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In September 2021, the Government announced plans to substantially increase funding for health and social care through a new tax, the Health and Social Care Levy.

£5.4 billion of revenue from the levy will be used to support adult social care reform in England over the next three years (2022 to 2025). £3.6 billion will be used to fund reforms to how people pay for social care, and £1.7 billion will be used to support wider reform in the sector. Details of the plans for wider reform were set out in a white paper published in December 2021.

Stakeholders have, however, emphasised the need to examine the Government’s reforms against the wider context of the funding pressures affecting adult social care.

This briefing provides information on this wider context by examining the main funding pressures affecting publicly funded adult social care services in England. It also sets out the additional funding committed to adult social care since 2016/17, and provides information on funding plans from 2022/23.

Further information on the reforms is in the Library briefing: Proposed reforms to adult social care (including cap on care costs).

Adult social care funding pressures

Adult social care funding has been under pressure for several years. Factors which have contributed to this include:

  • Demographic pressures: the number of older people (the group most likely to need social care) is rising faster than the population as a whole. There is also increased demand for care from working age adults.
  • Pressures on local government finances: the National Audit Office has estimated that local government spending power (government funding, council tax and business rates) reduced by 29% in real-terms between 2010/11 and 2021/22. While adult social care has been protected from spending reductions to some extent, there may be reduced headroom for savings in the future.
  • Increases in the National Living Wage: the Association of Directors of Adult Social Services (ADASS) estimated the increase in the national Living Wage in April 2021 would cost councils around £494 million.
  • The Covid-19 pandemic: there are concerns the pandemic could compound long-term funding pressures.

Effects of funding pressures

It’s suggested by various stakeholders that the funding pressures in adult social care contribute to several issues in the sector, including:

The social care ‘funding gap’

Estimates of the size of the social care ‘funding gap’ vary. In an October 2020 report (590KB, PDF), the Health and Social Care Committee said an additional £7bn per year was required by 2023/24. It said this would be “ a starting point” to cover demographic changes, raise staff pay in line with the National Minimum Wage and protect people who face catastrophic social care costs.

Additional funding from 2016/17 to 2021/22

Additional funding was provided to the adult social care sector between 2016/17 and 2021/22, often in the form of short-term ring-fenced grants. Money has also been given through the improved Better Care Fund and local authorities have been given the power to raise additional revenue locally though council tax (the social care precept).

Additional funding for 2021/22 has comprised:

  • Local authorities have been able to levy a 3% social care precept.
  • £300 million of additional Social Care Grant funding for adult and children’s social care (on top of a £1.41 billion Social Care Grant rolled over from 2020/21).
  • £2.1 billion provided to local authorities through the improved Better Care Fund.

Social care funding from 2022/23

As set out above, £5.4 billion of revenue from the new Health and Social Care Levy will be used to support adult social care reform in England over the next three years (2022 to 2025). Of this:

  • £3.6 billion will be used to fund reforms to the way people pay for adult social care.
  • £1.7 billion will be used for a wider reform of adult social care.

At the Autumn Budget and Spending Review 2021, the Government said local authorities would be provided with £1.6 billion of new grant funding in each of the next three years, on top of the funding through the Health and Social Care Levy. The funding will not be ring-fenced for adult social care. It added that local authorities with social care responsibilities are expected to be able to increase the adult social care precept by up to 1% per year for the next three years.

In a written ministerial statement setting out details of the Local Government Finance Settlement for 2022/23, the Secretary of State, Michael Gove, confirmed the social care grant (for children’s and adult social care) would be increased by £636 million. He added that this, together with a £63 million inflationary uplift to the improved Better Care Fund and deferred adult social care precept flexibilities of up to 3% from last year’s settlement, “forms a package of additional resource, specifically for social care, potentially worth over £1 billion.”

The Government has generally received credit from stakeholders for acting on adult social care reform. However, much of the commentary has focused on whether the funding committed is sufficient to address the wider issues in the sector. For example, ADASS has said the funding identified so far “can be no more than pump-priming” and there is “much more funding to find.

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