10% national living wage hike will trigger adult social care cuts, councils warn

Next year’s 10% hike in the national living wage (NLW) will trigger adult social care cuts without increased government funding for councils, a survey has found.

Shire authorities said the NLW rise would cost them £6.3m each on average in 2024-25, totalling £230m across the sample polled by the County Councils Network (CCN) following last month’s autumn statement.

The rise in the NLW from £10.42 to £11.44 an hour, announced in the autumn statement, will benefit many adult social care staff in independent providers commissioned by local authorities.

More adult care cuts planned

However, without additional resource to fund the rise, the CCN found authorities were planning higher council tax rises with some more likely to make further cuts to adult care than previously forecast.

The network released the findings of its snap poll on the same day that the Local Government Association (LGA) reported that one in five authorities were on the financial brink.

In response to an LGA survey also carried out following the autumn statement, 20% of respondents said it was very or fairly likely they would declare that they could not balance their budgets in 2023-24 or 2024-25.

Councils declaring ‘bankruptcy’

The association received responses from 114 council chief executives, including those from district councils, which are not responsible for social care.

Nottingham and Birmingham councils have already issued a section 114 notice this year, following similar declarations by Croydon, Thurrock and Slough since 2021.

The notices trigger a stop on new spending and generally lead to significant cuts to non-statutory services and government intervention in the running of the authority.

Children’s services pressures

Like other council and social care bodies, the CCN and LGA had been hoping the autumn statement would deliver extra resource for local government to tackle pressures on children’s and adults’ services.

Prior to the statement, the CCN said its members were facing a combined overspend of £639m in 2023-24, half of which was accounted for by children’s services.

However, chancellor Jeremy Hunt cut taxes and left funding plans for councils and many other government departments unchanged.

Half of respondents to the latest CCN survey said they would need to make additional service cuts because of the autumn statement, with the majority of this group saying these would fall on adult social care.

Council tax rises higher than planned

And while seven in ten of those surveyed by the CCN before the autumn statement said they would increase council tax by the maximum 4.99% in 2024-25, this had risen to nine in ten in the post-statement survey.

But, in line with the LGA’s findings, it said this would not be enough for some authorities. Seven in ten CCN members not confident they could balance their budgets in 2024-25, up from four in ten before the autumn statement.

In a letter to levelling up secretary Michael Gove following the survey, 30 council leaders wrote: “We understand that the public finances are tight, but the government had some fiscal headroom in the autumn statement to help ease these pressures outside of our control.

“However, no direct additional funding was provided to local government, and increases to the national living wage have added hundreds of millions of additional, unplanned, costs to our budgets.”

Gove urged to demand more from Treasury

They urged Gove to go back to the Treasury and call for more resources for councils, including for children’s social care specifically, in the local government funding settlement, due later this month, a view echoed by the LGA.

Its chair, Shaun Davies, said: “While councils have worked hard to reduce costs, find efficiencies and transform services, the easy savings have long since gone. The government urgently needs to act to address the acute financial challenges faced by councils.”

The government has consistently defended its record on social care spending in the face of such criticisms, pointing to £8.1bn it has provided from 2023-25, mainly for adults’ services.

Additional social care funding

This consists of:

• £3.2bn extra through the existing social care grant, with 60% expected to be spent on adults’ services and 40% on children’s services.
• £1.6bn to tackle delayed discharges, with the funding split between councils and NHS integrated care boards.
• £1.6bn through increasing the adult social care council tax precept by 2% and raising standard council tax by 3% in each year.
• £1.08bn through the market sustainability and improvement fund, designed to help councils increase provider fees, tackle waiting lists and boost recruitment and retention.
• £570m through a separate market sustainability and improvement fund – workforce fund, which has the same objectives but is particularly focused on tackling staff shortages.