A combination of tax rises and increased staffing costs could force some care homes to close, leaders across the sector have warned.

While last month’s budget made provision for local authorities to receive an additional £600m to fund adult and children’s social care, rises in the minimum wage and employer national insurance (NI) contributions are likely to absorb these.

Care England, which represents adult social care providers, warned the proposed funding uplift was “a drop in the ocean” compared to an increase in costs that it estimates at £2.4bn.

Vic Rayner, CEO of National Care Forum, which represents not-for-profit organisations in the sector, added: “Adult social care providers will be hit particularly hard by the government’s planned changes to employers’ NI contributions.

“Of the local authorities with responsibility for social services, 70 per cent of their spending is on social care,” Mr Rayner said. “Even if all the £600m were to be dedicated to meeting the cumulative additional costs that social care employers will now face, it is unlikely to cover the required uplifts. This is before envisaging how hard this will hit people who pay for their own care.” 

Mike Padgham, chair of the Independent Care Group, which represents independent care providers, agreed that an increase in employee costs would impact the labour-intensive care sector particularly hard.

“For a lot of providers this will place existential pressure on them and could well push some out of business, unless it is matched by extra funding to those who commission care and there was little sign of that.”

Mr Padgham told the BBC the extra £600m for social care would have “little or no impact” once shared between 152 local authorities and children’s services.

Describing the budget as “a step in the right direction”, councillor Louise Gittins, chair of the Local Government Association, added: “Councils and the services they provide to their residents still face a precarious short and long-term future. The Government needs to give explicit clarity on whether councils will be protected from extra cost pressures from the increases to employer NI contributions.”