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Local authorities in England will be supported by £1.36 billion from the Health and Social Care Levy to pay a fairer rate of care to adult social care providers, according to new guidance from the Department of Health and Social Care (DHSC) for councils in England.

The Market Sustainability and Fair Cost of Care Fund is set to increase the support available for the care sector as part of the UK Government’s 10-year vision for reform set out in the People at the Heart of Care whitepaper.

People paying privately for adult social care often pay a higher rate than those funded by the local authority, according to the government, and the Market Sustainability and Fair Cost of Care Fund intends to help close this gap.

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The primary purpose of the Market Sustainability and Fair Cost of Care Fund is to support local authorities to prepare their markets for reform, and to support local authorities to move towards paying providers a fair cost of care.

To ensure the investment makes it from local authorities to care providers, the new DHSC guidance sets out that local authorities must: carry out cost of care exercises to improve understanding of how much it costs to provide care in their specific area, including assessing the various costs care providers face in the area; ensure the care market in the area is sustainable and identify and increase rates where a fairer cost of care is needed; and spend no more than 25 percent of funding in year one towards implementation costs to ensure remaining funding goes towards genuine increases in fee rates.

There will not be a set fee rate as the costs of providing care will not be the same across the country due to local market variations, the guidance underlines.

During year one, local authorities will receive an extra £162 million, followed by £600 million in the second and third years.

As a condition of receiving future funding, local authorities will also need to evidence the work they are doing to prepare their markets and submit the following to DHSC by 14 October 2022:

  • cost of care exercises for 65+ care homes and 18+ domiciliary care
  • a provisional market sustainability plan, using the cost of care exercise as a key input to identify risks in the local market – a final plan will be submitted in February 2023
  • a spend report detailing how funding allocated for 2022 to 2023 is being spent in line with the fund’s purpose

Health and Social Care Secretary Sajid Javid said: “This is the beginning of one of the most comprehensive reform plans that this country has ever seen in adult social care.

“The Health and Social Care Levy will help fund reforms to social care and the NHS – ensuring everyone who needs support is cared for in the right place at the right time. For this to happen we need a thriving adult social care market and this will only be possible if providers receive a fairer cost for care.”

The Health and Care Levy is a UK-wide 1.25 percent National Insurance Contribution that will start from April 2022 to help the NHS and adult social care to recover and reform after COVID-19.

The Market Sustainability and Fair Cost of Care Fund, announced in December 2021, is one of the first steps in the 10-year vision for adult social care. It is part of wider reforms to the social care sector in the UK announced by the government.

As well as providing a fairer cost of care for care providers, the levy will provide more than £1 billion to help people live safely, independently and where they want to, and improve the use of technology including housing improvements. The levy will also provide at least £500 million to develop and support the social care workforce, including training places, improve wellbeing of staff members, and investing in workforce skills.

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