Social care 360: expenditure

4. Expenditure

Total expenditure on social care fell in 2022/23 but more was spent on long-term care

Why is this indicator important?

While total expenditure is not a perfect proxy for the amount and quality of care arranged by local authorities, currently it is 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 report, excludes this spending.

What was the annual change?

In 2022/23, total expenditure on adult social care rose to £28.4 billion, an increase of 5.6% in cash terms but a fall of 1.0% in real terms* over 2021/22. Gross current expenditure, which excludes income from the NHS, increased 1.1% in real terms.

What is the long-term trend?  

In 2022/23, total expenditure was £2.7 billion more in real terms than in 2010/11.

Since 2015/16, local authorities have increased spending on community-based care and spent less on institutional care. However, the increase in community-based expenditure may reflect an increase in costs rather than activity. In 2022/23, 12,000 fewer people received community-based support compared to 2015/16 but more was being paid for their care: the unit cost of home care (the only aspect of community activities for which we have a unit cost) increased by 17% in real terms between 2015/16 and 2022/23.

What explains this?

• At first, the reduction in real-terms total expenditure in 2022/23 is surprising. Local authority spending power rose in real terms by 4.6% in 2022/23 and local authorities increased the number of people, particularly older people, to whom they provided long-term care in 2022/23 (see indicator 2, receipt of social care). The most likely explanations for this fall in total spending on adult social care are: 
  
  Total expenditure isn’t the best measure to show changes in spending on long-term care because it includes spending on areas other than the direct provision of care to individuals. Gross current expenditure, which strips out NHS income, is a better measure and this showed a 1.1% real-terms increase last year. Spending on long-term care specifically rose 4.3%.

• Local authorities spent money in different ways in 2022/23 compared to recent years. 2020/21 and 2021/22 were exceptional years because 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. It seems likely that some of the grant funding to support care markets during the Covid-19 pandemic was accounted for here.

What has happened in 2023/24?

In the 2022 Autumn Statement, the government made available up to £2.8 billion in 2023/24 and £4.7 billion in 2024/25 to help support adult social care. This included £1 billion of new grant funding in 2023/24 and £1.7 billion in 2024/25, further flexibility for local authorities on Council Tax, and delaying the rollout of adult social care charging reform from October 2023 to October 2025.

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’s and adults’ social care.

Nonetheless, in February 2024, the cross-party House of Commons Levelling Up, Housing and Communities Committee noted that ‘local authorities are increasingly reporting concerns about their financial positions and their ability to maintain delivery of their services’ and said that ‘the Government must act now if local authorities are to survive the severe crisis and financial distress that they face’.

5. Cost of commissioning

The cost to local authorities of buying care continues to increase

Why is this indicator important?

Local authorities do not usually directly provide services such as home care and care homes; 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 1.1%, from £1,523 to £1,540. The average weekly fee for older people’s care home places increased 2.8% to £842. The average hourly rate for externally commissioned home care rose 2.1% to £20.57.

What is the long-term trend?

In real terms*, since 2015/16 the average weekly fee for working-age adults has increased by 10%, the average weekly fee paid for older people has increased by 26%, and the average hourly rate for home care has increased by 17%.

What explains this?

The above-inflation increases in care home and home care fees in 2022/23 are part of a wider trend since 2015/16 of local authorities increasing fees in order to stabilise the provider market. 

Nonetheless, despite this support, there remain serious concerns that the rates paid remain too low to be sustainable. 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 41% more for their care in care homes and around £3 more per hour for home care than publicly funded clients. The rates paid for home care remain below the Homecare Association’s minimum price of £23.20 for 2022/23.

The Care Quality Commission (CQC) reported that care home profits in March 2022 were at their lowest level since it began its market oversight regime in 2015 and that home care profits had also fallen. In its 2022/23 report, the CQC said, ‘workforce capacity and capability pressures, and concern about financial pressures, are forcing some care providers out of the market or increasing the reliance on people who pay for their own care (self-funded care)’. The CQC also suggested that local authorities were reporting that people’s care needs were increasingly complex. This could further account for increasing provider rates.

During 2022/23, providers faced significant cost pressures, particularly from wages. In April 2022, the main rate of the National Living Wage increased by 6.6% to £9.50.

What has happened in 2023/24?

The Homecare Association published its new calculation for the Minimum Price for Homecare of £25.95 per hour in England, effective from April 2023, when the National Living Wage increased 9.7% to £10.42 per hour.

In April 2024, the National Living Wage is due to rise to £11.44 and the Homecare Association’s Minimum Price for Homecare rises to £28.53.