The government is set to begin a major review of the funding of elderly care in England. But in the face of massive financial pressures and an increasingly elderly population, what is going to be the true cost of balancing the books?

New figures seen by the BBC reveal struggling care homes are facing average real term cuts of 2.5% in fees from local councils.

Experts have warned this could mean many more face the same fate as Britain’s biggest care provider Southern Cross, which this month narrowly avoided being forced into administration.

Preliminary figures from leading health economist William Laing reveal the extent of the squeeze across the sector.

Mr Laing carries out an annual survey of the fees councils pay to care homes. This year, there has been an average rise in fees across the UK of just 0.5%. This equates to a real terms cut of 2.5% after inflation is taken into account.

Tonight File on 4 investigates how cutbacks are leaving elderly people with insufficient care, and councils with a major financial headache.

The programme also hears from small care home providers who say they are being forced out of business because the fees local authorities now pay them are too low.

For more information – File on 4 is on BBC Radio 4 on Tuesday 28 June at 2000 BST and Sunday 3 July at 1700 BST. Listen again via the BBC iPlayer or download the podcast or click the link http://www.bbc.co.uk/news/business-13896362