Fair cost of care

What is fair cost of care?

As set out in section 5 of the Care Act 2014, local authorities have a duty to promote the efficient and effective operation of a market in services for meeting care and support needs, with a view to ensuring services are diverse, sustainable and high quality for the local population, including those who pay for their own care. Section 4.31 of the Care and Support Statutory Guidance states the following:

"When commissioning services, local authorities should assure themselves and have evidence that contract terms, conditions and fee levels for care and support services are appropriate to provide the delivery of the agreed care packages with agreed quality of care.

"This should support and promote the wellbeing of people who receive care and support, and allow for the service provider’s ability to meet statutory obligations to pay at least the minimum wage and provide effective training and development of staff."

It should also allow the retention of staff needed to deliver services to the agreed quality and encourage innovation and improvement. Local authorities should have regard to guidance on minimum fee levels necessary to provide this assurance, taking account of the local economic environment. This assurance should understand that reasonable fee levels allow for a reasonable rate of return by independent providers. A reasonable return is sufficient to allow the overall pool of efficient providers to remain sustainable in the long term.

The government's 10-year vision for care and support

In December 2021, central government published the White Paper ‘People at the Heart of Care’, which sets out a 10-year vision for care and support in England.

The white paper is based around 3 key objectives:

  • People have choice, control and support to live independent lives
  • People can access outstanding quality and tailored care and support
  • People find Adult Social Care fair and accessible

The white paper introduced the principle of a ‘fair cost of care’.

Currently, there are 2 rates of care fees that care providers charge:

  • The local authority rate
  • The self-funder rate – this is usually a higher rate

The intention of ‘fair cost of care’ is to establish one ‘fairer’ rate in local areas.

Annex B – establishing a local rate for fair cost of care

To obtain one local rate for fair cost of care for the future, local authorities worked nationally with care providers to obtain current cost rates for domiciliary, residential and nursing rates. This was to understand what the median rate of care is within the locality and per type of care. 

Following the fair cost of care exercise, local authorities sent submissions to the Department of Health and Social Care (DHSC) in October 2022.

One of the documents sent to the government in October 2022 was Annex B. This outlined the process and provider engagement to understand what a local fair cost of care might look like. There is a separate Annex B for care homes and one for home care. The government has asked us to publish both parts on our website from Wednesday, 1 February 2023.

Annex C - Market Sustainability Plan

As part of the wider Adult Social Care Charging Reforms, all local authorities are required to complete a Market Sustainability Plan. It describes how we'll ensure local care markets for people over 65 in residential and nursing services and all over 18 home care is kept stable. Following the Chancellor of the Exchequer's announcement in November 2022, this has been delayed until 2025.

The Market Sustainability Plan has a prescribed template that all areas were required to complete and should be read in conjunction with Annex B.

The Market Sustainability Plan is an assessment of the current sustainability of local care markets and a description of how the fair cost of care delays are being addressed. It includes information about setting 2023/2024 and 2024/2025 fees.