Councils already planning £1.4bn in adult care savings next year before added pressures from Budget

Councils were already planning to make £1.4bn in adult social care savings next year before learning of the added pressures on the sector brought about by the government’s Budget.

That was one of the messages from the Association of Directors of Adult Social Services’ (ADASS) autumn survey, released today, which also revealed that councils were having to make over £1bn in savings in the current financial year.

ADASS’s survey, answered by 131 of the 153 English authorities, was conducted from 12 September to 9 October 2024, before Rachel Reeves delivered her Budget, setting out government spending plans for 2025-26.

Budget impact on social care

Reeves said that councils’ available resource would increase by 3.2% next year, with at least £600m in additional grant earmarked for social care.

However, at the same time, she announced  a 6.7% rise in the national living wage, which will benefit many thousands of care workers, and a significant increase in employers’ national insurance contributions, which will likewise kick in April 2025.

The rate employers pay per employee will rise from 13.8% to 15%, while the salary threshold at which they start paying the tax will fall from £9,100 to £5,000, bringing many more part-time workers, who make up 45% of the adult social care workforce in England, within its scope.

‘£600m risks being swallowed up by tax and wage rises’

Several sector bodies said the impact of the wage and tax rises on adult care providers would swallow up the £600m in additional grant, despite this expected to be available for the severely-stretched children’s social care sector as well.

They also warned that providers risked becoming financially unsustainable as a result of the measures.

However, ADASS’s survey revealed that authorities were already predicting severe pressures on adults’ services before learning of the Budget’s impact.

£1.4bn in planned savings

It found that authorities were planning to make £1.4bn in savings in 2025-26, based on extrapolating responses to the full complement of 153 authorities, a 55% increase on the £903m budgeted for 2024-25, as revealed by ADASS’s spring survey this year.

However, the latter figure had been topped up by £156m of in-year savings that councils responding to the autumn survey reported having had to find, taking the total for 2024-25 to over £1bn.

In addition, 81% of respondents said they were on course to overspend their budgets this year. Based on their responses, ADASS estimated that the 153 authorities were on course to overspend their allotted funding by £564m in 2024-25 – about 3% of total net budgets – a similar figure to 2023-24.

This is despite councils having budgeted to increase spending on adult social care by 9.2% in real terms in 2024-25 on the back of a significant boost in government funding. A 7.5% real-terms rise in 2023-24 helped councils increase the numbers of people receiving long-term, as well as reablement, packages of care.

Commenting on the results of its survey, ADASS said: “These are not the conditions for adult social care to thrive. These are not the conditions under which the new government’s proposed national care service can hope to succeed.”

A national care service is the government’s long-term ambition for the sector – however, it is yet to set out what this means in practice.

Budget ‘risks pushing providers over the edge’

Following the ADASS survey results, the Homecare Association reiterated warnings that the Budget would threaten provider sustainability.

“ADASS reports 81% of councils are already overspending and face unprecedented savings targets,” said chief executive Jane Townson.

“This means council fee rates are unlikely to rise enough to cover increases in provider costs. The Autumn Budget’s changes to employers’ national insurance contributions (NICs) and the minimum wage risk pushing many homecare providers over the edge.

“This perfect storm of council underfunding and increased employment costs will force providers to make impossible choices. We’re already seeing evidence of care visits being shortened; non-compliance with the minimum wage; providers exiting contracts; and providers ceasing to trade.”

She called on the government to exempt home care providers from the NICs increase and fully fund the increase to the NLW.