Large parts of England’s adult social care market face collapse as a result of tax and wage rises announced in the budget, with devastating consequences for vulnerable and older people who rely on care services, a leading thinktank has warned.
The Nuffield Trust said that while the government has consistently spoken of its long term ambition to reform the social care sector, there may be “little of it left” to reform unless it takes urgent action to stabilise the care market financially.
The care sector faced an extra £2.8bn cost burden from next April, the trust estimated, adding most care providers will struggle to shoulder their share of the bill, and at least £1bn extra was needed to keep the market afloat.
Care providers, councils and charities have all warned of the potentially dire consequences of national insurance contribution (NIC) changes and rises in the “national living wage” announced by the chancellor, Rachel Reeves, last month.
Although the NHS and councils are protected from the rise in employers’ NICs, charity and private providers of state-funded services from care to homelessness are not, placing them under what some have called “existential” financial pressures.
The government has refused to offer national insurance exemptions to social care providers, although it has promised a financial lifeline for hospices amid fears the charity-run end of life care services face cuts and closure as a result of rising costs.
The Nuffield Trust calculates the cost to England’s 18,000 care providers of changes to NIC and national living wage rises will more than wipe out the extra £600m allocated to care in last month’s budget.
With councils – which fund 70% of adult social care – struggling financially and unlikely to meet rising contract costs, many providers will face “tough decisions” including laying off experienced highly paid staff, reducing staff hours, or freezing pay for those earning above the minimum wage, the trust said.
Other care providers may be forced out of business, it added. “Without additional funding from central government, the combined financial impact of the NIC rise and the new minimum wage level might see not just single providers going out of business but large swathes of the market collapsing.”
The most devastating consequences of such a market collapse would be for individuals using care services, whose lives would be disrupted, and by people who struggle to access or afford the care and support they need, the trust said.
Natasha Curry, the deputy director of policy at the Nuffield Trust, said: “Faced with a series of financial black holes in almost every corner of the public sector, the government faced the unenviable task of urgently raising funds at the budget to plug them. But by choosing not to provide support to adult social care providers in covering the costs of the rise in NICs, the result is likely to be catastrophic.”
She added: “The government rightly wants to reform social care, but with the real prospect of swathes of the social care market collapsing under these extra cost pressures, there may be little left of it to reform unless the government takes urgent action to cover NICs for adult social care providers.”
Nadra Ahmed, the executive co-chair of the National Care Association, which represents small and medium sized care providers, said: “With no tangible investment over the decades the impact on the increased financial burdens put upon providers is likely to lead to catastrophic consequences for those who rely on social care support.”
A Department of Health and Social Care spokesperson said: “We are providing councils with £1.3bn of new funding for 2025-26, including at least £600m for social care. On top of this, we have allocated an extra £86m for the disabled facilities grant to bolster support for councils and those with social care needs.”
