Mounting social care costs leave councils facing £6.2bn black hole over next two years, warns LGA

Mounting social care costs will leave English councils facing a £6.2bn financial black hole over the next two years, the Local Government Association has warned political parties ahead of the general election.

The LGA calculated that authorities would need an additional £4.7bn in 2025-26, compared with 2024-25, to maintain services at existing levels, but would only be able to cover half of this amount (£2.4bn) through increased income, leaving a gap of £2.3bn.

In 2026-27, costs would be £8.9bn higher than in 2024-25, but incomes would only be £5bn above current levels, £3.9bn short of what was required, according to the LGA.

Scale of social care pressures

The association said social care cost pressures were a key driver of the shortfall, with the cost of providing children’s and adults’ services expected to be £10bn higher in 2026-27 than it was last year (2023-24).

The additional cost is expected to be split roughly equally between the two services (£5.1bn for adult social care and £5bn for children’s services). However, in percentage terms, this represents a much steeper increase for children’s services (36%) than adult social care (23%).

The LGA issued its funding gap warning in a policy paper published today designed to influence the political parties ahead of the 4 July general election.

Call for parties to commit to council funding boost

In it, the association called for all political parties to “commit to a significant and sustained increase in funding for councils in the next spending review”, which will set government spending limits for the next few years and is expected later in 2024.

It said this should include funding adult social care adequately and sustainably, drawing on analysis by the Health Foundation, which has calculated that to cover costs and meet demand, the sector would need an additional £5.4bn this year. 

Lack of Labour and Tory commitments on social care

The LGA’s intervention comes with neither Labour nor the Conservatives having made specific funding commitments in relation to social care or local government ahead of the publication of their manifestos.

The current government has made no spending plans for 2025-26 onwards, though it has pencilled in real-terms increases of 1% per year up to 2028-29.

However, it is widely expected that certain services, including the NHS, defence, schools, international aid and childcare, will receive above-average settlements.

This means that unprotected areas, such as local government, would face annual real-terms cuts of 1.9% to 3.5%, according to the independent Institute for Fiscal Studies (IFS).

Investment in prevention urged

In its policy paper, the LGA urged the parties to back multi-year funding settlements for authorities to replace the current practice of the government setting one-year settlements, which the LGA and others have heavily criticised for undermining councils’ ability to plan services.

The LGA called for greater investment in prevention and early help across both children’s and adults’ services. For the latter, this should include investment in reablement services, led by therapists, to help people recover independence, support for unpaid carers and voluntary sector provision such as sitting and befriending services.

It also urged increases in care worker pay, fully funded by government, to tackle the sector’s “serious recruitment and retention issues”.

The association has previously criticised the government for failing to fund the impact of the 9.8% increase in the national living wage, from £10.42 to £11.44 per hour, in April this year.  

Over the longer-term, the LGA said there should be an independent review into pay and conditions in the sector and how these should be set.

‘Many challenges facing new government’

“On July 5, whoever forms the next government will be faced with many challenges, whether it is building more affordable housing, improving care for adults and children, reducing homelessness, boosting inclusive growth or tackling climate change,” said the LGA’s senior vice-chair, Kevin Bentley.

“Local government’s offer to the next government is huge. Respect us, trust us and fund us. By working together as equal partners, we can meet the fundamental long-term challenges facing our communities.”