Local authorities in England were underfunding older people's residential and nursing care homes by over £2bn per year during 2021/22, independent care providers have calculated.

As of April 2022, the average difference between what a local authority in England pays for residential care fees and the Fair Cost of Care was £218 per week, a figure that increases to £231 per week for nursing care, according to Care England, the representative body for independent care providers.

These findings follow an analysis of the average fee rates currently paid by councils and the reported Fair Cost of Care rates published on 1 February 2023. The Fair Cost of Care was a Government-led exercise designed to achieve a shared understanding of the local cost of providing care.

Care England’s analysis identified regions of concern which were ‘significantly underfunding’ care.

In the North East region, in an area covered by 12 councils, a local authority would be required to uplift average fees paid in 2021-22 for residential care by over 18% and 24% for nursing to meet the Fair Cost of Care at a cost of over £100m per annum across the 12 authorities.

In the South East, an area covered by 19 local authorities, the average uplift for residential would need to be over 32% and 25% for nursing to address the gap between the average fee paid and the Fair Cost of Care at a cost during 2021-22 totalling a gap of over £400m per annum.

Professor Martin Green, chief executive of Care England, said: ‘The evidence is clear. The care sector is being significantly underfunded by local authorities and requires significant investment by central government. The continued funding shortage needs to be tackled head-on.’

Citing the £7.5bn the Government has committed to investing in social care over the next two years, Professor Green continued: ‘Our analysis indicates that the £7.5bn will not scratch the surface in tackling the inherent issue of Local Authorities underfunding care packages and the rising gap between fees paid and the cost of care caused by inflation.

‘The inability of many local authorities to pay the actual cost of care has resulted in the cross-subsidisation of the state by individuals who self-fund their care. Care staff pay is directly impacted by fees paid for care by local authorities and those who self-fund and, as such, providers who rely more heavily on local authority funded residents are more restricted in their ability to increase rates of pay without being financially constrained, which has a direct correlation to the recruitment and retention issues experienced by the sector.

‘The core purpose of the Fair Cost of Exercise, an initiative led by the Government, was aimed at increasing the care fees paid by Local Authorities to ensure the care sector's sustainability. This reality must now be realised.’

A report published today by the health think tank, the King’s Fund, warned that requests for publicly-funded social care are at a record high.