Experienced care workers were earning just 4p per hour more on average than newcomers to the sector as of December 2024, according to new Skills for Care data.

This is the smallest pay gap between independent sector care workers with five or more years’ experience and those with those less than a year’s service yet recorded in a data series dating back to 2016.

Then, experienced care workers earned 33p per hour (4.4%) more on average than newcomers, but the gap has fallen significantly since, dropping from 10p to 4p per hour from March to December 2024.

Shrinking pay gap between senior care workers and junior colleagues

Skills for Care’s latest report on independent sector pay also showed that the differential between care worker and senior care worker salaries had reached its lowest level yet recorded – 6%, down from 8% in March 2024 and a high of 11% in March 2017.

Median pay for senior care workers stood at £12.75 per hour in December 2024, compared with £12.00 per hour for care workers, said the report.

The squeeze in pay progression appears to have been driven by the impact of growth in the national living wage (NLW), now the wage floor for those aged 21 and over, on a low-paying sector such as adult social care. Since the NLW’s introduction in 2016, real-terms median pay has grown by 26.2% among the bottom tenth of independent sector earners and by just 14.1% among the top tenth.

Providers’ challenge in meeting living wage rises

The NLW has increased sharply over the past two years, from £9.50 to £10.42 per hour in April 2023, a rise of 9.7%, and then to £11.44 last April (9.8%). This has meant that independent care workers have received average real-terms pay rises of 5.4% and 7%, respectively, in each of the past two years, said Skills for Care.

However, it added that some employers had reported that keeping up with changes in the NLW had been challenging, alongside their other business costs.

This is likely to become more challenging still next month, when the NLW grows by a further 6.7%, to £12.21 per hour, and employers must also meet the costs of significant increases to their national insurance contributions (NICs).

Skills for Care found that 58% of independent sector adult social care workers – about 780,000 staff – were earning less than the forthcoming NLW (£12.21 per hour) as of December 2024 – meaning they would benefit from next month’s rise. This includes about 575,000 care workers.

Much of the rest of the workforce is likely to receive a pay rise too because of the need to maintain pay differentials as far as possible.

Costs of NLW and national insurance hikes

Think-tank the Nuffield Trust has calculated that the rises in the NLW and NICs combined will cost independent sector providers an additional £2.8bn in 2025-26, with councils expected to fund £2bn of this to cover the services that they commission.

However, dedicated adult social care funding for councils in England is due to rise by approximately £1.2bn in 2025-26.

“Many councils cannot cover the rise in employment costs and we are worried this will increase the risk of non-compliance with the minimum wage,” said Homecare Association chief executive Jane Townson, in response to the Skills for Care figures.

Townson criticised the government’s decision last week to overturn a House of Lords vote to exempt adult social care providers from the NICs rise.

‘A direct threat to the quality of care’

For Care England, which represents independent sector providers, chief executive Martin Green said: “Care providers are caught between rising wage costs and insufficient money to fund them. Many are already struggling to recruit and retain staff, and with further financial pressures, the situation is only going to worsen.

“This is not just a problem for the providers themselves – it is a direct threat to the quality of care that millions rely on”.

The government has curbed the recruitment of care staff from overseas with adults’ providers in England instead required to prioritise hiring international workers already in the country.

Ministers said the measure, which comes into force on 9 April 2025, was designed to provide work for care staff who had come to England and then been exploited, leaving them without a job.

However, provider leaders warned that the move, along with an accompanying rise in the minimum wage paid to care staff on health and care worker visas, would exacerbate the sector’s recruitment challenges.

This in the context of there having been a sharp fall in the number of staff recruited from abroad following a ban on care workers on these visas bringing dependants with them, which was introduced last year .

Sector’s increasing reliance on overseas staff

That had followed a two-year period in which providers had become increasingly reliant on overseas staff to tackle high vacancy levels, after being permitted to recruit care workers from abroad.

Independent sector providers hired 105,000 people from overseas into direct care roles in 2023-24, up from 80,000 in 2022-23 and just 20,000 in 2021-22, according to Skills for Care figures.

Over that time, the number of overseas staff from outside the EU working in the sector almost doubled, from 140,000 to 300,000, while the number of British staff fell by 70,000, from 1.26m to 1.19m.

Increasing exploitation concerns

However, the growth in the number of overseas care staff was accompanied by widespread reports of workers being exploited, either by employers or agencies recruiting workers from abroad.

