What Impact Will Unfunded NLW and NI Increases Have on the NHS & Social Care?
Social care providers operate across various services, including children’s services, younger adults (18-65 years), and older adults (65+ years), delivering care through care homes, nursing homes, home care, supported living, day centres, and other specialist services. As of 2023/24, the adult social care sector in England comprises approximately 1.59 million individuals working in 18,500 organizations (source: Skills for Care)
For comparison, the NHS in England employed approximately 1.34 million full-time equivalent (FTE) staff as of July 2024. (source: NHS England)
Our health and social care system functions as an interconnected network. While the NHS provides medical treatment and health services, social care supports individuals with daily living tasks, helping them maintain independence, dignity, and quality of life. Services span personal care, medication management, housing support, and community activities for both adults and children. Together, they form a unified system addressing the physical, social, and emotional needs of individuals.
The Adult Cocial Care sector in England plays a pivotal role in the national economy contributing approximately £68.1 billion in Gross Value Added (GVA). This substantial contribution underscores the sector’s significance in supporting local economies and providing essential services to communities. (source: Skills for Care)
Recent survey data from the The Care Provider Alliance , based on responses from over 1,180 care providers, highlights the devastating potential consequences of the combined effects of National Living Wage (NLW) increases and Employer’s NI changes:
73% will refuse new care packages from local authorities/NHS.
57% plan to hand back existing contracts.
22% are considering closing entirely.
64% anticipate making staff redundancies.
92% will need to increase rates for self-funders.
The survey also reveals severe implications for the care workforce. In addition to cutting jobs as highlighted above:
76% of providers will have to cut training and resources for staff
86% cannot maintain wage differentials, threatening career progression
64% will step back from paying the Real Living Wage
These outcomes will have dire implications, not only for individuals who depend on care but also for the workforce delivering it. Furthermore, the NHS will struggle to achieve its priorities:
Shifting Care from Hospitals to Communities.
Embracing Digital Transformation.
Focusing on Preventive Care.
Lord Darzi’s 2024 independent review of the NHS in England underscores the critical state of social care. He identifies it as a major contributor to NHS challenges, with insufficient funding leading to delayed hospital discharges, higher hospital admission rates, and added pressure on NHS resources. Darzi calls for greater integration between health and social care, with adequate funding to improve patient outcomes and enhance system efficiency.
In evidence to the Commons Health and Social Care Select Committee, Lord Darzi highlighted:
NHS productivity has crashed – with operating theatres left empty because there were no free beds for those in need of them. The logjam in hospitals is significantly worse than it has ever been. Despite NHS waiting lists exceeding seven million, operations are being cancelled repeatedly, often because beds are filled by those in need of social care.
(source: The Telegraph)
A report by the Nuffield Trust (November 2024) reveals that 18,000 independent organizations delivering adult social care in England face estimated cost increases of £2.8 billion in the next financial year. This figure dwarfs the £600 million additional grant allocated by ministers for both children’s and adults’ social care in 2025-26.
With most organisations running on low margins, absorbing additional costs on a grand scale will only be feasible for the very largest providers, which make up only 2% of the market. Because local authorities already often pay fees for care that are below sustainable levels, to remain financially viable many providers cross-subsidise by charging higher fees to people who pay for their own care.
(source: Nuffield Trust)
The Autumn Budget failed to address how additional wage costs resulting from NLW and Employer’s NI increases would be funded. While the NHS was promptly exempted from the Employer’s NI increase, social care providers and local authorities were left out. This lack of clarity undermines the stability of the care sector.
As the Chief Executive Officer at Fosse Healthcare Limited, Co-Chair of the Nottinghamshire Care Association and Co-Chair of the Derby Care Association I am asking The Rt. Hon. Wes Streeting MP to avoid the collapse of the social care market which will severely impact the NHS, and to confirm that adequate funding to sustain a stable social care market will be provided.
We must act now to prevent the crisis from escalating further. Delayed action will have far-reaching consequences, destabilizing the health and social care system, straining the NHS, and endangering care for the most vulnerable members of society.
Providers Unite, Association of Directors of Adult Social Services (ADASS), Local Government Association
Head of Training at SENAD
9moWell written and well said, the impact of these changes will negatively impact many lives. I pray the government step back and reflect on the damage they will inflict if they do not reverse thier short-sighted decisions.