LaingBuisson has unveiled the thirteenth edition of its Care Cost Benchmarks (CCB), encompassing financial data for 2024/25. This well-established model, honed over two decades, is regarded as the definitive resource by care home operators and commissioners for determining the ‘Fair Cost’ of sustainable care services for older adults, around half of whom rely on council-funded fees.
In the closing years of the previous Conservative government, the impact of austerity on council-paid fees was acknowledged, with significant funding shortfalls identified. The latest edition of the CCB assesses the current state of fees across England’s 151 councils responsible for adult social care, presenting data on:
- The ‘Fair Costs’ for sustainable delivery of nursing and residential care for older people in 2024/25
- Average fees reported by councils for the opening months of the 2024/25 financial year
- The disparity between council-funded fees and care operators’ actual costs (both shortfalls and any surpluses)
The report highlights that residential care fee shortfalls are particularly prevalent. Of the 151 councils providing data for early 2024/25, 107 pay less than the full cost required to deliver residential care. Meanwhile, 45 councils indicate that their fees meet or exceed care providers’ costs.
For nursing care, the picture is more balanced. Seventy-three councils report fees below full costs, while 78 councils claim their payments meet or surpass them. However, the report cautions that nursing care fees from some councils may lack reliability.
Overall, based on average reported fees, LaingBuisson estimates a £223 million annual funding shortfall in England for care homes serving older people during 2024/25.
The shortfalls are most pronounced in northern England. Out of 51 councils with adult social care responsibilities in the North East, North West, and Yorkshire & the Humber, 35 pay less than the ‘Fair Cost’ for nursing care, while 43 fall short of the ‘Fair Cost’ for residential care.
These shortfalls range from minimal weekly deficits to several hundred pounds per week.
Looking ahead to 2025/26, the CCB anticipates a difficult financial environment, with councils under pressure to deliver fee increases of 7% for nursing care and 8% for residential care. This is necessary to maintain care home profitability amid two primary inflationary drivers:
- A National Living Wage increase of 6.7%, rising from £11.44 to £12.21 per hour on 1 April 2025
- A rise in Employers’ National Insurance contributions from 13.8% to 15%, alongside a reduction in the earnings threshold to £96 per week, as announced in the Labour government’s October 2024 budget. This change will affect many part-time care workers previously exempt.
These factors are expected to elevate care home costs by 7%–8%, despite the Bank of England projecting general inflation to stabilise near 2%.
Unexpectedly, Oldham Council, situated in the less affluent North West, reports the highest average fees for nursing care at £1,369 per week, inclusive of the NHS Free Nursing Care subsidy. Other councils exceeding £1,300 per week include Kirklees, Trafford, and South Tyneside. The lowest reported fees are in North East Lincolnshire (£893 per week), followed by Blackpool, Halton, and Knowsley, all below £1,000.
For residential care, the London Borough of Hounslow leads with an average weekly fee of £1,348, followed by Wandsworth, Richmond Upon Thames, and Hampshire, all exceeding £1,200. Conversely, Halton in the North West records the lowest fee at £615 per week, with several councils, including Knowsley, North Somerset, and Nottingham City, reporting averages below £700.
The release includes a comprehensive schedule comparing council-paid fees to full care home costs, encompassing operating profits and capital returns.
