Following the November 2024 budget, social care providers have been vocal in their disappointment at the potential impact of the rise in NICS and NLW. Everyone working in social care needs to a good understanding of how the funding is currently distributed in order to understand what options exist to support any future changes.
In this briefing note, we look at how social care is funded in England, drawing upon insights provided by the following reports:
Social care in England relies on a complex funding system, supported by local and central government, the NHS, and service users. Local authorities manage its delivery under legal obligations. Below is a summary of the primary funding sources.
Local authorities fund social care using income from council tax, business rates, and service charges. However, there is no dedicated national budget for adult social care. As a result, councils must decide how much of their resources to allocate to these services.
The Social Care Grant, valued at approximately £5 billion in 2024/25, is the largest government grant for adult social care. It covers both adult and children’s services, giving local authorities flexibility in allocation. Additionally, the Market Sustainability and Improvement Fund (MSIF) provides ring-fenced funding for improving market stability by raising provider fees, expanding capacity, and enhancing sustainability.
The Better Care Fund (BCF) pools budgets between local authorities and the NHS to integrate health and social care services. It includes a mandatory NHS contribution worth about £5 billion in 2024/25. Furthermore, the Improved Better Care Fund supports adult social care by offsetting funding variations from the social care precept.
Social care is not free at the point of use. Individuals contribute to the cost of their care through private customer fee income based on a means test that considers their income and assets.
Introduced in 2022, this fund helps local authorities and the NHS increase social care capacity. It aims to reduce hospital stays and free up beds.
Launched in 2016/17, the precept allows local authorities to raise council tax specifically for adult social care.
The reports highlight critical financial issues in social care funding.
A growing funding gap exists due to rising demand and insufficient investment. The Health Foundation estimates that £8.2 billion extra per year is needed to meet future demand. Contributing factors include an ageing population, complex needs, and rising care costs.
Short-term funding settlements hinder long-term planning. For instance, funds like the Adult Discharge Fund address immediate needs but fail to provide sustainable solutions. This approach makes it harder for councils and providers to forecast or invest effectively.
Variations in local wealth affect the ability to raise funds through the social care precept. Additionally, the government’s outdated formula for allocating resources creates disparities.
Recruiting and retaining care workers remains a challenge due to low wages, tough conditions, and limited career paths. Financial constraints prevent providers from improving pay or working conditions.
Ensuring market sustainability is essential for maintaining care quality. Paying providers a fair cost is critical to avoiding market failures. While the MSIF aims to address this, more effort is needed for lasting stability.
The reports suggest the following outlook for social care funding in England:
The future of social care depends on the government’s commitment to investment and reform. By addressing current challenges, the system can ensure better accessibility and quality of care for generations to come.
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