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Care England, the largest and most diverse representative body for independent care providers of adult social care in England, has identified that Local Authorities in England were underfunding older people’s residential and nursing care homes by over £2bn per annum during 2021/22 which does not account for inflation, which peaked at over 11% in 2022 and is projected to exceed 7% for 2023-24 according to the ONS.

These findings follow an analysis of the average fee rates currently paid by Local Authorities across England and the reported Fair Cost of Care rates published on 1 February 2023 in their Annex B submissions to the Department of Health and Social Care. The Fair Cost of Care was a government-led exercise designed to achieve a shared understanding of the local cost of providing care.

Across all Local Authorities and just over 178,000 Local Authority funded residents in England, as at April 2022, the average difference between what a Local Authority pays for residential care fees and the Fair Cost of Care was £218 per week, whilst this figure increases to £231 per week for nursing care.

Care England’s analysis identified regions of concern which were significantly underfunding care according to their Fair Cost of Care calculations. In the North East region, consisting of 12 Local Authorities, providing care to over 14,000 Local Authority care home residents, a Local Authority would be required to uplift average fees paid in 2021-22 for residential care by over 18% and 24% for nursing to meet the Fair Cost of Care at a cost of over £100m per annum across the 12 authorities. In the more affluent South East, consisting of 19 Local Authorities, and provides care to over 30,000 Local Authority funded care home residents, the average uplift for residential would need to be over 32% and 25% for nursing to address the gap between the average fee paid and the Fair Cost of Care at a cost during 2021-22 totalling a gap of over £400m per annum.

Of particular significance, 10 of the largest Local Authorities by residents funded were significantly underfunding care and would require on average, an uplift of 31% for residential and 27% for nursing funded residents to meet the Fair Cost of Care resulting in a gap of over £500m per annum.

Four Local Authorities, Dorset, Newcastle upon Tyne, Reading and St. Helens, reported the Fair Cost of Care rate below the average fee rate they paid to care homes which throws questions on the accuracy of their Fair Cost of Care calculations or average fee data reported.

The Government’s ambition of establishing a Fair Cost for Care was primarily to address Local Authorities paying provider fees that do not adequately cover the actual cost of providing care.

Professor Martin Green OBE, Chief Executive of Care England, says:

“The evidence is clear. The care sector is being significantly underfunded by local authorities and requires significant investment by central government. The continued funding shortage needs to be tackled head-on. Whilst the Government has injected £7.5bn into social care over the next two years, this is aimed at creating an additional 200,000 new care packages and supporting the early discharge of people from hospital to ease the NHS backlog, whilst also being split between adult and child services which are also critically underfunded by central government. Our analysis indicates that the £7.5bn will 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. The inability of many local authorities to pay the actual cost of care has resulted in the cross-subsidisation of the state by individuals who self-fund their care. Care staff pay is directly impacted by fees paid for care by Local Authorities and those who self-fund and, as such, providers who rely more heavily on Local Authority funded residents are more restricted in their ability to increase rates of pay without being financially constrained, which has a direct correlation to the recruitment and retention issues experienced by the sector. 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. This reality must now be realised.”

Care England’s data analysis is based on the following sources:
Capacity Tracker informed April 2022 residents placed in care homes
CMA 2017 report informed resident mix
ONS informed self-funder resident data
LG Inform informed Local Authority funded resident data
NHS Digital informed the NHS resident data
iBCF informed the average fee rates (unless the Local Authority had updated their average rate by way of an FOI or their FCoC Annex B)
Annex B from the Fair Cost of Care Exercise informed the Fair Cost of Care rate