Large increases in public sector spending, but ‘mind the ever-widening fiscal gap’ for social care

31 October 2024

Care Provider Alliance (CPA) responds to Chancellor Rachel Reeves’ Budget

While we welcome the weekly earnings limit for Carer's Allowance rise to the equivalent of 16 hours at the National Living Wage per week, other measures laid out in this budget will have a catastrophic impact on care providers, and ultimately on the ability for people to access the care they need, and rightly deserve. 

The employer National Insurance contributions threshold dip will mean care providers will have to find an additional £615 per employee for everyone earning more than £96.15 per week or just under 8 hours per week at the new living wage.

Furthermore, the employer contribution increase from 13.8% to 15% from April 2025 will also have factored in, and together with the enormous 6.7% increase in national living wage to £12.21, providers will be faced with a massive increase in staff costs, which already sit at over 70% of the employer operating costs.

How many providers will consider exiting the market? Last year, our member Care England’s Sector Pulse Report 2023, found 43% of care providers already have closed parts of their operations or handed back contracts. If this continues, there will be significant capacity issues for local authorities. 

Unlike other businesses, much of a social care provider’s income comes from Government funding; the State purchases approximately 70% of all adult social care services. 

Our member, Homecare Association’s recent report calculated a deficit of £1.08 billion just for homecare to cover the national minimum wage at £11.44. Earlier in the year, following the publication of its 2023-24 Fee Rate Maps, our member ARC England’s members called for a minimum 12% uplift in 2024-25 to meet the National Living Wage increase implemented in April 2024, but the average uplift was just 8.55% in supported living for those with a learning disability or autism.

It is widely agreed, the social care sector is critically underfunded by £8.4bn to meet future demand, improve access to care and cover the full cost of care by 2024/25. The Chancellor announced just £1.3 billion of new grant funding for local authority, with only £600 million new grant funding for social care; this is nowhere near covering these additional associated employee costs. 

Going forward, this has to fundamentally change.