New analysis on council funding for social care

October 7, 2021

New analysis, published today from the Institute for Fiscal Studies (IFS) reveals that English councils will need billions more from the Government and big council tax rises to maintain services and to pay for social care.

Under current Government spending plans, council tax increases of 3.6% per year will be needed for the next three years just to ensure councils can provide the same range and quality of services in 2024–25 as was provided pre-pandemic. This would push up the average annual bill paid by households by £160 by 2024−25, or £77 after accounting for inflation. In fact, this is likely to be a minimum requirement. Bigger increases in underlying demand and cost pressures, or top-ups to other budgets (such as schools) which eat into the amount available for grants to councils, could easily push up the necessary council tax rises to 5% per year, or by over £220 by 2024–25.

These are among the findings of new analysis, published today as a pre-released chapter of the 2021 IFS Green Budget, funded by the Nuffield Foundation and in partnership with Citi.

The chapter also finds that the UK Government will very likely have to stump up considerably more for planned reforms to adult social care services in England.

The Government has said it will provide £5.4bn over three years to begin the roll-out of a new lifetime cap on care costs and more generous means-testing arrangements, as well as higher payments for care providers, increased support for informal carers, investment in housing adaptations and supported housing, and workforce development. Given the scale of what the Government wants to achieve, the IFS has said this funding is unlikely to be sufficient to meet the Government’s stated aims in full over the next three years.

In the longer term, the annual cost of meeting the Government’s ambitions for social care is likely to be around £5bn a year, almost three times the average annual funding planned over the next three years. Funding for higher pay for care workers, or to enable councils to relax care needs assessments alongside changes to financial means-testing, could require billions more on top of this, according to the IFS.

Finally, the chapter highlights how the formulae used to allocate funding between councils are out of date and in desperate need of reform:

Existing funding formulae are still based on population sizes and characteristics in 2013. Yet, for example, the population of Blackpool is estimated to have fallen by more than 2%, while that of Tower Hamlets is estimated to have increased by over 20%.  The IFS reports that failure to update funding formulae to account for changes in population and other factors driving needs means the Government is less able to target funding to where it is most needed, potentially pushing up how much funding it has to provide overall.

David Phillips, an Associate Director at IFS and another author of the chapter, said, ‘The recently announced social care reforms pose major challenges for councils across England. The funding announced by the government so far is unlikely to be enough to meet all of its objectives, in either the short or longer term. Without sufficient funding, councils may find themselves having to tighten the care needs assessments further in order to pay for the care cost cap and more generous means-testing arrangements. That would see some poorer people who would now be eligible losing access to council-funded care, so that coverage can be extended to other, typically financially better-off, people.’

Mark Franks, Director of Welfare at the Nuffield Foundation, said, ‘Despite the Government’s recently announced social care plan, even significant council tax increases risk not being sufficient to meet the future demand for local service provision or address staffing issues in the adult social care sector. Currently, many existing adult social care workers only receive minimum wage and zero-hours contracts are common, which has contributed to staff shortages in the sector. Until sustainable funding is in place to address these issues, disabled and older people are at risk of being unable to access the care they need.’

Visit the Institute of Fiscal Studies website for more information and further analysis.

In other news, Online disability hate crime soared by more than 50% across England and Wales during 2020/21, according to new figures published this week.

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