Social care sector faces collapse as NICs and wage rises loom, providers warn

The Guardian

20-03-2025

The adult social care sector could collapse 'in a matter of months' when the government's rise in national insurance contributions (NICs) and the national living wage (NLW) comes in from April, providers have warned.
Thousands of elderly and vulnerable adults rely on social care services that are often supplied on behalf of local authorities by independent providers.
However, without sufficient extra funding, smaller operators say they will be unable to cope with the increase.
The National Care Association, which represents more than 1,000 small and medium-sized care providers, is warning of a 'seismic change' to the sector, and the likelihood of service closures.
Nadra Ahmed, the NCA's executive co-chair, told the Guardian: 'People may close their services, they may sell up to another provider, they may reduce the number of packages they take.
'I suspect that in about six months, we'll start to see a seismic change.'
One company in Lancashire providing daily care for 450-500 households said it may have to fold and leave its area's local authority to take on its workload because it cannot afford the NIC rises.
'Our accountants are looking to see how long we can hold on for before we have to say 'enough's enough', and give notice to the local authorities,' said Leanne Reeder from Homecare Services, on the Guardian's Politics Weekly UK podcast.
'There's only so long you can pay the wages if you're not getting the funding.
'The social care sector will break and will maybe sustain for a matter of months before people close down.'
Care providers are just one example of a service where local authorities rely on private contractors who may need to scale back their operations due to the NICs increase.
This week, private transport providers who play a vital role in getting children with special educational needs and disabilities (Send) to and from school indicated they may have to cancel some services because of increased costs.
Without urgent government intervention, thousands of families fear their children will be left stranded at home, unable to access their education.
The changes to both the amount employers contribute towards national insurance payments and the planned uplift to the living wage was announced by the chancellor, Rachel Reeves, in the budget last October.
It will see NICs increase by 1.2%, and the NLW go up by 6.7%, from £11.44 to £12.21 an hour.
Providers warn the effect of these government measures will be to further exacerbate 'bed-blocking' in NHS hospitals, with patients unable to be discharged without adequate care packages in place.
On Wednesday afternoon, MPs voted against exempting private hospices, care providers and independent pharmacists and specialist transport services from the national insurance increase.
Ed Davey, leader of the Liberal Democrats, called for the government to 'cancel its damaging tax hike'.
He told the Guardian: 'This is incredibly worrying for people who need care, and for family carers who inevitably end up filling the gaps.
'There are already millions of people missing out on the care they need, so the threat of providers closing their doors is the last thing we need.
'Labour's jobs tax will be a disaster for social care and the NHS, especially with thousands of people already stuck in hospital beds because the care they need to leave isn't there.'
A government spokesperson said: 'Taking the necessary choices to fix the foundations of the economy at the budget meant we could deliver an extra £26bn for health and social care.
'This government inherited a social care system in crisis. We have taken immediate action, including a £3.7bn funding boost, 7,800 new adaptations to help disabled people live independently in their own homes, and we are also introducing the first ever 'fair pay agreement' for care professionals.'
Adult social care has faced severe challenges in recent years, with a lack of funding from local authorities, an increase in demand, and major recruitment and staff retention issues.
In September 2023, the number of vacancies in the care sector was put at an estimated 8.4%, equating to roughly 131,000 jobs.
In January this year, the government announced a taskforce that would develop plans for a new national care service, to be led by the cross-bench peer Louise Casey.
However, the timeline for this plan has been criticised – with interim findings to be published in 2026, but the final report is not expected until 2028.