Fair cost of care and market sustainability
As instructed by the Government, local authorities were required to complete a Fair Cost of Care exercise with providers to improve the understanding of the cost of providing care in their local area.
Our Market Sustainability Plan outlines our assessment of the local care market and our plan to increase the lowest fee rates.
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The reports explain how the cost of care exercises were carried out and capture the median actual operating costs, as well as the lower and upper quartile for:
- care homes for residents over 65 and offering:
- standard residential care
- residential care for enhanced needs
- standard nursing care
- nursing care for enhanced needs
- domiciliary care for residents over the age of 18
The Department of Health and Social Care (DHSC) considers the median actual operating cost for providing care in the local area to be the 'Fair Cost'.
It provided additional funding (see Fair Cost of Care Fund) for 2022/23 and 2023/24 to move towards this fair cost where local authorities are paying below this rate. Allocations for 2024/25 and 2025/26 continued the 2023/24 funding.
Assessment outcomes
We have given due regard to the outcomes and data obtained from the Fair Cost of Care exercise for future competitive tender processes and fee setting. The outcome of the cost of care exercise is not intended to be a replacement for the fee-setting element of local authority commissioning processes or individual contract negotiation.
The Fair Cost of Care guidance states ‘as many local authorities move towards paying the fair cost of care, it is expected that actual fee rates paid may differ due to such factors as rurality, personalisation of care, quality of provision and wider market circumstances.’
The Fair Cost of Care exercise is separate from the local authority’s fee uplift process.
Common questions about the Fair Cost of Care exercise can be found on the Local Government Association website.
Market Sustainability and Fair Cost of Care Fund
The government guidance states that the Fair Cost of Care Fund amounts to £1.36 billion. In 2022 to 2023, £162 million was allocated. A further £600 million was made available in each of 2023 to 2024, 2024 to 2025 and 2025 to 2026.
The 2022 to 2023 allocation was prioritised for care at home. This is in alignment with the national policy directive of supporting people to live independently at home and to help address the local workforce challenges and enable timely hospital discharges.
The Local Government Finance Settlement for 2023 to 2024 confirmed the funding allocation from the Market Sustainability and Improvement Funding Grant. This was prioritised for care at home rates and also included fee increases for standard fee rates for residential care. Subsequent years have been used to continue to support those rates.