Health and Adult Services Executive Member Meeting
REPORT TO Corporate Director of Health and Adult Services (HAS) in consultation with the Executive Member for Health and Adult Services
Fee uplifts for Residential, Nursing, Home Based Support, Supported Living and Community-Based Services 2026/27
5 March 2026
1.0 PURPOSE OF THE REPORT
1.1 This report informs the Executive member of the proposed fees for Residential, Nursing, Home Based Support, Supported Living, Community Based Services and Direct Payment Personal Assistant rates in 2026/27 as part of the consultation process to enable the Corporate Director – Health and Adult Services to agree those fees.
2.0 BACKGROUND
2.1 Contractually the Council has a commitment to review fee levels on an annual basis. The Council has always had an obligation to take account of the market pressures and to seek views from providers on fee levels, but from April 2015 new statutory responsibilities under the Care Act 2014 require the Council to shape and sustain its markets.
2.2 In setting fees, the following objectives have been set:
· Meet the duty to pay due regard to the costs of providing care
· Consult with the market (through the Independent Care Group) and consider any alternative proposals
· Ensure no contract for over 65 care homes is paid below the Actual Cost of Care (ACOC) rate (where applicable)
· Work within the requirements of the Approved Provider List (APL)
· Prioritise the funding to lower-paid contracts to ensure market sustainability
· Work within the budget agreed by Council.
2.3 In April 2022, the Council implemented its Actual Cost of Care (ACOC) exercise for over 65 residential and nursing packages of care. It was agreed that all new packages would receive at least the relevant ACOC rate and that existing/legacy rates would be increased to ensure that they met that rate within three years.
2.4 In calculating expected costs, we have listened to representations made by the ICG and also asked all providers to complete a financial return. Although the number of returns was disappointingly low (only 11 responses), we have still taken any information provided into account as part of our evidence base and also consider information we have received from other local authorities. We also consider any representations made directly to us by providers and information from national organisations. Finally, in recent years, we have also looked at numbers and data we have and fed in work completed on the Actual Cost of Care and the Fair Cost of Care exercises undertaken as part of the government’s Market Sustainability programme, as well as the provisions in our Approved Provider (APL) contract.
2.5 In the past and after discussions with the ICG, the allocation of funding has been tailored to ensure that those receiving the lowest fee amounts has once again been prioritised.
2.6 The proposal outlined below works within the figure available in the budget where extra funding has been allocated to cover ASC costs which far exceed government funding. This has been achieved by prioritising this service area within the Council, raising Council Tax to the maximum level allowed and using Council reserves – although this last source is of course unsustainable in the long term.
2.7 The data set out above has produced a baseline inflation rate of 3.8% (residential, nursing and supported living) and 3.9% for home-based care. In addition to this, our best assumptions are that the new cost burden arising from the Employment Rights Act, and specifically around Day-One Rights whereby sick pay will start at Day 1, rather than Day 4, will cost another 2.2%.
2.8 The principles of this offer are set out below:
· No relevant packages will be paid below Actual Cost of Care (ACOC) rates – including those at APL rates.
· We acknowledge that changes to sick pay (Day-One Rights) could not have been built into rates set in 2022.
· In general therefore two rates of inflation apply for each type of care. The first (around 6.0% - 6.1%) takes account of all expected cost increases, including Day-One Rights and will apply to contracts which have not yet transferred to the (generally higher) APL rates. The second (2.2%) will support the Day-One Rights cost increases and will apply to APL rates. As with 2025/26 and 2023/24, inflation will be paid on APL, up to ACOC and certain other thresholds, as an exceptional issue within the contract and therefore something which could not have been predicted when providers submitted their APL rates covering the length of the contract.
· We are always keen to see the proposal by the Home Care Association for a minimum rate for home care, but their suggested rate for 2025/26 of £32.14 was in our view unrealistic, and a 28% increase above the actual national average. Their figure for 2026/27 (£34.42) has increased this gap to 37%.
· We will continue to set a higher threshold for rural and super-rural home care rates.
· Any increase for legacy rates will be capped at the current APL (2022-27) rate. All but the highest APL rates will have been inflated in three of the four full years of the contract.
· Fees will be rounded to the nearest number divisible by 7 for care homes and divisible by 4 for home care and services charged on an hourly basis.
