Council social care spending up 10% in real terms for second year in a row, data shows

Council spending on adult and children’s social care is due to rise by 10% in real terms this year for the second consecutive year, government data has shown.

Planned expenditure on adult social care will increase by £2.1bn, to £24.5bn, in 2024-25, a rise of 9.2% after taking account of inflation; this follows an increase of £2bn (10% in real terms) in 2023-24.

Increases in budgeted costs have been even steeper for children’s social care, with a second consecutive rise of 11% in real terms, taking planned expenditure to £14.2bn in 2024-25, according to the figures from the Department for Levelling Up, Housing & Communities (DLUHC).

The statistics illustrate the scale of the pressures on both services, with the proposed growth in real-terms spending far outstripping that for local government as a whole, which is due to be 7.3% in 2024-25, following a 5.9% rise last year.

Pressures on adults’ and children’s services

In adult social care, pressures include two consecutive increases of just under 10% in the national living wage, increasing pay for several hundred thousands of care staff but requiring substantial increases in the fees councils pay providers.

For children’s social care, the key pressure continues to be the cost of placements for looked-after children, with spending on the care system accounting for two-thirds (£933m) of the £1.4bn rise in planned expenditure this year.

This is an increase on last year, when rising looked-after children’s costs accounted for £700m of the £1.2bn rise in planned costs (58%).

This has been driven by a national shortage of suitable placements for children and young people in the context of increased complexity of need, driving up high prices.

Council leaders have also accused some larger providers of children’s homes of “profiteering” from the situation, a conclusion accepted by the government, which has set up a group to advise on how this can be tackled (source: Children and Young People Now).

The figures also demonstrate the impact of increased funding for both services over the past two years, both through ring-fenced government grants and councils being allowed to raise the dedicated adult social care council tax precept by 2% per year (see box).

Social care pressures set to continue

According to the Local Government Association (LGA), pressures on the two service areas are set to continue over the coming years.

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).

Concerns over post-election funding

Ahead of the 4 July election, ministers have not set out detailed spending plans for 2025-26 and beyond, though have pencilled in real-terms average increases of 1% per year in day-to-day spending up to 2028-29.

Based on this and expectations that the NHS, defence, childcare and overseas aid will receive better than average settlements, think-tank the Institute for Fiscal Studies (IFS) set out possible scenarios for council spending in a report last week.

These were based on whether councils were able to raise council tax (including the adult social care precept) by 5% or 3% per year and whether government grants for local authorities were frozen in real terms, cut by 2.7% a year or slashed by 7% per annum.

Optimistic and pessimistic scenarios for council spending

Under the most optimistic scenario, council expenditure would increase by 2.5% per year in real terms over the next four years, less than the 4.5% per year the IFS said would be required from 2025-27 if LGA projections about cost pressures were fulfilled.

Under the most pessimistic projection, real-terms spending per year would rise by just 0.4% from 2025-26 to 2028-29, which would leave adults’ and children’s services far short of what they needed to keep up with levels of need.

The IFS said that were authorities to be able to raise council tax by 5% per year, funding would only be sufficient if demand and cost pressures slowed down, and only then for more affluent councils with a bigger tax base.

More deprived authorities would only be able to cope if the government redistributed grant funding to them.

“Even if demand and cost pressures do slow down, 3% increases in council tax would likely be insufficient to meet spending pressures even in more affluent areas,” said the think-tank.

Manifesto social care commitments uncosted

While neither the Conservatives nor Labour have set out funding plans for local government in general beyond the election, both have made commitments in relation to adult social care.

Labour has pledged to introduce a fair pay agreement for adult social care staff, increasing pay and conditions, while both parties are committed to introducing the planned change to the adult social care charging system in October 2025.

However, neither party set out any funding for either policy in their election manifestos, while the IFS has pointed out that there is no resources currently allocated to implementing the charging reforms.

In its report on council funding last week, the think-tank said: “Paying for any of these plans would require some combination of tax rises, higher borrowing or cuts to other areas of public spending.

“The limited tax-raising powers available to councils, who cannot borrow to cover day-to-day spending, mean that if central government did not fully cover the costs of social care reform, councils would need to cut back other spending.”