Report Warns of ‘Doom Loop’ for Adult Social Care Due to Tax and Wage Increases, Strained Council Budgets

March 3, 2025 TruthUSA

According to one of the report’s authors, shifting unfunded costs onto care providers could create a ‘doom loop’ resulting in reduced social care support for individuals in need.

A non-profit organization has cautioned that tax and wage increases impacting the cost of care provision, along with strained council budgets, may set off a “doom loop” for adult social care services, leading to a decrease in available assistance for those requiring it.

The King’s Fund disclosed on Monday that the rising costs of social care have triggered a continuous cycle of escalating expenses.

Between 2015/16 and 2023/24, there was a 17 percent increase in care worker pay in real terms. While beneficial for those employed in the field, this pay raise also led to higher costs for social care providers. Consequently, these increased costs were mirrored in the fees charged to local councils for commissioned services.

After analyzing nearly ten years of data, The King’s Fund reported that fees paid by councils had escalated by 13 percent for adult care homes and by 33 percent for seniors’ care homes. Additionally, at-home care costs saw an 18 percent increase.

During the period from 2015/2016 to 2021/22, local authorities prioritized social care above other council responsibilities, but still faced significant financial pressures and had to ration the care they provided.

Consequently, the number of individuals receiving long-term care declined from 873,000 to 818,000 over the span of six years. However, the demand remained constant, with new requests for support rising from 1.8 million in 2015/16 to 2.1 million in 2023/24.

‘Doom Loop’ May Resurface

This cycle of increased costs, reduced support, and heightened demand has only recently been reversed, the organization stated, with a complete halt only evident in the past financial year (2023/24) due to a significant increase in council spending power.

However, this cycle could recur as employers face a minimum wage increase from £11.44 to £12.21 per hour starting in April. Additionally, employer national insurance contributions will rise to 15 percent and the tax threshold will be reduced from £9,100 to £5,000.

One of the report’s authors, Simon Bottery, stated in a social media post that “imposing unfunded costs on care providers will ultimately result in a ‘doom loop’ where fewer individuals receive social care support.”

“There is now a genuine risk of restarting that doom loop. The national living wage will increase by 6.7% in April, and employer national insurance contributions will escalate. Yet local authorities must sustain provider operations and will face immense pressure to hike fees,” Bottery mentioned.

Council Deficits Totaling £4.6 Billion

Unless the national government acknowledges and fully compensates for the expenses involved in these measures, local government might have to finance additional provider costs while grappling with a precarious financial position after a decade of diminishing core spending power, as per the report.

This caution emerges as councils confront mounting financial strains that could endanger other critical community services.

Campaigners from the Providers Unite coalition take part in a rally for the social care day of action at Parliament Square, London, England, on Feb. 25, 2025.(Lucy North/PA Wire) — Campaigners from the Providers Unite coalition take part in a rally for the social care day of action at Parliament Square, London, England, on Feb. 25, 2025.Lucy North/PA Wire

In October, the County Councils Network (CCN) indicated that councils are grappling with deficits amounting to £4.6 billion by March 2026.

The CCN highlighted that rising costs were primarily due to increased demand in three key areas: children’s services, adult social care, and home-to-school transport for children with special educational needs.

This group, representing 37 councils in England serving 26 million people, warned that without additional funding or a substantial review of councils’ statutory obligations, local authorities might be reduced to mere care service providers, compelled to forgo delivering other essential services.

Adult Social Care Commission

An independent commission on adult social care, chaired by Baroness Louise Casey, is set to commence in April.

The commission’s initial phase is scheduled to present its findings in 2026, outlining social care challenges and proposing short-term reforms. The subsequent phase, slated for release in 2028, will offer recommendations for long-term transformation of adult social care services.

Previously, the Department for Health and Social Care (DHSC) acknowledged the significant social care challenges inherited by the government and took immediate measures, such as a £3.7 billion funding infusion, 15,000 new installations to aid disabled individuals in living independently and safely at home, and a £2,300 raise in carers allowance.

The DHSC emphasized that the Casey commission will formulate proposals “for a National Care Service to deliver high-quality care to all in need and assist in rebuilding the sector to ensure its sustainability for the future.”

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