The Gangmasters & Labour Abuse Authority (GLAA), which investigates worker exploitation, said last year that 61% of all concerns it received from April to June 2024 concerned abuses within the UK care sector.

Many workers reported being forced to work excessive hours with the threat that their sponsorship, obtained by their employer to enable them to work in the UK, would be cancelled, said the GLAA.

Others were forced to pay off debts resulting from excessive fees charged by exploiters to secure work, or reported not being properly paid, living in unsuitable conditions while being charged high accommodation fees and, in some cases, being offered no work at all.

Prioritising recruitment of staff who have lost sponsorship

Between July 2022 and December 2024, the government revoked more than 470 sponsor licences from care sector employers because of abuses, preventing them from recruiting from abroad. However, this has left many sponsored staff without a job.

Last year, the then Conservative government announced a £16m fund, allocated to regional partnerships of councils and providers, to help find care roles for these staff and offer them pastoral support.

The government has now gone further by barring providers from hiring care workers or senior care workers from abroad on health and care worker visas unless they have first tried to recruit from among the pool of workers already in England who have lost sponsorship.

Under changes to immigration rules, employers seeking to sponsor a care worker from abroad must provide confirmation to the Home Office from their regional partnership that they have fulfilled this requirement.

Employers will still be able to obtain sponsorship for staff who came to the UK via a different immigration route to the health and care visa, so long as they have already been working for them for three months.

Care workers ‘subjected to appalling exploitation’

At the same time, the government is raising the minimum wage employers must pay staff on a health and care visa from £11.90 to £12.82 per hour. This is above the £12.21 national living wage (NLW) that also comes into force next month.

In a statement announcing the changes, migration and citizenship minister Seema Malhotra said that “too many providers [had] recruited care workers to the UK and failed to provide them with the work they were promised, or have subjected them to appalling exploitation”.

“We have a duty to protect people against destitution, exploitation and modern slavery, and the best way to do so is through secure, properly paid work and employment conditions,” she added.

Requirements ‘will exacerbate recruitment challenges’

However, the Homecare Association said the requirements would “further exacerbate recruitment challenges for home care providers already struggling with an unsustainable commissioning system”.

This is a reference to the gap between the fees paid to providers by NHS and local authority commissioners and the minimum price the association has calculated is needed to meet costs and make an appropriate profit or surplus.

Last year, it identified a £1bn shortfall in commissioner fees and its minimum price in England, which it calculated as being £28.53 per hour in 2024-25.

However, the association’s minimum price has risen sharply for 2025-26, to £32.14 per hour, due to a 6.7% rise in the NLW, an increase in the rate of employer national insurance contributions (NIC) and a lowering of the salary threshold at which companies start paying NICs.

‘You cannot legislate for better conditions without funding’

“The government is imposing immigration restrictions without fixing the broken commissioning system that makes stable employment impossible,” said Homecare Association chief executive Jane Townson.

“You cannot legislate for better working conditions while simultaneously underfunding the services expected to provide them.”

Providers are holding a day of action in protest against the impact of the autumn Budget on adult social care.

The Providers Unite event today includes a rally at the Houses of Parliament to lobby MPs on the implications for the sector of the increases in employer national insurance contributions and the national living wage (NLW), which are due to come into force in April.

The campaign is calling on the government to review the measures, with 3,900 providers and people having signed a letter to chancellor Rachel Reeves warning that the policies risk “eroding the foundations” of adult social care services.

What are providers protesting about?

In the autumn Budget, in October 2024, Reeves announced:

• A 6.7% rise in the NLW, from £11.44 to £12.21 an hour, benefiting hundreds of thousands of care workers.
• A rise, from 13.8% and 15%, in the contribution rate for employers’ national insurance.
• A reduction in the wage threshold at which employers start paying national insurance, from £9,100 to £5,000 a year.

Estimated £2.8bn in additional costs

Think-tank the Nuffield Trust has calculated that the measures will cost independent care providers in England an extra £2.8bn in 2025-26: £940m in additional national insurance and £1.85bn in extra wage costs.

With councils purchasing an estimated 70% of the care these providers deliver, the Nuffield Trust said authorities would have to find £2bn of this bill.

The government’s finance settlement for councils includes a £880m top-up to the existing social care grant, which can be used on adults’ and children’s services. If councils allocate 60% of this to adults’ services, in line with current practice, this will yield £528m in 2025-26.

