Social care 360: expenditure

4. Expenditure

Spending on social care is going up, driven by higher provider costs 

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 2023/24, total expenditure on adult social care rose to £32.0 billion, an increase of 12.8% in cash terms and 6.3% in real terms from 2022/23. Gross current expenditure, which excludes income from the NHS, rose to £27.2 billion, an increase of 8.1% in real terms.  

What is the long-term trend?  

In 2023/24, total expenditure was £4.6 billion more in real terms than in 2010/11. Expenditure fell from 2010/11 to 2014/15 and then rose consistently year on year. There were large increases in expenditure during 2020/22 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.   

What was the money spent on?¹  

Local authorities spent similar proportion of money on long-term support for working-age adults (£10.4 billion) and older people (£11.0 billion) in 2023/24, compared with 2022/23. 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 (£3.0 billion), direct payments (£1.6 billion) and home care (£1.1 billion), while less than one-third was spent on care homes. Local authorities also spent £0.2 billion on short-term support for working-age adults.    

For older people, nearly two-thirds was spent on care homes – either nursing homes (£2.4 billion) or residential homes (£4.5 billion). Local authorities also spent £0.8 billion on short-term support for older people. 

In terms of reasons for support, the two largest blocks of expenditure were on learning disability support for working-age adults (£7.1 billion) and physical support for older people (£7.7 billion). Other major areas were support with memory and cognition for older people (£2.1 billion), physical support for working-age adults (£2.0 billion), mental health support for working-age adults (£1.3 billion), learning disability support for older people (£1.0 billion) and mental health support for older people (£0.8 billion).   

Local authorities spent a further £2.3 billion on social-work-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’, which unlike ‘total expenditure’ does not include spending that arises from NHS income.   

What explains this?  

The large increase in annual expenditure in 2023/24 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 particularly in 2023/24, 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 the ability of local authorities to support more people with publicly funded long-term care – is likely to be related to additional funding provided to local authorities by the 2022 Autumn Statement. In the 2022 Autumn Statement, the government made available up to £2.8 billion in 2023/24 to help support adult social care. This included £1 billion of new grant funding in 2023/24, £600 million of which was distributed through the Better Care Fund and intended to support hospital discharge. It also included further flexibility for local authorities on Council Tax. This additional funding came from a delay until October 2025 of adult social care charging reform, with its associated costs. (Charging reform was subsequently cancelled by the incoming Labour government in 2024.)   

Although there was no additional money for local government in the 2023 Autumn Statement, in January 2024 the government announced an additional £600 million for local authorities in 2023/24, of which £500 million was for children and adults’ social care.  

²2020/21 and 2021/22 were exceptional years 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 2024/25?  

In 2024/25, the previous government made available up to £4.7 billion to help support adult social care. This included £1.7 billion of new grant funding and further flexibility for local authorities on Council Tax.   

Local authority net expenditure (excluding funding via NHS) was budgeted to be 9.1% higher in real terms than the amount budgeted for 2023/24.  

Despite this, in November 2024, the Association of Directors of Adult Social Services reported that 81% of councils expected to overspend their adult social care budgets in 2024/25, up from 72% in 2023/24, with an estimated total overspend of £564 million. It also said that over a third of councils were being required to make in-year savings.   

In December 2024, the provisional local government settlement for 2025/26 made available £5.9 billion for social care through the social care grant. This was an overall increase of £880 million compared to 2024/25.   

5. Cost of commissioning

Staffing costs are a key factor in the increasing fees paid for by local authorities 

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 real terms, the average weekly fee paid by local authorities in England for care home places for working-age adults rose by 3.8% to £1,696. The average weekly fee for older people’s care home places increased 6.5% to £951. The average hourly rate for externally commissioned home care rose 0.9%, from £21.83 to £22.03.  

What is the long-term trend?

In real terms, since 2015/16 the average weekly fee for working-age adults has increased by 13%, the average weekly fee paid for older people has increased by 33%, and the average hourly rate for home care has increased by 18%.  

What explains this?

In 2023/24, the government introduced the market sustainability and investment fund which had an explicit goal of increasing fee rates paid to social care providers. However, the above inflation increases in care home and home care fees in 2023/24 are best seen as 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 17% in real terms since 2015/16 (see indicator 8). Staff costs make up around 60% of the costs of residential or nursing home providers and 70% of the cost of a home care provider. Many staff are paid at or around the statutory minimum.   

In most years since 2015/16, local authorities have therefore prioritised provider fees over increasing the care and support packages they offer to people. Between 2015/16 and 2020/21, the amount of care commissioned each year fell and this trend only changed in 2022/23 and 2023/24. However, since the fee increases have differed between the working-age adult, older people’s and home care sectors, factors other than just wage costs are likely to be at work.   

One further factor in higher fees is likely to be the increasing needs of those being supported by local authorities, which in turn requires more intensive and costly support packages. In the Association of Directors of Adult Social Care spring survey, directors rated increasing complexity of cases as their greatest budgetary concern. They argued that reasons for this included earlier discharge from hospital, meaning people arrived in social care with greater needs, and more people in need of social care because they were no longer receiving NHS continuing health care (which provides NHS-funded medical and social care to people with high needs due to an underlying health condition). However, the number of people receiving that support has fallen since 2017/18.   

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.   

In any case, fees paid to providers remain in many cases below the level needed to provide quality care. In March 2021, the National Audit Office reported a Department of Health and Social Care 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.   

What has happened in 2023/24?

On 1 April 2024, the National Living Wage increased to £11.44, an annual increase of 9.8%, and will rise 6.7% to £12.21 in April 2025.    

In the Autumn Budget 2024, the government announced that employers national insurance contributions would increase by 1.2 percentage points from 1 April 2025 and the earnings threshold for employer contributions would fall from £9,100 to £5,000. The Nuffield Trust estimated this would cost adult social care providers over £900 million.