Half of tax revenue to go on social care by 2035, IFS says

Adult social care spending could account for half of local council tax revenue by 2035, the Institute for Fiscal Studies (IFS) has warned.

The IFS made its forecast in a new report, on the basis that council tax revenues rise by 4.5% a year, or more than double the rate of inflation.

The report argues that “ongoing reforms to local government finance risk a growing funding gap for adult social care and conflict with efforts to provide consistent and high-quality care services across the country”.

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With the growing gap between local council tax revenue and increasing social care spending demands, the IFS says the Government is faced with the option of either providing ring-fenced top-up funding, or introducing separate ring-fenced funding for the sector.

The IFS highlights problems with both approaches, however, arguing that, in the case of providing top-ups, councils could divert the non ring-fenced portion of their social care funding to other services, meaning that the effectiveness of this approach could be limited.

Alternatively, a central ring-fenced fund would cause issues with social care spending varying considerably around the country in ways unrelated to assessed spending needs, the IFS argues.

The report concludes: “The question of whether adult social care funding should be the responsibility of local or national government is therefore part of a broader question which is not getting the attention it deserves: what is the right balance between national standards and local discretion when it comes to public services? A proper public debate on this issue is long overdue, not least in the context of adult social care services.”

The IFS calls for the Government to use its Green Paper to consider how an effective public funding model of social care should operate.

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