· When the inflationary uplift brings a legacy rate in line with the current APL rate, the placement or package of care will be transferred to the 2022-2027 APL contract.
· Thresholds and caps have been set by reference to average costs and other exercises such as Actual Cost of Care and have increased in line with inflation (approx. 6%) since last year.
· ACOC rates (and any uplift to them) are only for North Yorkshire Council packages and do not include specialist care home packages.
2.9 The rates below, if agreed, are within the funding agreed in the Council’s 2026/27 budget, although inflation is of course allocated on budget and not on any overspend.
2.10 The Council has a duty to promote the efficient and effective operation of the adult care market, while also ensuring value for money in all areas of social care expenditure.
2.11 North Yorkshire Council and its predecessor, North Yorkshire County Council, has invested heavily in local provision. This has included:
· A new Approved Provider List (APL) which allowed providers to submit sustainable rates for the period 2022-27.
· Actual Cost of Care (ACOC) for over 65 residential and nursing packages of care – implemented in April 2022 with the agreement that all new packages would receive at least the relevant ACOC rate and existing/legacy rates would be increased to ensure that they met that rate within three years.
· An exceptional inflation award for 2023/24 which acknowledged the very high rates of inflation in the UK economy.
· Implementing a robust sustainability process to enable the Council to offer a range of financial and non-financial interventions to mitigate risk to provider organisations.
· Expanding the Quality Team to provide hands-on, practical support to care providers who are experiencing quality or other sustainability challenges
· Support with recruitment and training
3.0 PROPOSED FEE LEVELS
Care Homes 65+ (ACOC)
3.1 In April 2022, the Council implemented its Actual Cost of Care (ACOC) exercise for over-65 residential and nursing care. It was agreed that all new contracts would receive at least the relevant ACOC rate and that existing/legacy rates would be increased to ensure that they met that rate within three years. Legacy rates refers to rates that were agreed on contracts that pre-date the current 2022-2027 APL.
3.2 The proposal for 2026/27 is that no rates will be lower than the uplifted 2026/27 ACOC rate from 6 April – both legacy and APL packages. Taking account of expected rates of inflation over the next financial year, the new ACOC rates are as set out below:
|
|
Legacy & ACOC contracts |
APL contracts (above 26/27 ACOC, which includes an increase for Sick Pay as well as other inflation) |
|
Residential |
£1,001 (5.9%) |
0% |
|
Residential/dementia |
£1,057 (6.3%) |
0% |
|
Nursing |
£1,113 (6.0%) |
0% |
|
Nursing/dementia |
£1,120 (6.0%) |
0% |
|
Cap 1: Legacy contracts between 26/27 ACOC and Threshold – 2.2% increase. The Threshold levels proposed are · £1,274 (Residential); · £1,337 (Residential Dementia and Nursing); · £1,491 (Nursing Dementia)
Cap 2: Legacy contracts above Threshold - 0% |
||
3.3 Contracts on the 2022-2027 APL that are at ACOC will be uplifted to the 26/27 ACOC rate. This represents an increase of up to 6.3%.
3.4 All uplifts will be capped at the provider’s equivalent APL rate.
3.5 For those contracts on the current APL with rates above the new ACOC, no inflation will be applied.
3.6 ACOC rates (and any uplift to them) are only applicable to packages commissioned in the North Yorkshire Council boundary and do not include specialist care home packages.
Care Homes under 65 and non-ACOC services over 65
3.7 ACOC rates only apply to contracts for people aged 65+. Therefore for legacy contracts (those that pre-date the 2022-2027 APL) supporting adults under the age of 65 and Learning Disability residential services, the inflation rate will be 6% for those below £1,911 per week and 2.2% for those above.
3.8 Contracts supporting adults under the age of 65 and non-ACOC over 65 residential services which are on the current APL will receive 2.2% below £1,911 and 0% above that.
One-to-One Rates
3.9 All such contracts (Legacy and APL) will be uplifted by 2.2%
Supported Living
3.10 For supported living legacy contracts, the inflation rate will be 6.0% up to a cap which is the lesser of £27.19 or the provider’s current APL rate. Anything above £27.19 will not receive inflation.
3.11 For supported living contracts on the APL, the inflation rate will be 2.2% up to a cap which is the lesser of £27.19 or the provider’s current APL rate. Anything above £27.19 will not receive inflation.
