Guidance

Market Sustainability and Improvement Fund 2025 to 2026: main guidance

Published 2 May 2025

Applies to England

This guidance is intended to support local authorities in administering the Market Sustainability and Improvement Fund (MSIF or ‘the fund’) in 2025 to 2026. The guidance applies to England only.

Executive summary

Key elements of MSIF for 2025 to 2026 are as follows:

• MSIF is worth £1.05 billion for local authorities in 2025 to 2026
• the 3 fund target areas remain the same as in the previous years. They are:  
  • increasing fee rates paid to adult social care (ASC) providers
  • increasing ASC workforce capacity and retention
  • reducing waiting times for ASC
• using MSIF alongside other available funding, the government expects local authorities to maintain improvements made in these target areas since the fund began in 2023 to 2024 and, where possible, seek further improvements. The funding is also provided on the condition that it is used as part of a wider increase in planned ASC spending for 2025 to 2026
• the deadline for submissions has been extended to 11:59pm on 11 June 2025 to accommodate the delay in publishing the MSIF guidance and to ensure local authorities have sufficient time to prepare and submit their final MSIF 2024 to 2025 and initial 2025 to 2026 returns
• to reduce the reporting burden on local authorities, the spend return section of the 2025 to 2026 initial and final returns has been shortened. Local authorities must provide:
  • their initial report for 2025 to 2026, alongside their final report for 2024 to 2025, by 11:59pm on 11 June 2025
  • their final report for 2025 to 2026 by 11:59pm on 20 May 2026
• also to reduce the reporting burden, the MSIF capacity plan reporting requirement has been removed. Instead, to reflect the desire of the Department of Health and Social Care (thereafter ‘the department’ or ‘DHSC’) to better understand local authorities’ ongoing strategy regarding market sustainability and capacity in long-term ASC services, local authorities are required to share a link to their published market position statements (MPSs) or another similar published document as part of their final return due by 20 May 2026

The rest of this document provides further, in depth guidance.

Introduction

1.1. MSIF was first introduced in April 2023. The primary purpose of the fund in 2025 to 2026 is to support local authorities to maintain existing improvements made since the fund began, within the fund target areas. This funding is also expected to support local authorities to, where possible, seek further improvements to ASC services in their area, in particular to build capacity and improve market sustainability.

1.2. Under Section 5 of the Care Act 2014, local authorities have a duty to promote the efficient and effective operation of the market for ASC and support as a whole. The ambition of the Care Act 2014 is for local authorities to influence and drive the pace of change for their whole market, leading to a sustainable and diverse range of care and support providers, continuously improving quality and choice and delivering better, innovative and cost-effective outcomes that promote the wellbeing of people who draw on care and support.

1.3. The government considers that 3 target areas for improvement underpin the overarching objective of building capacity and improving market sustainability. These are:

• increasing fee rates paid to ASC providers in local areas
• increasing ASC workforce capacity and retention
• reducing ASC waiting times

1.4. In 2025 to 2026, MSIF remains one grant totalling £1.05 billion. To further simplify the fund and reflect changes in the broader ASC policy landscape, and given the significant amount of time that has passed since the Market Sustainability and Fair Cost of Care Fund 2022 to 2023, the £162 million Fair Cost of Care element of the fund has been merged into the overall fund total.

1.5. Local authorities have the flexibility to spend their total allocations for 2025 to 2026 on one or more of the 3 targets most relevant to them locally. The government is aware of the pressures facing ASC and recognises there will be difficult decisions to be made. However, local authorities are encouraged to use the fund to ensure they can provide sustainable fee rate uplifts, particularly to support providers following the increase to the National Living Wage and changes to employers’ National Insurance contributions announced at the Budget, increasing costs for care providers.

1.6. Local authorities are also encouraged to work with their local NHS partners to ensure, where possible, joint approaches to their ASC market. Examples of this include working together on co-ordinated approaches to provision in the geographic location and working together to ensure market sustainability. Local authorities should also consider working with neighbouring local authorities to encourage geographical stability and consistency for those drawing on care and for providers.

Note on 2025 to 2026 social care resources

1.7. The 2025 to 2026 local government finance settlement consultation response sets a clear expectation that the additional funding being made available to ASC this year must be used to maintain existing improvements made since the fund began in 2023 to 2024. In addition, this funding is also expected to support local authorities to, where possible, seek further improvements to ASC services in their area - in particular to build capacity and improve market sustainability through increasing fee rates paid to ASC providers and increasing workforce capacity and retention, thereby reducing waiting times.

