The Institute of Fiscal Studies has warned that local councils will need billions of pounds in additional funding to meet the rising costs of adult social care.
It detailed how a growing elderly population, increases in the number of disabled adults, and higher wage and other costs, mean that English councils will likely need billions in extra funding over the next parliament if they are to meet the rising costs of providing adult social care. That funding though will be required just to maintain services at current levels.
It would also mean that councils’ spending on local public services per resident will, next year, still be at least 20% below 2009–10 levels, on average.
The analysis shows that with councils now 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, especially for adult social care.
With council tax rising in line with inflation (2% 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.
The IFS found that even if council tax went up by 4% 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.
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 4%.
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.
Not all councils benefit equally from the additional funding planned for next year – and some may even see their funding fall due to the fact that 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.
Commenting, 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.”