Councils face ‘almost impossible struggle’ to fund social care

22 Mar 18

Revenue from council tax and business rates in England will not keep pace with a growing social care need – and the funding gap is likely to significantly increase, the Institute for Fiscal Studies warned today.

Even if council tax revenues increased by 4.5% a year, adult social care spending is likely to amount to half of all revenue from local taxes by 2035, the IFS has predicted.

There is “no easy way to square the circle”, the think-tank recognised in its report Adult social care funding: a local or national responsibility?, “without backtracking on reforms to local government finance and reintroducing general grant funding”.

Grant funding from government is planned to end by 2020, and councils will be expected to rely on council tax and business rates for most of their revenue.

If councils meet their social care costs through local tax revenues “the amount left over for other services – including children’s services, housing, economic development, bin collection – would fall in real terms (by 0.3% a year, on average)”, the IFS warned in the report, funded by the Health Foundation charity.

One in 10 councils are to see their share of the population aged 75 and over increase by 6 percentage points or more over the next 20 years, the IFS noted.

Potential solutions all have drawbacks, the report suggested.

These include a ring-fenced top-up grant from government but this could lead to councils cutting back on how much of their own money is allocated to these services.

If government fully funded social care, this would “remove over one-third of what councils currently spend from local control, reducing residents’ say in local spending decisions”, the report stated.

Polly Simpson, research economist at the IFS, said: “The government has to decide whether it thinks adult social care is ultimately a local responsibility, where councils can offer different levels of service, or a national responsibility with common standards across England.

“If it opts for the latter, it cannot expect a consistent service to be funded by councils’ revenues, which are increasingly linked to local capacity to generate council tax and business rates revenues.”

David Phillips, associate director at IFS, suggested the government could “decide to keep and, over time, increase the general grant funding for councils that it currently plans to abolish in 2020”.

He added: “More radically, it could devolve revenues from other more buoyant taxes, such as income tax, to councils to help fund local services.”

CIPFA recently called for a greater proportion of centrally collected taxes to be directed to towards health and social care budgets, from 22% to 24%, to generate a £14bn funding boost.

Commenting on today’s IFS findings, Rob Whiteman, CIPFA chief executive, said: “The government must not assume that when local government grants are withdrawn, income from council tax and business rates will be enough to cover service requirements.”

CIPFA research has shown the social care precept – which allow councils to raise their council tax by 6% over the three years 2017-20 – is being used up by 44% of councils over this financial year, he added.

“[This means] they won’t be able to boost social care funding in 2019-20.”

Whiteman called for the upcoming social care green paper, due to be published before the summer, to outline “meaningful change”.

Anita Charlesworth, director of research & economics at the Health Foundation, said: “The increasing pressures on the social care system are impacting on the quality of care people receive, causing additional delays in the NHS, and squeezing the budgets of other council-funded services.”

She pointed out the social care funding black hole in 2019-20 is expected to be £2.5bn.

Claire Kober, chair of the Local Government Association’s resources board, said: “Local government must be able to keep every penny of taxation raised locally to plug funding gaps and pay for the vital local services our communities rely on.”

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