Question marks over extra resource for councils

In addition, authorities may increase council tax by up to 2% and ring-fence the proceeds of this for adult social care, raising about £650m and bringing the total amount of extra dedicated resource for the sector in 2025-26 to almost £1.2bn.

Authorities may also raise council tax by a further 3%, without putting the issue to a local referendum, and have also been given a £600m ‘recovery grant’, providing further resource that can be used on adult social care.

However, councils will also need to use much of this money to deal with other pressures, not least in children’s services, while county authorities have warned that they will be receiving very little of the recovery grant because it is distributed based on deprivation.

Social care ‘already underfunded’

Moreover, councils and providers alike have repeatedly warned that the autumn Budget measures will hit a sector that is already underfunded.

For example, last year, the Homecare Association calculated that there was a £1bn shortfall in home care fees paid by commissioners and the amount required by providers in England to pay staff the NLW, meet other costs and make a 5% profit or surplus.

Speaking ahead of the day of action, the association’s chief executive, Jane Townson, said: “Losing access to quality home care risks harm to people needing care, adds burdens to family carers, and piles pressure on an over-stretched NHS.

“Today, we stand united with homecare providers and their care workers with one message: enough is enough. The government’s refusal to exempt our sector from the latest national insurance hikes, coupled with a lack of proper funding for the minimum wage increase, risks devastating disruption of homecare provision.”

Peers vote to exempt care providers for NI increase

On the day of the rally, the House of Lords voted to exempt adult social care providers – along with NHS-commissioned healthcare providers and hospices – from the increase in national insurance contributions.

This was through an amendment to the National Insurance Contributions (Secondary Class 1 Contributions) Bill, the piece of legislation that will bring in the change.

The bill is due to be subject to a final vote in the Lords – at the third reading – before returning to the House of Commons, which will consider amendments to the legislation made by peers in order to agree a final version of the bill.

Sector representative body Care England welcomed the amendment, with chief executive Martin Green saying: “This is a huge moment for the social care sector and a testament to the relentless campaigning from care providers, local trade associations, national bodies, the Care Provider Alliance, and Providers Unite. For too long, social care has been overlooked, but yesterday’s vote proves that when we come together, our voices can no longer be ignored.”

Prospects for success

However, the government is almost certain to use its sizeable majority in the Commons to overturn the amendment on exempting care providers from the national insurance contributions increase. The House of Lords would be unlikely to press its case in relation to the amendment, in that event.

Next month, fiscal watchdog the Office for Budget Responsibility will assess whether the government is on course to meet its fiscal rules: that by 2029-30, it should only be borrowing to invest and that public sector net debt should be falling as a percentage of national income (source: Institute for Government).

The pressures on the public finances means the OBR may judge the government to be on track to miss the first of those rules unless the government takes reparatory action, such as raising taxes or cutting spending (source: Institute for Fiscal Studies).

This hugely limits the prospects for additional investment in services including social care.

Staff vacancy numbers in adult social care services fell last year, early data suggests.

As of December 2024, 7% of roles in independent sector adult social care providers in England lay vacant, down from 7.6% in April 2024, according to the Skills for Care (SfC’s) figures.

The data only covers those providers that have submitted figures to SfC’s adult social care workforce data set (ASC-WDS) for the relevant time period so is not representative of the sector as a whole.

SfC’s last sector-wide assessment measured the independent sector vacancy rate at 8.1% as of March 2024, down from 9.9% in 2023 and 10.7% in 2022.

Rapid fall in level of overseas recruitment

These falls were largely driven by the recruitment of staff from abroad. However, levels of international recruitment have fallen since March 2024, when the government banned adult social care staff on new or extended health and care visas from bringing partners or children to the UK.

According to SfC’s estimates, independent providers recruited 18,000 international staff from April to September 2024, compared with 105,000 in the year to March 2024, a fall of roughly two-thirds in the quarterly average.

Nevertheless, SfC data showed that the number of filled posts in independent providers rose from 575,000 to 585,000 from April to December 2024, alongside the apparent fall in vacancies.

Possible contributors to the trends include the 9.8% rise in the national living wage (NLW), from £10.42 to £11.44 an hour, in April 2024, which will have driven up pay across hundreds of thousands of care worker roles.

Concerns over potential care and job cuts

The NLW is due to rise again in April, by 6.7%, to £12.21 an hour. However, there is widespread sector concern that the measure, in combination with the planned increase in employer national insurance contributions, will lead to cuts to both levels of care and employment.

