Social care 360: expenditure

4. Expenditure

Increased spending is now funding both higher provider fees and more people receiving support

Why is this indicator important?

Although total expenditure is not a perfect proxy for the amount and quality of care arranged by local authorities, it is currently the best overall indicator available. Total expenditure includes spending on social care resulting from NHS income, whereas gross current expenditure, which is also used in this review, excludes this spending.

What was the annual change?

In 2024/25, total expenditure on adult social care rose to £34.5 billion, an increase of 7.9% in cash terms and 4.1% in real terms from 2023/24. Gross current expenditure, which excludes income from the NHS, rose to £29.4 billion from £27.1 billion, an increase of 9% in cash terms and 4% in real terms.  

What is the long-term trend?  

 In 2024/25, total expenditure was £7.8 billion more (29%) in real terms than in 2015/16. Expenditure fell from 2010/11 to 2014/15 and then rose consistently year on year. There were large increases in expenditure during 2020/21 and 2021/22, due to the Covid-19 pandemic, and then a small downward adjustment in 2022/23 before a return to increases in 2023/24 and 2024/25.  

What was the money spent on?¹  

 Local authorities spent similar proportions of money on long-term support for working-age adults (£11.5 billion) and older people (£12.0 billion) in 2024/25, compared with 2023/24. However, the pattern of spending between home/community-based services and residential/nursing services was very different. For 18–64-year-olds, nearly two-thirds of money was spent on community-based support: supported living (£3.4 billion), direct payments (£1.8 billion), home care (£1.2 billion) and other community care (£1 billion), while less than one-third was spent on care homes.

For older people, nearly two-thirds was spent on care homes – either nursing homes (£2.6 billion) or residential homes (£5.0 billion).

In terms of reasons for support, the two largest blocks of expenditure were on learning disability support for working-age adults (£7.7 billion) and physical support for older people (£7.8 billion). Other major areas were support with memory and cognition for older people (£2.2 billion), physical support for working-age adults (£2.1 billion), mental health support for working-age adults (£1.5 billion), learning disability support for older people (£1.0 billion), and mental health support for older people (£0.9 billion).  

Local authorities spent a further £2.4 billion on social care-related activities, such as assessment and safeguarding, and £1.4 billion on commissioning and service delivery.  

¹This and all other figures in this section are expressed as ‘gross current expenditure’: see box ‘How is social care expenditure funded?’ for a definition and further information.

What explains this?  

The increase in annual expenditure in 2024/25 is, in some ways, a continuation of a trend towards higher spending on adult social care that began in 2014/15.2 Until 2022/23, this growth in expenditure appears largely to have supported a regular real- terms increase paid to providers of social care services (see indicator 5), which was in turn driven largely by increasing staff costs due to the introduction of the statutory minimum wage (see indicator 8).

However, in 2022/23 and then in 2023/24 and 2024/25, the additional expenditure also supported – for the first time since 2015/16 – an increase in the number of people receiving long-term support.

The significant change in 2023/24 and 2024/25 is likely to be related to additional funding available to local authorities, in part linked to a delay in (and ultimately cancellation of) adult social care charging reform, with its associated costs. The Social Care Grant rose from £2.3 billion in 2022/23 to £3.9 billion in 2023/24 and then £5.0 billion in 2024/25.

This contributed to an increase in overall local government spending power from 2022/23 onwards, though it remained well below the levels of 2010/11.

However, despite local authorities having more money to spend, their overall financial situation is worsening. In 2024/25, external debt at English councils rose by 10% and useable reserves fell by 4%.

In addition, local authorities are having to fund spending on social care (both adult and children’s) through cuts in other areas such as waste collection and libraries. They have also raised additional money through increased fees and charges on people who receive publicly -funded care. In 2024/25, Income from client contributions increased 9.8% in real terms.

²The years 2020/21 and 2021/22 were exceptional because during the Covid-19 pandemic, local authorities received grant funding from central government to support their local care markets. Their expenditure on ‘commissioning and service delivery’ rose sharply in 2020/21 and 2021/22 but fell back (to £1.3 billion) in 2022/23. Comparisons of expenditure between years must therefore be treated with caution.    

What has happened in 2025/26?

Local authority core spending power in 2025/26 is 4.3% higher in real terms than in 2024/25. The largest part of this is from council tax, but increases in the Social Care Grant were also significant in the overall figure.

5. Cost of commissioning

Fees paid by local authorities are rising but not keeping pace with costs

Why is this indicator important?