1.8. The government is making up to £3.7 billion of additional funding available for local authorities with social care responsibilities in 2025 to 2026. This includes a £880 million increase to the Social Care Grant and allowing an increase of up to 2% to the ASC precept. Therefore, the funding within this grant is provided on the condition that it is used as part of a wider increase in planned ASC spending for 2025 to 2026.

1.9. To monitor this, DHSC will initially compare the increase in the 2025 to 2026 revenue account (RA) budget for ASC with both the 2024 to 2025 RA budget, to capture year-on-year increases, and the 2022 to 2023 RA budget, to capture increases over the lifetime of the fund. This work will assume (unless the local authority shows otherwise) that the following will be allocated to ASC:

• an appropriate share of the local authority’s additional Social Care Grant allocation for 2023 to 2024, 2024 to 2025 and 2025 to 2026, in line with aggregate use of this funding in previous years^{[footnote 1]}
• the local authority’s share of the Local Authority Better Care Grant (formerly the improved Better Care Fund (iBCF) and Discharge Fund) for 2023 to 2024, 2024 to 2025 and 2025 to 2026
• the resources raised in 2023 to 2024, 2024 to 2025 and 2025 to 2026 from the ASC precept

We also expect local authority spending on ASC to increase to reflect demand and cost pressures and that local authorities will make use of the increase in income from unhypothecated sources, including the Recovery Grant.

When outturn spending data for 2025 to 2026 becomes available in October 2026, DHSC will compare actual expenditure that year with the previous year (2024 to 2025) and the baseline year (2022 to 2023) to assess how local authorities’ expenditure has changed compared to the additional funding made available by the government.

Guidance on the grant conditions

1.10. The grant conditions that local authorities must meet are set out in the grant determination, which will be published and linked here shortly. Guidance to support local authorities in complying with these grant conditions is set out below.

Condition 1: allocating the full grant allocation on ASC

1.11. This is a ringfenced grant and each local authority must allocate its full grant allocation on ASC.

Condition 2: maintaining existing improvements and, where possible, seeking further improvements

1.12. The fund must be used to maintain existing improvements made since the fund began in 2023 to 2024. In addition to this condition, the government’s expectation is that local authorities should use this funding to, where possible, seek further improvements in at least one of the target areas in 2025 to 2026.

1.13. The government has selected target areas for improvement that will help contribute to increasing ASC capacity overall, while providing some flexibility to local authorities to best address local sustainability and improvement needs. Local authorities can choose which of the target areas they want to focus on. These target areas are:

• increasing fee rates paid to ASC providers in local areas
• increasing ASC workforce capacity and retention
• reducing ASC waiting times

1.14. Each target area is linked to specific metrics that DHSC will use to monitor performance. These are set out in the ‘Activities and metrics’ section below. Though local authorities are only expected to maintain existing improvements and, where possible, seek further improvements in one of these target areas, they may use the funding across more than one area. Local authorities should ensure that, to the best of their ability, other target areas do not worsen. As such, local authorities must report on all of the metrics. Local authorities should decide how they choose to focus the funding on the target areas, in line with local circumstances and priorities.

Condition 3: providing DHSC with initial and final reports

1.15. Local authorities must provide DHSC with an initial and final 2025 to 2026 report to demonstrate that conditions and expectations of the grant have been met. Local authorities should use templates that are provided by DHSC (see Annex A: provisional reporting templates and guidance and Market Sustainability and Improvement Fund 2025 to 2026: initial reporting template).

1.16. As the grant determination will set out, the initial 2025 to 2026 report must be submitted by 11:59pm on 11 June 2025 and must include:

• confirmation that the local authority has allocated its share of the grant in full to ASC, in line with condition 1
• reporting against all the required metrics set out in the ‘Activities and metrics’ section of this guidance

1.17. The final 2025 to 2026 report must be submitted by 11:59pm on 20 May 2026 and must include:

• confirmation that the local authority has spent its share of the grant in full on ASC, in line with condition 1
• a record of all the required performance metrics specified in this guidance (see the ‘Activities and metrics’ section)

Condition 4: providing a link to your published MPS

1.18. In addition to the initial and final 2025 to 2026 reports, local authorities must share a link to their published MPS. As set out in section 4.82 of the Care and Support Statutory (CASS) guidance, local authorities should produce, publish and regularly update a document such as an MPS to be transparent with providers and stakeholders about the market. If local authorities do not have an MPS specifically, they can provide another, similar published document to the department. This should be provided to DHSC by 11:59pm on 20 May 2026.

