A new IFS report, 'Adult social care funding: a local or national
responsibility?', funded by the Health Foundation, argues that
ongoing reforms to local government finance risk a
growing funding gap for adult social care and
conflict with efforts to provide consistent and high-quality care
services across the country.
The government plans to
abolish general grant funding for councils from 2020,
meaning councils will depend on council tax and
business rates for the vast majority of their general
funding. But revenues from these taxes are unlikely to
keep pace with the rising costs of adult social care services,
leaving councils with increasingly tough choices about which
services to prioritise.
We identify the following
challenges:
Even if council tax
revenues increased by 4.5% a year – more than double the rate of
projected inflation – adult social care spending could
amount to half of all revenue from local taxes by 2035. That is up
from just 30% today.
If councils did meet
these costs from their local tax revenues, the amount
left over for other services – including children’s services,
housing, economic development and bin collection – would fall in
real terms (by 0.3% a year, on average). In other words,
decades more austerity for services that have often already seen
cuts of 20% or more since 2010.
Even if larger tax
revenue increases could be delivered, or growth in the cost of
adult social care constrained, ongoing changes to the way local
government finance is allocated mean that different
councils could find themselves with revenues that differ
significantly from their spending needs. This is
because there is now less redistribution between councils as
spending needs and local tax revenues change over
time.
And changes in relative spending needs and revenues can be
significant:
• For
instance, between 2006–07 and 2013–14, 1 in 5 councils saw their
relative ability to raise local tax revenues fall, whilst their
relative need for adult social care increased, according to
official needs assessments.
• Looking to the
future, different councils are likely to see very different
pressures from an ageing population. In 1 in 10 councils, the
share of the population aged 75 and over is projected to grow by
6.0 percentage points or more over the next 20 years. But in
another 1 in 10 councils, it is due to increase by just 1.7
percentage points or less.
If councils’ relative spending needs and their shares of
revenues are moving differently, delivering consistent access to
and quality of social care across England could be
difficult. Either the social care services you can
access could become increasingly dependent on where you live. Or
the money councils have for other things could bear the brunt of
adjustments, impacting access to children’s services, public
health services, housing services and bin collection.
There is no easy way to square this
circle without backtracking on reforms to local government
finance and reintroducing general grant
funding:
• Ring-fenced grants to top up
councils’ own tax revenues may not actually get
spent on adult social care services, because councils could cut
back how much of their own money is allocated to these
services.
• If
the government wanted to ensure its ring-fenced grants were spent
in full on adult social care, the grants would have to fully fund
these services. But doing this would remove over
one-third of what councils currently spend from local control,
reducing residents’ say in local spending
decisions.
• Full
ring-fenced grants could be allocated according to spending
needs. But in 2015–16 the latest spending needs
assessment only explained 13% of the variation in what councils
actually spent on adult social care. For over half of councils,
the difference between what they spent on adult social care and
what the official relative needs formula suggested they would
need to spend was 10% or more. Moving to needs-based
grants would therefore imply a big redistribution of spending
around the country and would need to be phased in
slowly.
"With increasing demand and costs, council tax and business rates
revenues are very unlikely to be enough for councils to fund both
adult social care services and the other services they are
expected to provide,” said David Phillips, associate
director at IFS and an author of the report. “At
the very least, the government will have to provide an
increasingly large top-up via the Improved Better Care Fund or
similar ring-fenced grants. Alternatively, it could decide to
keep and, over time, increase the general grant funding for
councils that it currently plans to abolish in 2020. More
radically, it could devolve revenues from other more buoyant
taxes, such as income tax, to councils to help fund local
services."
"The government has to decide whether it thinks adult social care
is ultimately a local responsibility, where councils can offer
different levels of service, or a national responsibility with
common standards across England," said Polly
Simpson, research economist at IFS and another author of the
report. "If it opts for the latter, it cannot
expect a consistent service to be funded by councils’ revenues,
which are increasingly linked to local capacity to generate
council tax and business rates revenues. In that case,
centralised funding for social care would seem more appropriate,
and could allow closer integration with the NHS, which is also
centrally funded. But it would make England even more centralised
than now, and go against the government’s devolution agenda. All
in all, a difficult circle to square."