Almost two-thirds (64%) of organisations said they would need to make staff redundant, while 57% said they would have to hand care contracts back to councils and NHS commissioners on the back of the measures, according to a survey carried out last November by the Care Provider Alliance.

Think-tank the Nuffield Trust has estimated that the measures will cost providers in England £2.8bn in 2025-26, £2bn of which would need to be met by local authorities. Separately, the Association of Directors of Adult Social Services (ADASS) has calculated that councils face £1.8bn in increased costs in adult social care in 2025-26 due to the two measures, and wider inflation.

The government has said that it is making available an extra £3.7bn for local authorities with adult social care responsibilities in 2025-26. However, only about £1.2bn of this is dedicated funding for the sector.

Council fee rises for social care providers have lagged behind increases in the national living wage (NLW) for each of the past three years, providers have reported.

The research, carried out before the government’s autumn 2024 Budget added an estimated £2.8bn to the costs of adult social care in 2025-26, revealed that services were facing increasing workforce challenges.

The latest Sector Pulse Check, carried out from August to September 2024 by representative body Care England and learning disability provider Hft, was based on data from 206 organisations responsible for the care of 128,000 older people and people with learning disabilities and/or autism.

Council fees not keeping up with wage rises

It found that 85% of providers felt that local authority fee increases were not sufficient to cover last year’s rise in the (NLW), from £10.42 to £11.44 an hour.

This replicates findings from 2023, when 79% of providers reported that fee rises did not cover the impact of that year’s rise in the NLW, and 2022 – the first year that the survey covered both learning disability and older people’s providers – when 81% of respondents reported the same.

The average care worker wage among the providers surveyed (£12.10 an hour) was 8.1% above the equivalent figure in the 2023 survey (£11.19 an hour), compared with a 9.8% rise in the NLW over the same period.

Recruitment squeeze

Alongside the reported squeeze on fees, 91% of providers listed workforce-related costs as among their top three financial pressures, up from 81% in the 2023 survey, with 86% citing pay as a key barrier to recruitment, the same proportion as in 2023.

Two-thirds of providers said they had seen a decrease or no change in the number of applications they had received from UK jobseekers in the past 12 months, down from 54% in the 2023 survey.

And while 55% reported an increase in applications from international staff over the previous 12 months, policy changes introduced in March 2024 – notably a ban on overseas social care staff on health and care visas bringing dependants to the UK – have squeezed the supply of staff from abroad.

Financial pressures easing

This year’s survey did reveal some improvements in providers’ financial position compared with 2023, including that:

• 29% of providers said they were in deficit in 2024, down from 40% in 2023.
• 26% said their surpluses had decreased, down from 31% in 2023.
• Use of agency staff fell to 7.8% in 2024, from 15.7% in 2023, despite the workforce pressures.
• 29% of providers said they had closed down parts of their organisations or handed back contracts to local authorities as a result of cost pressures, down from 43% in 2023.
• 9% said they were offering care to fewer people as a result of cost pressures in 2024, down from 17% in 2023.

Estimated £2.8bn bill from Budget

However, the survey was carried out before last year’s Budget announcement of a further 6.7% rise in the NLW and a significant increase in employer national insurance contributions (NICs), both of which will be implemented this April.

Think-tank the Nuffield Trust has estimated that these measures will cost providers an extra £2.8bn in 2025-26, with local authorities having to find £2bn of this in increased fees. The Association of Directors of Adult Social Services, meanwhile, has calculated an increased bill for local authorities of £1.8bn.

However, both the Nuffield Trust and ADASS figures far exceed the approximately £1.2bn in dedicated additional funding for adult social care that the government has allocated to councils for 2025-26.

Calls for sector funding boost and easing of migration rules

On the back of the latest Sector Pulse Check, Care England and Hft urged the government to:

• Fully fund the rise in employer or exempt care providers from the increase.
• Remove the ban on social care staff coming to the UK on health and care visas from bringing dependants.
• Introduce a multi-year funding framework for adult social care, with annual increases linked to inflation and increases in the NLW.
• Increase pay across the sector, over the long-term, in order to achieve parity with similar NHS roles.
• Introduce national standards for commissioning to tackle inconsistencies in local authority practices.

The survey results come with the government having announced the establishment of a commission, headed by Baroness (Louise) Casey, on long-term reform of adult social care, but faced sector criticism for deferring its final report until 2028 at the latest.

