November 25, 2024

Social care providers at risk of collapse as analysis reveals cost to sector of employer national insurance hike


Changes to Employer National Insurance Contributions announced last month look set to cost the adult social care sector over £900m next year, more than wiping out the extra funds allocated to social care at the recent Budget, new analysis reveals today.


Taken together with the planned increases to National Minimum Wage rates, the Nuffield Trust says that the 18,000 independent organisations providing adult social care in England will be faced with increased costs of an estimated £2.8bn in the next financial year. This will mean that many businesses - especially smaller ones - are at risk of going bust, disrupting or ending vital care for thousands of older and disabled people.  

 

The Nuffield Trust says these combined cost pressures outstrip not only the extra funds for children’s and adult social care announced in the Budget but will also eat up the extra spending power local councils are expected to have as a result of Budget-driven increases for other services and the likely hikes they will make to council taxes. If councils are unable to pay social care providers higher fees, the vast majority of small providers who cannot absorb these extra costs will have to increase prices for people who pay for their own care, stop accepting council-funded people, or go out of business altogether.   

Based on an approximation of the entire wage bill for the independent social care sector in 2025/26, to which the forthcoming changes to Employer National Insurance are applied [1], the analysis finds that:


  • The planned 1.2 percentage point increase to Employer National Insurance Contributions (ENICs) and the reduction of the earnings threshold for employer contributions from £9,100 to £5000 in 2025/26 will add in the region of £940 million more to the employer national insurance bill for independent (non-public sector) social care organisations, compared to the current regime. 
  • This estimated figure is slightly above that contained in a line later retracted from the Office for Budget Responsibility’s costings of the costs to government of covering employers’ national insurance in adult social care. 
  • The 6.7% increase to the National Living Wage (the minimum wage for those aged 21 and over) will add an estimated £1.85bn to the total wage bill in 2024/25 compared to the current financial year, assuming as in previous years that all wages above the minimum also rise at a roughly similar rate to maintain differentials in earnings. 
  • Taken together, these add an estimated £2.8bn of cost pressures to social care providers, the majority of which are small or medium-sized organisations with limited ability to absorb additional costs. 
  • With local authorities purchasing around 70% of care delivered by independent social care providers, councils would need to find an extra £2 billion if they are to increase the fees they pay to offset these higher costs – immediately consuming both the £600m extra funding allocated to social care (for both children and adults) at the Budget and the effects of an increased local government grant and changes to council tax rates (expected to yield around £2bn in total) for all council services. 


Commenting on the analysis, Natasha Curry, 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 raise in ENICs, the result is likely to be catastrophic. 

“Already fragile after a decade of cuts, runaway inflation and the effects of Covid-19, adult social care was in desperate need of relief. But this was a Budget that gave with one hand and took away with the other. 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 ENICs for adult social care providers.” 




[1] The Nuffield Trust’s analysis calculates the impact of the 1.2 percentage point increase to Employer National Insurance Contributions (ENICs) and the reduction of the earnings threshold for employer contributions from £9,100 to £5000. Drawing on publicly available data it creates an estimate of the wage bill for the entire sector once the minimum wage changes come in and applies the effects of the ENICs changes, deducting changes to the Employment Allowance.

 

