Could this be the end for local authority-provided residential care?

Mike Clifford discusses the trend of local authorities selling or closing their residential care facilities and what it means for the future of adult social care.

Adult social care accounts for over 40% of all local authority spending, with local authorities across the UK budgeting £24.5 billion towards these care services in 2024-25. This will inexorably rise what with continuing demand pressures from an ageing population, difficulties in care sector recruitment and the ever-increasing costs of care service delivery.

The Government, having committed to reform adult social care services in its election manifesto has provided some hope, announcing a 3.2% funding boost at the Autumn Budget. However, equating to around an extra £600m this is a drop in the ocean compared to the investment needed, especially given that provider costs will increase further in April when the new National Living Wage and National Insurance wage thresholds come into force. This has left local authorities whose budgets are already stretched to breaking point with limited options as to the type and amount of care they can provide their constituents, with some even having to scrap residential care all together. A recent Oxford University study has already found that publicly owned and provided adult social care is much reduced, falling from 42% of all provision to 9% since 2001.

In recent times, local authorities such as Derbyshire, Kirklees, East Lothian and Renfrewshire, have been forced to consider whether to close or sell their residential care facilities in a bid to cut costs amid a challenging financial landscape.

Understandably, closures and sales are heavily contested by campaigners, residents and their relatives who often blame financial mismanagement on these difficult decisions. However, the reality is, these are the hard choices local authorities face in a care sector that has been treading water for some time.

The end of local authority directly owned residential care?

Squeezed budgets over time have forced many local authorities to rethink the care they should directly provide, with some opting to replace residential care completely with more targeted and specialist domiciliary care.

Derbyshire County Council, for instance, found that the number of people over 65 potentially living with severe dementia across the county is likely to increase by around 45% to 14,190 in the next five years.

So, Derbyshire knew it needed to start prioritising more dementia care, but was limited in what it could provide by funding. After consultation, it proposed to sell off eight of its care homes, freeing up resources to offer more specialist dementia care services.

As Derbyshire stated, it doesn’t have to directly provide residential care services, it just needs to ensure that care is available for people and that the care market is operating efficiently and effectively. Moving provision of the service to the private sector was considered a sensible option in order to ensure that public money can be directed where it is needed most.

Derbyshire isn’t the only council reining in its involvement in the residential care market. In September 2024, Kirklees Council found that the maintenance costs to keep its residential care facilities running was too high to be manageable. It then made the decision to dispose of its care homes to focus more on providing direct care to service users in their homes.

Similarly, Renfrewshire Council reduced the number of care homes it directly owned and operated and used the savings to bolster care quality at the remaining facilities.

What’s next?

Just last week, the Government announced that Baroness Louise Casey will lead an independent review of adult social care and share recommendations for its reform; this is likely to take the form of a national social care service.

While a positive step in the right direction, many have argued that a review is unnecessary. We already know that money and resources are constrained in the care sector and previous inquiries and reports have presented options for future funding of social care, so do we need another inquiry to tell us something we already know?

The review is expected to take three years, with the initial set of findings published in 2026. That’s not including the time the Government needs to consider and respond to the findings. For local authorities, this timeframe is nowhere near quick enough.

In the absence of an immediate plan from the Government and continuing fiscal constraints, we can expect selling care homes to continue to be an attractive option for councils – sometimes the only option.

That doesn’t have to be a bad thing if managed correctly. For example, in children’s services there are already plans in motion to encourage more charities and not-for-profit organisations into the children’s care sector. The Government is exploring options to rebalance the market by encouraging new third-sector charities and ethical investors to enter the market through ‘fast-tracking’ providers and setting up new funding mechanisms. And of course, there are lots of private companies that offer excellent care services.

We have long needed a system that brings all these elements together under a framework of high standards, ensuring the provision of high-quality care.

But is three plus years too long for local authorities? Is yet further ‘kicking the can’ going to result in the hastening of the remodelling of local authority directly provided residential care into more specialist domiciliary and dementia care with an increasing emphasis on care at home (something that every study shows is desired by most care recipients)?

Mike Clifford is Head of the Corporate Health and Care practice at national law firm Weightmans,