This year's increase in councils' adult social care budgets appears to be barely enough to cover required rises to wages and taxation for the providers they commission, government figures suggest.
English authorities are budgeting £26.7bn for adult social care in 2025-26 (excluding funding from the NHS), up by £2.2bn in cash terms and £1.6bn (6.2%), after adjusting for inflation, on budgeted spend for the year before, according to Ministry of Housing, Communities and Local Government (MHCLG) figures.
The spending has been enabled by average council tax rises of about 5% and increases in the government's social care grant.
The inflation-adjusted figure is based on the GDP Deflator, a general measure of price rises that is not specific to either local government or adult social care.
This has been measured as 2.65% for 2025-26, but cost increases facing councils in adult social care are likely to far exceed this, due to April's rises in the national living wage (NLW) and employers' national insurance contributions (NICs).
£2bn extra costs for councils from wage and tax rises
Think-tank the Nuffield Trust has calculated that the 6.7% rise in the NLW, from £11.44 to £12.21 per hour, would cost England's roughly 18,000 independent adult care providers an extra £1.85bn 2025-26.It also assessed that the accompanying increase in rate of NICs paid by employers, from 13.8% to 15%, and the lowering of the salary threshold at which it starts being paid, from £9,100 to £5,000, would cost providers £940m this year.
The trust found that councils would need to fund £2bn of the £2.8bn combined cost because they were responsible for purchasing 71% of the care delivered by these providers.
This is only marginally below the £2.2bn cash increase in councils' budgeted spend for 2025-26 compared with 2024-25. However, adult social care is likely to be facing other cost pressures this year other than the increases in the NLW and employers' NICs, such as rising demand for care and support driven by population need.
Council fee rises 'not meeting providers' increased costs'
In addition, provider leaders have warned that increases in fees this year have not been sufficient to cover their increased costs, including from the NLW and NICs rises.According to the Homecare Association, providers have faced an average 10% increase in costs this year, but council fees have only risen by 5.6%.
The organisation has assessed that there is a £1.6bn gap between current fees and the minimum amount of funding required by providers to pay all care staff the NLW, meet other costs and and make a profit of 7%, which the Homecare Association has described as “small”.
Question marks over spending review impact
The MHCLG figures follow the government's spending review, which set public expenditure limits from 2026-29.The government said it had "made available" an extra £4bn for adult social care by 2028-29 compared with 2025-26, though this is dependent on local authorities increasing council tax by 5% per year and will likely involve them squeezing resources for other services, potentially including children's social care.
It also appears to leave little or no room for investment in reform in response to next year's first report from Baroness (Louise) Casey's Independent Commission into Adult Social Care, or to fund the government's planned fair pay agreement for staff in the sector.
The MHCLG figures also revealed that councils plan to increase children's social care spending by £1bn (7.1%) in real terms, compared with budgeted spend for 2024-25, mainly through boosting spending on care placements.
Funding shortfall Councils 'putting services to vulnerable at risk'
In response to the data, a Local Government Association (LGA) spokesperson said: “These figures are a reminder of the rising pressures on both adult and children’s social care.“LGA analysis from October shows that children’s and adult’s social care faces additional cost pressures of £3.4bn in 2025-26 compared to 2024-25. This ongoing shortfall puts services for vulnerable children and adults at risk and severely limits councils’ ability to support the government mission to break down barriers to opportunity.
“Many councils will continue to have to increase council tax bills to try and protect services but still need to make further cutbacks. While government faced tough choices, future funding for adult social care is good news but a lack of significant extra government money needed to meet immediate pressures is worrying.”
