The 2025 Social Care 360 outlines past, present and possible future funding pressures in adult social care. The review delivers an urgent message for the government: underfunding wage increases for care workers could have dire consequences for adult social care. With the introduction of the National Living Wage in 2016, care providers faced escalating costs, which were passed on to local authorities through higher fees.
Struggling to balance their books, local authorities reduced the number of people receiving long-term care, creating a cycle of rationing that left many vulnerable individuals without essential support.
The Impact of Wage Increases on Care Providers
Since the introduction of the National Living Wage, care workers’ wages—among the lowest paid in the UK—have seen a significant rise. By 2023/24, median pay had increased by 17% in real terms, offering much-needed financial relief to workers. However, wage costs represent the most significant proportion of a care provider’s budget, and local authorities commission most adult social care services. As wage bills increased, care providers sought higher fees from local councils, who faced mounting financial pressure.
Between 2015 and 2023, local authorities increased payments to care providers to cover these costs: fees for older people’s care homes rose by 33%, for home care by 18%, and for working-age adults in care homes by 13%. Although this helped stabilise the provider sector, it came at a cost—fewer people received the care they needed.
The Decline in Long-Term Care Support
While local authorities prioritised adult social care, the funding pressures in adult social care and limited budgets led to rationing. From 2015 to 2021, the number of people receiving long-term care fell from 873,000 to 818,000, with older adults bearing the brunt of the reductions. Many individuals were left without the necessary support to manage daily living, with the system unable to meet growing demand.
This cycle of rising costs and reduced support only recently began to reverse, thanks to an increase in local authority spending power in 2023/24. For the first time in years, councils could pay higher fees and extend care to more individuals. However, the Social Care 360 review warns that new financial pressures could jeopardise this fragile recovery.
New Challenges on the Horizon
Looking ahead to 2025, care providers face additional financial burdens. Increased employers’ national insurance contributions and the proposed introduction of a “fair pay agreement” to raise wages above the statutory minimum are expected to inflate costs further. While these measures will improve care workers’ pay and working conditions—potentially boosting recruitment and retention—they also risk driving providers out of the market if local authorities cannot meet the increased fees.
The Role of Local Authorities
Local authorities tasked with balancing their budgets may once again be forced to ration care services. Although the government has committed to ensuring that local government settlements account for rising provider costs, the Social Care 360 review cautions that councils may struggle to maintain service levels without full reimbursement from the central government. If the funding shortfall persists, the number of individuals receiving long-term care could decline again, undoing recent progress.
Implications for Adult Social Care Reform
The upcoming commission on adult social care, led by Baroness Casey, will need to address these funding challenges. The commission should focus on ensuring that local authorities are fully supported to meet the rising costs of care provision while maintaining and expanding access to long-term care. If the government fails to act, the adult social care sector could face a repeat of the underfunding crisis seen in recent years, with devastating consequences for those who rely on its services.
Conclusion
The Social Care 360 review clearly shows the delicate balance between funding, provider costs, and access to care. While wage increases are crucial for improving the lives of care workers, they must be matched by adequate funding to avoid pushing care providers, social work staff and local authorities into financial distress. The upcoming commission on adult social care presents an opportunity to create a more sustainable system, but only if the government learns from past mistakes and takes decisive action to support the sector.