Delayed action ‘leaving more people without support they need’

Care England chief executive Martin Green said: “We are ready to work alongside Baroness Casey and the government to turn this commission into a catalyst for genuine change. But let’s be clear: the status quo is no longer an option. Every delay, every failure to act, pushes more care providers out of the sector and leaves more people without the support they need.”

The Local Government Association (LGA) issued a broadly similar message in response to the survey.

“Local authorities are under unprecedented financial pressure, exacerbated by inflation, rising demand, an increase in employer national insurance contributions, and workforce challenges,” said the chair of the LGA’s community wellbeing board, David Forthergill.

“We urgently need a long-term funding plan for adult social care, along with a workforce strategy that values and supports care workers. Without immediate government action, care services will remain at risk, with devastating consequences for individuals and families who rely on them.”

An extra £200m for social care in next year’s council finance settlement is “wholly inadequate” to tackle additional costs facing adults’ services, sector leaders have warned.

The government pledged to increase the social care grant – which is ring-fenced for adults’ and children’s services in England – by £880m, in its provisional local government finance settlement for 2025-26, published on 18 December 2024.

This is up from the previously planned increase of £680m.

The Ministry of Housing, Communities and Local Government (MHCLG) also confirmed that councils would receive £515m to deal with the impact on them of the increase in employer national insurance contributions (NICs) that comes into force in April 2025.

Funding shortfall

However, this does not cover the extra costs facing authorities from the impact of the employer NICs rise on the providers that they commission, notably in adults’ services.

The Association of Directors of Adult Social Services (ADASS) has calculated that councils face an additional £1.8bn in adult social care costs next year, as a result of the rise in employer NICs, a 6.7% increase in the national living wage (NLW) and inflation more broadly.

However, dedicated additional funding for adult social care will be about £1.2bn (see box).

‘This means fewer people will receive care’

In response to the news, ADASS president Melanie Williams said authorities would still be left with a funding gap for adults’ services.

“This means that fewer people will be able to draw on care and support to help them stay independent and well, such as transport to go shopping, a regular cooked meal or support for family carers,” she said.

“Limiting the number of people who can access adult social care creates a vicious cycle; too many people reach crisis point and end up in hospital unnecessarily because they aren’t receiving low level care at home, and they can’t leave hospital because there isn’t enough support to return home safely.”

Additional funding ‘wholly inadequate’

The Homecare Association, which represents domiciliary care providers, said that, while the additional £200m was welcome, it was “wholly inadequate to stabilise the sector”.

The association recently published its calculation of the minimum price for home care in 2025-26, which is the price per hour providers need to be paid to cover staffing costs and operating costs, as well as make a reasonable profit.

This will rise from £28.53 this year to £32.14 in 2025-26, significantly as a result of the rises in employer NICs and the NLW, though the association has also increased its minimum profit margin from 5% to 7%, based on evidence from care market analysts LaingBuisson around current profit levels.

‘Care workers deserve better’

Association chief executive Jane Townson said meeting its revised figure for 2025-26 would require a funding boost from councils and NHS commissioners of £1.8bn in 2025-26.

She added: “Care workers deserve better. Employers cannot offer fair pay without a fair price for care. If Labour is serious about improving social care, they must act now.”

On behalf of charities providing care to disabled people, the Voluntary Organisations Disability Group issued a similar message.

Chief executive Rhidian Hughes said that, if the full costs for providers of the NICs and NLW rises were not met, they would be “forced to cut services”.

This reflects the findings of a survey by the Care Provider Alliance, an umbrella body for provider associations, on the impact of the NICs and NLW rises on organisations.

Almost two-thirds (64%) of organisations said they would need to make staff redundant, while 57% said they would have to hand care contracts back to councils and NHS commissioners, if their additional costs were not covered.

Variations in funding rises

A more positive outlook on the settlement was provided by think-tank the Institute for Fiscal Studies (IFS).

It said that, once a £1.1bn payment derived from a levy on businesses for packaging costs were taken into account, councils’ spending power – the total resource available to them if they maximised increases in council tax – would rise by 5.5% in real-terms on average in 2025-26.

This is above the 3.5% figure issued by the MHCLG, which excludes the ‘extended producer responsibilities’ levy.

However, the IFS stressed that, because of the increasing weighting of funding towards poorer areas, real-terms spending power increases would average 7.9% in the poorest tenth of areas and just 4.4% in the least deprived tenth of localities.

