Care as a market: does competitive tendering drive down quality and pay?

The debate in brief

Social care in England operates as a market. Local authorities commission services from a mix of private companies, charities, and social enterprises, overwhelmingly through competitive tendering. The theory is that competition drives efficiency and choice. The reality, according to a growing body of evidence, is that it drives down wages, fragments provision, and pushes providers -- including charities -- into a race to the bottom on price.

Care workers are at the sharp end. Skills for Care reported that the median hourly pay for care workers in the independent sector was 11.00 pounds as of March 2024 -- just below the new National Living Wage of 11.44 pounds that came into force in April 2024. Turnover in adult social care stood at 26.0% in 2023/24, down from a pandemic peak but still reflecting deep structural problems with pay, conditions, and recognition. The Nuffield Trust has described the workforce crisis as the single greatest threat to the sustainability of social care.

Charities operating in this market face a particular tension. Many entered care provision because they believed they could deliver something better than the cheapest commercial provider. But commissioning frameworks that select primarily on price force them to compete on the same terms, eroding the distinctive value -- relational care, community connection, advocacy -- that justified their involvement.

Quick takeaways

The arguments

The case for market-based commissioning

The market model was introduced in the 1990s under the NHS and Community Care Act 1990, separating the purchaser and provider roles of local authorities. The rationale was that competition would drive innovation, efficiency, and choice. Providers who delivered poor care would lose contracts; those who delivered well would grow. Councils, freed from the burden of direct provision, could focus on assessing need and managing quality.

There are cases where this has worked. Some local authorities have developed sophisticated commissioning that balances price with quality, outcomes, and social value. The Social Value Act 2012 gave commissioners a legal hook to weight tenders on broader community benefit, not price alone. The best commissioning relationships involve genuine partnership between councils and providers, with shared risk and long-term contracts that allow investment in staff and services.

Private and voluntary providers also brought capacity into a system that the state alone could not sustain. With an ageing population and rising demand, the argument goes, there is simply not enough public money to deliver all care through directly employed local authority staff. The market, imperfect as it is, provides flexibility and scale.

The case that the market is failing

The Competition and Markets Authority concluded in 2017 that the care home market was "not working well" for residents, their families, or local authorities. It found that many councils were paying fees that did not cover the actual cost of care, forcing providers to cross-subsidise from self-funding residents or cut costs -- overwhelmingly by cutting staff pay and numbers.

The consequences are visible in the workforce data. Skills for Care's 2024 workforce report showed that 390,000 people left the adult social care sector in 2023/24. The median hourly pay of 11.00 pounds in the independent sector (as of March 2024) compared poorly with 12.43 pounds mean hourly pay in local authority provision, where terms and conditions are generally better. Zero-hours contracts remained widespread, covering around a quarter of the care workforce. UNISON surveys of care workers have consistently found high proportions considering leaving the sector, with low pay cited as the primary driver.

For charities, the market creates a specific bind. Organisations that pay the Real Living Wage, invest in training, and maintain lower staff-to-service-user ratios are structurally disadvantaged in tenders that weight price heavily. The result, documented by NCVO and the Lloyds Bank Foundation, is that charities either reduce their terms to compete or withdraw from the market entirely -- in either case, the distinctive contribution they offer is lost.

The race to the bottom in care worker wages

The connection between commissioning practice and care worker pay is direct and well-documented. When local authorities set contract prices below the actual cost of delivering care, providers absorb the shortfall through the workforce: lower wages, fewer hours, less training, higher caseloads. The Homecare Association's Minimum Price for Homecare, published annually, consistently shows a gap between what councils pay and what it actually costs to deliver an hour of compliant domiciliary care. In 2024/25, the Association calculated a minimum price of 28.53 pounds per hour; many councils were commissioning below this.

The Fair Work Convention in Scotland and the Real Living Wage movement have attempted to break this cycle. The Scottish Government's commitment to pay the Real Living Wage in adult social care, backed by central funding, shows that it is possible -- but also highlights how far England lags. The Women's Budget Group has argued that the undervaluation of care work is fundamentally gendered: 82% of the care workforce is female, and the low pay reflects a broader societal devaluation of work historically performed by women.

The evidence

Skills for Care's annual workforce estimates provide the most comprehensive data. In 2023/24, the adult social care workforce in England comprised approximately 1.71 million filled posts. Staff turnover was 26.0%, representing around 390,000 leavers. Vacancy rates remained elevated. The independent sector -- private and voluntary providers -- employed the vast majority of the workforce, with median pay significantly below local authority rates.

The Nuffield Trust's analysis of social care funding confirmed that local authority spending on adult social care fell significantly in real terms per person through the austerity decade from 2010/11, with only partial recovery thereafter and nowhere near restoration to pre-austerity levels. ADASS budget surveys have consistently shown councils planning further reductions even as demand rises.

The King's Fund's research on care markets documented growing provider fragility, with smaller providers -- including many charities -- most at risk. Between 2015 and 2023, the CQC registered a net decline in smaller domiciliary care agencies, while larger corporate providers consolidated their market share. This concentration reduces the diversity of provision and the likelihood that commissioners can shape a genuinely mixed market.

Research by the LSE's Care Policy and Evaluation Centre found that care home quality, as measured by CQC ratings, was not consistently better in areas with more provider competition. The theoretical link between competition and quality -- the core justification for the market model -- was not supported by the English evidence.

