4. Expenditure
Total expenditure has increased due to the Covid-19 pandemic and is now higher than in 2010/11
Why is this indicator important?
Though 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?
Total expenditure on adult social care rose in 2021/22 to £26.9 billion, an increase of 3.3 per cent in cash terms and 3.8 per cent in real terms over 2020/21.
- Deflator
We use the GDP deflator to convert spending from cash terms to real terms (ie, taking into account the effects of inflation). The GDP deflator is a measure of general, whole-economy-wide inflation in the domestic economy, and is used by government bodies – including NHS Digital, on whose data much of Social care 360 is based – to adjust for inflation in measures of public spending. Due to higher inflation in 2020/21 because of Covid-19, unusually, in 2021/22 the GDP deflator records a small negative inflation compared to 2020/21 – that is, there was deflation rather than inflation. As a result, cash increases are lower than increases in real terms.
What is the long-term trend?
Total expenditure in 2021/22 was £2.6 billion more in real terms than in 2010/11. However, as a result of Covid-19, some expenditure in 2020/21 and 2021/22 was on support for the social care sector rather than individuals’ care and so totals are not comparable with previous years.
- What was the money spent on?
Local authorities spent approximately the same amount of money1 – £8.3 billion – on long-term support for both working-age adults and older people in 2021/22. However, the pattern of spending was very different.
Nursing Residential Supported accommodation Direct Payments Home care Supported Living Other long-term community care Total 18–64 £0.3 billion £2.3 billion £0.5 billion £1.4 billion £0.9 billion £2.2 billion £0.7 billion £8.3 billion 65+ £1.7 billion £3.4 billion £0.1 billion £0.5 billion £1.9 billion £0.4 billion £0.2 billion £8.3 billion For 18–64-year-olds, most money was spent on community-based support: supported living (£2.2 billion), direct payments (£1.4 billion) and home care (£0.9 billion), though £2.3 billion was also spent on residential care homes. Local authorities also spent £190 million on short-term support for working-age adults.
For older people, most money was spent on care homes – either nursing homes (£1.7 billion) or residential homes (£3.4 billion), though £1.9 billion was also spent on home care. Local authorities also spent £578 million 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 (£5.7 billion) and physical support for older people (£5.3 billion). Other major areas are support with memory and cognition for older people (£1.5 billion), physical support for working-age adults (£1.5 billion), mental health support for working-age adults (£0.9 billion) and mental health support for older people (£0.6 billion).Local authorities spent a further £1.9 billion on social work-related activities such as assessment and safeguarding, and £2.0 billion on commissioning and service delivery. In 2019/20, local authorities had spent only £1.1 billion on commissioning and service delivery; the increase in initially 2020/21 (£2.3 billion) and then 2021/22 reflects increased grant-funded support to social care providers due to Covid-19.
- 1These figures are gross current expenditure (total £22.0 billion), so do not include spending that results from NHS income or income from fees and charges.
For both older people and working-age adults, there has been a shift towards community-based expenditure and away from residential expenditure. These trends pre-date but may have been accelerated by the Covid-19 pandemic.
However, the increase in community-based expenditure may reflect an increase in costs rather than in activity. In 2021/22, 22,000 fewer people received community-based support compared to 2015/16. However, the unit cost of home care (the only aspect of community activities for which we have a unit costs) increased by 13.8 per cent in real terms between 2015/16 and 2021/22.
What explains this?
The increase in expenditure in 2021/22 is a result of continuing measures to cope with the consequences of the Covid-19 pandemic. Local authorities received £3 billion in additional grants from central government to support their local care markets, which were facing extra costs particularly for staffing. Much of this extra spending involved support for providers of services rather than direct expenditure by local authorities on people in need of care.
The expenditure increase also reflects higher fees from care providers (see indicator 5, unit costs). The price of residential and nursing care for working-age adults has increased 7 per cent in real terms since 2015/16 and that for older people has increased 21 per cent. The price of home care has increased 13.8 per cent since 2015/16. These increases are in part driven by increases in staffing costs (see indicator 8, pay). All these trends pre-date the Covid-19 pandemic.
The increase in expenditure also reflects a continuation of increased income from the NHS, which – until 31 March 2022 – took over responsibility for paying for the first 4–6 weeks of social care after people were discharged from hospital. This was to ensure that people were able to leave hospital – and therefore free up beds – as quickly as possible during the pandemic.
