Councils will need billions in extra funding over the next parliament to provide social care as a growing elderly population takes its toll, according to the Institute for Fiscal Studies.
Analysis from the IFS, published today (November 11), predicted a growing gap between councils' income and what they need to meet the rising costs of adult social care.
Councils mainly depend on council tax and business rates to fund their spending.
The IFS warned they will need billions in extra funding just to maintain services at current levels, which many people have argued are not sufficient.
The IFS calculated with council tax rising in line with inflation (2 per cent a year), councils will need an extra £4bn a year to maintain current levels of social care and stop further cut backs spent on other services like children’s social care and housing.
The IFS estimated this shortfall would rise to £18bn a year by the mid-2030s.
The institute stated even if council tax was going up by 4 per cent each year councils would need an additional £1.6bn a year in funding by 2024/25, increasing to £4.7bn by 2029/30 and £8.7bn by 2034/35.
The IFS warned any boosts to social care, pledged by the main parties as part of their general election campaigns, would come on top of this extra funding.
For example, Labour’s plan for free personal care for the over 65s would cost an extra £6bn if introduced next year, increasing to £8bn by 2030.
Under Labour’s plans those most in need will receive free personal care, meaning they will not have to pay for help with daily tasks such as getting in and out of bed, bathing and washing, and preparing meals in their own homes, and residential care.
The outgoing government has already allocated an additional £1.3bn in funding for 2020/21, and councils with social care responsibilities will be allowed to increase their council tax take by up to 4 per cent.
But the IFS warned even if this was spent in full, it will only be enough to undo around one-fifth of the shortfall.
Also, not all councils will benefit equally from the additional funding planned for next year and some may even see their funding fall.
This is 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, according to the IFS.
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 4 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.”
The social care funding issue has been dragging on for the past years until the government announced in the Queen’s Speech last month (October 14) that it will introduce changes to social care to "ensure dignity in old age".
This was after prime minister Boris Johnson pledged urgent action on the issue in his first speech in office.
But besides a planned 2 per cent precept that will enable councils to access a further £500m, no detail was given on what would be included as part of the proposals.
Secretary of state for Housing, Communities and Local Government Robert Jenrick explained last month (October 29) that while the government was committed to bringing forward proposals on adult social care, there was no timetable as to when these proposals will be introduced.
The long-awaited social care green paper also remains to be seen, although health secretary Matt Hancock has previously suggested the paper may be scrapped in favour of immediate legislation as the government focused on finding a solution to the problem rather than to discuss it further.
The original rationale for a green paper was to explore the issue of how social care is funded by individuals.
amy.austin@ft.com
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