Context 2: The adult social care market

Extract D (Figure 1)

Pay for adult social care workers, compared with pay for workers in the whole economy, £s per hour, 2024

Extract D (Figure 2)

UK elderly population aged 75 and over (forecasts in thousands)

Extract E

The adult social care market in crisis

Adult social care in the UK involves the provision of residential care and domiciliary (home-based) support to elderly and disabled individuals, helping them live with dignity and reducing the burden on the NHS. Care is provided by a mix of private, voluntary/not-for-profit, and local authority-run services. High-quality social care delivers significant private benefits, but also massive positive externalities (external benefits), including relieving bed-blocking in NHS hospitals, enabling family members to remain in the workforce, and enhancing community welfare.

Historically, local authorities directly managed and provided most residential care. Over the last four decades, the sector has transitioned to a market-based model, where over 84% of care homes are now privately operated for-profit. While marketization aimed to lower costs and increase efficiency, local authorities have faced severe budget cuts, resulting in a squeeze on the fees they pay to private care providers. A stark divide has appeared between 'self-funders' (wealthy individuals who pay high fees) and state-funded residents, leading to market instability and calls for social care to be nationalised or heavily subsidised.

Extract F

Systemic failures and the funding gap

There are clear elements of market failure in the adult social care sector, though many argue that government underfunding and strict regulatory frameworks (such as Care Quality Commission (CQC) standards and staff-to-resident ratio guidelines) are the primary causes of the industry's near-collapse. Despite being a critical public service, adult social care remains one of the lowest-paid sectors in the UK economy (see Figure 1). High stress, low pay, and insecure zero-hour contracts lead to an annual staff turnover rate of approximately 35%, causing a chronic recruitment crisis.

At the same time, local authority funding rates have failed to match the rapid increases in the National Living Wage and high inflation. Representatives report that the true cost of delivering a residential care place exceeds local authority reimbursement rates by over £150 per week per resident. Consequently, many care homes have ceased operations or rejected council-funded residents entirely, creating 'care deserts' in lower-income regions. Addressing this requires major reform, but finding a sustainable funding mechanism poses a significant challenge for public finances.

---

Extract F states: 'There are clear elements of market failure in the adult social care sector, though many argue that government underfunding and strict regulatory frameworks... are the primary causes of the industry's near-collapse.'