What has happened in 2022/23?
In the 2022 Autumn Statement, the government announced a funding package for adult social care of up to £7.5 billion in 2023/24 and 24/25. The next section has further details on this funding.
5. Cost of commissioning
Local authorities are paying more for care home places and home care.
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, most of which are for-profit. Providers need fee levels to be sustainable to ensure they can provide good-quality services, attract and retain a workforce and, ultimately, continue to operate services.
What was the annual change?
In real terms (see Deflator below), the average weekly fee paid by local authorities in England for care homes places for working-age adults rose by 2.5 per cent, to £1,428 in 2021/22. The average weekly fee for older people’s care home places increased 2.6 per cent to £767. The average hourly rate for externally commissioned home care rose 2.9 per cent to £18.88.
- Deflator
We use the GDP deflator to convert spending from cash terms to real terms (ie, taking into account the effects of inflation). The GDP deflator is a measure of general, whole-economy-wide inflation in the domestic economy, and is used by government bodies – including NHS Digital, on whose data much of Social care 360 is based – to adjust for inflation in measures of public spending. Due to higher inflation in 2020/21 because of Covid-19, unusually, in 2021/22 the GDP deflator records a small negative inflation compared to 2020/21 – that is, there was deflation rather than inflation. As a result, cash increases are lower than increases in real terms.
What is the long-term trend?
In real terms, since 2015/16 the average weekly fee for working-age adults has increased by 7.3 per cent, the average weekly fee paid for older people has increased by 21 per cent and the average hourly rate for home care has increased by 13.8 per cent.
What explains this?
The above-inflation increases in care home and home care fees in 2021/22 represents a return to the trend since 2015/16 of local authorities increasing fees in order to stabilise the provider market and more accurately reflect the cost of providing care. This follows a blip in 2020/21 in which working-age adult care home fees and home care fees fell in real terms, albeit this was in part a result of the measure of inflation used in 2020/21 and they did increase in cash terms.
The increases in fees may also reflect Covid-19-related grant support from government to social care providers through local authorities.
Nonetheless, despite this support, there remain serious concerns that 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 40 per cent 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 remain below the Homecare Association’s minimum price of £21.43 for 2021/22.
The government recognised this problem in September 2021 when, as part of planned charging reforms, it set aside £1.4 billion to help local authorities move towards paying a ‘fair cost of care’ to providers. However, funding for this was subsequently subsumed into a wider package of support for local authorities announced at the Autumn Statement in November 2022 (see below).
The Care Quality Commission said that care home profits in March 2022 were at their lowest level since it began its market oversight regime in 2015 and home care profits had also fallen.
Providers faced significant cost pressures, particularly from wages, during 2021/22. In April 2021, the main rate of the National Living Wage increased by 1.7 per cent in real terms. Covid-19 also brought increasing costs in sick pay and for personal protective equipment, while increasing staff vacancies have left providers relying more on expensive agency-staff costs.
What has happened in 2022/23?
In October 2022, the Association of Directors of Adult Social Care Services said that most councils continued to report providers handing back contracts, closing or ceasing trading. 94 per cent of councils thought that funding was not sufficient to meet provider costs over the winter.
In the Autumn Statement in November 2022, the government announced a funding package for adult social care of up to £7.5 billion.* The total is made up of £1.6 billion of new funding via the Better Care Fund (shared between local authorities and the NHS) to get people out of hospital and into care settings; a £1.1 billion grant ringfenced for adult social care, which is also intended to support discharge; £3.2 billion of funding as a grant for adult and children’s social care, transferred from the intended funding for charging reform, which has been postponed until October 2025; and up to £1.7 billion of revenue-raising powers for local authorities through increased flexibility for local authorities on Council Tax.
*Totals in fact add up to £7.55 billion, as set out in table below.
| 2023/24 | 2024/25 | Total | |
| Better Care Fund (shared between local authorities and the NHS) | £600m | £1 billion | £1.6 billion |
| Adult social care grant (also intended to support discharge) | £400m | £680m | £1.08 billion |
| Adult and children's social care grant (transferred from the intended funding for charging reform) | £1.27 billion | £1.88 billion | £3.15 billion |
| Revenue-raising powers for local authorities through increased council tax flexibility | £550m | £1.17 billion | £1.72 billion |
| Total funding package | £2.82 billion | £4.73 billion | £7.55 billion |
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