This is driven significantly by the distribution of a new £600m recovery grant, which will go to 33 of 36 metropolitan councils, half of London boroughs, unitary councils and district authorities, but just one in 21 county councils.

Counties issue alarm 

This was reflected in the County Councils Network’s (CCN) response to the settlement.

“By targeting the £600m recovery grant on metropolitan and urban councils, the government is ignoring the fact deprivation is not the only driver of councils’ costs nor the key indicator of which councils are under the most financial distress,” said CCN finance spokesperson Barry Lewis.

“Instead, it is demand and market failure across adult and children’s social care and special educational needs services that are pushing councils in all regions and of political control to the brink.”

Council funding reform

The changes in the distribution of funding in 2025-26 are the first step in a wider reform of local government funding, designed to ensure that it better reflects need, which will be implemented in 2026-27. The MHCLG has launched a consultation on this reform.

The IFS said that reform was needed because current approaches to allocating funding were “out of date and essentially arbitrary with respect to current local circumstances”. However, it stressed there would be “significant losers as well as winners from whatever reforms are implemented”.

Extra £13m for children’s services

The settlement also announced an extra £13m for children’s social care, which will fund the introduction of a mandatory offer of family group decision making to parents when councils are considering making an application for a care or supervision order.

Dedicated funding for adult social care in England will rise by just over £1bn next year, according to government plans.

However, this falls far short of the estimated £1.8bn in extra costs facing councils, chiefly driven by rises in employers’ national insurance contributions (NICs) and the national living wage(NLW), the Association of Directors of Adult Social Services has warned.

The funding was set out in a Ministry of Housing, Communities and Local Government (MHCLG) policy statement on the local government finance settlement for 2025-26, published last week. This provided further detail on announcements made in the October 2024 Budget.

£1bn in extra funding

The extra money is made up of projected increases in the adult social care precept (£650m) – the element of council tax that is ring-fenced for the sector – and adults’ services’ share of a £680m rise in the existing social care grant, which amounts to about £400m.

Though local authorities will have further funding they can use on adult social care in 2025-26, the sector will need to compete with other services for this, several of which – including children’s services – are also under severe pressure.

Responding to the news, ADASS chief executive Sally Burlington said: “Whilst the additional funding is welcome, the 2025-26 budget doesn’t provide local councils with enough to cover the increase in the cost of care due to the recent national living wage (NLW) and employer national insurance rise and the growing numbers of us needing more complex care and support.”

Minimum wage and tax increases

The NLW is due to rise from £11.44 to £12.21 an hour in April 2025, benefiting many thousands of low-paid care workers, but costing independent providers an estimated £1.85bn next year, according to think-tank the Nuffield Trust.

The trust has also calculated that the rise in employers’ NICs would cost providers a further £940m in 2025-26. It said all but the 2% of the largest providers would have to pass on these costs on to funders – who are mostly councils – but warned that authorities were not being sufficiently resourced to pick up the tab.

A survey by the Care Provider Alliance (CPA), an umbrella group for provider representative bodies, found that most services would have to cut jobs and care on the back of the changes, without further government funding.

Councils ‘will be forced to ration care’

Burlington echoed these warnings on the back of the MHCLG figures, adding: “Without addressing this funding gap, local councils will be forced to further ration care and support, focusing on those people with the greatest needs.

“People waiting for care are likely to face further delays, risking their health deteriorating further and those paying for their own care may be forced to cut back on support due to increasing costs, making their lives more difficult.”

The government has pledged to cover councils for the increased direct costs they will face from the rise in NICs and will provide further information later this month when it sets out the provisional local government finance settlement for 2025-26 in detail.

Call for further funding

However, it has not pledged any funding to cover authorities for the knock-on impact on providers they commission.

Burlington urged ministers to address this in the settlement, adding: “ADASS along with care providers across the sector are calling on the government to provide additional funding to mitigate the shortfall in funding, or risk further destabilising local care markets at the detriment of those of us drawing on care and support”

Her message was echoed by Local Government Association chair Louise Gittens, who warned: “Without action, councils will be forced to make further cuts to statutory services, and risk not fulfilling some of their most important duties.”

Targeting funding at deprived areas

Alongside last week’s statement, the MHCLG announced plans to consult on reforming the way government funding for councils is distributed to ensure it better targets need.

As a first step, it will provide authorities with a £600m ‘recovery grant’ in 2025-26, which will “allocate funding where the numbers of vulnerable people who rely on council services are highest, and the ability to fund need locally is weakest”.

