Progress Without Funding Risks Undermining the System
The introduction of a Fair Pay Agreement (FPA) in adult social care represents one of the most significant policy shifts in a generation. Designed to address long-standing issues of low pay, insecure employment and poor workforce conditions, it aims to transform a sector that supports over a million people daily yet has struggled for decades to attract and retain staff.
At its heart, the Fair Pay Agreement seeks to establish nationally negotiated minimum standards on pay and employment conditions, giving care workers a stronger voice and improving the overall attractiveness of the sector.
This is a welcome and necessary ambition. However, without a sustainable funding model, there is a real risk that the policy could accelerate instability across an already fragile care market. Fair pay agreement process in adult social care – consultation document – GOV.UK
A Sector Built on Unsustainable Economics
The current adult social care market is shaped by a fundamental tension. On the one hand, the system depends on independent providers operating in a competitive marketplace, commissioned primarily by local authorities. On the other, funding constraints have driven what has been described as a ‘race to the bottom’ on cost, with providers under pressure to deliver care at the lowest possible price.
This dynamic has directly contributed to:
- Low pay and limited career progression for staff
- High turnover and vacancy rates
- Reduced capacity for providers to invest in quality and innovation
The Fair Pay Agreement acknowledges these issues and attempts to correct them. But improving pay without addressing how care is funded risks shifting financial pressure directly onto providers, many of whom are already operating on extremely tight margins.
The Risk to Providers: Between Reform and Reality
For providers, the implications of Fair Pay Agreements are complex:
Potential benefits
- Improved recruitment and retention
- Greater workforce stability
- Enhanced quality of care through experienced staff
Key risks
- Increased wage costs not matched by fee uplifts
- Reduced viability of smaller or community-based providers
- Market exit by financially stretched organisations
In a system where local authorities remain the primary commissioners of care, the absence of guaranteed uplifts in contract rates could mean providers are expected to absorb these costs, something many simply cannot do.
New models of care
Local authorities are also having to cut staff to meet ever tighter budget restrictions. This leaves many looking for new models of care, that are more easily managed and facilitated so that more money can be moved to frontline services. This can mean that even greater responsibility is placed on providers as ‘lead providers’ that are required to take on the responsibility for all support needs in geographical areas, leading to significant risks if a provider fails and a lack of choice for people receiving care.
Other models have seen an increasing use of self-employed personal assistants and micro-providers, who are largely unregulated. In these areas local authorities are supporting the growth of unregulated services.
Quality, Regulation and the Emerging Gap
There is a growing challenge around quality oversight across the sector.
CQC data shows that while many inspected services achieve good outcomes, there remain:
- Variability in quality across provider types
- A significant number of services either unrated or outside the inspection regime entirely
Additionally, inspection coverage has not fully recovered since the pandemic, meaning a growing proportion of services may not hold a current rating. CQC inspections fall to second lowest level since 2016
This is particularly concerning when considered alongside the growth in unregulated provision, raising questions about consistency, safety, and transparency for people using services.
Legal Duties Under the Care Act: A System Under Strain
The Care Act 2014 places clear statutory obligations on local authorities. They must:
- Promote a diverse and sustainable care market
- Ensure a range of high-quality providers are available
- Enable people to have genuine choice and control over their care
Market shaping is not simply about commissioning at the lowest cos, it is about ensuring long-term stability, quality and responsiveness.
However, current funding pressures risk undermining these duties. Where providers exit the market or reduce capacity, and where cheaper, unregulated alternatives become more prevalent, the ability of local authorities to meet their Care Act responsibilities becomes increasingly compromised.
The Wider Funding Problem: Inequality and Stagnation
The challenges facing providers cannot be separated from the wider funding model.
Key structural issues include:
- Reliance on council tax
Adult social care funding is heavily dependent on local authority revenue, including council tax precepts. This approach is widely recognised as regressive, placing a greater burden on lower-income households and creating geographic inequalities in funding capacity. - Static self-funding thresholds
Eligibility for state-funded care remains tied to strict asset thresholds (e.g. £23,250), reinforcing a two-tier system where many individuals must fund their own care until their assets are depleted. - Growing demand and insufficient national investment
Demographic pressures and increasing complexity of need continue to drive costs upward without a commensurate increase in sustainable national funding.
The result is a system where:
- Providers depend on cross-subsidy between self-funders and publicly funded care
- Inequalities in access and quality are widening
- Financial risk is disproportionately carried by individuals and providers
Why Fair Pay Must Be Matched by Fair Funding
The Fair Pay Agreement represents a critical opportunity to reset the social contract for care workers. But it cannot succeed in isolation.
Without a comprehensive national funding settlement, the risks are clear:
- Providers may become financially unviable
- Market fragmentation could increase
- Reliance on unregulated care may grow
- Local authorities may struggle to meet statutory duties
To avoid this, reform must include:
Alignment between regulation, commissioning, and workforce policy
Nationally consistent funding mechanisms
Realistic fee rates that reflect the true cost of care
Investment in workforce development and quality
Conclusion: A Moment of Choice for Social Care
Adult social care stands at a crossroads.
The introduction of Fair Pay Agreements signals a long-overdue recognition of the workforce. But unless this is matched by bold, sustainable funding reform, the sector risks becoming even more unstable, undermining both providers and the people who rely on them.
The Care Act is clear: people should have choice, quality, and a sustainable care market. The question now is whether national and local policy will align to deliver this in practice. Care Act 2014
