Councils accused of taking risks with OAPs' wellbeing by failing to pay enough for care
The UK Home Care Association (UKHCA) has found just one in 10 authorities is paying agencies a minimum of Â£16.70 an hour - with the national average Â£2.12 below this figure.
It warned the under-spend is"taking major risks with people's wellbeing" and said "underfunded home care is an urgent situation".
The industry body calculates its Â£16.70 hourly minimum price based on care worker costs, running the business, as well as profit and surplus.
Its report, using data obtained through freedom of information requests to 208 authorities, showed the average hourly price paid by councils across the UK was Â£14.58.
In England this was Â£14.66, Wales Â£14.99, Scotland Â£14.74 and Â£12.35 in Northern Ireland.
The body found seven councils were paying average rates so low it was "unlikely to cover even the direct costs of employing home care workers", which it estimated to be Â£11.94 an hour.
These included South Tyneside on Â£11.55 and North Tyneside on Â£11.27.
At the other end of the spectrum, Oxfordshire pays the highest average price of Â£19.81, followed by Bath and North East Somerset on Â£19.59.
How much North East councils pay for home care
* Darlington - Â£13.28
* Durham - Â£13.15
* Gateshead - Â£11.92
* Hartlepool - Â£12.65
* Middlesbrough - Â£12.24
* Newcastle upon Tyne - Â£12.69
* North Tyneside - Â£11.27
* Northumberland - Â£12.72
* South Tyneside - Â£11.55
* Stockton-on-Tees - Â£12.80
* Sunderland - Â£12.20
Colin Angel, UKHCA's policy director, said: "Councils which decide to pay inadequate rates for home care are taking major risks with people's wellbeing and the jobs of local people who provide care.
"We have already seen evidence of home care providers leaving the state-funded care market, or closing their doors for good because they cannot afford to remain in business.
"People who use home care services are already experiencing the consequences of unstable care markets. Underfunded home care is an urgent situation, which must not be allowed to continue."
It is estimated 873,500 people over-65 are supported at home to live independently and are helped with tasks such as getting dressed and washing.
The report warns there has been "an apparent increase in home care providers handing back home care contracts" on the basis of inadequate fees.
And that without addressing the under-funding, the independent and voluntary sector will "continue to struggle and retain care workers".
It adds: "Ultimately, the care market will become economically unsustainable, with a consistent inability for the state to enable older people and disabled people to live independently at home."
UKHCA recommends authorities pay a rate which is "at least" consistent with the national minimum wage and the full costs of running a home care service.
It also suggests that "governments in each UK administration must ensure that purchasing authorities have sufficient resources to pay the necessary fees".
Janet Morrison, chief executive of Independent Age, said the "adult care system is in crisis".
She added: "We urgently need a open and honest conversation about how we adequately fund adult care both now and in the future."
Councillor Izzi Seccombe, of the Local Government Association, said: "The care provider market cannot carry on as it is and there is a real danger of more widespread market failure.
"Either care is properly funded or providers will pull out of council contracts or, in worst case scenario, go bust.
"The market for publicly funded care is simply not sustainable as it stands."
A Department of Health spokesman said: "This Government is committed to ensuring those in old age throughout the country get affordable and dignified care.
"We are significantly increasing the amount of money local authorities have access to for social care, by up to Â£3.5 billion by 2020. Councils must be able to demonstrate that their care providers pay staff the minimum wage."