Autumn Budget 2017 Contents

9Social care funding

139.On 15 December 2016, the Secretary of State for Communities and Local Government, Sajid Javid MP, announced that “councils [would] be able to raise an additional £208 million for social care, by having the flexibility to increase the dedicated social care precept by up to three per cent next year if they choose”.125

140.The IFS analysed the new announcement made by DCLG and noted that the extra money that local authorities could raise would only bring money forward, rather than increase social care funding:

If councils make full use of the three per cent precept in each of the next two years, they will not be able to use the precept in April 2019: a cap of six per cent in total over the next three years applies. In other words, council tax increases can be brought forward to raise money in the short term, but this will do nothing to plug the longer-term funding issues adult social services face.126

141.As the council tax base varies between local authorities, a flat increase in revenue from a social care precept has different funding consequences for each local authority. Paul Johnson told the Committee “The precept is not directly correlated with need […] some local councils that cannot raise an awful lot from the precept because they have low-value properties and have a lot of need, and there will be other councils that it will work much better for, so there will be a distribution of outcomes”.127

142.The “Better Care Fund” is being introduced to compensate for the differences in outcomes between local authorities. The IFS notes, however, that:

The back loading of the Better Care Fund (it is set to be just £100 million in 2017), and the front-loading of the increases in council tax via the Social Care Precepts mean that in 2017–18 and 2018–19, areas with lots of high valued properties and/or low needs will see a relatively bigger increase in the resources available for social care.128

143.In its November 2017 Economic and Fiscal Outlook, the OBR highlighted that local authorities, in particular those with social care responsibilities, have begun to draw down on their reserves:

One striking feature of the net reserves drawdown last year was the difference in behaviour between local authorities with and without social care responsibilities […] local authorities with upper-tier responsibilities, including education and social care, and the GLA both drew down from their reserves (by £0.2 and £0.5 billion respectively). Other authorities, without upper-tier responsibilities, added £0.2 billion to their stocks of reserves. In total, English local authorities drew down £0.4 billion in net terms from reserves in 2015–16. In 2016–17, upper-tier authorities drew down again, and by more than in 2015–16 (£1.4 billion). The GLA once again drew down from reserves (by £0.4 billion), while other authorities added further to their stock of reserves (by £0.2 billion).

144.The social care precept is effectively a hypothecated tax. In previous Parliaments, former Treasury Committees criticised hypothecation of central government taxation, partly on the grounds that the revenue raised by such taxes rarely reflects the required amount of spending.129,130

145.The same arguments apply at local government level. Unless there is a strong justification for why social care funding requirements should grow in line with the council tax base in each local authority, the precept is not a sustainable or equitable way of financing social care. The drawdown of reserves among local authorities where social care demand is high, compared to the increase in reserves among local authorities where social care demand is lower, is evidence of this. The Government should consider, in the context of reforms to local government finance—including business rates retention—how social care funding can be allocated in a way that more closely reflects underlying demand and need in different parts of the country.

125 Department for Communities and Local Government, ‘Dedicated adult social care funding forms key part of continued long-term funding certainty for councils’, accessed 17 January 2018

126 Institute for fiscal studies, ‘How far do today’s social care announcements address social care funding concerns? (16 December 2016)’, accessed 17 January 2018

127 Q 128

128 Institute for fiscal studies, ‘How far do today’s social care announcements address social care funding concerns? (16 December 2016)’, accessed 17 January 2018

129 Treasury Committee, Fourth Report of Session 2007–08, Climate change and the Stern Review: the implications for Treasury policy, HC 231, February 2008

130 Treasury Committee, Sixth Report of Session 2015–16, Spending Review and Autumn Statement, HC 638, 12 February 2016

19 January 2018