Skip to main content

Social care: recent funding announcements and the state of the care home market (England)

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

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”.

The note provides further analysis and reaction to the Chancellor’s announcement, as well as information about the provisional local authority funding settlement.