Government's new 'Fair Cost of Care reforms' could trigger widespread care home closures in England

The new ‘Fair Cost of Care’ adult social care reforms could see care homes facing widespread closures and a shortage of beds, according to a new report.

The warning from the County Councils Network (CCN) claims the government has “seriously” underestimated the costs of its proposals by at least £854m a year.

The CCN report by healthcare analysts LaingBuisson examines the proposals to allow private payers (self-funders) to ask councils to arrange care on their behalf at lower local authority rates and the intention to introduce a new ‘Fair Cost of Care’, which aims to increase care fees paid by councils to make the care market sustainable.

The government has allocated £378m per year for councils to pay this new Fair Cost of Care and to protect providers from financial losses when private fee payers are eligible to ask their local authority to arrange their care and access lower council rates from October 2023.

However, the study concludes that that the government’s allocation ‘seriously underestimates’ the amount of new funding required and could cause a ‘severe sustainability risk’ to care homes across the country. Widespread care home closures could leave councils struggling to find beds for those who require care and trigger a deterioration in the quality of care between local authority and private placements.

The report calculates that an extra £854m a year is needed, at the bare minimum, to make the proposals workable by avoiding large-scale closures and to ensure ongoing investment into the social care sector.

Cllr Martin Tett, adult social care spokesperson for the County Councils Network, said: “There is a clear consensus from those that work in adult social care that the government’s Fair Cost for Care proposals are laudable – we all support the principle of making the system fairer. But the government has seriously underestimated the costs of its proposals.

“At the present funding level, these proposals could have a serious impact on the care sector across the country, leading to widespread care home closures and a rationing of care for the hundreds of thousands of people who need it each year.”

Councils will be left between a 'rock and a hard place'

He is worried councils will be left between “a rock and a hard place – either by raising council tax to excessive levels and cutting local services, or by seeing widespread care home closures in their areas”.

“Councils are committed to working with government to develop a roadmap which both implements reform alongside maintaining market stability. However, the government needs to seriously consider the findings from this report and provide a substantial uplift in funding to make the proposals workable.”

Care England echoed these sentiments, with its chief executive, Martin Green saying the funding allocated so far could lead to ‘catastrophic financial failure’ for care providers.

The report indicates that the largest losses would be for care providers in the South East, East, and the South West, as these are the areas with the largest amount of private fee payers eligible to ask councils to arrange their care. At the moment, self-funders tend to pay up to 40 per cent more on average than those who are state-funded.

The reforms mean self-funders can ask local authorities to arrange their care so they can access local authority fee rates.

The CCN is urging the government to bring forward funding so local authorities can access the Health and Social Care levy to fund the extra £854m needed. Currently, councils will have to wait until 2025 to access full funding from the levy.

If there is no extra funding, the reforms should be delayed

If no extra funding is forthcoming, CCN argues the Fair Cost for Care and Section 18(3) policies should be delayed until at least 2025.

Professor Green said: “It shows that the annual cost to councils is at least three times current government funding allocations and if not immediately revised this could lead to catastrophic financial failure to be experienced by providers, leading to home closures, and an inability to invest in services for some of the most vulnerable members of society now and into the future.

“Levelling out self-funder and council funded fee levels is welcome but must be on the basis that care costs are met in full and allow the sector to invest for significant growth of our ageing population, and to improve the pay and career development of its staff.”

William Laing, director of LaingBuisson, said: “The social care reform policy objectives are widely accepted, but the central government money earmarked to enable councils to pay a fair cost for care is clearly inadequate, with the risk of severe unintended consequences including the destabilisation of the care market in some areas.”