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England’s council funding system ‘unsustainable’

Social care could require 60% of local tax revenues within 15 years

The total amount of funding available to councils in England will become increasingly inadequate over the coming years, largely because of social care demands, a report has warned.

The Institute for Fiscal Studies (IFS) found that overall spending on local services by English councils fell by 21% between 2009-10 and 2017-18.

Some services have seen much deeper cuts. Spending on planning and development and housing services, for example, fell by more than 50%.

The IFS said this has allowed councils to protect social care services from the full force of budget cuts. Spending on adult social care fell by 5% between 2009–10 and 2017–18, although the numbers receiving care fell by much more. 

The report warned that the total amount of funding available will become increasingly inadequate, despite an end to overall budget cuts. This is because current plans envisage councils relying on council tax and business rates for the vast bulk of their funding – and revenues from these taxes are unlikely to keep pace with rising costs and demands, the report said.

With annual increases to council tax of 3% (the maximum councils can increase it without a referendum if powers for extra increases for social care lapse as planned), rising costs and demands mean that adult social care could require 60% of local tax revenues within 15 years, up from 38% now. Without additional funding, this would mean cuts to other services.

Even if council tax was increased by 4.7% a year (the average increase this year including the extra increases ring-fenced for social care), adult social care could amount to 50% of local tax revenues.

The IFS concluded that there are two choices: either councils have to be provided with additional revenues to enable them to continue providing existing services; or government and society must accept that councils can afford to provide fewer or lower quality services than they currently do.

David Phillips, an associate director at the IFS and an author of the report, said a proper national debate is needed to avoid the services councils provide being gradually eroded.

Steven Cameron, pensions director at Aegon, said that when government publishes proposals for a stable and sustainable way of sharing social care costs between the state and individuals, it must tackle geographical differences in demand for social care.

“There are dramatic differences in age profiles between regions, with cities tending to have a younger age demographic than rural areas,” he explained. “In Dorset, for example, 13% of the population are aged 75 and over which compares to just 5% in the London region. While younger age groups place different demands on local councils, the projected rocketing demand for social care driven by our ageing population will create huge funding pressures.”