2025’s Social Care Shake-up: Funding Increases and Council Fee Changes Explained

In early 2025, the UK government unveiled a £3.7 billion package to bolster adult social care, which includes an £880 million increase in the Social Care Grant for 2025–26. This funding aims to help local authorities manage increasing demand, stabilize services, and support care workers facing rising living costs. Additionally, central policymakers established the Casey Commission, led by Baroness Casey, to develop a long-term vision for adult social care. The commission's first report is expected in 2026, with final recommendations by 2028. While these reforms present a unique opportunity to modernize the sector, councils must make difficult decisions on how to use the extra funding to create sustainable fee rates that allow providers to cover wage increases and operational costs.

Most of the £880 million relief was distributed to councils through the ring-fenced Social Care Grant, but other financial pressures persist. The autumn 2024 Budget added another £2.8 billion to sector costs for 2025–26, largely due to National Living Wage increases and inflation. Despite these allocations, Care England warned that local authorities might still need to find up to £1.4 billion in savings from adult social care budgets this year, highlighting that headline figures often hide deeper shortfalls. Practically, councils must decide how much of their increased spending power can be passed directly to care providers as fee uplifts and how much must be allocated to broader social service commitments.

Staffordshire County Council serves as an example. For 2025–26, Staffordshire recommended a 6% increase in domiciliary and community-based care fees, effective from April 6, 2025, while adjusting client contributions to align with increased costs. By segmenting uplifts across service categories such as homecare, day services, and supported housing, Staffordshire aims to help providers cover wage growth without destabilizing the council’s budget. In contrast, North Yorkshire proposed reducing the average homecare rate from £26.96 per hour in January 2024 to £24.73 per hour in January 2025, citing affordability concerns despite the Home Care Association’s recommended rate of £32.14 per hour. North Yorkshire acknowledged that higher fees would better match provider costs but deemed such increases unaffordable, opting instead to transition packages to legacy contract rates under its 2022–27 Approved Provider List. This effectively caps short-term uplifts even as providers face steep wage and overhead hikes.

Elsewhere, Bury Council’s 2025–26 review raised residential care fees by 6.64%, moving the Real Living Wage rate from £680.02 to £725.21 per week and the standard rate from £663.11 to £707.12 per week for older adults. Domiciliary care rates in Bury increased by 1.7% across the board, reflecting the autumn 2024 Benefit uprating. However, statutory charging limits prevented equivalent uplifts for resident-funded homecare packages, meaning some providers must absorb marginal shortfalls. In Kent, the council allocated its entire 2025–26 £88.3 million uplift, equivalent to a 6.2% rise in core spending power, for adult social care. This acknowledges that both pay pressures and more complex placements are driving costs upwards. Yet, Kent also warned that new placements and agency staffing remain significant budget drivers, urging providers to demonstrate efficiencies through digital record-keeping and workforce planning to secure higher rates.

These local authority decisions occur against the backdrop of broader reform. The Casey Commission is gathering evidence on workforce shortages, funding gaps, and integration challenges. Its first-phase report, due in 2026, will influence the next Spending Review and likely advocate for a National Care Service that mirrors NHS delivery models, addressing long-standing fragmentation between health and social care. Meanwhile, the Better Care Fund policy framework, set to mobilize around £9 billion of NHS and local government resources, will hold local systems accountable against metrics like emergency admissions and delayed discharges. This means councils must not only fund fee uplifts but also invest in preventative services and cross-sector partnerships to shift care from hospitals into communities.

For care providers, these developments offer both encouragement and concern. On one hand, the extra Social Care Grant provides breathing space for workforce development and service innovation. A mid-sized Midlands provider, for example, used its 2024–25 grant allocation to pilot a community outreach team for older adults with complex needs, working alongside the local NHS trust to share patient data securely. This led to a 15% reduction in avoidable hospital admissions over six months. In 2025–26, that same provider plans to leverage the additional funding to expand outreach, recruit more “care navigators,” and invest in remote monitoring devices, aligning with the government’s push for prevention and integration.

On the other hand, modest or negative fee uplifts can quickly erode provider viability. In regions like North Yorkshire, where homecare rates fell, some providers are exploring collaborative cost-saving measures, such as joint procurement of mileage reimbursement or shared training programs, to keep services afloat even if hourly fees remain under pressure. In Staffordshire, proactive engagement with the council’s fee consultation enabled one domiciliary provider to secure an extra 0.5% uplift for complex homecare packages. They used this marginal gain to fund an in-house recruitment campaign, reducing vacancy rates by 10% over six months—a model that could be replicated elsewhere.

Looking ahead, an emerging Fair Pay Agreement for adult social care is set to standardize pay rates, which should reduce over-reliance on agency staff and encourage stable careers in the sector. Providers must begin modelling potential salary structures now to understand budgetary implications, especially for those heavily reliant on agency staff. They should also perform regular cost-of-care exercises, similar to the government’s Fair Cost of Care framework, to build evidence for future negotiations, ensuring that every council-approved rate reflects actual service costs.

In summary, the government’s 2025–26 reforms and funding boosts provide a crucial opportunity to reset adult social care financing and strengthen ties with NHS delivery. However, local fee uplifts vary widely, from Staffordshire’s 6% increases to North Yorkshire’s cuts, underscoring that providers must stay agile. By auditing CQC compliance, engaging early with fee consultations, exploring collaborative cost-savings, and preparing for Fair Pay, organizations can navigate this transition. Ultimately, the goal is to secure rates that enable high-quality, sustainable care, whether that’s expanding community outreach teams or ensuring residential homes can pay staff a Real Living Wage. This is the moment to harness additional funding, align with integration goals, and build resilient service models that will thrive under the new funding landscape.