Boris Johnson’s social care plan will require big council tax rises, say economists

Council tax bills in England could soar by as much as £220 per year, warns IFS

Adam Forrest
Thursday 07 October 2021 06:54
Boris Johnson refuses to rule out future tax rises

Boris Johnson’s promise to “fix” Britain’s ailing social care sector will need billions of pounds more from his government and substantial council tax rises, a leading think tank has warned.

Extra cost pressures faced by local authorities could easily push up council tax bills by 5 per cent a year – or £220 – by 2024-25, the Institute for Fiscal Studies (IFS) said.

The think tank said even significant hikes in council tax would still leave local authorities with huge black holes in their budgets as they attempt to boost social care provision.

During Wednesday’s Conservative Party conference speech, the prime minister promised to “get social care done” after “decades of drift and dither”.

However, in a new analysis published on Thursday, the IFS said the extra £12bn a year promised by the government for the NHS and social care is “unlikely to be enough” to help councils carry out Mr Johnson’s plan.

The economists said even an increase in council tax of 4 per cent next year would leave English councils facing a £2.7bn funding gap in 2022-23.

“The recently announced social care reforms pose major challenges for councils across England,” said David Phillips, an associate director at the IFS.

“The funding announced by government so far is unlikely to be enough to meet all of its objectives, in either the short or longer term.”

The government has said it will provide £5.4bn over three years to begin the rollout of a new lifetime cap on care costs and more generous means-testing arrangements.

But the IFS said the annual cost of meeting Mr Johnson’s ambitions is likely to be about £5bn a year – almost three times the average annual funding currently planned.

The think tank warned that without additional funding, some councils might have to tighten the care needs assessments further to pay for the reforms – pushing out some of the poorest people in need of care.

Mr Phillips said it could “see some poorer people who would now be eligible losing access to council-funded care so that coverage can be extended to other, typically financially better-off, people”.

Mark Franks, the welfare director at the Nuffield Foundation health think tank, which funded the research, warned: “Even significant council tax increases risk not being sufficient to meet the future demand for local service provision, or address staffing issues in the adult social care sector.”

The IFS also said the formulae used to allocate funding between councils in England are now out of date and “in desperate need of reform”.

The population of Blackpool is estimated to have fallen by about 2 per cent, while the estimated population of Tower Hamlets has increased by more than 20 per cent since Whitehall officials set the current mechanism in 2013.

Kate Ogden, a research economist at the IFS, said the funding system is “hopelessly out of date … This results in manifest unfairnesses in the distribution of resources between councils.”

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