Home based support
3.12 For legacy home-based support contracts (not on 2022-27 APL), the inflation rate will be as follows:
|
Home based support legacy contracts – hourly rates |
||
|
Urban incl.all practical support, sitting services and live in care |
Rates up to £29.50 – 6.1% |
Rates above £29.50 – 0% |
|
Rural and Super-Rural |
Rates up to £35.12 – 6.1% |
Rates above £35.12 – 0% |
3.13 For APL home-based support contracts, the inflation rate will be as follows:
|
Home based support APL contracts – hourly rates |
||
|
Urban incl.all practical support, sitting services and live in care |
Rates up to £23.78 – 6.1%
Rates up to £29.50 – 2.2% |
Rates above £29.50 – 0% |
|
Rural and Super-Rural |
Rates up to £23.78 – 6.1%
Rates up to £35.12 – 2.2% |
Rates above £35.12 – 0% |
3.14 Any increase will be capped at the providers equivalent 2022-2027 APL rates.
Community Based Support
3.15 For Community Based Support legacy contracts that pre-date the current 2022-2027 APL), the inflation rate will be 6%.
3.16 Community Based Support Contracts on the current 2022-27 APL will receive inflation of 2.2%.
Negotiated Rates
3.17 Where a provider has negotiated a rate which is below their APL rate for an individual contract, the negotiated rate will receive the same uplift as APL – i.e. 2.2% but would not exceed the 26/27 APL rate.
Direct Payments
3.18 The uplift here will recognise the impact of staffing cost increases and will be 4.1%, in line with the increase in National Living Wage.
Payments
3.19 Following feedback from providers, we are planning to re-introduce payments in arrears for non-residential services as soon as is practicable in the new financial year. Any such change will be introduced over an agreed timescale to minimise any cashflow issues for providers. Residential payments will continue to be made in advance. We will be introducing additional guidance to support non-residential services in completing their reconciliation returns (E-Invoice), to ensure this is being undertaken in a fair and consistent way. This will be implemented with a view to moving returns from the E-Invoice to the online provider portal during 2026-27.
3.20 It is envisaged that the move to payments in arrears will enable providers to realise efficiencies as the reconciliation process will be much less resource-intensive.
4.0 ANALYSIS OF THE PROPOSALS
4.1 The current APL states that any inflationary uplift will be discretionary. However the proposal in this paper recognises the exceptional circumstances of the increase in Employers National Insurance costs effective from April 2025 and which providers will not have foreseen when submitting their fee rates for the period 2022-2027. Therefore this award includes support for Sick Pay costs for both legacy and APL contracts.
4.2 The offer also sets thresholds for reduced rates, both for legacy and APL contracts. This is done to ensure that lower-paid providers receive more support while also seeking to ameliorate the financial impact to the social care budget of very high cost packages. One of the Council’s stated MTFS targets is to bring the average cost paid by the Council closer to rates paid elsewhere in the country. This past year has seen continued success in this for home care, but more needs to be done for residential costs. This is done by seeking to reduce the increase at the higher cost end of the market while continuing to invest in other providers. Ultimately this will be to the advantage of those receiving care in North Yorkshire by freeing up some budget, while also protecting residents who pay for their care.
4.3 There has continued to be much national focus in the last year about the fragility of the care market in England, including the adequacy of funding and reliance on an international workforce. However the Council undertakes quality monitoring of such provision.
4.4 In addition to the fees paid by the Local Authority, Nursing care homes will receive Funded Nursing Care payments for eligible residents from health commissioners. This is set nationally by the NHS and since 1 April 2024 the standard rate has been £254.06. No rate for 2026-27 has yet been published.
Residential and Nursing care Homes
4.5 In North Yorkshire since April 2025, 2 care homes (and one NYC owned Elderly Persons Home) have closed. This compares with
2024/25: 5
2023/24: 1
2022/23: 4
2021/22: 6
2020/21: 8
2019/20: 2
2018/19: 2
2017/18: 6
4.6 As of February 2026, the care home market in North Yorkshire is slightly above the national average in terms of quality of care provided by registered care providers, with 87.89% rated Good or better in North Yorkshire against an England average of 82.65%. The Quality Team continues to provide proactive support to providers where quality concerns have been identified or where improvements would be beneficial.
