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Northern England Bears Brunt of Council Care Fee Deficits, LaingBuisson Reveals

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November 29, 2024
in Economy, Investing
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Northern England Bears Brunt of Council Care Fee Deficits, LaingBuisson Reveals
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The thirteenth edition of LaingBuisson’s Care Cost Benchmarks (CCB), detailing financial data for 2024/25, has been published. This extensively refined model, developed over 20 years, remains a critical reference point for care home operators and commissioners in determining the ‘Fair Cost’ of sustainable care for older individuals, approximately half of whom depend on council-funded support.

In its final term, the Conservative government acknowledged that austerity measures had caused significant underfunding of council-paid care fees. The newest CCB edition provides a detailed analysis of the financial position of all 151 English councils responsible for adult social care, examining:

The ‘Fair Costs’ for delivering nursing and residential care in 2024/25
Reported average fees paid by councils in the opening months of 2024/25
The gap between council payments and the actual costs incurred by operators (both deficits and surpluses)

Fee shortfalls are most prominent in residential care. Of the 151 councils reporting data, 107 pay below the full cost required, whereas 45 councils confirm their fees meet or exceed operators’ costs.

For nursing care, councils are more evenly divided, with 73 underpaying and 78 meeting or exceeding costs. However, the reliability of reported nursing care fees varies across councils, according to the CCB.

On average, LaingBuisson calculates a £223 million shortfall in council funding for care homes serving older adults in England for 2024/25.

The northern regions of England experience the most acute shortfalls. Among 51 councils in the North East, North West, and Yorkshire & the Humber, 35 fail to meet the ‘Fair Cost’ for nursing care, and 43 fall short for residential care.

Shortfalls vary from minor weekly discrepancies to several hundred pounds.

Looking to 2025/26, the CCB forecasts a challenging financial climate. Councils will face difficulties funding the necessary fee increases—7% for nursing care and 8% for residential care—to sustain care home viability. These increases are driven by two key factors:

A 6.7% rise in the National Living Wage, from £11.44 to £12.21 per hour, effective 1 April 2025
An increase in Employers’ National Insurance from 13.8% to 15%, alongside a threshold reduction to £96 per week, as outlined in the Labour government’s October 2024 budget. This will affect part-time workers previously exempt from Employers’ NI.

These changes are set to drive care home costs up by 7%–8%, despite general inflation stabilising near 2% as projected by the Bank of England.

Interestingly, Oldham Council in the North West leads with the highest reported fees for nursing care at £1,369 per week, including the NHS Free Nursing Care subsidy. Other high-paying councils include Kirklees, Trafford, and South Tyneside, all exceeding £1,300 per week. At the lower end, North East Lincolnshire reports £893 per week, followed by Blackpool, Halton, and Knowsley, all below £1,000.

For residential care, Hounslow in London reports the highest average fees at £1,348 per week, followed by Wandsworth, Richmond Upon Thames, and Hampshire, all over £1,200. Meanwhile, Halton records the lowest fee at £615 per week, with several councils, including Knowsley and Wolverhampton, reporting averages under £700.

A detailed appendix accompanies the report, listing council-paid fees against full care home costs, including allowances for profit and capital returns.

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