Councils in England face a significant shortfall in adult social care funding in the coming financial year despite the government allowing them to raise council tax by 2% to fund adult services.
Figures compiled by the Local Government Association (LGA) for its response to the local government finance settlement for 2016-17 suggest that even if all 152 authorities took advantage of the council tax ‘precept’ there would be still be a significant funding gap.
As a result even councils that intend to apply the council tax precept, which can be applied on top of the standard council tax rise without the need for a local referendum, face having to find ways to save money.
The LGA called for the government to bring forward an extra £700m in funding due to be provided to councils in 2018-19 to help them meet cost pressures in 2016-17.
Spending review settlement
In its spending review in November, the government announced significant cuts in core government funding to councils. But it offered councils two ways to manage the mounting pressures on adult social care, such as rising levels of need and the national living wage, which will be set at £7.20 an hour for over 25s from April, above the current minimum wage of £6.70.
One was the opportunity to increase council tax by an additional 2% a year in each of the next four years, so long as that any money raised from this “precept” was spent on adult social care. This was on top of councils’ right to increase the tax by 1.99% for general services without having to put the rise to a referendum.
The government has said that, if all councils applied the precept in each of the four years, it would raise almost an extra £2bn a year by 2019-20; however, think-tank the King’s Fund has put the figure closer to £800m on the basis that many councils will not pursue the rise each year.
Funding falls short
In its joint submission to the spending review with the Association of Directors of Adult Social Services, the LGA said that councils faced increased adult social care costs of at least £800m in 2016-17, including about £340m to implement the living wage.
The LGA has now calculated that, if all councils took advantage of the council tax precept, it would raise £400m in 2016-17. However, overall, when the cut in government grant to councils is taken into account, authorities with social services responsibilities are facing a 3.2% cut in their budgets in 2016-17, said the association.
The second source of government support was an increase in the Better Care Fund – the government-mandated integrated budget with health – given directly to local authorities, rising to £1.5bn in 2019-20. However, none of this money will be available in 2016-17 and very little (£105m overall) in 2017-18, with £825m pledged for 2018-19.
In its statement today, the LGA urged the government to bring forward £700m of the Better Care Fund funding to 2016-17 so that councils could fill the shortfall in funding in the coming year. It also said the government should support rather than criticise local authorities that take advantage of the option to apply social care council tax levy.
Pressures on councils
Council budget proposals for 2016-17 illustrate how local authorities feel that the council tax precept will not be enough to manage additional cost pressures in adult social care this year.
Leicester City Council’s budget proposals for 2016-17, for example, note that a 2% rise in council tax would generate an estimated £1.8m which is only around a third of what adult social care will need to pay for the introduction of the national living wage, never mind the rising cost of care packages.
The council said it was working on savings that would enable it to live within its budget for adult social care in 2016-17, including reducing the number of people referred into the system through offering community-based alternatives, reducing the cost existing service users and cutting the number of care home placements.
Meanwhile Devon County Council expects to collect an extra £6.5m by applying the council tax increase for adult social care but says the cost of introducing the national living wage will be £7m in 2016-17.
Newcastle City Council, which is proposing to cut 30 full-time equivalent posts in adult social care in 2016-17, expects to raise £1.7m from the council tax rise but says this is “nowhere near enough to address the scale of the financial pressures we face”.
Sharon Taylor, vice chair of the LGA, said: “While extra council tax flexibilities and income will help ease some of the funding pressures facing councils, it would be wrong to think this will be enough to solve the long-term pressures facing local services and communities.
“After years of striving to keep council tax as low as possible, town halls find themselves in the impossible position of having no choice but to ask residents to pay more council tax over the next few years while possibly having to offer fewer services in return.”