Billions needed to meet rising costs of adult social care

The Institute for Fiscal Studies has warned that councils are expected to need billions in extra funding over the next Parliament if they are to meet the rising costs of providing adult social care.

Because of a growing elderly population, increases in the number of disabled adults and increases in wage and other costs, the funding will be required just to maintain services at current levels, with the institute arguing that councils’ spending on local public services per resident will still be at least 20 per cent below 2009–10 levels next year, on average.

With councils now largely dependent on council tax and business rates to fund their spending, new analysis shows that a growing gap is likely to open up between their income and what they need to meet the rising costs of service provision, especially for adult social care.

With council tax rising in line with inflation (two per cent a year), by the end of the Parliament councils will need an extra £4 billion a year from the government just to maintain social care services at current levels and stop further cut backs in the share of national income spent on other services like children’s social care, public health and housing. This would rise to £18 billion a year by the mid-2030s. Even with council tax going up by four per cent a year every year – double the rate of inflation – councils may need an additional £1.6 billion a year in real-terms funding by 2024–25. This would grow to £4.7 billion by 2029–30 and £8.7 billion by 2034–35.

An additional £1.3 billion 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 four per cent. The IFS says that, 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.

David Phillips, 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 four per cent 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.”

Barbara Keeley, Shadow Minister for Social Care and Mental Health, said: “The IFS lays bare the Tories’ chronic underfunding of local government and its effects on social care. The Conservatives have cut 60p out of every £1 that the last Labour government invested in our councils, causing massive damage to communities across the country. It’s time for real change. It’s time for a Labour government that will build a National Care Service with free personal care for older people at its heart and provide local councils with the funding they need.”