Councils could raise £2bn in extra council tax with ‘social care precept’
Councils may be able to raise council tax by up to 2% to increase social care funding by around £2bn as part of economic changes in this week’s Spending Review.
It is understood that chancellor George Osborne may open up the income source in areas facing a social care funding crisis.
The move would represent both an attempt to rescue the failing sector and a measure of further devolving revenue raising powers to councils, such as through the already announced devolution of business rates.
If all councils decide to impose the 2% social care precept, it is thought that as much as £2bn could be raised by the end of the decade. The percentage rise in tax would be equivalent to £30 a year on a Council Band D property with a £1,400 council tax bill, for example.
Councils will be able to decide whether or not to impose the levy, but all funds must be spent on social care. The new tax would be in addition to current powers that enable councils to increase council tax by 2% without a vote.
It is understood that the tax rise will not require a referendum, but it is still unclear how the Treasury will be able to oversee the new source of revenue.
The chancellor’s move could be seen as a victory by councils that have been issuing stark warnings about the growing social care funding gap in the last few months.
Council leaders, commissioners of adult social care services and providers have already warned that the sector’s cash shortfall is growing by £700m a year. The “chronic underfunding” of these providers could ultimately drive 24% of care providers out of the market and worsen the bed shortage crisis by 40,000 places.
Both the King’s Fund and the LGA have also called on the government to reinvest the £6bn earmarked to implement the delayed Dilnot reforms on the sector, as well as take advantage of savings made in other departments.
It is still unclear what measures will be taken to address the need for greater integration between social care and the healthcare sector, however – especially with hospitals and community services facing a deficit of £1.6bn just in the half-year mark, projected to balloon to £2.2bn by the end of the financial year.
The Institute of Fiscal Studies had previously indicated that councils could benefit from raising extra money with council tax in order to plug the predicted 27% drop in central government grants.
Local government minister Marcus Jones MP has also pointed to the possibility of further devolution of central government grants in the Spending Review, such as funding to freeze council tax, the new homes bonus and cash for the Troubled Families programme.