1.19. To reduce the reporting burden on local authorities, the department has removed the MSIF capacity plan reporting requirement condition that was in place previously. By asking local authorities to provide the link to their published market strategy this still provides DHSC with insight into how they are complying with their market shaping duties under the Care Act 2014, as well as strategically managing their local market capacity and demand. The change also aligns with the department’s desire to better understand local authorities’ ongoing plans regarding market sustainability and capacity in long-term ASC services. Intermediate care and other short-term care capacity and demand plans will continue to be required as part of Better Care Fund plans. Paragraph 4.83 of the ‘Care and support statutory guidance’ sets out detail on what local authority MPSs should contain.

Activities and metrics

Introduction

1.20. This section provides further detail on the activities and metrics attached to the target areas:

• increasing fee rates
• increasing workforce capacity and retention
• reducing waiting times

These 3 areas of improvement are closely linked and interdependent. For example, to increase ASC capacity and reduce waiting times, it may be necessary to recruit additional staff and retain the existing social care workforce. The primary mechanism by which local authorities can support their providers to retain staff and recruit new staff is often by increasing fee rates paid to them, and managing their contracts with providers well, to ensure fee uplifts are being used to improve workforce pay and conditions. Fee rates should also be considered in the context of the rising costs of delivering care.

1.21. Local authorities can choose how they focus their allocation of the grant, including distributing it across the 3 target areas. However, as set out in the grant conditions, they must maintain existing improvements made since the fund began in 2023 to 2024 and are expected to, where possible, seek further improvements, measured by the performance metrics set out below.

1.22. Local authorities are best placed to choose between these 3 target areas depending on their circumstances, and they will want to particularly consider the importance of fee rates for market sustainability given the pressures facing providers.

Increasing fee rates

1.23. As set out in section 5 of the Care Act 2014, local authorities have a duty to promote the efficient and effective operation of a market in services for meeting care and support needs, with a view to ensuring services are diverse, sustainable and high quality for the local population, including those who pay for their own care. Section 4.31 of the ‘Care and support statutory guidance’ states that:

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’s ability to meet statutory obligations to pay at least the 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 have regard to guidance on minimum fee levels necessary to provide this assurance, taking account of the local economic environment. This assurance should understand that reasonable fee levels allow 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.

1.24. As per the grant conditions, local authorities are required to maintain existing improvements that have been made in the previous years of the fund and, where possible, seek further improvements when conducting fee-setting activity for the 2025 to 2026 financial year. It is expected that, when looking to maintain and build on improvements, local authorities should ensure fee levels for care and support services take account of the actual costs of care in their area, including the National Living Wage, employers’ National Insurance contributions and inflationary pressures on providers in 2025 to 2026.

1.25. As with the MSIF guidance for 2024 to 2025, this may also include increasing fee rates in a wider range of ASC service providers that were not originally in scope of the 2022 to 2023 Market Sustainability and Fair Cost of Care Fund.

1.26. When setting fee rates for 2025 to 2026, local authorities should work with providers to ensure increased fee rates lead to improvements to delivering ASC services in their local area.

1.27. Local authorities should also consider how fee rates can support the government’s broader and longer-term ASC priorities, including:

• the key shifts in care towards a home-first approach
• the focus on prevention
• the implementation of the Fair Pay Agreement for the sector

When setting fee rates for 2025 to 2026, local authorities should work with providers to ensure increased fee rates lead to improvements to providers’ operations, such as payment of travel time in domiciliary care and eliminating ‘call-cramming’.

Metrics

1.28. To assess whether improvement has been maintained on increasing fee rates beyond planned rises, local authorities must include their local average fee rates in the initial and final 2025 to 2026 reports to be shared with DHSC in June 2025 and May 2026 (see Annex A: provisional reporting templates and guidance). As with previous years, fee rate data will be published.

1.29. The proposed fee rate metrics are in line with those reported in 2023 to 2024 and 2024 to 2025, and are an expanded continuation of the iBCF (now the Local Authority Better Care Grant) local authority fee rate collection. This started in 2017 to 2018 via the Better Care team and was included as part of the Fair Cost of Care collection in 2022 to 2023.​ The metrics will continue to include the following 3 service types, which were collected for the first time in 2023 to 2024:

• 18 to 64 residential care home
• 18 to 64 nursing care home
• 18 and over supported living

These service types were arrived at following consultation with the sector when the fund was initially established in 2023. They reflect a balance between adequate levels of detail for key service types, while retaining clear definitions and minimising reporting burdens on local authorities.

1.30. For each of the service types, we will ask local authorities to include the metrics set out below in their initial and final reports.

