Social care 360: expenditure

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4. Local authority expenditure

Total spending by local authorities is slightly higher than at the start of the decade.

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Why does this indicator matter? 
Though spending is not a perfect proxy for the amount and quality of care arranged by local authorities, currently it is the best overall indicator available. 

What was the annual change in 2019/20? 
Total spending on adult social care increased by 2.2 per cent in real terms. In actual terms, it increased from £22.2 billion in 2018/19 to £23.3 billion in 2019/20.  

Local authorities spent £7.5 billion on long-term support for working-age adults in 2019/20. Of this, they spent £2.5 billion on nursing or residential care, £451 million on supported accommodation and £4.6 billion on community support, including home care. They also spent £159 million on short-term support for working-age adults.  

Local authorities spent £7.9 billion on long-term support for older people, of which £5 billion was on nursing or residential care, £121 million on supported accommodation and £2.7 billion on community support, including home care. They also spent £450 million on short-term support for older people.  

These figures are gross current expenditure, so do not include spending that results from NHS income or income from fees and charges.  

What is the long-term trend? 
As the graph shows, in the past decade spending on social care has been a tale of two halves. From 2010/11 until 2014/15 spending fell rapidly (and was greater in more deprived areas) but then rebounded as the government and local authorities responded to concerns such as providers leaving the market and increased pressures on the NHS. Total spending is now £99 million higher in real terms than it was in 2010/11.  

What explains this? 
Spending on adult social care needs to be seen in the context of overall reductions in local government expenditure. Government funding for local authorities fell by 55 per cent between 2010/11 and 2019/20, resulting in a 29 per cent real-terms reduction in spending power. Local authorities are also legally required to set a balanced budget each year.  

On average, adult social care represents more than 40 per cent of the total spending of local authorities. Local authorities face increasing financial pressures on their budgets from a growing older population and increasing numbers of working-age adults with disability, which leads to more requests for support (see indicator 1). The costs of providing care are also going up by more than inflation (see indicator 5).

Since 2014/15, the government has provided local authorities with more money to spend on adult social care, in the form of grants, often short-term, including monies channeled through the Better Care Fund). Local authorities have also been given the power to raise money locally, through the adult social care supplement to Council Tax, and have also raised more money from fees and charges on service users. All this has allowed total expenditure to rise.  

However, other measures of expenditure have not risen as much. The measure of spending that omits NHS income (‘gross current expenditure’) still has spending below where it was in 2010/11. And spending per head of population is well below where it was in 2010/11. So, the money has not gone on providing services to more people, despite the increased demand. Unmet need for care remains high among older people (there is limited data about working-age adults) and in 2018 was twice as high in the most deprived areas.

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Increased spending has gone, at least in part, towards responding to the increasing costs of providing care. Provider fees (see indicator 5) have increased faster than inflation since 2015/16 (which in turn has been led by increasing workforce cost because of the National Living Wage).

What is the impact of Covid-19 likely to be?
Expenditure might be expected to rise, at least in the short term, as more money flows into local government to meet additional costs. Local authorities forecast that Covid-19 would create £6.9 billion of extra cost pressure in 2020/21, with more than £3 billion of these costs falling on adult social care. The government says it has provided £7.2 billion of additional funding to local authorities, of which sector-specific support included a £546 million adult social care infection control fund, a £149 million rapid testing fund and a £120 million workforce capacity fund (funding for these was extended in March 2021).

Longer term, the Spending Review for 2021/22 has given local authorities additional spending power of 4.5 per cent in cash terms. However, most of this is accounted for through the ability of local authorities to raise Council Tax by up to 5 per cent and not all local authorities will do this.

On the other hand, deaths of people from Covid-19, will, sadly, have reduced the number of people receiving publicly funded adult social care services, particularly in care homes. In addition, as part of the drive to free up beds in acute hospitals, the government made available more than £1 billion through the NHS to pay the social care costs of people leaving hospital. These factors will have reduced local authority spending.

5. Costs

The cost of commissioning care for local authorities continues to rise.

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Why is this indicator important? 
Local authorities1 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. For local authorities, fee levels are a major part of their expenditure: of the £23.3 billion spent by local authorities on adult social care in 2019/20, just £5.1 billion was spent on their own services and £18 billion was spent on provision by others. 

What was the annual change? 
The average cost of purchasing residential and nursing home care places and home care packages all increased by more than the rate of inflation. The average weekly cost of care home places (residential and nursing, for both older people and working-age adults combined) increased from £804.07 to £814.05, a real-terms increase of 1.2 per cent. Home care packages increased from £16.86 an hour to £17.48, also a real-terms increase of 1.2 per cent.  

There were significant differences between age groups in cost of care home places (we do not have this data for home care). Places for working-age adults were nearly twice as expensive at £1,317.45 as older people at £678.95. However, the rate of increase in 2019/20 for working-age adults was only 1.2 per cent compared to 2 per cent for older people.  

There was wide variation between local authorities in the amounts paid. The highest average rate for home care, for example, was £25.56 an hour and the lowest was £14.00.  

What is the longer-term trend? 
The cost of purchasing care home places has grown 9.0 per cent since 2015/16. However, the increase has not spread evenly across age groups – the cost of beds for older people has grown 12 per cent since 2015/16 against 4 per cent for working-age adults. For older people, the rate of increase may be slowing – the increase in 2019/20 is the lowest since 2016/17.  

The cost of purchasing home care services has also increased by more than inflation – 10.6 per cent in real terms since 2015/16. Again, the rate of increase may be slowing. The 1.2 per cent increase in 2019/20 is the lowest annual increase since 2015/16. The average price of commissioning home care remains well below the minimum price recommended by the UK Homecare Association.  

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What explains this?
Some of the expenditure on fees is being used to cover increasing workforce costs of adult social care providers, driven by increases in the National Living Wage. It is also possible that the unit price of packages is increasing because people have increasing complexity of needs.

Higher fees may also have helped restore margins in the sector, stabilising a market that has seen significant numbers of providers either go out of business or withdraw from the publicly funded sector altogether. Despite this increase in fees in 2019/20, 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 65 and over and below the sustainable rate for home care. The report noted that the Department for Health and Social Care does not challenge local authorities who pay low rates. The report also found that earnings before interest, tax, depreciation amortisation and rents (EBITDAR) had been stable for the larger for-profit homes over the past four years but they had fallen for the larger home care providers.

What is the impact of Covid-19 likely to be?
The cost to local authorities of purchasing care is likely to have increased still further during 2020/21. Providers needed more personal protective equipment (PPE), had to cover for staff who were ill or isolating, and faced increasing insurance costs. The government provided additional funding through the Adult Social Care Infection Control Fund, introduced in May 2020, which local authorities were expected to pass onto providers. There was also additional funding for local authorities more generally, though providers reported variation in the extent to which these funds reached them. The additional costs of providing services may also feed through into increases to underlying rates for commissioned home care and residential care. This will only become clear in autumn 2021 when data for 2020/21 is published.

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  • 1. All the data in this section relates to commissioning by local authorities. There is no official, publicly available data about the prices paid by self-funders for their care.

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