Funding


the deteriorating adequacy of the funding attached to each individual placement. By 2025/26, the weighted annual shortfall


stands at £14,415 per resident. Weekly, the shortfall in residential care rose from £158 in 2022/23 to £198 in 2025/26, while in nursing care it rose from £345 to £452 over the same period. In annual terms this represents a deficit of over £10,000 for every publicly funded residential placement in the country, and over £23,000 for every nursing placement, a figure that approximates the full annual salary of a care worker, absorbed on every single publicly funded nursing bed, every year. Because care is commissioned and delivered placement by placement, higher occupancy no longer improves a provider’s financial position in the way that conventional care home economics would predict. Filling beds now extends the scale of the loss rather than reducing it, a dynamic that runs directly against the assumption of stability on which the market has always depended. The deterioration recorded in 2025/26


owes a great deal to specific, unfunded policy decisions taken that year rather than to structural drift alone. The most significant of these was the change to employer National Insurance (NI) contributions, which combined an increase in the contribution rate with a reduction in the earnings threshold from £9,100 to £5,000. Staffing costs typically account for between just over half (55 per cent) and 70 per cent of total provider expenditure, and the reduction in the threshold alone brought a substantial proportion of the part time and lower paid workforce within scope of employer contributions for the first time. This landed alongside a second consecutive year of significant national living wage increases, producing a combined 10.6 per cent rise in employment costs within the year, against average local authority fee uplifts of less than 5.5 per cent, itself a figure shaped by the funding settlements available to councils rather than by any assessment of what providers actually needed. This meant the shortfall widened by more than


By 2025/26, the weighted annual shortfall stands at £14,415 per resident


a quarter (26.7 per cent) of the shortfall in real terms in that single year, the sharpest deterioration recorded across the whole period, and clear evidence that the funding model contains no mechanism capable of adjusting automatically when government’s own decisions change the cost of delivering care. The funding gap is not distributed evenly


between types of care. Nursing care carries both the larger shortfall and the faster rate of deterioration, growing by more than 30 per cent over the period compared with around 25 per cent in residential care. This reflects nursing care’s cost structure, reliance on registered nurses, higher staffing ratios, and the more demanding clinical governance required, all of which expose it more heavily to the employment cost pressures driving the gap nationally. This matters well beyond the finances of individual providers. Nursing homes supply the step-down capacity that allows hospitals to discharge patients who need ongoing clinical support but no longer require an acute bed, a function central to NHS patient flow and explicitly relied upon within the NHS’s own long-term plan and its ambition to shift care into the community. Where nursing capacity becomes financially unviable and providers reduce beds or exit the market, that pathway narrows and pressure on acute hospital capacity increases. A related and less visible pattern has also


emerged in which people with nursing level needs are placed into residential settings, not on clinical grounds but because that is what available budgets can support, transferring


22 www.thecarehomeenvironment.com October 2026


a level of clinical risk onto services that are neither staffed nor regulated to carry it. Nor is the gap distributed evenly across


the country. By 2025/26, the weekly shortfall per resident ranges from £78 to £343 in residential care and from £278 to £639 in nursing care, a spread in the latter worth more than £18,000 a year for a single placement, determined almost entirely by which of the local authorities happens to be responsible for setting the fee. This variation is not a deliberate policy


choice. It is the product of all of those local authorities making independent decisions about fee setting, each shaped by different local budget pressures, within a national funding framework that has never provided sufficient resource to begin with. Local authorities carry a statutory duty under the Care Act 2014 to secure sustainable, high quality care in their areas regardless of the funding made available to them. The Associaton of Directors of Adult Social Services (ADSS) ADASS Spring Survey 2026 recorded that councils overspent their adult social care budgets by £715 million in 2025/26 alone, with directors reporting diminishing confidence in their ability to meet legal obligations. The postcode lottery this produces in provider sustainability is a symptom of insufficient national funding, not a failure of local commissioning practice, and it leaves communities in the worst affected areas facing a growing risk to the future availability of care. Since the Fair Cost of Care benchmark


was established in 2021/22, the system has moved 49 per cent further away


DC Studio - stock.adobe.com


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60