s National Audit Office report on adult social care reform), there is really no reason why we should expect anything other than more of the same from the incumbent administration: the delayed cap on fees will benefit very few and does nothing at all to address mounting levels of unmet need. Further tightening of immigration criteria will make the UK less attractive as a destination for social care workers and an increase in the National Living Wage will, without concomitant extra funding to local authorities, further threaten the business viability of many care providers who are already close to the cliff edge. 

The current Labour Opposition, should it be elected next year (and many pundits tip this to be the likely outcome) has pledged to take a wages-based approach which, while ideologically sound with its grass roots supporters, will surely ring alarm bells for independent care providers. At the heart of Labour’s plans for social care reform is a proposal for state-backed collective bargaining that will mark a departure from decades of declining trade union power in the UK. What is really interesting is that Labour says it will use the social care sector as a test bed for introducing the new system, via a new state-brokered agreement on social care pay, terms and conditions, which it hopes will attract more UK-based staff and so reduce the sector’s reliance on immigrant labour. 

As yet, the plans are spare on detail, but the broad approach is that government would bring together unions and employers to thrash out minimum wage rates, as well as policies such as pay progression. Once a deal is struck, the Government would give it statutory backing – so that it applied right across what is a highly fragmented workforce, with many thousands of individual employers. 

Would it work? Well, the NHS works if you throw enough money at it, and the key question is: would a new Labour Government be prepared to fund the cost of any uplift, given that close to half of social care is state-funded? While Labour sources acknowledge there would be a direct impact on the public purse, via an increase in the cost of providing taxpayer-funded care – the party is yet provide any cost estimates. 

We can only wait and see, but we shouldn’t dismiss the idea of social care reform via wage negotiation, given the signal failure of the present government to bring about any meaningful improvement. 

Meanwhile, those care providers who provide services to publicly funded clients have the option to adopt what is rapidly becoming established practice; restructuring their business administration to enable the recovery of VAT paid on costs incurred from providing services to publicly funded clients. This measure might mean the difference between curtailment or closure of services and continuing business viability in a fiscal environment where public funding of social care is clearly insufficient. 

For more than 15 years, VAT recovery specialists Kieran Lynch have been helping social care providers to recover VAT paid on costs they have incurred in providing care services to publicly funded clients. Over those 15 years, Kieran Lynch estimates that they have facilitated the return to the sector upwards of £100 million in VAT. For those care providers who look after publicly funded clients, simply waiting for one government or another to bring about real change may not be a timely option. 

Thinking about restructuring for VAT recovery? 

Contact Kieran Lynch on 0114 262 2127 or visit

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