Current context

The social care workforce crisis has become a recognised policy priority but remains unresolved. The government's 2025 consultation on a National Care Service proposed a Fair Pay Agreement for care workers, which would set sector-wide minimum terms and conditions. This would, in principle, prevent the undercutting that competitive tendering currently enables. However, no legislation has been introduced and no timeline confirmed.

The employer National Insurance increase from April 2025, estimated by NCVO to cost the sector 1.4 billion pounds, has added further financial pressure to charity care providers already operating on margins of 1-3%. Several charity providers have reported having to hand back contracts to local authorities because they can no longer deliver them without making a loss.

The Darzi Review of the NHS in 2024, while focused on health, explicitly recognised the interdependence of health and social care and called for a workforce strategy that spans both. Whether this translates into funded action remains to be seen. ADASS reported in 2025 that councils were planning further cuts to adult social care budgets despite rising demand.

Last updated: April 2026

What this means for charities

Charities providing social care face a strategic question that cannot be deferred much longer. If commissioning continues to be driven primarily by price, charities will either compete on price -- losing the staff investment and relational approach that makes them distinctive -- or exit the market, leaving it to large corporate providers with no mission beyond margin.

The organisations navigating this most effectively tend to do three things. They build evidence for the value their approach delivers, in terms commissioners understand: lower hospital admissions, reduced staff turnover, better outcomes for people receiving care. They form alliances with other providers and campaign for commissioning reform, rather than competing against each other in a system designed to extract the lowest price. And they are honest with funders and the public about what care actually costs.

The deeper question is whether care should be a market at all. A growing number of voices -- from the IPPR, the Women's Budget Group, and trade unions including UNISON -- argue that the marketisation experiment has failed and that care should be treated as a public good, with direct employment and national terms and conditions. Whether or not charities agree with that conclusion, they should be central to the conversation about what replaces the current model.

Common questions

Why are care worker wages so low?

Because local authorities, which commission most publicly funded care, set contract prices that do not cover the true cost of delivery. Providers absorb the shortfall through the workforce. The Homecare Association has documented this gap consistently, showing councils commissioning domiciliary care below the minimum compliant price. The result is wages clustered around the National Living Wage floor, with limited progression, widespread zero-hours contracts, and chronic recruitment problems.

Do charities provide better care than private companies?

Not automatically, but the evidence suggests that mission-driven organisations often invest more in staff, deliver more relational care, and sustain higher CQC ratings. Research by the Lloyds Bank Foundation found that smaller charities in particular brought community connection and flexibility that larger corporate providers struggled to replicate. However, when commissioning is purely price-driven, these differences are compressed or eliminated.

What is the Fair Pay Agreement proposal?

The government's 2025 consultation proposed a Fair Pay Agreement for social care that would set sector-wide minimum terms and conditions, including pay rates above the National Living Wage. This would prevent providers from undercutting each other on staff costs. The model draws on experience from New Zealand, which reached a landmark pay equity settlement for care workers in 2017, resulting in pay increases of 15--50% across the aged and disability care sector. No legislation has been introduced in England as of early 2026.

Could local authorities provide care directly instead?

Some already do, and their staff tend to be better paid with better terms and conditions. But decades of outsourcing have reduced in-house capacity, and rebuilding it would require significant investment. The IPPR's Commission on Health and Prosperity in 2024 recommended a mixed model with a much larger role for direct public provision, arguing that the market has failed to deliver either quality or efficiency.

How does the social care market affect people receiving care?

The CQC's State of Care 2024 report found that while most providers were rated Good, quality was uneven and access was increasingly determined by ability to pay. Self-funders paid significantly more than council-funded residents in the same care homes, effectively cross-subsidising publicly funded places. People with the most complex needs -- including many disabled people -- faced the longest waits and the fewest choices.

Is Scotland doing things differently?

Yes. The Scottish Government committed to paying the Real Living Wage in adult social care, backed by central funding to providers. It has also established the National Care Service (Scotland) Act process, aiming for a more integrated, publicly accountable model. The approach is not without criticism -- implementation has been slower than promised and funding questions remain -- but it represents a fundamentally different direction from England's market-driven model.

Key sources and further reading

• The State of the Adult Social Care Sector and Workforce in England -- Skills for Care, 2024. The most comprehensive workforce data, covering pay, turnover, vacancies, and workforce demographics.

• Care Home Market Study -- Competition and Markets Authority, 2017. The landmark finding that the care home market was "not working well" for residents, families, or local authorities.

• Minimum Price for Homecare -- Homecare Association, 2024/25. Annual calculation of the minimum cost of delivering a compliant hour of domiciliary care, consistently above what many councils pay.

• Social Care Funding Gap -- County Councils Network / LGA, 2024. Projections of the growing gap between social care funding and demand.

• Budget Survey 2025 -- Association of Directors of Adult Social Services (ADASS), 2025. Annual survey of local authority spending pressures in adult social care.

• The Social Care Workforce -- Nuffield Trust, 2024. Analysis of workforce trends, pay, and the impact of funding pressures on recruitment and retention.

• State of Care 2024 -- Care Quality Commission, 2024. The regulator's annual assessment of health and social care quality in England.

• Social Care: A Gender Perspective -- Women's Budget Group, 2024. Analysis of how the undervaluation of care work reflects and reinforces gender inequality.