Local authorities do not usually provide services such as home care and care homes directly; instead, they commission them from third-party providers. Providers need fee levels to be sustainable to ensure they can provide good-quality services and, ultimately, stay in business.    

What was the annual change?

In 2024/25, the average weekly fee paid by local authorities in England for care home places for working-age adults rose by 3.6% in real terms to £1,823. The average weekly fee for older people’s care home places increased 3.3% to £1,019. The average hourly rate for externally commissioned home care rose 3% in real term to £23.56.    

What is the long-term trend?

In real terms, since 2015/16 the average weekly fee for working-age adults has increased by 18%, the average weekly fee paid for older people has increased by 38%, and the average hourly rate for home care has increased by 22%.  

What explains this?

 Above-inflation increases in care home and home care fees in 2024/25 are part of a wider trend since 2015/16 of local authorities increasing fees in order to stabilise the provider market. This has been necessary because providers have faced mounting staff costs, arising largely from increases in the level of the statutory minimum wage. To maintain compliance with the minimum wage, median care worker pay has increased 23% in real terms since 2015/16 (see indicator 8).

In most years since 2015/16, local authorities have therefore prioritised provider fees over increasing the care and support packages they offer to people. To support this, in 2023/24 the government introduced the Market Sustainability and Improvement Fund, which had an explicit goal of increasing fee rates paid to social care providers. In 2024/25 this was worth £845 million of funding to local authorities.

However, the fee increases in 2024/25 will not have met the increases in costs that providers faced. Staff costs account for around 60% of the costs of residential or nursing home providers and 75% of the cost of a home care provider, and median care worker pay in 2024/25 increased by 6.3% in real terms, following a 9.8% increase (cash terms) in the National Living Wage.

To recoup these costs, homes charge private payers more than local authority clients. In 2017, the Competition and Markets Authority estimated that on average, private payers were charged 41% more, and there is little to suggest that the gap will have improved. Families may also be asked to ‘top up’ the costs of local authority care home residents, though there is no solid evidence about the extent of this. Concerns about local authority fee rates have existed for some time. In March 2021, the National Audit Office reported a DHSC assessment that most local authorities paid below the sustainable rate for care home placements for adults aged over 65 and below the sustainable rate for home care. It also noted estimates that self-funders pay around 40% more for their care in care homes and around £3 more per hour for home care than publicly funded clients. The rates paid by local authorities for home care also remain below the Homecare Association’s ‘minimum price’, which it says is the amount required to pay care workers at the minimum legal rate and meet the other costs of running a care business.

One further factor in higher fees is likely to be the increasing needs of those being supported by local authorities, which in turn require more intensive and costly support packages. In the Association of Directors of Adult Social Services (ADASS) 2024 Spring Survey, directors rated increasing complexity of cases as their greatest budgetary concern.

Provider profitability does not appear to be a factor in increasing fees. There is no clear trend of increased profits for the largest providers of publicly funded residential care between 2015 and 2023, while providers of homes for working-age adults show generally declining profits. In home care, profits increased from 6.3% in 2015 to 7.6% in 2023, though this is a fall from their peak of 10.8% in 2012. 

What has happened in 2025/26?

In April 2025, the National Living Wage rose 6.7% to £12.21.

A further inflationary factor was a rise in employer National Insurance contributions. In April 2025, the earnings threshold for employer contributions fell from £9,100 to £5,000, which Nuffield Trust estimated will cost adult social care providers more than £900 million a year.

In August 2025, local authorities reported the following provisional fee increases for 2025/26:

• home care: 5.3%

• care homes without nursing for clients aged 65 and over: 5.3%

• care homes with nursing for clients aged 65 and over: 4.9%

• supported living: 5.6%

• care homes without nursing for clients aged 18–64: 5.0%

• care homes with nursing for clients aged 18–64: 6.0%.

Carterwood found that quoted fees by care homes for older people to self-funders in England had increased 8.2% for residential care and 7.6% for nursing care between 2024/25 and 2025/26.

The Care Quality Commission monitors the financial wellbeing of the largest, most difficult-to-replace care providers. In November 2025 it noted that the viability of some specialist contracts and services was a key concern, particularly for not-for-profit providers.

Despite the pressure on costs, in its Autumn Survey 2025, ADASS found fewer social care directors saying providers were handing back contracts or closing altogether than in previous years. According to the survey, 61% reported that providers in their local area had either closed, ceased trading or handed back contracts since 1 April 2025, down from 65% in 2024 and 66% in 2023.