Funding
Why care funding is priced to fail
The gap between the true cost of care and local authority fees is bigger than ever. Fraser Rickatson examines what that means for providers, local authorities, families and the NHS.
Adult social care in England is funded through fees that local authorities pay to independent and voluntary sector providers on behalf of the older people they support. For those fees to sustain a stable, high- quality system, they need to reflect what care genuinely costs to deliver. For many years, they have not. A new Care England report, report, Priced to Fail, sets out in detail, and year by year, the scale of that shortfall for older people’s residential and nursing care between 2022 and 2026, what has caused it to grow, and what it means for the people who draw on care, the workforce who provide it, the NHS that depends on it, and the country that will need more of it in the years ahead. In 2021/22, the government attempted
to put fair funding for older people’s care on an evidence based footing through the Fair Cost of Care exercise. Every local authority was asked to work with providers to establish, from real data, what care actually costs to deliver, to publish a Market Sustainability Plan, and to set out a strategy for closing the gap between current fees and that cost. The exercise was intended as the first step toward reform under Section 18(3)
of the Care Act 2014, which would have allowed both state funded and self-funded residents to access care at equitable rates. That reform was delayed and was ultimately abandoned. What survived was the benchmark itself, the most rigorous account of the true cost of care ever produced in England, drawn directly from provider data and verified through local authorities’ own ‘market sustainability plans’. The Care England report keeps that
benchmark alive. It applies minimum inflationary uplifts to the original 2021/22 figures each year, and compares the result against the average fees local authorities actually report paying through the ‘market sustainability and improvement fund’ (MSIF). This produces a consistent, year on year measure of the distance between what care costs and what it is paid, built entirely on government’s own evidence and reported spending, and designed throughout to be conservative rather than overstate the problem.
The scale of the funding gap By 2025/26, the gap between what local authorities pay for older people’s residential
and nursing care and what it genuinely costs to deliver has reached £2.36 bn. In 2022/23, the baseline year for this analysis, the gap stood at £1.59bn in cash terms, or £1.75bn in real terms. It narrowed in 2023/24 to £1.67bn in real terms, as the introduction of the MSIF provided meaningful additional support to local authorities. That improvement did not hold. By 2024/25 the gap had reopened to £1.93bn as MSIF supported spending growth slowed against continuing cost growth, and in 2025/26 it widened again to £2.36bn, the largest single year increase on record. Across the period as a whole, the gap has widened by bearly half (49 per cent) in cash terms and by more than a third (35 per cent) in real terms, and in three of the four years measured it has grown rather than narrowed. This widening cannot be explained by
rising demand alone. Holding the number of residents constant at 2025/26 levels across all four years isolates the effect of changing funding adequacy from the effect of a growing population needing care. Under this scenario the gap still grows from £1.86bn to £2.36bn, an increase of approximately half a billion pounds driven entirely by
October 2026
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