It will go to places where, weighted by population, deprivation outweighs council tax-raising ability, with some areas getting nothing at all.

Concerns over impact on county councils

The news sparked concern from the County Councils Network (CCN), which warned that deprivation was only one indicator of demand facing councils and the recovery grant risked ignoring the pressures on shire authorities.

“Considering that increases in the minimum wage and national insurance contributions will more than wipe out extra funds for social care, it is possible most CCN member councils – and many more across the country – will receive nothing from the ‘recovery grant’ which will be heavily targeted and weighted exclusively by deprivation,” said CCN Tim Oliver.

“As we have argued over the last few weeks, whilst deprivation is a key indicator of a councils’ need, it is not the only indictor nor the most important measure of financial distress. The reality is that it is demand and market failure across adult and children’s social care and special educational needs services that are pushing councils to the brink.”

He said CCN members deserved “an appropriate share of the recovery grant”.

Overhaul of funding system ‘long overdue’

However, London Councils, which represents the capital’s boroughs, welcomed the government’s plans to reform the distribution of local government funding, citing a report last year from think-tank the Institute for Fiscal Studies (IFS) that found London was under-funded relative to need.

For the IFS, head of devolved and local government finance David Phillips said the planned reform of the funding system was “long overdue”, with existing allocations based on “a range of ad-hoc decisions and data from back as far as the 1990s”.

Phillips also stressed that more deprived areas “bore the brunt” of local government funding cuts in the 2010s, though added that whether redistributing resource to them was fair “will be in the eye of the beholder”.

Social care must be protected from the “catastrophic” impact of increases in employers’ national insurance contributions (NICs), the Association of Directors of Adult Social Services (ADASS) said today.

ADASS revealed that, by its calculations, local authorities would face £1.8bn in extra costs in 2025-26 due to increases in employers’ NICs and the national living wage (NLW) announced in last month’s Budget, along with inflation.

This is lightly less than the £2bn in additional costs to councils from the Budget calculated by think-tank the Nuffield Trust in research published last week.

The news came as sector leaders gathered in Liverpool for the National Children and Adult Services Conference (NCASC), which was opened by ADASS president Melanie Williams.

Budget’s ‘catastrophic’ impact on social care

In her speech, Williams said: “The budget had catastrophic impacts on the cost of adult social care – not just for local government, but also for out important partners who support people in their neighbourhoods and places in our voluntary and community sector.”

She added that, if councils had almost £2bn spare for adult social care, they would be implementing the planned reforms to the charging system – scrapped by Labour shortly after taking power – and “a really decent early help and prevention service in all of our places”.

“Should we end up having to give a big chunk of this money to government, the consequences are unimaginable on our ability to meet need,” Williams said.

The government has implied that councils will be exempt from the rise in employer NICs but has not spelt out the details of this.

Providers planning to cut jobs and care

However, it has offered no such protection to care providers, which the Nuffield Trust has estimated will face £940m in extra costs from the measure in 2025-26.

A survey by umbrella body the Care Provider Association, released yesterday, found that providers would have to cut jobs and the amount of care they provided as a result of the Budget measures, including the rise in the NLW.

In calling for social care to be protected from the NICs rise, ADASS said potential options included delaying the implementation of the increases, lowering the planned rate of the tax, exempting providers or paying councils compensation.

‘Immediate government funding is essential’

The Local Government Association issued a similar message to Williams, with its social care spokesperson, David Fothergill, saying: The consequences of inaction will be leaving people without the support they need and further embedding a two-tier care system.

“Immediate government funding is essential to protect these services and ensure councils can continue to fulfil their vital role in supporting communities.”

Providers say they will have to cut jobs and reduce the amount of care they deliver because of the increased costs imposed by the Budget, a survey has found.

Almost two-thirds (64%) of organisations said they would need to make staff redundant, while 57% said they would have to hand care contracts back to councils and NHS commissioners, reported the Care Provider Alliance (CPA).

The CPA – an umbrella body for organisations representing providers – surveyed 1,180 organisations about the impact of the increases to the national living wage (NLW) and employers’ national insurance contributions (NICs) announced in last month’s Budget.

Tax and wage increases

From next April, employers will have to pay NICs at 15% – up from 13.8% – on staff earnings above £5,000 a year, down from £9,100, while the NLW will rise from £11.44 to £12.21.