Share

August 1, 2026
16 October 2026 6.30pm - 11.00pm Merry Hill
July 29, 2026
Baroness Casey launches the Big Conversation on Care with the public 
July 21, 2026
Amber Court Residential Care Home Turns the Tide
July 16, 2026
Care Association Alliance sets out a national funding model for adult social care, designed to give families certainty, providers stability, and councils the resources to do their job (read the full repo rt here ) A new CAA report proposes pooling the financial risk of an ageing population nationally, rather than leaving it with 153 individual councils. The core of the model: ring-fenced national funding shared on a needs-based formula, a national tariff for care, and an independent body to keep it honest. Individuals keep a means-tested contribution, but with a lifetime cap and a raised capital threshold, so no one faces unlimited costs or has to sell their home. Councils keep assessment, planning, safeguarding and oversight, but are relieved of carrying a national demographic risk on a local budget. Backed by the Rt Hon Damian Green, Chair of the Social Care Foundation and former Deputy Prime Minister responsible for social care policy. The Care Association Alliance (CAA) has published a proposal for how England should fund adult social care for older people. Its report, Adult Social Care Funding Reform, describes a national funding settlement built on a straightforward idea: the cost of growing old and needing care is a national risk, and it should be met nationally, while care itself continues to be arranged and delivered locally. A national risk carried on local budgets At present, primary responsibility for adult social care sits with 153 local authorities under the Care Act 2014. They assess need, commission services and manage local provider markets. They also carry the full financial weight of demographic change, a pressure that is national in scale and rising quickly. The number of people aged 85 and over is projected to double within twenty years, and the Office for Budget Responsibility estimates that simply maintaining today's system will require public spending on social care to grow by 3.1 per cent a year over the next decade, compared with the 0.7 per cent average delivered between 2009/10 and 2022/23. That pressure shows up directly in the price of care. On average, councils pay £24.10 an hour for home care, while the Homecare Association puts the minimum sustainable rate at £32.14. The National Audit Office found in 2021 that authorities were commissioning care at below the sustainable cost of care, and the King's Fund reports that in 2025/26, council fee increases of around 5 per cent were outpaced by provider cost increases of 8 to 10 per cent. This is not a matter of councils choosing to underpay. It is what happens when local budgets are asked to absorb a national cost. Providers take the strain through thinner margins and deferred investment, and families often meet it through the higher fees paid by those who fund their own care, on average 41 per cent more than the council-funded rate. One settlement, built as a system The CAA argues that these are symptoms of a single structural mismatch, and that they need to be fixed together. Its proposed national funding settlement rests on three principles: pooling the financial risk of demographic change nationally, a statutory entitlement to support triggered by assessed need, and continued local delivery within a national framework. In practice, the settlement has five main components: A ring-fenced national care grant , distributed to councils on a needs-adjusted formula, so that funding follows need rather than local fiscal capacity. A reformed means test , with a raised capital threshold, frozen at £23,250 since 2010/11, and a lifetime cap on what any individual can be asked to pay. A national tariff for residential and home care , set at the independently assessed cost of sustainable provision, which councils commission at or above. A bundled funding model for residential care , with assessed packages that are portable when people move. A reformed Deferred Payment Agreement scheme , so that no one is required to sell their home to pay for residential care. Underpinning the settlement is an independent National Care Assessment Body, sitting outside both the NHS and local government, which would verify the cost evidence, review the tariff and report where provision falls short. Local authorities retain their role as commissioners and delivery leaders, close to their communities and provider markets, but are relieved of being the sole bearer of national financial risk. The report is explicit about what it does not propose. This is not a free care service on the model of the NHS, and it does not absorb social care into the health service. Individuals who can contribute to the cost of their care will continue to do so, within a reformed means test and a lifetime cap. The word national describes the funding architecture, not the way care is provided. The proposal is offered as a contribution to the Casey Commission, which is beginning to test public views on who should receive care, what the state should guarantee and what individuals should contribute. The CAA says funding reform is the necessary first step, and Adult Social Care Funding Reform is the first in a programme of papers it will publish over the coming months. Melanie Weatherley MBE, Co-Chair of the Care Association Alliance, said: “No family should receive worse care because of where they happen to live, and no provider should have to choose between keeping a contract and delivering care safely. These are not failings of the people running the system. They are what happens when a national risk is carried on local budgets. If we fund care nationally, price it honestly through a national tariff, and ask an independent body to keep it that way, we can give families certainty, providers stability, and councils the resources to do the job they are asked to do. “This paper is not a criticism of local authorities, who are doing a demanding job under real pressure. It is a practical plan to put the whole system on a sustainable footing, and we hope it is useful to Baroness Casey's commission as it begins its work.” The Rt Hon Damian Green, Chair of the Social Care Foundation and former Deputy Prime Minister responsible for social care, said: “The case for reform is widely accepted. What has been missing is a workable, affordable plan that a government of any colour could adopt. This paper offers exactly that, and a cross-party route to deliver it.” (read the full report here ) ENDS Notes to editors The Care Association Alliance is the national umbrella body for local care associations in England, a member-led organisation with more than 50 local care associations, collectively representing over 10,000 independent care providers across every English region. It is a founding participant in the Care Provider Alliance. The £24.10 per hour figure is a national average local authority domiciliary care fee, not a per-council figure. It is cited alongside the Homecare Association's minimum sustainable rate (£32.14), the National Audit Office's 2021 finding on below-sustainable-rate commissioning, and the King's Fund's 2025/26 fee-versus-cost analysis, all set out in full in Adult Social Care Funding Reform (Paper One), published [DATE] 2026. Additional figures are drawn from the Health Foundation REAL Centre, the OBR, the King's Fund, the IFS and Social Care 360. The funding-gap projection runs to 2032/33. Baroness Casey's remarks were made on 7 July 2026, in a BBC Radio 4 Today interview and a speech to the Local Government Association's annual conference, in which she confirmed the Casey Commission will begin testing the views of the public this month ahead of its first report, due this year. Spokespeople are available for interview. Media enquiries: Melanie Weatherley MBE, Co-Chair of the Care Association Alliance.
July 10, 2026
Digital News: Scam - be aware!
July 7, 2026
New Dates for WMCA In-House Oliver McGowan Training
Show More