Adult social care funding pressures

Estimated costs to meet growing demand and improve services in England

The Health Foundation has previously set out our priorities for government to fix the crisis in social care. These include:

• meeting the growing demand for social care
• improving access to care
• improving pay and conditions for staff
• providing fairer and more generous state protection against care costs.

These priorities need to be considered in the context of the available public funds for adult social care. At the 2022 Autumn Statement, government announced an additional £2.8bn for the sector in cash terms in 2023/24 and £4.7bn in 2024/25, aimed at creating an additional 200,000 new care packages and supporting discharge of people from hospitals.

In our analysis we use four scenarios to highlight the potential funding pressures in adult social care up to 2032/33. These reflect some of the key issues that need to be addressed to meet future demand and improve adult social care.

This updates our previously published analysis, most recently before the government’s last spending review in March 2021. We also highlight how our estimates have changed over time as the underlying data and context have developed. The datasheet and technical annex are available to download below.

We account for the additional £5.4bn funding for 2020/21 and 2021/22 to meet additional costs resulting from COVID-19. But we do not account for a series of other pressures due to complexity and data availability (see Uncertainties box).

We use four scenarios for this analysis that reflect some of the key issues that need to be addressed to maintain and improve adult social care. To calculate the potential funding pressures in social care up to 2032/33, we first estimate the funding that councils currently have available for adult social care based on local authority spending patterns, data on central government funding allocations and estimates of the revenue raising power of local government. Then we compare this estimate of current funding with the spending that would be needed to:

• meet future demand for care
• meet future demand and improve access to care
• meet future demand and cover the full cost of care
• meet future demand and improve access to care and cover the full cost of care.

The last three scenarios all build on the first scenario of meeting future demand for care, for which we use projections from the Care Policy and Evaluation Centre. Its evidence suggests that the demand for social care is rising, both for younger adults and older people. While there was significant unmet need for care before the pandemic, more recent data point to this having risen further over the past 2 years. Estimates from the Association of Directors of Adult Social Services (ADASS) suggest that the number of people awaiting assessment for care increased fourfold from 70,000 in September 2021 to 294,000 in April 2022.

Social care spending grew by an average of around 2.6% a year in real terms between 2014/15 and 2021/22. As a baseline, we assume that spending will continue to grow at the same rate between 2021/22 and 2024/25. This could be an underestimate of the available funding in light of the additional government funding announced in the 2022 Autumn Statement for 2023/24 and 2024/25. However, the funding announced represent the maximum local authorities could spend on social care. In practice, local authorities are likely to spend less than this due to the multiple spending pressures they are facing. We refer to the difference between our baseline spending estimate and the funding required under our different scenarios up to 2024/25 as a ‘funding gap’.  

Spending on social care over the longer term is highly uncertain and complex to project. We therefore assume 0% real-terms spending growth in our baseline case between 2024/25 and 2032/33. We then calculate the scale of funding pressures relative to this baseline in alternative scenarios. We refer to the difference between our baseline case and the funding required under our different scenarios up to 2032/33 as ‘funding pressures’.

Figure 1 summarises our projections of the future funding pressures for adult social care under our four scenarios. 

In our original analysis, our baseline case estimated the level of funding that councils could have available for adult social care services based on current national spending plans, local authority spending patterns and estimates of the revenue-raising power of local government based on past trends. Here, we undertake two sensitivity analyses to explore how our estimates could change by adjusting the assumptions presented in the main analysis.

Sensitivity 1: Government continues to invest in social care at historical trend growth rates over the longer term.

This sensitivity analysis assumes that the government continues to invest beyond this parliament (2024/25) at the same historical rate of growth in social care spending the decade prior (around 2.6% per year in real terms) up to 2032/33, rather than being flat (0%) in real terms from 2024/25 to 2032/33, which we assumed in our baseline projection. This would result in a funding pressure of around £2.8bn in 2032/33, £5.5bn less than in scenario 1 to meet future demand.

Sensitivity 2: Local authorities are able to invest more in social care over the medium term.

This sensitivity analysis assumes that local authorities are able to invest more in social care than our baseline assumption of 2.6%. We assume that the growth in funding over the medium term matches the projected growth in local government spending power and the planned Better Care Fund over the period 2021/22 to 2024/25. This equates to around 4.5% a year compared with our baseline assumption of 2.6%, resulting in a funding pressure of around £6.9bn in 2032/33 – £1.4bn less than in scenario 1 to meet future demand. Note that in this case, we assume that growth in real-terms spending on social care is flat (0%) over the longer term beyond 2024/25, as we do in our main baseline projection.

Our scenarios explore potential funding needed to meet growing demand for care, improve access to care and cover the full cost of care. This extra spending would need to be matched with wider policy changes to meet these objectives.

Ultimately, more fundamental reform of the way social care is funded is needed to provide fairer and more generous state protection against care costs. Policymakers have a mix of options for how this could be done – from expanding the state’s ‘offer’ into a more comprehensive system, to stronger protection for people against potentially catastrophic care costs. We have not modelled the costs of funding reform in our estimates, but any credible option for reform would require significant additional government investment.

In recent years, the Health Foundation has carried out analysis of the challenges facing the social care sector. This includes the funding needed to meet growing demand, improve access to the service and the cost of different policy options.

Our key figures have varied across our analysis, as the assumptions and context have changed. Download the data sheet (Tab 2: Historical overview) to view these changes and explore the underlying assumptions.

In summary, the figures have changed for several reasons including:

• Our analysis uses updated inflation data to take account of costs in the economy and presents the funding pressures in real terms. 
• The base or first year of the analysis changes when new data on social care spending is published by NHS Digital. This provides updated information on how much local authorities spend on social care and can affect our estimates of what might happen in the future.
• We may change the financial year that we use to estimate funding pressures so that the analysis provides up-to-date figures and remains relevant to the current context.
• We may make updates to reflect refined modelling assumptions, for example in light of government policy announcements for additional social care funding (such as the Autumn Statement 2022 or the Spring Statement 2023), or other technical assumptions.