Independent Providers of Adult Social Care Face £2.8 Billion Costs Increase: Think Tank

An elderly woman's hands on Dec. 22, 2016. Yui Mok/PA

Thousands of independent adult social care providers are facing an increase in costs of £2.8 billion in the next financial year, after Budget measures come into force, a think tank has warned.

The Nuffield Trust has warned that many private and non-profit social care firms are at risk of going bust, disrupting or ending care for thousands of older people.

Its analysis, published on Friday, showed that 18,000 independent providers won’t be able to fully bear the cost of increases to employer national insurance contributions (NICs), announced last month.

Taken together with minimum wage hikes, the cost for these companies will reach £2.8 billion, the think tank said.

The employer NIC rate is set to rise from April 2025 by 1.2 percent, from 13.8 to 15 percent.

The increase to NICs and the reduction of the earnings threshold from £9,100 to £5,000 in 2025–2026 will raise the providers’ bill by £940 million, the report said.

An uplift of 6.7 percent to the National Living Wage, announced by Chancellor Rachel Reeves, will also result in higher bills for the social care sector, the Nuffield Trust said. It will add an estimated £1.85 billion to the total wage bill in 2024–2025, compared to the current financial year.

‘Catastrophic’ Impact

The government has pledged at least £600 million of new grant funding to support social care, but according to the Nuffield Trust, this is not nearly enough.

The combined cost pressures from tax increases “outstrip the extra funds for children’s and adult social care,” and will also “eat up” the councils’ extra spending power, leading to higher council taxes, the report said.

Local authorities are set to overspend on social care by around £564 million in the current financial year, with 37 percent expecting to have to draw on reserves to absorb the costs.

An additional £1 billion would be needed next year to keep up with the demand for adult social care, according to the Health Foundation.

“In this context, it is difficult to see how councils will be able to increase the rates they pay for care sufficiently to enable providers to make financial ends meet. Providers will face their own tough decisions,” the Nuffield Trust said.

Some social care providers may look to cut costs by reducing staff hours and freezing pay for those above the minimum wage, while others may choose to close down altogether.

Deputy Director of Policy at the Nuffield Trust Natasha Curry said that by not covering the costs of NIC hikes, the government fails to back adult social care, with the likely result “catastrophic.”

“Already fragile after a decade of cuts, runaway inflation and the effects of Covid-19, adult social care was in desperate need of relief. But this was a Budget that gave with one hand and took away with the other.

“The government rightly wants to reform social care, but with the real prospect of swathes of the social care market collapsing under these extra cost pressures, there may be little left of it to reform unless the government takes urgent action to cover ENICs for adult social care providers,” she said.

The Nuffield Trust has previously said that the adult care sector needs “meaningful” financial support, as opposed to “sporadic short-term handouts” by the government.

The Care Provider Alliance, which represents associations of independent and voluntary adult social care providers in England, said the sector is “critically underfunded by £8.4 billion to meet future demand.”

The £600 million new grant funding for social care is nowhere near covering additional employee costs announced in the Budget, the alliance said.

In September, minister of state for care Stephen Kinnock vowed to work closely with the adult social care sector, the NHS, and other community partners to improve service resilience ahead of the winter period.