Home-Based Support
4.7 Fees to home care providers are based on hourly rates.
4.8 The average rate paid by the Council is currently quoted by DHSC a £26.01 which is 4% above the national average of £25.05. Two years ago, our rate was 22% above the national average.
4.9 As of February 2026, 92.5% of Domiciliary Care Providers in North Yorkshire were rated good or better. CQC data shows that 90.5% of registered community-based adult social care services (i.e. including Home-Based, Supported Living and Shared Lives) were rated “good” or better, which remains better than the national average of 87.42%.
4.10 The benchmarking data shared above shows how the average North Yorkshire rate for home care has reduced in recent years compared with other councils. Part of the reason for this is additional sufficiency in the market creating more competition and providers willing to reduce their charges, sometimes below their APL rates.
4.11 While this is to be welcomed for the budget, we also recognise an ongoing sustainability risk for those contracts paid at levels which are significantly below our average, for example where rates are £20 - £23 per hour, compared with £26. This risk is magnified by changes in immigration policy which will reduce workforce capacity.
4.12 The proposals here therefore include an option to pay the same general inflation rate (6.1%) to APL contracts below a certain threshold. This threshold has been calculated in consultation with the ICG at £23.78 and includes staffing costs (direct and indirect).
4.13 This proposal in some way mirrors residential and nursing care where we already have an Actual Cost of Care rate which is inflated fully each year for both legacy and APL rates. Although this would not be an ACOC for home care, it is worth noting that we are currently working to update our Actual Cost of Care rates
4.14 This will help to safeguard provision but will also provide an incentive for providers where they are able to reduce costs.
Community-based services
4.15 For Community Based Services the proposed increase is 2.2% uplift for APL rates, and 6% for legacy packages.
Direct Payments – Personal Assistant Rates
4.16 The uplift recognises the impact of staffing cost increases and also aims to continue to incentivise the use of Direct Payments to employ Personal Assistants. The increase will be 4.1%, in line with the increase in National Living Wage as below:
|
|
2025/26 |
2026/27 |
|
Standard PA Rate |
£13.25 |
£13.79 |
|
Enhanced PA Rate |
£15.65 |
£16.29 |
|
Pilot Standard PA Rate |
£15.00 |
£15.62 |
|
Pilot Enhanced PA Rate |
£17.00 |
£17.70 |
4.17 Where Direct Payments are used to pay for services that are on the Approved Provider List the provider must liaise with the direct payment recipient to agree an increase. The increase will not exceed the equivalent APL rate.
5.0 CONSULTATION AND ALTERNATIVE OPTIONS, INCLUDING IMPACT
5.1 Negotiations have been taking place with the ICG since November 2025. As stated above, a data gathering exercise had a disappointing level of returns (11), but officers have considered all information presented to them.
5.2 As part of the work a number of alternative options were considered including paying a flat rate to all providers. However the proposal presented here meets the objectives set out at 2.2 above, including prioritising the lowest paid contracts and working within the current contract, while being able to allocate funding to support the additional cost of Sickness.
5.3 The proposals take into account of assessment of the current market, including sustainability conversations and the fees paid in North Yorkshire relative to the rest of the country. Although attempts were made to understand from providers why market rates were higher in North Yorkshire, including a specific question related to this, as stated above, the response was very disappointing and nothing was forthcoming from providers on this question.
5.4 Discussions with the ICG did however result in some of their suggestions being included in the proposal, including an updated proportion of staffing v non-staffing costs.
5.5 Due to actions taken by the council we now have a more competitive market in some areas, but this has been done by ensuring that rate are competitive and cover costs (in fact leading to reduced average cost in home care). This award protects lower cost contracts and where providers are potentially more vulnerable to financial sustainability issues.
5.6 In the past the ICG has raised the issue of whether providers were clear that APL rates covered the full contract period (i.e. included future year inflation) and again we can confirm that any inflation above these rates is discretionary. However, as in 2023/24 and 2025/26 an amount for inflation has been included in the APL calculation as a result of the increase in costs related to sick pay as this qualifies as an exceptional circumstance which could not have been foreseen when rates were set. This has been done to support providers in North Yorkshire despite no government funding to support it.
