Councils Face Social Care Crisis as Costs and Council Tax Rise Amid Soaring Demand

Across England, local councils are under growing financial strain as they struggle to balance budgets in the face of sharply rising costs and demand for adult social care. The latest blow came in the previous year’s Budget, when Chancellor Rachel Reeves raised employers’ National Insurance contributions to 15 percent and increased the minimum wage. These measures, though intended to bolster the welfare system, have added substantial cost burdens for councils already stretched thin by mounting demand and limited funding.

Adult social care is a labour intensive sector, requiring significant expenditure on staff. National Insurance and wage increases have driven costs even higher at a time when the system must support an ageing population with increasingly complex care needs. According to the King’s Fund, local authority spending on adult social care surged from £27.1 billion in 2019 to £32 billion last year. Yet the Government’s pledge of £500 million to help mitigate the impact of labour cost rises for centrally employed staff has fallen short, leaving councils with significant funding gaps.

The County Councils Network has projected a £54 billion shortfall in council budgets by 2030, sounding the alarm over the sustainability of essential services. Despite government claims of turning the tide on underfunding, local authorities forecast further rises in council tax just to keep pace with escalating costs. In Kent, for instance, even after aggressive cost controls, the council anticipates increasing council tax by the maximum 5 percent permitted under current rules, with all new revenue likely to be absorbed by social care commitments.

The pressure on social care providers is equally acute. Many operate on wafer thin margins, with a large portion of the 1.6 million workforce earning at or near minimum wage. Independent care providers face an additional £940 million in staffing costs this year alone as a result of the National Insurance hike, according to the Nuffield Trust. Some are now withdrawing from local authority contracts, prioritising self funders or considering closure as they can no longer make the figures work under current funding rates.

For some councils, social care and children’s services now account for up to three quarters of total annual spending, necessitating highly challenging savings plans. In Nottinghamshire, extra employee costs have required an extra £25 million this year just for adult social care, placing local finances under severe stress. Meanwhile, the Homecare Association highlights that margins for many home care providers are so tight that further cost increases are simply unsustainable without new funding streams.

The Government has earmarked an extra £4 billion for adult social care by 2028, but sector leaders and local authorities argue that only long term reform can ensure a sustainable future. While an inquiry led by Baroness Casey is now under way, substantive change will not be forthcoming until at least 2028. In the short term, councils face the unpalatable choice between cutting vital frontline services or raising council tax for residents already feeling the pinch. The spectre of a widespread financial crisis in local government looms ever larger, with the need for decisive policy action becoming harder to ignore.