Across the country, councils are cash-strapped.
Many are desperately searching for ways to cut spending and balance the books in an effort to avoid catastrophe.
Yet rather than get a helping hand from Westminster, they were dealt a fresh blow by Rachel Reeves in last year’s Budget. The Chancellor took a gamble that local authorities could bear the costs of raising employers’ National Insurance contributions (NICs) to 15pc and a sharp rise in the minimum wage.
However, the increases have coincided with a jump in demand for adult social care services as councils grapple with an ageing population and residents with more complex needs.
Care is a people-intensive business, meaning a lot of National Insurance and wage costs.
The rise in demand has pushed spending on adult social care, which councils are legally bound to provide, to fresh highs. These services already accounted for a large proportion of many councils’ budgets even before the rise in costs.
Local authority spending on adult social care climbed from £27.1bn in 2019 to £32bn last year, according to the King’s Fund.
The Government has said it will provide £500m over the course of this financial year to help councils mitigate the impact of the tax hike on labour costs for centrally employed staff.
But those on the front lines say this is not enough to cover the true costs.
It has left a growing number of councils struggling to balance the books. The County Councils Network (CCN) has warned that the local authorities are facing a £54bn black hole in their budgets by 2030.
Now, as Reeves prepares for yet another multibillion-pound tax-raising Budget, concerns are growing that the system could be pushed to breaking point.
With other council services and care provisions cut to the bone, something has to give.
Council tax rises
Local authorities are already preparing to push through significant rises in council tax to make the sums add up.
Even the Reform-controlled Kent Council told The Financial Times this week it will likely have to increase the levy by the maximum 5pc despite its Elon Musk-style cost-cutting efforts.
Martin Samuels, executive director for adult care and community wellbeing at Lincolnshire County Council, says local authorities are facing “real challenges because we have to make sure the fee rates we pay keep pace with what it actually costs to deliver the service”.
If his local authority were to increase council tax by the maximum 5pc, all of the additional funding would go towards paying for adult social care, he says.
Demand for adult social care is projected to rise from around 520,000 in 2022 to just over 750,000 by 2042, according to the Care Policy and Evaluation Centre at the London School of Economics.
Glen Sanderson, the leader of Northumberland County Council, warns: “There’s no clear finish line in terms of what we’re going to do … about the cost and the increasing level of care that’s needed.”
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His council spent a quarter of its entire budget on adult social care last year. To balance its books next year, Northumberland will have to make savings of £20m.
“It gets harder and harder every year,” says Mr Sanderson. “Twenty million coming off our spending on all of these frontline services can be extremely difficult to find.”
Northumberland is just one of dozens of local authorities struggling to cope. Nottinghamshire County Council has spent an additional £25m on adult social care this year just to meet the increase in the national living wage and increase employers’ NICs.
Combined with children’s social services, care makes up 75pc of Nottinghamshire County Council’s annual spending.
Guy Van Dichele, executive director of adult social care at Nottinghamshire County Council, says: “We’ve got about 10,000 people who at any one time have long-term care and support needs.”
Pay strains
It’s not just local authorities that are being squeezed either. Adult social care providers ranging from nursing homes to in-home support have been hit with a sharp jump in labour costs.
“You’ll find many providers very, very unhappy about the situation, feeling that the Government doesn’t understand the situation they face,” says Simon Bottery, from the King’s Fund.
They want the Government to recognise that “simply shunting costs on to providers that they will struggle to recoup isn’t a way to ensure an effective quality, sustainable social care service”, he added.
Around 1.6 million people are employed by the adult social care sector in England, with the vast majority paid at or around the minimum wage.
Calculations by the Nuffield Trust show the rise in employers’ National Insurance contributions, which came into force in April, will add £940m to the staffing costs of independent social care providers this year alone.
Daisy Cooney, head of policy at the Homecare Association, says the growing cost of staff is prompting some providers to shut down or are considering closing because of the financial strain.
“We’re in a position now where the margins that many home care providers operate with are so small … There’s nothing to eat into when costs increase that significantly without funding,” she says.
The strain is leading some social care providers to opt out of council funded contracts because of low rates of pay.
“What we’re seeing is that home care providers are just reaching a point where they either are having to hand back contracts to the local authorities, re-prioritise by looking to the self-funded market rather than state-funded clients, or they literally cannot make the numbers work,” explains Cooney.
Reeves’s spending review allocated £4bn extra to adult social care in 2028 compared to 2023, but councils say this is not enough and want a more long-term solution.
The verdict of Baroness Casey’s inquiry into adult social care will not be delivered until 2028 – Kirsty O’Connor/PA
Earlier this year, the Government tasked Baroness Casey with carrying out an inquiry into adult social care. Yet the two-phase review will not deliver its final verdict until 2028.
Cyril Lobont, a researcher at the Nuffield Trust, says: “Reform has been systematically kind of pushed down the road with a lot of funding that was at some point intended for reform ending up just being plugged into keeping the sector running day to day.”
Reeves’s tax increases simply fuel the problem. More funding is being eaten up by taxes, even as demand for adult social care continues to rise.
A government spokesman said: “We’re turning the tide on decades of underfunding in councils in England, with £69bn available this year – a 6.8pc increase in cash terms.
“We have also provided them with extra support for NIC costs alongside a funding boost for adult social care by more than £4bn.”