1.31. The initial 2025 to 2026 report (June 2025) must include the following (see Annex A: provisional reporting templates and guidance and Market Sustainability and Improvement Fund 2025 to 2026: initial reporting template):

• final average external provider local authority fee rate in 2024 to 2025 (in-year data was already provided as part of the 2024 to 2025 MSIF collection - this is an opportunity to provide final or corrected data for 2024 to 2025 given that the financial year will have finished)
• average provisional^{[footnote 2]} external provider local authority fee rate in 2025 to 2026, from which we will calculate a percentage uplift from 2024 to 2025
• free text to provide additional context on the report if required

1.32. The final 2025 to 2026 report (May 2026) must include the following:

• final average external provider local authority fee rate in 2025 to 2026 (this is an opportunity to provide final or corrected data for 2025 to 2026 given that the financial year will have finished)
• free text to provide additional context on the report if required

1.33. June 2025 and May 2026 fee rate data collections will cover the following service types:

• 65 and over residential care home
• 65 and over nursing care home
• 18 and over home care
• 18 to 64 residential care home
• 18 to 64 nursing care home
• 18 and over supported living

Workforce capacity and retention

1.34. Increasing fee rates for providers can support local authorities in working closely with providers to maintain previous improvements and seek further improvements in staff pay and benefits. However, local authorities could choose to use their allocation of the fund to deliver other measures that address local workforce capacity pressures in ASC through retention activity. This includes, but is not limited to, investment in measures to support staff and boost retention of staff within social care. For example:

• using measures other than increased fees to improve workforce terms and conditions
• bringing forward planned uplifts relating to pay in advance of the new financial year
• occupational health and wellbeing measures
• incentive and retention payments
• investing in workforce training and qualifications

1.35. If focusing on this target area, the government expects local authorities to work closely with ASC providers to determine how to best use the funding to maintain existing improvements made since the fund began in 2023 to 2024 and, where possible, seek further improvements. Local authorities should consider supporting the full range of ASC providers on workforce capacity and retention, regardless of whether the local authority already commissions care from them.

Metrics

1.36. To assess maintenance of improvements of a local authority’s workforce capacity, DHSC will estimate workforce growth by calculating the proportional increase in the number of people employed by Care Quality Commission (CQC)-registered providers within the local authority. This will be based on monthly Capacity Tracker data (see Adult social care in England statistics: background quality and methodology) on the number of people directly employed, as reported by CQC-registered providers (with the raw data cleaned to remove outliers).

The workforce growth measure is calculated separately for the domiciliary and residential sectors, for each local authority. We will estimate workforce growth between April 2025 and April 2026.

1.37. This is the same workforce metric that DHSC used in 2024 to 2025, which replaced the workforce information that was collected as part of the MSIF returns in 2023. As it is produced by DHSC based on data that providers are already reporting through the Capacity Tracker, as in 2024 to 2025, there is no need for local authorities to collect their own workforce data from providers in 2025 to 2026.

1.38. The reporting template includes a free-text box that gives local authorities the opportunity to provide additional context to their return, such as activities undertaken to boost workforce capacity and retention. Further information can be found in the ‘Reporting’ section.

Waiting times

1.39. As set out previously, reducing waiting times for ASC is another target area in which local authorities must maintain existing improvements made since the fund began and can choose to seek further improvements in where possible.

Metrics

1.40. DHSC previously asked local authorities to submit waiting time metrics as part of their 2023 to 2024 reports. To reduce reporting burdens, as in 2024 to 2025, the department is not asking local authorities to submit this again for 2025 to 2026. For 2025 to 2026 the department will monitor waiting times using the client level data (CLD) submitted for the year 2025 to 2026.

1.41. In 2024 to 2025, DHSC monitored waiting times using the difference between the number of days from a client’s first request to the start of their first service. Following extensive feedback from local authorities, DHSC is in the process of amending these metrics in conjunction with the sector.

1.42. DHSC will now calculate multiple waiting time metrics. These are based on:

• the average number of days between a new client’s request or referral and the start of their assessment
• the average number of days between a new client’s assessment and the start of their support
• where a client has both a request and an assessment with an event outcome that indicates a service was put in place, we will calculate the number of days between the relevant request and the start of the service

1.43. The metrics only capture waiting times for events that have already happened and are reported to DHSC in their CLD returns - they are not related to size of a waiting list.

Reporting

1.44. The following section provides details on the reporting requirements that local authorities must meet as part of the conditions of the fund. The reporting requirements aim to be proportionate to the fund and other reporting requirements that local authorities will need to meet in 2025 to 2026. However, the government recognises the added burden that completing returns in relation to the fund creates. As the grant determination will set out, to assist with the additional cost of completing the reporting requirements, local authorities may use up to £1,000 of their overall grant allocation, which cannot be exceeded. This value was reached using the new burdens assessment conducted for the fund when it was set up in 2023 to 2024 and accounting for reductions in reporting requirements since then.

