Care home providers have accepted what they see as a “grossly inadequate funding" deal from the Scottish Government and councils.

The once lucrative private industry says it is seeing costs rise far faster than its income as more and more people rely on its services.

Industry lobby Scottish Care negotiates fees with Cosla, the councils group, under a funding deal with Holyrood authorities. It is upset that the Scottish Government made it pay a living wage to all of its 100,000 workers - a key position for the SNP administration - in return for the deal. Staffing accounts for much off the industry's costs - most workers are women - and unions have welcomed tying new funding deals to pay.

Scottish Care chief executive, Donald Macaskill, claimed some of its 400 members, providing 900 services, could go under.

He said: "Many providers have expressed not only their disappointment with this funding but their sense of dismay and hurt. As they see it, the contribution of the care home sector to wider health and social care provision, is clearly viewed with such low esteem that the viability concerns for the sector have been so easily dismissed.

“We are profoundly concerned about the survival of some of our care homes."

Dr Macaskill said the sector was forced to accept a marginal uplift of 2.8 per cent to the funding of care home placements made by local authorities. However that deal depends on care homes delivering the new Scottish Living Wage of £8.45 to adult social care workers in homes from May 1, 2017.

After these costs are deducted providers. Scottish Care said, will be left with a net one per cent uplift in funding for care homes - at a time when they are faced with significant cost pressures which have increased by approximately 8.5 per cent.

Dr Macaskill added: "Cosla have indicated that the limited finances available mean they are unable to further improve this funding package. Therefore we can only conclude that it is the failure of Scottish Government to adequately fund the settlement that risks a significantly detrimental impact on provision for older people in Scotland." He said providers had agreed to the deal under protests and had been “caught between a rock and a hard place”. He said: "This is not only about money. It is about the rights, dignity and choice of older people. Scottish Care and its members believe this deal is completely unacceptable, and we will work hard to ensure that older people’s human rights and care services cannot be jeopardised in this way again."

A Scottish Government spokesperson said: "We have already provided significant investment of £250 million, alongside a further £100 million next year, to support social care and ensure adult care workers receive the Living Wage.

"“Everyone should receive quality care and support appropriate to their needs. We have seen the number of care services found to be providing good, very good or excellent care rise, and the on-going review of National Care Standards will ensure those using care services experience even better quality of care and support across health and social care services.”

Unison led the campaign for the Scottish Government to link the living wage to any deal with private care home, which account for 83 per cent of all places in Scotland. It said the living wage would "make a huge difference to a large, low paid, mostly women workforce".