Laura Sharman William Eichler 21 February 2017

Finding the money for social care

Finding the money for social care image

Surrey County Council’s aborted proposal to increase council tax by 15% to pay for adult social care highlighted one of the biggest issues facing local government at the moment: the social care funding crisis.

According to the Local Government Association (LGA), adult social care will face a £2.6bn shortfall by 2020. Whitehall cuts, inflation, the National Living Wage (NLW), an aging population – all of these factors are placing councils with social care duties under enormous pressure.

The Association of Directors of Adult Social Services (ADASS) has even warned that without new funds local authorities will ‘fail to meet their statutory duties’, that is to say, they will not be able to provide the care legally required of them.

The Government has taken steps to address this increasingly acute problem. Setting out the local government finance settlement for 2017/18, the communities secretary Sajid Javid announced last December councils would be allowed to increase council tax by 6% over the next two years in order to fund social care services.

Mr Javid predicted this 1% per annum increase on the social care precept already in place (2%) would help generate an additional £652m by 2020. He also promised councils would have access to a £240m adult social care support fund – money that would be diverted from the New Homes Bonus.

The response to the news was one of scepticism. The National Care Association dismissed it as a ‘quick fix’ and said the Government had been too late in acknowledging the crisis. Given that social care was not mentioned in the chancellor’s Autumn Statement the previous month, this criticism was understandable.

There were also accusations the finance settlement did not provide the social care sector with new money but rather just moved cash around, a point made in a recent budget submission by ADASS.

‘The most recent settlement further acknowledges concern but does not introduce additional funding: it redistributes the New Homes Bonus to form an Adult Social Care Grant of £241m and re-profiles the ability of councils to raise the precept by up to a total of 6% in the next three years,’ the submission said.

It even added: ‘The recycling of New Homes Bonus money will leave some councils with less [their emphasis] to spend on adult social care.’

ADASS’s budget submission also accused Whitehall of an ‘overstatement’ in their projections of how much the social care precept would raise. They suggested the Government was not being entirely ‘transparent and accurate’ about the funding position.

The calculations for the precept in the 2015 Spending Review were stated as being based on ‘up to’ £2bn being raised over the review period, the equivalent of £500m per year. However, recent figures from the Government show that just £380m was raised in year one.

‘So, even with the 3% precept raising powers announced, it is likely to total no more than £1.74bn over the period [2015-2020],’ argues ADASS. ‘The 2017/18 Local Government Financial Settlement (LGFS) confirmed this by reporting that a further 1% increase in 17/18 would raise a maximum of £208m.’

ADASS concluded the cumulative affect of this overstatement meant there was £260m less than stated in the Spending Review, which ‘more than eradicates the benefit’ of the estimated £240m from the New Homes Bonus.

Putting these calculations to one side, what does the situation look like on the ground? How much can local authorities raise through council tax – with or without the precept?

And given councils are projecting a combined overspend on adult social care for 2016/17 of around £441m - a huge rise on the £168m in 2015/16 - does it come close to being enough?

The Surrey case is an interesting one. Speaking to LocalGov before the proposed referendum on the 15% council tax hike, a spokesperson from the county council confirmed the raise would bring in an estimated £90m - enough to cover the shortfall in adult social care.

The referendum was abandoned amid accusations of a ‘sweetheart’ deal with the Government. But had it gone ahead, it does not seem to be too much of a stretch to suggest the electorate probably would have rejected it.

Surrey’s mooted 15% far exceeded the 4.99% (1.99% plus the 3% social care precept) councils are permitted to raise council tax without a referendum and so its reasonable to infer that it would be politically very difficult to raise council tax to a level that could cover social care costs.

The experience of Liverpool also points in this direction. They proposed a 10% council tax increase, which would have brought in an extra £7m. The raise did not go ahead because a public consultation showed the city’s residents were unlikely to support it.

Even if the city council had been able to go through with its plans, they would have made little difference. According to Liverpool mayor Joe Anderson, the cost of adult social care – an estimated £130m in 2017 – exceeds the amount it raises in council tax.

Mayor Anderson summed up the scale of the problem facing his city in terms other councils would recognise.

‘We are working flat out to protect the most vulnerable and developing plans with our health partners to invest more in prevention and support the discharge of people from hospital faster, but it is a huge challenge when we are faced with an increasingly ageing population with ever-more complex needs that costs more to provide care for,’ he said.

‘The £2.8m we have raised for social care this year by being allowed to increase council tax by an additional 2% [last year’s social care precept] has already been swallowed up by increased fees paid to our care providers recognising their additional cost pressures in implementing the National Living Wage and pension changes.

‘It is chicken-feed in the face of the funding pressures we face, and the National Living Wage alone is set to cost adult social care in Liverpool an additional £25m by 2019/20.’

There is a similar message from London. Haringey leader Claire Kober told LocalGov her council is planning on implementing the 3% social care precept but not to raise council tax beyond that. ‘Does it close the gap? In a word, no,’ she said. ‘To give you some numbers around that: 3% on council tax here raises about £2.7 - £2.8m. Our overspend in adult social care in the current financial year is £12m. It’s a really simple metric.’

The chair of London Councils, the group representing the capital’s 32 boroughs and the City of London, Cllr Kober can be expected to have a good grasp of the financial situation facing the city’s councils. ‘I was in a meeting earlier in the week, which was talking about the five north London boroughs in our STP [sustainability and transformation plans] process - so Camden, Islington, Haringey, Enfield and Barnett - and there the projections are that by 2021 there is a £300m social care funding gap,’ she explained. ‘It’s really very big.’

Cllr Kober also noted the risks of attempting to raise council tax beyond 4.99%. ‘Potentially, the risk is you spend not insubstantial sums of cash on a referendum that then rejects your proposal to increase council tax.’ To put this into context, the cost of holding the Surrey referendum would have been between £85,000 to £300,000.

The picture is the same for many other councils. Reading BC, which is implementing the 4.99% increase, estimates the 3% social care increase will bring in a little over £2.25m. Their social care costs for 2017/18 are £35m. Hampshire CC also says the 4.99% is not enough to cover projected social care costs.

One exception is Hammersmith and Fulham which is proposing to freeze council tax and is planning on investing an extra £3.4m into adult social care. It claims it has found the savings through efficiencies.

By 2020 central Government funding to local authorities will be gone and replaced by council tax and business rates. Given the above figures, councils are going to have to be remarkably creative just to cover social care costs, let alone everything else.

The LGA’s response to the final Local Government Finance Settlement says it all. ‘Almost all social care councils have found it impossible to turn down the chance to raise money for social care through council tax rises in 2017/18,’ LGA chairman Lord Porter said. ‘But increasing council tax raises different amounts of money for social care in different parts of the country and the extra income raised will be swallowed up by the cost to councils of paying for the Government's National Living Wage.

‘Social care faces a funding gap of at least £2.6bn by 2020. It cannot be left to council taxpayers alone to try and fix this.’

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