Adult Social Care Facing ‘Doom Loop’ Over Tax and Wage Hikes, Stretched Council Budgets: Report

One of the report’s authors said loading unfunded costs on care providers will lead to a ‘doom loop’ in which fewer people receive social care support.

A general view of staff on a NHS hospital ward at Ealing Hospital in London, on Jan. 18, 2023. Jeff Moore/PA Wire

Tax and wage hikes driving up the cost of care provision, coupled with councils’ already-stretched budgets, could lead to a “doom loop” for adult social care services where there is less help available for those who need it, a charity has warned.

The King’s Fund reported on Monday that the rising cost of social care has triggered “an annual chain reaction” of increased costs.

Between 2015/16 and 2023/24, care worker pay increased by 17 percent in real terms. While this pay rise benefited those working in the sector, it also drove up costs for social care providers. In turn, these increased costs were reflected in the fees charged to local councils for commissioned services.

The King’s Fund analysed nearly a decade’s worth of data and said that fees paid by councils had increased by 13 percent for adult care homes and by one third (33 percent) for seniors’ care homes. At-home care has also seen a rise, increasing by nearly one-fifth (18 percent).

The charity said that between 2015/2016 to 2021/22, local authorities “prioritised social care over other council responsibilities,” but budgets “still came under severe pressures and were forced to effectively ration the care they provided.”

As a result, the number of people receiving long-term care in this six-year period declined from 873,000 to 818,000. Demand has not fallen, however, with the number of new requests for support increasing from 1.8 million in 2015/16 to 2.1 million in 2023/24.

‘Doom Loop’ Could Return

This trend of higher costs, less support, and more demand “has only recently been reversed,” the charity said, and was only fully broken last financial year (2023/24) when there was a significant increase in spending power by councils.

However, this trend could return as employers face a rise in the minimum wage from £11.44 to £12.21 an hour from April. Employer national insurance contributions will also increase to 15 percent and the threshold at which the tax starts being paid is slashed from £9,100 to £5,000.

One of the report’s authors, Simon Bottery, said in a post on social media platform X that “loading unfunded costs on care providers ultimately leads to a ‘doom loop’ in which fewer people receive social care support.”

“There is now a real risk that doom loop will start over. The national living wage will rise 6.7% in April and employers’ national insurance contributions will shoot up. Yet local authorities have to keep providers in business so will be under huge pressure to increase fees,” Bottery said.

Council Deficits Worth £4.6 Billion

“Unless national government recognises and fully reimburses the cost of these measures, local government could be in the unenviable position of having to fund the additional costs of providers while struggling with a precarious financial position after a decade in which core spending power has fallen,” the report said.

The warning comes as councils face increasing financial pressures, which could put other vital community services at risk.

Campaigners from the Providers Unite coalition take part in a rally for the social care day of action at Parliament Square, London, England, on Feb. 25, 2025.Lucy North/PA Wire

In October, the County Councils Network (CCN) said that councils are facing deficits totalling £4.6 billion by March 2026.

The CCN had said rising costs were owing to increased demand in just three areas: children’s services, adult social care, and home-to-school transport for children with special educational needs.

The group, which represents 37 councils across England servicing 26 million people, said unless the government provides additional funding or radically rethinks the statutory responsibility of councils, local authorities will be reduced to little more than care service providers, forced to abandon providing other core services.

Adult Social Care Commission

An independent commission into adult social care, chaired by Baroness Louise Casey, will begin in April.

The first phase of the commission is due to report in 2026 and will outline issues facing social care and make recommendations for short-term reform. The second phase, to be published in 2028, will be making recommendations for long-term transformation of adult social care services.

The Department for Health and Social Care (DHSC) has previously said the government had “inherited significant challenges facing social care” and has taken immediate action, “including a £3.7 billion funding boost, 15,000 new installations to help disabled people live safely and independently in their own homes, and a £2,300 increase to carers allowance.”

The DHSC said the Casey commission will develop recommendations “for a National Care Service to provide high-quality care for everybody who needs it and help us deliver our commitment to rebuild the sector so that it is fit for the future.”