Local authority financial sustainability and the section 114 regime Contents

2Social care

9.In recent years, demand for social care services has grown significantly, for both children and adults.11 Adult care pressures are the result in part of changing demographics, including an ageing population and an increase in the number of working-age adults with disabilities. The increased pressure on children’s care is in part a result of an increasing number of children with complex needs. As councils have sought to prioritise spending in this area, so the funding available for more discretionary services has been significantly reduced.12 In 2018, the NAO found that, between 2010–11 and 2016–17, whilst spending on adult social care had risen by 3.2%, spending on planning and development had fallen by 52.8% in real terms, spending on housing services and highways and transport by 45.6% and 37.1% respectively, and spending on cultural and related services by 34.9%.13 Since far more people use these services than require social care, the cuts tend to be more visible and can fuel the perception that councils are not providing value for money.

10.The most recent financial settlement included an additional £300 million for social care and, as in previous years, permitted councils with social care responsibilities to levy a social care precept in 2021–22, on top of the permitted council tax increases. This year the precept has been set at 3%. We heard that this additional funding, though welcome, was not enough and that local government financial resilience depended on the Government implementing a sustainable funding solution to adult social care.14 According to Richard Watts, the expense of meeting this demand is “stretching” local authorities to “breaking point”, with social care spend now accounting for 60% to 70% of most top-tier councils’ budgets.15 A “sustainable solution to social care funding” would be a “game changer” and an essential first step in restoring local government finances.16 One of the main causes of Croydon Council’s financial weakness was its spend on adult and children’s social care.17

11.Richard Watts concluded that once the sustainable social care settlement was in place “the rest of a sustainable funding model for local government in this country can fall into place relatively quickly.”18 Core Cities said the social care precept provided some “limited means to raise additional funding” but that it was “not sustainable”, raised “different amounts of money in different parts of the country” and added “an extra financial burden on households.” It welcomed the additional, un-ring-fenced grant funding for social care in the financial settlement, which will give councils “flexibility on how their allocations are best used locally”, but said that £300 million was “not significant in comparison to the cost pressures that these vital services face.” It also criticised the Government for predicating the majority of additional funding on increases in council tax and the social care precept, which “will place a significant financial burden on households at a time of economic uncertainty”.19

12.In their 2018 joint report, Long-term funding of adult social care, a previous Health and Social Care Committee and our predecessor Committee explored options for reforming the funding of social care. The report concluded that local government funding could “only ever be one part of the solution for social care” and recommended the introduction of an earmarked contribution, known as the Social Care Premium, possibly paid as an addition to national insurance. It also recommended that under-40s be exempt and that consideration be given to a minimum earnings threshold.20 We are exploring the long-term funding of adult social care in a separate inquiry.

13.The failure to properly fund children’s and adult social care, especially adult social care, is the single biggest threat facing local government financial resilience. Given that the cost of providing social care consumes between 60% and 70% of the budgets of top-tier councils, a solution to this funding crisis alone could largely restore local government finances. The Government’s current policy of effectively forcing local councils to impose successive above-inflation council tax rises is imposing additional burdens on council tax payers. It is disappointing that the recent Queen’s Speech made so little mention of plans to reform social care funding. We are also concerned about the cuts to more discretionary services arising from councils’ need to prioritise social care provision. We recommend that the Government urgently reform the funding of social care in England.

11 Q2; Core Cities UK (FSS0004); Derbyshire County Council (FSS0006); Special Interest Group of Municipal Authorities (FSS0007); Society of County Treasurers (FSS0003); for more detail on the causes of changing demand for social care, see: The King’s Fund, Social care 360: access

12 Local Government Association (LGA) (FSS0002)

14 County Councils Network (FSS0008); Special Interest Group of Municipal Authorities (FSS0007)

15 Q4; Q45

16 Q8; Q45; the same point was made in the submission from the County Councils Network (FSS0008)

19 Core Cities UK (FSS0004)

20 Health and Social Care and Housing, Communities and Local Government Committees, First Joint Report of Session 2017–19, Long-term funding of adult social care, HC 768, paras 92–4

Published: 19 July 2021 Site information    Accessibility statement