A growing elderly population and rises in the number of disabled adults mean councils face unprecedented pressures on their finances
English councils will need billions in extra funding over the next parliament if they are to meet the rising costs of providing adult social care, a new report warns.
Analysis from the Institute for Fiscal Studies (IFS) shows that a gap is likely to open up between council's income and what they need to meet the rising costs of adult social care.
It calculates that with council tax rising in line with inflation, by the end of the parliament councils will need an extra £4 billion a year from the government maintain social care services at current levels. This would rise to £18 billion a year by the mid-2030s.
Councils are now largely dependent on council tax and business rates to fund their spending.
They also face a number of pressures on their finances, including a growing elderly population, increases in the number of disabled adults, and increases in wage and other costs.
The IFS says that even if council tax goes up by 4% a year every year, councils may need an additional £1.6 billion a year in real-terms funding by 2024–25, growing to £4.7 billion by 2029–30.
The IFS says the costs of any increases pledged by parties in the election campaign would come on top of these pressures.
Labour has pledged to introduce free personal care for all people over 65, providing help with daily tasks.
The Conservative Party has so far been less specific about its plans, as its manifesto is yet to be published, with Boris Johnson saying the it would “solve the problem of social care and end the injustice that means people have to sell their home to pay for their old age”.
The government has allocated £1.3 billion in funding for the 2020–21 financial year, and councils with social care responsibilities will be allowed to increase council tax by up to 4%.
The IFS says that even if this additional funding was spent in full, it would only be enough to undo around one-fifth of the peak-to-trough fall in councils’ spending on services.
However, not all councils benefit equally from the additional funding planned for next year and some may even see their funding fall.
This is because because some councils have benefited from pilot schemes allowing them to retain more of the growth in local business rates revenues, and most of these pilots will come to an end in March.
Plugging the funding gap
The IFS is calling for local councils to be given additional tax raising powers - such as via a local income tax – to help plug the long-term funding gap.
It says this would give councils and their residents more discretion over how much to tax and spend, and stronger financial incentives to grow the local economy.
Additional grant funding from Westminster would also allow money to be targeted at places where spending needs are the highest or local revenue-raising capacity is the lowest.
David Phillips, author of the work and an associate director at the IFS, says: “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.”