Billions needed for adult social care

November 11, 2019

New analysis from the Institute for Fiscal Studies (IFS) has found that billions of pounds are needed by councils to fund adult social care.

The IFS states that this is down to a growing elderly population, increases in the number of disabled adults, and increases in wage and other costs. The billions that IFS suggests English councils will likely need over the next parliament is estimated based on continuing to maintain services at current levels. Even with the additional funding, councils’ spending on public services per resident will, next year, still be at least 20% below 2009-10 levels, on average.

The analysis shows that, with councils largely dependent on Council Tax and business rates to fund their spending, a growing gap is likely to open up between their income and what they need to meet the rising costs of service provision.

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 Government just to maintain social care services at current levels and stop further cutbacks in the share of national income spent on other services like children’s social care, public health and housing. This figure would rise to £18b a year by the mid-2030s.

Even with Council Tax going up by 4% a year every year – double the rate of inflation – councils will still likely need billions for adult social care, specifically 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.

Any promises pledged during the election campaign to extend the reach of adult social care services would require additional funding on top of this. For example, according to the Health Foundation and The King's Fund, the cost of free personal care for the over 65s would be £6bn if introduced in 2020, increasing to £8bn in real terms by 2030. Even then, such pledges would not restore adult social care services back to their 2010 levels – hundreds of thousands of people have lost support as a result of stricter eligibility criteria since then, says IFS, and returning to those levels would cost something like a further £8bn a year in 2020-21, and even more in the longer term.

An additional £1.3bn in government funding has been allocated for the coming financial year, 2020–21, 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 Government and Council Tax will only be enough to undo around one-fifth of the fall in councils’ spending on services.

There are big choices to be made over funding of local government, says IFS, suggesting:

  • The long-term funding gap could be closed by giving councils additional tax-raising powers, such as via a local Income Tax. Or they could be provided with additional grant funding from Westminster. The former would give councils and their residents more discretion over how much to tax and spend, and stronger financial incentives to grow the local economy. But the latter would more easily allow money to be targeted at places where spending needs are the highest and/or local revenue-raising capacity is the lowest.
  • The conflict between current policies for local government funding and for social care provision needs to be resolved. The funding system has increasingly prioritised financial incentives, which means undertaking less redistribution as local needs and revenue-raising capacities change. But at the same time both the Conservatives and Labour have wanted to ensure consistent social care service provision across the country. The next government will have to square this difficult circle.

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. That means finding billions more in funding to top up existing local tax revenues, even before thinking about new initiatives like free personal care.'

The full findings can be read on the IFS website.

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