Last month saw the new Government set out its first Budget. There was much to welcome, including a substantial downpayment on the investment needed to make the NHS fit for the future. But adult social care for older and disabled people – another essential public service which has suffered years of underfunding – did not fare so well. With a new survey of local authority leaders suggesting that 8 in ten councils are on course to overspend their adult social care budget in the current financial year, we break down what the Budget means for the care sector: the good, the bad and the ugly.

The good

First, there was some welcome news regarding support for the millions of unpaid carers looking after friends and family. Our Health Foundation analysis has highlighted the high personal and financial cost shouldered by unpaid carers. Four in 10 working-age carers do not work as much as they might do otherwise, while a similar proportion report financial difficulties due to their caring role. The Budget announced that carers will be able to earn slightly more before becoming ineligible for the Carer's Allowance, enabling an estimated 60,000 more people to receive it. And the chancellor nodded towards tackling problems with the earnings limit for the Carer's Allowance in the future, to avoid the scandal of carers unknowingly being overpaid and having to pay this money back to the government. 

The Budget did recognise the immense pressure on local authorities responsible for publicly funded social care. Around 70% of local authority spending goes on adult and children's social care and the Budget announced a welcome £1.3bn extra for local authorities next year. This includes £600m ringfenced for (children's and adult) social care. The Disabled Facilities Grant for home adaptations to enable people to live independently will also increase by £86m. Overall, the Treasury estimates local government spending could increase by up to 3.2% in real terms in 2025/26 – but this relies in part on local authorities taking advantage of new flexibilities to increase council tax and business rates. 

The bad

Unfortunately, the funding announced is simply not enough to address pressures on adult social care services. The Health Foundation's previous analysis suggested that more than £1bn extra would be needed next year just to meet growing demand for adult social care. So, £600m for both adults and children's social care is unlikely to touch the sides.

And, while the chancellor gave with one hand, she took with the other. Changes to National Insurance contributions (NICs) will increase costs to employers, including by lowering the threshold at which employers are required to pay this tax on their employees' earning. This change will disproportionately affect sectors with many part-time workers on low wages – this includes adult social care, where 45% of staff work part-time and the median hourly rate for care workers was £11.00 in March 2024. Reports suggest that, unlike the NHS, adult social care providers will not be compensated for increased costs due to these changes. In essence, providers could end up paying a lot of the extra money from the Budget straight back to the Treasury.

The Budget also announced that the National Living Wage (NLW) will rise by 6.7%, from £11.44 to £12.21 from April 2025. Government action to increase wages for the lowest paid workers is really welcome. But without additional government funding for social care to cover rising wage bills, this will significantly increase cost pressures on local authorities, providers and individuals with care needs who directly employ personal assistants. Skills for Care analysis suggests that the previous increase to the NLW earlier this year affected 60% of independent sector workers. Previously, underfunded increases to economy-wide minimum wages have had unwanted consequences in adult social care, pushing providers to offset costs by employing a greater proportion of workers at the minimum rate, and reducing reward for experience and progression.

The ugly

Most worryingly of all, there was no sign that reforming adult social care is a long-term priority for the government. The Budget was billed as the first phase of a two-part Spending Review, with phase 2 in the spring. Scandalously, adult social care was absent from the list of the Government's reform priorities for the second phase of the Spending Review which aims to deliver a new ‘mission-led, technology-driven and reform driven' new settlement for public services.

Right now, many people go without care they need and reliance on unpaid carers is high, partly because government support with care costs is limited to only the very poorest people with the most significant care needs. Care work is underpaid and undervalued, and there are chronic staffing problems. And problems accessing care services contribute to people remaining in NHS hospitals when they could be being cared for at home. The sector desperately needs significant investment and reform to right these wrongs.

Successive governments have promised adult social care reform but failed to enact meaningful change. One of Reeves' first decisions as chancellor was to cancel long-overdue ‘Dilnot' reforms, choosing to leave people vulnerable to very high care costs. But ministers have said that the new Government is reviewing options for establishing cross-party consensus to inform a 10-year plan for adult social care, to go alongside the one that's already underway for the NHS. That plan can't come soon enough..

Lucinda Allen is a senior policy officer and Hiba Sameen is lead economist at the Health Foundation