1.45. Local authorities will be required to declare the amount spent on administrative costs in the spend report section of the final 2025 to 2026 report.

1.46. Local authorities must submit the following documents to msifcorrespondence@dhsc.gov.uk by the following dates:

• initial report by 11:59pm on 11 June 2025
• final report by 11:59pm on 20 May 2026

1.47. Paragraphs 1.16 and 1.17 specify what local authorities must submit in both their initial and final 2025 to 2026 reports. Guidance on completing them is available in ‘Annex A: provisional reporting templates and guidance’, and the initial 2025 to 2026 reporting template is available at ‘Market Sustainability and Improvement Fund 2025 to 2026: initial reporting template’. See the landing page of this publication for both.

1.48. The reporting templates will also include free-text boxes where local authorities can provide additional data and context to their returns. Local authorities may choose to use this as an opportunity to explain the trends in each of the target areas.

1.49. DHSC reserves the right to amend the relevant dates for submission and update the means by which returns are submitted - for example, by providing an alternative web-based system in the future, for greater efficiency.

Market position statements

1.50. In addition to the initial and final 2025 to 2026 reports, local authorities must submit links to their MPS or a similar document by 11:59pm on 20 May 2026, to msifcorrespondence@dhsc.gov.uk.

Monitoring

1.51. Once the fund is implemented, the government will continue to work closely with local authorities to ensure the appropriate support is in place for meeting the grant conditions. To assess whether all conditions have been met, the department will formally review local authority returns. Examples of breaches of the grant conditions include:

• inappropriate use of funding, or no evidence of the funding having been spent on the specified purpose
• failure to submit one of more of the documents specified at paragraphs 1.46, and/or submission of incomplete documents, and/or documents that are not submitted by the deadline
• no evidence of maintenance of existing improvements made since the fund began in any of the target areas using the metrics outlined in the ‘Activities and metrics’ section of this guidance. DHSC will also consider information provided by local authorities through free-text boxes

1.52. If local authorities do not meet the grant conditions, the department will take steps to engage with them to better understand why, and to request further context about the activities undertaken in relation to the fund. Recognising that the fund runs over 3 years, the department will consider the performance of local authorities across this period when assessing final submissions. To assist local authorities with explaining their activities, the reporting templates will include free-text boxes that local authorities can choose to use to provide additional context to their returns.

History of the fund

1.53. When the fund began in 2023 to 2024, it was worth £562 million for ASC, which included £162 million of continued Fair Cost of Care funding. DHSC also announced the MSIF Workforce Fund in July 2023, worth an additional £365 million to councils in 2023 to 2024. In 2024 to 2025, these funds were combined into one grant, totalling £1.05 billion, allocated to local authorities for ASC. This consisted of:

• £845 million from the original MSIF
• an additional £205 million from the MSIF Workforce Fund

1.54. As set out above, MSIF remains one grant totalling £1.05 billion in 2025 to 2026, but the £162 million Fair Cost of Care element of the fund has been merged into the overall fund total.

1.55. The table below shows the total profile of the fund across all 3 financial years. As in previous years, the fund will be distributed using the ASC relative needs formula (RNF). Full local authority allocations are available in the grant determination, which will be published shortly.

Table 1: MSIF funding in 2023 to 2024, 2024 to 2025 and 2025 to 2026

Financial year	MSIF use on target areas of local authority choice for improvement (£ million)	Continued funding from the Market Sustainability and Fair Cost of Care Fund 2022 to 2023 (£ million)	MSIF Workforce Fund (announced 28 July 2023) (£ million)	Total value of MSIF for financial year (£ million)
2023 to 2024	£400	£162	£365	£927
2024 to 2025	£888	£162	Not applicable	£1,050
2025 to 2026	£1,050	Not applicable	Not applicable	£1,050

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1. Revenue outturn data for 2023 to 2024 shows that out of all local authority expenditure on social care, 62% was on ASC and 38% on children’s social care. The government will use this data as an assumption when modelling expected spend on social care by local authorities. Source: Local authority revenue expenditure and financing England: 2022 to 2023 individual local authority data - outturn. ↩

2. We define ‘provisional’ as follows: at the time of data collection in June 2025, external provider fee uplifts should have been decided by each council but may not yet have flowed through into actual care packages commissioned, or actual payments made to care providers. Councils should report a fee rate that best reflects the actual average fee rate (including uplifts) that they expect for the 2025 to 2026 financial year. ↩