Councils underfunded home care and older people’s care home services in England by just under £2.9bn in 2021-22, according to an analysis by provider bodies.
The figure is based on an examination of cost of care exercises that councils carried out recently to determine sustainable fee rates for these services and identify how far they were from paying them.
The exercises used data supplied by providers concerning their costs, broken down into areas such as staffing, premises, services and supplies and appropriate levels of profit, as of 2021.
As reported last month, the Association of Directors of Adult Social Services warned that the exercises – which the Department of Health and Social Care (DHSC) required authorities to carry out – revealed a significant shortfall.
Shortfall of almost £3bn
Provider bodies have now attempted to quantified this and identified a £2.88bn shortfall in home care and older people’s care home services, said umbrella organisation the Care Provider Alliance (CPA) in an open letter to care minister Helen Whately.
CPA member Care England said its analysis of the figures for older people’s care homes revealed a shortfall of over £2bn in this sector alone, with council residential care fees £218 a week below the calculated fair cost on average, and nursing home fees short by £231 per week.
It identified particular concerns in certain regions, with residential fees needing to rise by 32%, and nursing fees by 25%, in the South East, while in the North East, councils would have to improve their residential rates by 18% and their nursing rates by 24% to meet the assessed fair cost.
However, both Care England and the CPA said the figures were underestimates because of the impact of inflation on care providers’ bottom lines in the past two years.
“These figures do not reflect subsequent increases in the minimum wage and skyrocketing rates of inflation and energy costs,” wrote CPA chair Nadra Ahmed in her letter to Whately. “Nor do the figures account for the urgent need for improved pay, terms and conditions of employment for care workers.”
Care market ‘in untenable position’
She pointed out that the exercise also excluded care home provision for younger adults, which also faced significant pressures.
“It [is] deeply disappointing, but not surprising, that the care market is showing an untenable operating position, which impacts on people that draw on services across our country, their relatives and carers,” she added.
The exercises were carried out as part of a DHSC policy to encourage councils to move towards paying providers a “fair cost of care”, which was originally due to be backed by £600m in funding in each of the next two years.
However, this has now been cut to £162m per year, the same as in 2022-23, with the rest of funding reallocated to help councils meet a broader range of pressures, including delayed discharges from hospital, waiting times for care assessments and packages and care worker shortages.
This was as part of a funding settlement ministers have said would provide councils with up to £2.8bn in 2023-24 and £4.7bn in 2024-25 for social care.
Councils have questioned these figures since some of the money is designed to be spent on children’s social care and another chunk is dependent on authorities raising the maximum permissible amount from council tax in each year, though a County Councils Network analysis published last month found most were planning to do so.
Funding ‘does not scratch the surface’
Care England chief executive Martin Green said the overall package would “not scratch the surface in tackling the inherent issue of local authorities underfunding care packages and the rising gap between fees paid and the cost of care caused by inflation”.
He said the situation led to the ongoing issue of self-funders cross-subsidising council-funded residents by paying higher fees, and depressed the wages of care staff in homes where local authority placements predominated.
“The core purpose of the fair cost of exercise, an initiative led by the government, was aimed at increasing the care fees paid by local authorities to ensure the care sector’s sustainability,” Green added. “This reality must now be realised.”
For ADASS, joint chief executive Cathie Williams agreed with Green and Ahmed that the funding gap was an underestimate because it was based on April 2021 figures and did not include the full range of social care services.
She added: “Now the government has a better understanding of provider care costs they should provide the long-term sustainable funding to deliver the ambition set out in the  adult social care white paper for people to be able to access outstanding quality and tailored care and support.”
However, a DHSC spokesperson said: “We are making available up to £7.5bn in additional funding over two years to support adult social care and discharge which will help local authorities address waiting lists, low fee rates, and workforce pressures in the sector.
“This historic funding boost will mean local authorities can go beyond dealing with immediate pressures, to deliver long lasting tangible improvements to their adult social care services so people who draw on care can know they’re getting the best possible care for their needs.”
Sustainability plans due
The next stage of the fair cost process is for councils to publish market sustainability plans by 27 March 2023. These should set out:
- Councils’ assessments of the sustainability of their home care and older people’s care home markets, covering the sufficiency, diversity and quality of provision, the adequacy of average fee rates and the state of the workforce.
- Their evaluation of the expected impact of market changes over the next three years, including the expected introduction, in October 2025, of the right of self-funders to request their council arranges their care home placement, enabling them to take advantage of local authority fee rates.
- Their plans to address the sustainability issues identified.