Setting care home fees

The High Court has quashed a decision by a city council to set an annual increase to care home fees below-inflation. Philip Rule KC looks at the lessons from the judgment.

In the case of R (SARCP) v Stoke-on-Trent City Council [2025] EWHC 18 (Admin) the Administrative Court considered a dispute over the setting of care home fees and has quashed the decision taken.

The Court agrees that the decision taken for the 2024/2025 annual indexation increase to the fees for residential care placements by only 1.4% was unlawfully taken. The claimant argues that this level is insufficient and does not reflect the actual costs of providing care. There have been several homes closed in 2024 in the defendant’s area, leading to vulnerable residents being displaced, and concerns over the impact on quality of care if actual costs are not being met. The contract between the council and care home providers included a clause for annual fee adjustments, with a contractual minimum increase level of 1.4%.

The claim was allowed on five grounds for judicial review that established that:

1. The consultation process was flawed as the defendant failed to take the product of consultation, including the claimant’s response, conscientiously into account in finalising any proposals.
2. The defendant failed to follow relevant statutory guidance and comply with the duty by s.78 of the Care Act 2014 to act under the Care and Support Statutory Guidance issued by the Department of Health and Social Care. For example, the council did not adequately consider the actual costs of care, or inflationary costs including increases to the National Living Wage.
3. The defendant failed to consider and have due regard to the actual costs of care and other implicitly or expressly relevant statutory factors.
4. There was a failure to have due regard to the needs of and potential discriminatory impact upon disabled or elderly residents of residential care homes, and breach of the Public Sector Equality Duty required by s.149 of the Equality Act 2010.
5. The decision was also found to be a case of irrationality due to an unexplained evidential gap failing to justify the conclusion and inadequacy of reasons, and by irrationally adopting an objective of ‘keeping people in their own home’ but not considering its duties to people who were already residents and unlikely to return to their homes.

The court quashed the unlawful decision and ordered the council to re-take it within 28 days. This time it shall need to properly consider the consultation responses, statutory duties, and guidance.

This outcome is very important for both care providers and residents, as well as staff of the homes, and for sponsors (such as family members) who top-up fees where the council’s fees are not covering the necessary expenses of the care home providers. The decision therefore affects care home providers and residents, with potential changes in fees impacting the sustainability of care homes and the financial burden on residents and their families.

The judgment also emphasises the importance of proper consultation, adherence to statutory guidance, and consideration of the actual costs of care in making decisions that impact vulnerable populations. The court’s decision aims to ensure that the council’s future actions must be lawful and fair.

Philip Rule KC of No5 Barristers’ Chambers represented the successful claimant, a representative body for care homes in Staffordshire and Stoke-on-Trent, instructed by Liam Fitzgerald at Anthony Collins Solicitors LLP. Philip is head of the Public Law group at No5 Chambers.