Councils forced to use emergency cash to pay for social care as funding shortfall grows

Exclusive: More than half of local authorities due to overspend on social care this year with most set to make up shortfall through reserves

Philip Hammond faced pressure to use his Autumn Budget to boost investment in social care

Councils are being forced to spend billions of pounds of their emergency cash reserves on social care amid a significant funding shortfall, official documents reveal.

Analysis produced by the Office for Budget Responsibility (OBR) to accompany the Autumn Budget shows that English councils withdrew £1.4bn from emergency reserves last year.

They are forecast to have to draw down a further £1.7bn by 2020 – significantly more than the £0.9bn the OBR estimated in March.

Experts said relying on reserves to fund social care was “unsustainable” and “a crisis in the making”.

Local authorities face a huge funding shortfall in social care that is set to reach £2.5bn by 2020, according to the King’s Fund charity.

Because they have a legal duty to provide care to those who need it, councils have little choice but to find the cash to fund increasingly in-demand services or else risk breaking the law.

Many are therefore going significantly over their allocated budgets. More than half (53 per cent) of councils expect to overspend on adult social care this year, by an average of £21m.

Two-thirds of authorities that are currently overspending on social care plug the gap by utilising council reserves.

These funds are designed to safeguard councils from an event such as a recession and ensure they have enough resources to maintain services if circumstances change.

However, the funding gap in social care means many are being forced to use the funds to cover day-to-day spending, raising the prospect that they could be plunged into crisis in the face of an economic downturn or financial crisis.

Councils have seen their government funding cut by around 40 per cent since 2010, including 4.3 per cent in the last year alone.

In 2014, Eric Pickles, then the Communities Secretary, accused town halls of “pleading poverty” and told them to start spending the money set aside for a rainy day.

English councils currently have total reserves of around £23bn – down from £25bn two years ago.

However, MPs and local government leaders said the practice of using emergency funds to pay for regular spending was dangerous and “unsustainable”, as councils will eventually run out of cash.

Labour’s Clive Betts, chair of the Communities and Local Government Select Committee, told The Independent: “This is a matter of real concern.

“There was nothing in the Budget on social care. There is a crisis of funding for social care and drawing on reserves simply postpones the day the money runs out.

“This is not how councils should be funding social care. At some point the Government has to recognise this and put a proper funding regime in place.

“This is a crisis in the making. There’s a funding crisis in the here and now and this is just postponing the consequences.”

Mr Betts said the reliance on reserves also creates a postcode lottery because some councils have reserves they can draw on whereas others do not.

The OBR said councils are having to go over budget by more and more each year and rely increasingly on reserves.

Town halls have been overspending on children’s social services since 2010-11 and on adult social care since 2014-15.

Last year, councils in England overspent on their entire non-education budgets for the first time since the financial crisis, largely as a result of the cost of providing social care. Previously, under-spending elsewhere, such as on transport, made up for overspending on care services.

Amid growing concern over the funding shortfall, in March the Government announced a £2bn cash boost for social care. Town halls welcomed the increase but said it was not enough to meet demand.

Philip Hammond faced pressure, including from some senior Conservatives, to use his Autumn Budget to boost investment further. However, his Budget speech did not include a single mention of social care.

The Local Government Association (LGA) said using reserves to fund social care was “unsustainable”.

Councillor Izzi Seccombe, chairman of the LGA’s Community Wellbeing Board, said: “Adult social care services face a £2.3bn funding gap by 2020, including £1.3bn right now to stabilise the provider market. Councils are doing all they can to protect vital adult social care services that help people stay well and live independently in the community.

“Reserves are designed to help councils manage growing financial risks to local services. Using them to plug funding gaps is unsustainable and does nothing to address the systemic underfunding that they face.

“The reality is that the size of cuts councils are having to make and the growing demand for adult social care are simply too big to be plugged by reserves.

“It was hugely disappointing that there was no new funding announced for adult social care in the Autumn Budget. The Government needs to put this right in the local government finance settlement or else risk failing the ambition to support people’s independence and wellbeing with quality care and support.”

A Government spokesman said: “We are committed to making the social care sector sustainable which is why we have announced a cross-Government Green Paper on care and support for older people with input from a group of independent experts. We recognise that there is broad agreement across Parliament that reform for social care is a priority and look forward to hearing a range of views.

“The consultation builds on the additional £2bn over the next three years that we have already provided to meet social care needs, reduce pressures on NHS services and stabilise the social care provider market in the short term.”