Home / Resources & Guidance / Solutions To Aid The Financial Position Of Care Providers

Dear Colleague,

Solutions to aid the financial position of care providers 

Care England recognises the financial pressures facing Local Authorities which, according to the Local Government Association, will see a further 9% increase in the cost of Social Care in 2023-24 due to the National Living Wage uplift of 9.7% and the OBR forecast of 7.4% for 2023-24, this is of course off the back of 2022-23 inflation which equated to around 14% for care providers.

On top of this, the Government requires Local Authorities to utilise funds from 2022-23 through to 2024-25 to move toward the Fair Cost of Care, and as such any Local Authority that is offering uplifts less than inflation is unable to meet this requirement, and is consequently failing to achieve the required reform objective.

Care England wants to offer a number of pragmatic solutions which can be implemented with relative ease to improve the financial position of many care providers in addition to fee uplifts to help meet this obligation with minimal cost impact to Local Authorities or which can be funded via its current funding allocation from central government.

VAT Recovery:

Care providers are currently unable to recover VAT as Welfare Services are exempt from VAT. VAT restructuring is a solution to recover input VAT for care homes on Local Authority and NHS-funded contracts and injects additional funds directly into services. This process, which is adopted by circa 50% of Local Authorities, could equate to £30 to £50 being added to every weekly care package funded by Local Authorities or the NHS and have a significant positive financial impact to combat inflation equivalent to a 4% to 6% fee uplift, at no additional cost to the Local Authority outside of contract amendment and a revised billing processes. Care England has organisations and support to assist care providers, Local Authorities and the NHS to implement VAT recovery, and can address all legal concerns, challenges or hesitance considered in the past.

ASK: To permit VAT restructuring for all care providers locally and to connect with Care England to discuss how this can be implemented for your authority across all care providers.

Recruitment and Retention:

Workforce is the single biggest issue for our sector currently and we know that international recruitment is a key opportunity to introduce new people to the UK care sector however, it is only part of the solution.

As such, to support domestic recruitment and reduce the reliance on agency workers, which drives up the cost of care, Care England encourages Local Authorities and ICBs to purchase licenses for its care providers for the CareFriends App: the employee referral, reward, and recognition solution to help providers significantly reduce the domestic recruitment and retention pressures.

With agency costs averaging 14% of total payroll costs, a 50% reduction in agency usage would be seen between £20 to £30 being added to every weekly care package equivalent to a 3% to 4% fee uplift in care provider fees.  The solution is proven to improve conversion rates from 83:1 to 5:1 and reduces 12 week churn of new starters from around 50% to 15%, whilst reducing recruitment expenditure by around half the cost of traditional recruitment methods, and can be operational in approximately 2 weeks. Local Authorities are permitted to use government discharge funding for this purpose to help care providers recruit and retain workers to support hospital discharges.

ASK: Local Authorities to connect with Care England and CareFriends to discuss the cost of licenses for their providers to solve the recruitment and retention problems and to aid hospital discharges.


During the Covid-19 pandemic, some Local Authorities brought forward, sped up, or increased the frequency of care fee payments to care providers which have had a positive impact on care providers.  Providers tell us that changing this approach would have a very significant negative impact on provider cash flow, which in turn will reduce provider credit ratings and impact credit scored services such as energy contracts, reducing their ability to secure lower-cost energy deals, by way of example. There is also a significant trend moving toward the early part payment of pay to care staff, to help with the cost of living crisis, by giving access to pay as it is earnt.

ASK: Care England requires all Local Authorities to consider making or maintaining payments to providers from the start of the month, more promptly, or in advance.

We must work collaboratively over the coming months to help sustain the sector and to protect our workforce. We acknowledge the financial position of Government and Local Authorities, and hence why we are offering the above solutions beyond a fee uplift which can have an equally significant impact on care providers and support sustainability and can equally be funded via existing funding from Government.

Care England has resources and support it can offer immediately to help investigate or implement these suggestions.  We would be happy to meet with you, to discuss these opportunities and reach a common understanding of the pressures challenging the sector’s financial sustainability and work together to ensure long-term improvements can be made.

We are sending this letter to the Chief Executive, Chief Finance Officer and Director of Adult Social Care Services, or other relevant decision-makers, within your organisation.

If you could kindly confirm your availability to discuss this, we will happily set up a virtual meeting.

Yours sincerely,

George Appleton
Head of Policy, Care England