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Funding social care, and the care home market (England)

Published Friday, February 10, 2017

This note considers the current state of the market for residential care (i.e. care homes), and announcements made in the November 2015 Spending Review (and subsequently) regarding funding for social care. It also examines the debate around the sustainability of social care funding.

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The rather fragmented nature of the care home market combined with the fact that local authorities are the largest single purchasers in most parts of the country, means that local authorities have what has been described as monopsony purchasing power.

Given the pressures facing local authority budgets, they have sought to negotiate lower prices for the care home places they finance; this has prompted care home providers to seek further cross-subsidisation from self-funded residents, in a situation where many care home providers have significant debts and looming challenges such as the introduction of the National Living Wage.

The note also considers the role of the Care Quality Commission (CQC) in monitoring the financial health of strategically important care home providers, and the duties of local authorities in the event of the failure of a provider.

Given this prevailing funding climate, in his Statement on the Spending Review in November 2015, the Chancellor announced both a discretionary 2% Council tax precept for social care, and an additional £1.5 billion for the health and social care “Better Care Fund”.

In the run up to the Autumn Statement 2016 a range of organisations, including local government, health bodies, the voluntary sector and the Care Quality Commission, have questioned the sustainability of the market for publicly-funded social care and called for immediate additional funding to avert a ‘social care crisis’.

On 15 December 2016, as part of the English Provisional Local Government Finance Settlement 2017/18, the Secretary of State for Communities and Local Government, Sajid Javid, announced additional funding of up to nearly £900 million for adult social care in 2017/18 and 2018/19. This funding will be provided to local authorities with social care responsibilities through increased flexibility over the Social Care Precept and a new Adult Social Care Support Grant.

A range of stakeholders have expressed disappointment with the level of this additional funding and have called for a review of the long-term sustainability of social care provision.


Commons Briefing papers CBP-7463

Authors: Tim Jarrett; Hannah Cromarty

Topics: Community care, Older people

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