Home care funding £2bn short of minimum required in England, finds provider body

Home care funding is £2bn short of what is required this year in England, a provider body has found.

The Homecare Association said its research also revealed that the market for services was "deeply fragmented" and "over-saturated", with commissioners purchasing relatively few hours from many providers, leaving the viability of some organisations at risk.

In addition, its study found that the NHS was commissioning less home care in 2025 than 2024, adding to concerns about the health service tightening eligibility for continuing healthcare (CHC).

On the back of its report, the association called for the government to boost funding to fill the gap it had identified and fund improved staff wages. It also called for reforms to commissioning to ensure council and NHS fees were sufficient and providers were offered guaranteed hours.

£2bn shortfall in funding found

The Homecare Association had previously found that council home care fees in England this year were £1.6bn short of what was required to meet its calculation of the minimum price of home care in the country: £32.14 an hour.

That was based on analysis of a sample of home care contracts across the country, covering 90% of local authorities. Its latest, more comprehensive, analysis, based on data from all but one local authority, identified a similar shortfall among councils, of £1.64bn.

Authorities paid £24.35 per hour on average, with none paying the association's calculated minimum price, though rates varied widely by region, from a low of £21.87 in Greater London to a high of £26.83 in the South West.

NHS integrated care boards' (ICBs) rates were even lower, at an average of £23.84 per hour, with a resulting shortfall of £344.7m nationally, leaving an overall funding deficit of £1.98bn across England.

NHS funding level 'deeply worrying'

The association said the fact that NHS funding levels were lower than councils' was "deeply worrying", given that the health service generally restricted care to people with the most complex needs, who received CHC.

It also found that the number of hours purchased by ICBs during the sample week in April 2025 was 6% down on that commissioned during a comparator week in 2024.

The association said this suggested ICBs were reducing CHC packages or reclassifying healthcare needs as social care needs, transferring costs from the NHS to councils.

This is in line with official data showing a reduction in the number of people receiving CHC in England in recent years and the Association of Directors of Adult Social Services (ADASS) finding increased pressures on councils from meeting the needs of those previously eligible for continuing healthcare.

Third of councils not meeting care worker costs

By contrast, councils were purchasing 3% more hours in the sample week in 2025 compared with 2024.

However, the Homecare Association found that 30% of councils did not pay providers enough to meet the costs of employing care workers on the national living wage (NLW) - which it calculated as £22.71 - let alone meet their other costs.

Across the UK as a whole, the proportion of councils and Northern Ireland health and social care (HSC) trusts whose rates were below the costs of employing care workers had "dramatically increased", from 8% in 2023 to 29% in 2025, it added.

"When commissioners set rates that fall short of legal wage costs, they force providers into non-compliance or exit," the association warned.

'Deeply fragmented' care market

Alongside its minimum price, the Homecare Association has calculated that organisations providing predominantly state-funded care need to be delivering 1,500 hours of care per week to remain financially sustainable.

However, it found that the average number of hours purchased per provider across the English regions ranged from 238 in the South East to 517 in the North West.

It said this revealed a "deeply fragmented, over-saturated market", which left providers "struggling to remain financially viable delivering state-funded care", heralding "major consequences" for continuity of care.

Fair pay agreements for adult social care staff

The report comes with the government's Employment Rights Bill set to introduce so-called fair pay agreements for adult social care workers in England, Scotland and Wales.

These would be set by new negotiating bodies in each of the three countries, with representation from employers and unions, with the bodies' decisions signed off by ministers.

The government has provided £500m for the implementation of the first agreement in England, in 2028-29, but this has been widely criticised as deeply inadequate by sector leaders, including the Homecare Association.

Reforms to sick pay and zero hours contracts

The association has also previously warned that the Employment Rights Bill's measures on increasing access to statutory sick pay (SSP) and on requiring employers to offer staff on zero hours contracts guaranteed hours would pose significant challenges for the home care sector.

Under the bill, SSP would be payable from the first day of absence, not the fourth, as currently, and the current £125 earnings limit would be removed, with employers paying staff the lower of £118.75 per week or 80% of their average weekly earnings.

The Homecare Association found that 97% of providers offered staff no more than SSP, meaning the reforms would increase their costs.

In relation to zero hours contracts, which applied to 43% of domiciliary care workers as of March 2024 (source: Skills for Care), the association said these were driven by commissioning practices that did not offer providers guaranteed hours.

In its latest report, the association said no funding had been provided to implement either reform in adult social care, meaning providers would have to "absorb unfunded costs, which they cannot do, deliver non-compliant care or withdraw from contracts".

Investing in home care 'a moral and economic imperative'

Commenting on the findings, Homecare Association chief executive Jane Townson said: "A fair price for care is not an optional extra - it is the foundation of a sustainable health and care system.

"Investing properly in home care is both a moral and an economic imperative: it keeps people independent, relieves hospital pressure, and strengthens local economies.”

Echoing previous Homecare Association reports, the latest one called for the government to:

• Fund £2bn gap it had identified and also provide an extra £660m to enable staff in England to earn £13.60 an hour, in line with the pay of NHS healthcare assistants with at least two years' experience.
• Legislate for a national contract for care, under which commissioners would have to pay a minimum rate for services, calculated through an agreed methodology.
• Reform commissioning to replace "competitive, minute-by-minute purchasing" with contracts of sufficient scale that offered providers guaranteed hours and supported compliance with the Employment Rights Bill.

'Funding not keeping pace with costs'

In its response to the report, ADASS said that the latest increase in the NLW, along with this year's rise in employers' national insurance contributions, had "substantially increased the cost of care".

However, due to the "challenging financial environment" councils were working within, they had only been able to increase fees by 5% this year, which was not enough to meet providers' increased costs.

"In short, the funding made available to councils is not keeping pace with costs and the need of people who draw on care and support, this is why we have consistently called on government to increase funding for the sector," added an ADASS spokesperson.

Government 'turning around adult social care'

A Department of Health and Social Care (DHSC) spokesperson said the Labour government had "inherited a social care system facing significant challenges".

They said the government was "turning this around", through a funding settlement that would increase available resource for adult social care by more than £4bn a year from 2025-26 to 2028-29, and through the fair pay agreement, which would "boost recruitment and retention".

The DHSC spokesperson also pointed to the establishment of the Independent Commission into Adult Social Care, which is developing proposals for the longer-term reform of adult social care.

The commission, led by Baroness (Louise) Casey, will issue its first report - on how the government should develop a so-called "national care service" over the coming decade - next year.