5.7 A larger consultation exercise was carried out by the ICG relating to the proposals on which the rates in this paper are based on. This consultation was sent to 708 providers and of those only 96 replied. Of these 96, 20 (21%) agreed with the proposals while 76 (79%) did not. However this does still mean that 86% of providers did not respond, despite the ICG prompting that this would be taken as acceptance.
6.0 IMPLICATIONS
Financial
6.1 Budget plans have already included the cost of the increased fees proposed included in this report. In future years the Council will need to provide for the inflationary increases.
Human Resources
6.2 Human Resources: We require our contracted providers to meet national living wage levels and have reflected wage costs in our fees.
Legal
6.3 Legal: When setting fee levels, local authorities are not obliged to follow any particular methodology; in particular, there is no obligation to carry out an arithmetical calculation identifying the figures attributed to the constituent elements, R (Members of the Committee of Care North East Northumberland) v. Northumberland CC [2013] EWCA Civ 1740.
6.4 The Care Act 2014 places duties on local authorities to facilitate and shape the care and support market. The Act also requires local authorities to provide choice that delivers intended outcomes and improves wellbeing. Unlike previous case law, the Care Act strengthens the general duties of councils when setting fees. Relevant features of the Act (s.5) include: (i) An obligation on councils to: ...promote the efficient and effective operation of a market in services for meeting care and support needs with a view to ensuring that any person in its area wishes to access services in the market. …(and) has a variety of providers to choose from who (taken together) provide a variety of services. …(and) has a variety of high-quality services to choose from …(and) has sufficient information to make informed decision about how to meet the needs in question. In performing that duty, the local authority must have regard to the following matters (i) the need to ensure that it is aware of current and likely future demand for such services and to consider how providers might meet that demand (ii) the importance of ensuring the sustainability of the market (iii) the importance of fostering continuous improvement in the quality of such services and the efficiency and effectiveness with which such services are provided.
6.5 The Care and Support Statutory Guidance (CASSG) states that a local authority should have evidence that the fee levels they pay for care and support services enable the delivery of agreed care packages and support a sustainable market. When commissioning services, local authorities should assure themselves and have evidence that contract terms, conditions and fee levels for care and support services are appropriate to provide the delivery of the agreed care packages with agreed quality of care. This should support and promote the wellbeing of people who receive care and support and allow for the service provider to meet statutory obligations to pay at least the national minimum wage and provide effective training and development of staff. It should also allow retention of staff commensurate with delivering services to the agreed quality and encourage innovation and improvement. Local authorities should understand the business environment of providers offering services in their area and seek to work with providers facing challenges and understand their risks. Although the CASSG recognises that individual providers may exit the market from time to time, the local authority is required to “ensure that the overall provision of services remains healthy in terms of the sufficiency of adequate provision of high quality care and support needed to meet expected needs”.
6.6 The CASSG further states that in fulfilling this duty “Local authorities should commission services having regard to the cost effectiveness and value for money that the services offer for public funds”.
6.7 The Judge in the case of R(Care North East) v Northumberland CC [2024] summarised the above statutory provisions:
"(i) First, there is the importance of local authorities assuring themselves and having 'evidence' that contractual fee levels are appropriate to provide the delivery of agreed care packages with agreed quality of care (para 4.31).
(ii) Secondly, there is the importance of local authorities understanding that a reasonable fee level allows for a reasonable rate of return by independent providers that is sufficient to allow the overall pool of efficient providers to remain sustainable in the long term (para 4.31).
[Lavender J in R(Care England) at [6] called this and s.5(2)(d) CA 'the sustainability factor']
(iii) Thirdly, there is the point that local authorities must not undertake any actions which may threaten the sustainability of the market as a whole - the pool of providers able to deliver services of an appropriate quality - by setting fee levels below an amount which is not sustainable for providers in the long term (para 4.35)."
Equalities
6.8 Equality Act 2010: The council is required by law to pay due regard to the Equality Act 2010 and in particular the general and specific duties of the Public Sector Equality Duty. The evidence that the council has met its duties is contained in the previously published equality impact assessments (EIAs). Due regard has been paid to the actual cost of care in formulating the proposals, and it is anticipated that there will be a positive impact on both the provider market and people who receive services, by offering fee levels which support good care provision. An updated EIA has been undertaken to look at the specific contents of the 2026/27 offer. This shows there is no adverse impact on people as providers have had the opportunity to set their rates and legacy rates/ACOC have been uplifted.
