A New Care England report reveals local authorities are underpaying for older people’s residential and nursing care by £2.36 billion a year, equivalent to an annual shortfall of more than £23,000 per nursing home bed, as providers are pushed to breaking point by unfunded government policy decisions and years of inadequate fee uplifts.
Care England, the largest and most representative body for independent adult social care providers in England, today publishes Priced to Fail, an analysis of the growing funding crisis in adult social care. The report documents how the gap between what local authorities pay for residential and nursing care and what it genuinely costs to deliver has widened by 49% in cash terms since 2022/23, reaching £2.36 billion in 2025/26, its highest ever recorded level, with no mechanism currently in place to slow its further growth.
By 2025/26, the average residential care placement carries an annual shortfall of more than £10,000, while the equivalent figure for nursing care exceeds £23,000. The nursing shortfall alone is roughly equivalent to the full annual salary of a care worker, leaving providers to make difficult decisions about where that gap is absorbed, whether through staffing, delayed investment and repairs, or reducing the number of publicly funded places they can sustainably provide. The report also documents a stark regional postcode lottery, with the weekly shortfall per nursing home resident ranging from £278 to £639 depending solely on where a person happens to live.
Reacting to the findings, Professor Martin Green OBE, Chief Executive, Care England said:
“There are around half a million people living in care homes in England right now. They are our parents, our grandparents, people who built this country and paid into it their whole working lives on the understanding that it would be there for them when they needed it most. What this report shows is that the system we are asking them to rely on is being underfunded to the tune of £2.36 billion every single year, and that the gap is getting worse, not better. At some point, a government has to look at that figure and decide what it says about what we value as a society. We are at that point now, and the decision cannot wait any longer.”
The report’s findings land just days after Prime Minister Andy Burnham used his Labour Party Conference speech to set out his ambition for a National Care Service built in the tradition of the NHS. The analysis in this report shows that a sector absorbing a structural deficit of £2.36 billion, with provider viability under growing pressure and market capacity thinning in some regions, the infrastructure on which any NHS-style care system depends is being progressively defunded at precisely the moment ministers are asking it to do more.
The sharpest single-year deterioration in the period reviewed occurred in 2025/26, driven in large part by the combined effect of the National Living Wage increase and changes to Employer National Insurance Contributions. The gap between what was needed and what was provided is directly reflected in the 27% widening of the funding gap recorded for that year.
The report sets out seven recommendations spanning three areas where government action could begin to close the gap, addressing the level and structure of funding, the consistency of how care is commissioned and costed, and the rights of individuals when the system falls short of its statutory duties. Care England is clear that none of this requires the system to be rebuilt from scratch. It requires government to fund care adequately, commission it fairly, and be held accountable when it fails to do either. Baroness Casey’s Commission, whose final recommendations Prime Minister Andy Burnham has now brought forward a year to summer 2027, offers a genuine opportunity for long-term reform. But the work of building toward that point cannot wait for the report itself. These recommendations are the precondition for that reform to mean anything in practice.
Professor Martin Green OBE, Chief Executive of Care England, concluded:
“I have spent nearly forty years in and around adult social care, and I have never known a moment where the gap between what we ask of this sector and what we are prepared to pay for it has been this wide. I visit care homes where staff are doing extraordinary things for people who depend entirely on them, and I know that the financial reality those homes are operating in should not exist in a country with our resources. We have a word for what happens when you keep asking more of a system while giving it less. It fails. And when social care fails, the consequences ripple outward through the NHS, through local authorities, through families and communities, and every single one of those consequences costs more than whatever was saved by not funding it properly in the first place.”
