Heather Jameson 10 November 2019

Councils need billions more in funding, research finds

Councils will need billions of extra pounds worth of funding in the next parliament, if they are to meet the rising cost of adult social care, the Institute for Fiscal Studies (IFS) has calculated.

Figures released today show councils will be at least 20% below 2009-10 levels

According to IFS calculations, if council tax was raised by inflation (2%) annually, councils will need an extra £4bn a year by the end of the parliament to maintain current levels of adult care service, rising to £18bn a year by the mid 2030s.

If taxes were hiked to double the rate of inflations, local authorities would still need a further £1.6bn a year in real terms funding by 2024-25, growing to £4.7bn by 2029-30 and £8.7bn by 2033-35.

The figures are before the impact of any election campaign pledges are taken into account – for example Labour’s free personal care plan for the over-65s, which is expected to cost £6bn if introduced next year, rising to £8bn by 2030.

The extra funding and social care precept announced in the spending round, will only undo around a fifth of the ‘peak-to-trough’ fall in councils’ spending – and not all councils will benefit from the extra cash.

According to the IFS, the funding gap could be closed by fiscal devolution, handing councils revenue raising powers such as local income tax. Or they could provide additional income through grant funding from Westminster.

It calls on the next government to ‘square the circle’ between a funding system based on incentives with less redistribution and the political desire to ensure consistent social care provision across the country.

The report forms part of the Local Governnment Finance and Devolution Consortium, which supported by Capita, CIPFA, ESRC, PwC and The MJ, as well as a group of local government finance bodies. 

IFS associate director, David Phillips, said the extra funding announced for local government next year was ‘just a lull in the storm’.

‘Detailed public spending plans for 2021–22 and beyond have not yet been published. But we do know that councils will rely on council tax and business rates for more of their funding going forwards.

‘Those revenues just don’t look like they will keep pace with the rising costs of services like adult social care – even with council tax bills going up at 4% a year, which is double the rate of inflation.

‘That means finding billions more in funding to top up existing local tax revenues, even before thinking about new initiatives like free personal care.’

Head of policy and technical at the Chartered Institute of Public Finance and Accountancy, Don Peebles, said the figures echoed the findings of the Insitute’s performance tracker.

‘In order to provide simply the existing quality of care over the next five years, the government would need to spend 11.3% more than it did in 2018/2019.

‘This does not account for improving quality of care, or for the fact that demand is projected to increase exponentially as the population continues to live longer in poor health.

‘As we move towards the general election, we would encourage candidates to shed more light on how they plan to make social care sustainable in the long term.’

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