Climate Change
6.9 There are no specific climate change implications identified with these proposals.
7.0 REASONS FOR RECOMMENDATIONS
7.1 The detailed reasons for the recommendations are set out in details in the report above. The proposal ensures that, where appropriate, rates paid to providers will take account of cost of living increases
8.0 RECOMMENDATIONS
8.1 The Executive Member is asked to consider the contents of this report, including the analysis of the proposals in section 3 and the implications in section 6 and to agree
Residential and Nursing
(i) The four ACOC rates for 2026/27 will be:
|
Residential |
1,001 |
|
Residential/Dementia |
1,057 |
|
Nursing |
1,113 |
|
Nursing/Dementia |
1,120 |
(ii) All relevant rates will be uplifted to the 2026/27 ACOC rate from 6 April – both Legacy and APL packages.
(iii) Legacy Residential contracts between the £1,001 and £1,274 will receive 2.2%.
(iv) Legacy Residential Dementia contracts between £1,057 and £1,337 will receive 2.2%.
(v) Legacy Nursing contracts between the £1,113 and £1,337 will receive 2.2%.
(vi) Legacy Nursing Dementia contracts between the 1,120 and £1,491 will receive 2.2%.
(vii) There will be no inflationary uplift above these rates for Legacy contracts.
(viii) There will be no inflationary uplift for APL contracts above the relevant ACOC levels
(ix) For legacy contracts (those that pre-date the 2022-2027 APL) supporting adults under the age of 65 and non-ACOC over 65 residential services, the inflation rate will be 6% for those below £1,911 per week and 2.2% for those above.
(x) Contracts supporting adults under the age of 65 and non-ACOC over 65 residential services which are on the current APL will receive 2.2% below £1,911 and 0% above that.
Supported Living
(xi) For supported living legacy contracts that pre-date the 2022-2027 APL, the inflation rate will be 6.0% up to a cap which is the lesser of £27.19 or the provider’s current APL rate. Anything above £27.19 will not receive inflation.
(xii) For supported living legacy contracts on the APL, the inflation rate will be 2.2% up to a cap which is the lesser of £27.19 or the provider’s current APL rate. Anything above £27.19 will not receive inflation.
Home-Based
(xiii) For legacy home-based support contracts (not on 2022-27 APL), the inflation rate will be as follows:
|
Home based support legacy contracts – hourly rates |
||
|
Urban incl.all practical support, sitting services and live in care |
Rates up to £29.50 – 6.1% |
Rates above £29.50 – 0% |
|
Rural and Super-Rural |
Rates up to £35.12 – 6.1% |
Rates above £35.12 – 0% |
(xiv) For APL home-based support contracts, the inflation rate will be as follows:
|
Home based support APL contracts – hourly rates |
||
|
Urban incl.all practical support, sitting services and live in care |
Rates up to £23.78 – 6.1% Rates up to £29.50 – 2.2% |
Rates above £29.50 – 0% |
|
Rural and Super-Rural |
Rates up to £23.78 – 6.1% Rates up to £35.12 – 2.2% |
Rates above £35.12 – 0% |
(xv) Any increase will be capped at the providers equivalent 2022-2027 APL rates.
Community-Based (including Day Services)
(xvi) For Community-Based Support legacy contracts that pre-date the current 2022-2027 APL), the inflation rate will be 6%, while APL rates will receive 2.2%.
(xvii) All Community-Based Support legacy package uplifts will be capped at that provider’s APL rate.
Other
(xviii) The uplift for Direct Payments Personal Assistant rates will be 4.1%, as shown below:
|
|
2025/26 |
2026/27 |
|
Standard PA Rate |
£13.25 |
£13.79 |
|
Enhanced PA Rate |
£15.65 |
£16.29 |
|
Pilot Standard PA Rate |
£15.00 |
£15.62 |
|
Pilot Enhanced PA Rate |
£17.00 |
£17.70 |
(xix) For placements of people in care homes outside of North Yorkshire Council we will honour the rate agreed by the host authority where they have undertaken an Actual Cost of Care exercise and will consider individual business cases where there is no Actual Cost of Care exercise in place.
Authors of report:
Abigail Barron
Assistant Director Prevention & Service Development – Health and Adult Services
Anton Hodge
Assistant Director – Strategic Resources