This month, councils across the country have been busy signing off their budgets for the year ahead and are undoubtedly taking difficult decisions to help them make the savings they need.

Even after last month’s commitment by the Government of £60 billion to help local authorities deliver frontline services for the year ahead, councils say that funding pressures persist.

Extreme examples of this in practice are Croydon Council announcing it would be raising council tax charges by 15%, and Thurrock Council upping its council tax charges by 10%. Meanwhile, the London Borough of Hounslow has warned that the Government’s mandated social care ‘cost of care’ exercise has served only to show how big the funding gap remains.

The County Councils Network has recently highlighted that three in four local authorities will increase council tax by 4.99%, saying they have ‘little choice’ if they are to protect vital services.

Councils are undoubtedly impacted by the current economic climate of high inflation and a slowing economy. Owing to the way all councils operate financially, the levers that they can pull to self-raise the required revenue are limited.

Worryingly, even after pulling said levers, this can run the further risk of providing significant regional variation and unintended consequences, most notably in the delivery of social care services.

Balancing the books

Councils are funded from a range of sources, including through Government grants, and generate their own income through council tax and fees and charges.

Together, council tax and business rates make up local authorities’ largest source of income. For upper-tier councils, the council tax charges they issue to households across the country will include a charge to support the delivery of adult social care in their local areas.

This is an additional line on council tax bills, known as the Adult Social Care Precept, and can be increased by up to 2% per year to help provide social care.

However, simply raising this precept is not necessarily the silver bullet required to ensure social care is delivered effectively and consistently on a nationwide scale.

Postcode Lottery

Crucially, the amount of money paid by households as part of the Adult Social Care Precept, and their overall council tax bill, is determined by council tax property bands.

Households are each placed into eight council tax bands on a scale ranging from the lowest of Band A, to the highest at Band H. The band in which a household finds itself is based on what its property value would have been in 1991.

This directly affects the revenue collected by councils through the Precept, since regions where the majority of properties are classified within lower bands (A to D) will pay less into the funding pool overall.

While councils can also top-up social care funding through business rates, this also varies between regions.

What this means is practice is that councils under the control of higher band properties can raise more money than those controlling lower band properties. This situation is made worse by the fact that poorer communities which tend to have lower band properties are typically in greater need for council-funded social care provision.

This disparity leads to what has been described as a “postcode lottery”, where the quality of service you receive is determined by where you live. This of course isn’t a new phenomenon. Age UK pointed to the postcode lottery as far back as 2011.

The Local Government Authority too highlighted that Council Tax rises is “not the solution for meeting long-term pressures facing high-demand national services such as adult social care.”

The key for councils is to ensure they are able raise revenues in a manner that is aligned to need. Whether through an argument advanced by the Institute of Fiscal Studies on making council tax proportional to up-to-date property values, or through another reform mechanism, the need to tackle this issue is acute.

Not focusing on how this could be achieved risks leaving many councils struggling to raise the funds that they need locally for social care and place additional strain on the health service.

Supporting Social Care Means Supporting the NHS

As the ongoing pressures facing the NHS have shown us, social care provision is integral to keeping people well in their own homes and stopping conditions from increasing in severity to the point where a visit to the hospital is needed.

But social care is also important in its own right, with a remit that is broad and complex, covering housing, welfare, health and leisure. It has supported more than 800,000 people in England in the 2021/22 financial year, with almost 2 million requesting support in the same period.

Despite being a fundamental component of communities, all too often these services are perceived as merely add-ons to public service. This perception is not helped by the funding mechanisms used by councils to deliver such services.

Narrowing Disparity

There are, however, finally signs that this disparity will be narrowed. The introduction of integrated care systems (ICSs) across England, which brings together NHS organisations, local authorities and the voluntary sector to plan and deliver healthcare for the respective area. On paper, this should tackle inequalities in outcomes, experience and access. But without a new long-term funding settlement to balance the ability of councils to raise money for social care, regional disparities will continue.

Scotland, in turn, intends to go in the opposite direction, with a plan for a National Care Service designed to consolidate and centralise social care provision. Centralised planning and funding formulas similarly aim to end the postcode lottery. But the costs of setting up a centralised body and the unintended consequences of taking decision-making powers from local authorities have been criticised.

Time will tell which model will be more effective, but the prospect of any widescale reform is one that is welcome and long overdue. Nonetheless, a long-term settlement for social care funding, something successive UK governments have put-off, is desperately needed to ensure any reforms in structure are not left in vain.