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Councils ‘need billions in extra funding to meet cost of social care’

Revenues aren’t keeping pace with the rising costs of services

A growing elderly population, increases in the number of disabled adults and increases in wage and other costs mean that English councils will likely need billions in extra funding over the next parliament if they are to meet the rising costs of providing adult social care, a report warns.

The analysis from the Institute for Fiscal Studies (IFS) states that with council tax rising in line with inflation (2% a year), by the end of the parliament councils will need an extra £4bn a year from the government just to maintain social care services at current levels. This would rise to £18bn a year by the mid-2030s.

Even with council tax going up by 4% a year every year – double the rate of inflation – councils may need an additional £1.6bn a year in real-terms funding by 2024–25. This would grow to £4.7bn by 2029-30 and £8.7bn by 2034-35.

The report warns that the costs of any increases in generosity of the system pledged in the election campaign would come on top of these pressures. For example, according to the Health Foundation and The King’s Fund, the cost of Labour’s plan for free personal care for the over 65s would be £6bn if introduced next year, increasing to £8bn in real terms by 2030.

Such pledges would not restore adult social care services back to their 2010 levels – since when hundreds of thousands of people have lost support as a result of stricter eligibility criteria. That would cost something like a further £8bn a year in 2020-21, and require even more in the longer term, the IFS said.

An additional £1.3bn in government funding has been allocated for the coming financial year, and councils with social care responsibilities will be allowed to increase council tax by up to 4%. Even if spent in full, this additional funding from the government and council tax will only be enough to undo around one-fifth of the peak-to-trough fall in councils’ spending on services, the report calculates.

David Phillips, author of the work and an associate director at the IFS, said the additional funding announced for councils next year could be just a lull in the storm.

“Detailed public spending plans for 2021–22 and beyond have not yet been published. But we do know that councils will rely on council tax and business rates for more of their funding going forwards. And those revenues just don’t look like they will keep pace with the rising costs of services like adult social care – even with council tax bills going up at 4% a year, which is double the rate of inflation,” he added. 

Paul Morgan, managing director at Audley Group, suggested adult social care will be a political hot potato in the coming weeks.

“What the incoming government must focus on is not simply piling more money into a creaking system but reducing the need for care in the first place,” he said. “And that comes with taking a more holistic view of health in older people: from exercise and well-being advice, to bringing health, social care and housing together.”