The King’s Fund’s annual Social Care 360 report, published today, shows that while local authority spending on adult social care has increased and more people are receiving publicly funded long-term care than at any point in the last decade, the outlook for the sector remains precarious.
The report finds that in 2024/25, the average hourly rate paid by local authorities for externally commissioned homecare rose to £23.56 – a 3% increase in real terms. However, fee increases have not kept pace with the cost increases providers face, particularly from the 9.8% rise in the National Living Wage and mounting employer National Insurance contributions.
The King’s Fund notes that local authority homecare rates remain below the Homecare Association’s Minimum Price for Homecare, which represents the amount required to pay care workers at the legal minimum wage and meet the other costs of running a care business. The Association’s current Minimum Price stands at £34.42 per hour – almost £11 above the average council rate.
The report highlights that 890,000 people received publicly funded long-term care in 2024/25, the highest number since comparable records began. But this progress is built on fragile foundations: council external debt rose 10%, useable reserves fell 4%, and directors of adult social services reported a record £774 million overspend. Half of councils with social care responsibilities say they may need emergency government bailouts within three years.
Self-funders continue to bear a disproportionate burden, with providers forced to charge private-paying clients significantly more to cross-subsidise below-cost local authority rates. The means test threshold has been frozen at £23,250 since 2010/11 – it would be £33,654 if uprated with inflation – pushing more people into self-funding.
On workforce, the report confirms that vacancies have fallen from their 2021/22 peak of 10.7% to 7%, driven largely by 235,000 overseas recruits since March 2022. But domestic worker numbers have dropped by 85,000 since 2020/21, and care worker pay progression has effectively collapsed, with experienced staff earning just 7p per hour more than new starters. Skills for Care data shows care worker pay increases now lagging the National Living Wage by 1.7 percentage points – the widest gap since 2019/20 – as providers absorb NIC costs that fee uplifts have failed to cover.
Dr Jane Townson OBE, Chief Executive of the Homecare Association, said:
“This report confirms what we have been telling government for years: the system is structurally mispriced. Local authorities are paying an average of £23.56 per hour for homecare. Our Minimum Price – the floor for legal compliance with the National Living Wage, pension obligations and basic business costs – is £34.42. That is not a negotiating position. It is arithmetic.
“The consequences are now visible in the data. Providers are absorbing the employer NIC increase by compressing care worker pay. Experienced staff earn just 7p more per hour than new starters. That is not a career structure. It is a retention problem waiting to happen.
“We welcome the Government’s commitment to a fair pay agreement for care workers. But fair pay requires fair funding. Without a statutory minimum price for publicly commissioned homecare, backed by ring-fenced resources, the FPA will simply transfer costs onto providers who cannot absorb them, onto self-funders who are already being overcharged, and onto an NHS that cannot discharge patients because homecare capacity has been hollowed out.
“We are calling on the Government and the Casey Commission to address the root cause: a commissioning system that pays below the cost of delivery. We need a statutory minimum price for homecare, neighbourhood-based commissioning that plans for the care people actually need, and an end to the fiction that you can build a stable, high-quality homecare sector on rates that make legal compliance financially impossible.”
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Notes to editors
The Homecare Association is the UK’s membership body for homecare providers, with over 2,200 members nationally. The Homecare Association’s mission is to ensure that homecare is valued, so all of us can live well at home and flourish within our communities. The Homecare Association acts as a trusted voice, taking a lead in shaping homecare, in collaboration with partners across the care sector. It also provides hands-on support and practical tools for its members. As a member-led professional association, the Homecare Association's members agree to abide by the Association's Code of Practice.