Raising council tax to fund social care will deepen inequality in UK, experts warn

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Jeremy Hunt’s decision to fund more social care through increases in council tax will deepen inequality and undermine the cause of “levelling up”, the architect of the government’s planned reforms said last night.

The criticism from Andrew Dilnot, the economist whose blueprint for reform was delayed by another two years in Hunt’s first budget on Thursday, was echoed by senior figures in local government who said it would leave poorer areas at a disadvantage and was not the answer to the social care crisis.

Dilnot said there were two problems with funding more social care locally. First, it was impossible to know if all councils would want to ask voters to pay higher council taxes, so there would be uncertainties about levels of funding between local authority areas. Second, the amounts that could be raised would be higher in more prosperous areas where demand for means-tested care would often be lowest. “Funding extra spending on care through council tax further accentuates inequality, and further skews the system,” Dilnot said.

Dilnot made clear his frustration at Hunt’s decision to postpone implementation of his reforms – which include raising the amount of assets a person can have before getting state funding from ?23,250 to ?100,000 as well as capping lifetime care costs at ?86,000. However, he welcomed the provision of an extra ?4.7bn in the budget for social care in England.

Hunt also made clear in the budget that local authorities would be able to use additional “flexibilities” (to raise council tax by up to 5%) to pay for more care.

Local government expert Geoff Winterbottom, head of research and policy at a group of large municipal authorities within the Local Government Association, said a 5% council tax rise would raise ?85 per household in Richmond upon Thames, ?81 in Surrey, ?75 in Dorset but only ?39 per household in Manchester and the same in Hull.

Winterbottom said council tax was not the answer as it was “a regressive tax based on a hugely out-of-date valuation base. And it doesn’t match funding with need.

“It is within the power of ministers to equalise this effect by taking into account variation in council tax resource when allocating grant, and we urge government to do this in the 2023-24 settlement.”

Before the budget, social services directors warned they could not cope if many of the estimated 17,900 care providers went bust during the winter, leaving vulnerable residents homeless.

There was relief that the sector was spared from making cuts, but closer inspection of the budget figures has raised more questions, and social services directors have warned that councils may have to introduce “further rationing of care support”.

First, paying for the rise in the national living wage and winter fuel bills is likely to swallow most of the extra ?2.8bn in government funding and any council tax rise.

That means that there will be little scope to reduce the waiting lists for social care – currently 490,000 people are waiting to be assessed for their social care needs or for payments, according to Adass, the body that represents social services directors. About 2.6m people over 50 have some form of unmet need for care in England, according to Age UK – around a million more than estimated last year.

With council elections due next May, many within the social care sector fear that political leaders will be reluctant to raise council tax in the run-up to polling day.

Cathie Williams, chief executive of Adass [Association of Directors of Adult Social Services], said Hunt’s announcement was a small step forward. “Funding that would have gone towards subsidising the ‘cap’ on fees and ‘fair cost of care’ [paying care providers more] is being channelled instead into social care more generally,” she said. “It should help to cover the costs of the increases in the national living wage.

“Council tax increases are unfair in the context of social care as the areas of highest need raise the least council tax. This merely shifts the difficult decisions from national to local politicians. Given the cost of living crisis, there will be significant concern that this will not deliver all of the money that will be needed, and councils will be faced with the tough choice of further rationing care support.

“And there are two significant unknowns. We don’t know what the local government finance settlement will be. And we don’t know how the money announced will be distributed and whether it will be divided up to compensate poorer council areas sufficiently.”

Helen Wildbore, director of the Relatives and Residents Association, said ministers were assuming every council would increase taxes. “They don’t know how much of that will be raised. Some parts of the country will struggle and some councils just won’t be able to [raise the full amount]. It’s going to be a postcode lottery.”