Think-tank the Nuffield Trust has calculated that the two measures will cost England’s almost 18,000 independent care providers an additional £2.8bn in 2025-26, about £2bn of which would need to be found by councils.

This dwarfs the £600m in additional grant authorities have been promised for social care in 2025-26, which is expected to be available for both children’s and adults’ services.

Providers predict cuts to care and jobs

The CPA found that, without further government assistance:

• 73% would have to refuse new care packages from local authorities or the NHS.
• 57% would hand back existing contracts to local authorities or the NHS.
• 77% would have to draw on reserves.
• 64% would have to make staff redundant.
• 76% of providers would have to cut training and resources for staff.
• 86% would not be able to maintain wage differentials between staff.
• 22% indicated they would have to close their businesses entirely.

Among the 479 home care respondents, 42.9% planned to shorten care visits.

Most (77.6%) of the 628 care home providers who responded said they were planning to reduce or stop planned maintenance, while 79.7% said they would have to halt capital investment.

‘People’s lives will deteriorate’

“Without adequate support, we now know for certain that services will close, care providers will stop delivering public services, and care workers will lose their jobs,” said CPA chair Vic Rayner, who is also the chief executive of the National Care Forum.

“Critically, a huge number of people who rely on care and support will go without or see their lives deteriorate.”

Independent adult social care providers in England face a £2.8bn in extra costs in 2025-26 due to wage and tax rises announced in last month’s Budget, an analysis has found.

The Nuffield Trust assessed that the almost 18,000 providers would face £940m in increased costs from the rise in employer national insurance contributions (NICs) plus £1.85bn from the boost to the national living wage (NLW).

The trust said that only the largest providers – who make up about 2% of the market – would be able to absorb the costs because of the low profit margins services operated under.

Providers’ ability to increase fees to self-funders would “significantly vary”, meaning they would need to turn to local authorities, who are responsible for 70% of care purchased from the independent sector.

Based on this, the trust calculated that authorities would need to find an extra £2bn to cover providers for these costs next year, said the trust.

Assessed costs swamp £600m in extra grant

This is over three times the £600m in additional grant that ministers have allocated to social care in 2025-26, which is expected to be available for both children’s and adults’ services.

The trust estimated that the increased costs to councils was roughly equivalent to the 3.2% rise in real-terms council spending power that the government has promised for 2025-26.

However, this is due to cover all authorities for the increased costs of all of their services.

Councils already struggling to balance budgets

At the same time, authorities are already struggling to balance their £24.5bn-a-year adults’ services budgets, being due to overspend them by £564m in 2024-25, according to a recent Association of Directors of Adult Social Services (ADASS) survey.

The same ADASS survey found that councils were planning to make £1.4bn of adult social care savings in 2025-26 before news broke of the Budget measures.

Another think-tank, the Health Foundation, has assessed that councils would need an extra £1bn for adult social care in 2025-26, just to meet additional demand, let alone the costs brought about by the Budget.

And the Homecare Association has assessed that councils and NHS commissioners were paying providers £1.08bn less than what was needed to pay staff the NLW, meet other costs and turn a 5% profit.

‘Real and devastating consequences’

The Nuffield Trust concluded that, without a significant additional injection of government cash, the sector might see “not just single providers going out of business but large swathes of the market collapsing”.

“Real and devastating consequences will be felt most acutely by people already drawing on care, whose lives would be disrupted, and by those struggling to access or afford the care and support they desperately need,” it added.

The Local Government Association (LGA) said the increases in the NLW and employer NICs “must be fully funded”, with further investment required to “address unmet and under-met need and ensure timely access to social care for all who need it”.

Providers ‘should be exempt from national insurance rise’

The Homecare Association urged ministers to exempt domiciliary care providers from the NICs increase, while fully funding the NLW rise.

“Without immediate action, we risk the collapse of regulated homecare services in many areas, with devastating consequences for the older and disabled people who rely on them and additional pressure on an already struggling NHS,” it added.

Age UK issued a similar message, with its charity director, Caroline Abrahams, saying: “It’s hard enough already to source good, local, affordable care but if more providers go out of business it will get even more difficult. What’s more, it’s the smaller providers, charities and small and medium enterprises, where the best care is often to be found, who are at greatest risk of retrenchment and closure.

“It’s imperative the government compensates social care providers for these big cost hikes in the Budget, because otherwise for some they will be the straw that breaks the camel’s back.”