‘Swathes of social care market could collapse under £2.8bn cost pressures’

Private and non-profit social care providers could be faced with increased costs of around £2.8 billion in the next financial year, according to analysis which warns of businesses potentially going bust.

The Nuffield Trust, a health and social care think tank, said a rise in national insurance contributions (NICs) and wage bills for providers could see “swathes of the social care market collapsing under these extra cost pressures”.

Its analysis considered potential costs to almost 18,000 independent organisations – those not run by local authorities, including both private and non-profit – providing adult social care in England.

At her first Budget last month, Chancellor Rachel Reeves increased the rate of employers’ NICs by 1.2 percentage points to 15% and slashed the threshold at which the tax starts being paid from £9,100 to £5,000 to raise £26 billion a year.

She also announced that the national living wage will increase by 6.7% for employees aged 21 or older – from £11.44 an hour to £12.21 – from April.

The Nuffield Trust said the NICs hike alone could cost the adult social care sector around £940 million next year.

Wage rises on top of this could see an estimated £1.85 billion added to the total wage bill in 2024/25, the organisation added.

The trust said that, without the Government covering the NICs costs, providers face a tough financial future.

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.”

Voices within the sector warned in the immediate aftermath of the Budget that some care homes could be forced to close.

A Department of Health and Social Care spokesperson said: “This government inherited a social care system in crisis. We are determined to tackle the significant challenges and build a National Care Service so everybody can access the high-quality care they deserve.

“That’s why we took difficult decisions in the Budget to fix the foundations to restore stability in our public services and we are providing councils with £1.3 billion of new funding for 2025-26, including at least £600 million for social care.

“On top of this, we have allocated an extra £86 million for the Disabled Facilities Grant to bolster support for councils and those with social care needs.”