George Osborne is preparing to allow councils to raise council tax by up to 2% in their areas if they are facing a social care funding crisis, which could raise up to £2bn.

The new source of funds for social care is expected to be announced in the autumn statement on Wednesday. It will be seen as both an attempt to devolve further revenue raising powers to councils in England and Wales, and also address the gathering social care crisis.

Leading health thinktank the Kings Fund said that without a change of policy social care spending per capita is on course to reach its lowest level since the mid-1990s, despite an ageing population.

It is thought that if all councils decided to impose the 2% “social care” precept, then as much as £2bn could be raised by the end of the parliament in 2020. On a Council Band D property paying £1,400 a year, the additional cost would be £30 per property. It would be for the local council to decide if it felt it wanted to raise the cash, but the money could only be spent on social care. The precept would be in addition to existing powers for councils to increase council tax by 2% without recourse to a vote.

The news is likely to be seen as a victory of sorts for the communities secretary, Greg Clark, who has been fighting a rearguard action to reduce cuts in the central government grant to local government in the spending review. The proposal for a council tax social care precept was recently backed by the government’s social mobility commissioner, Alan Milburn, saying it would help Osborne avert a crisis.



Social care is the responsibility of local government although efforts are under way to try to merge the social care budgets with health budgets, in an acknowledgement that part of the over-burdening of hospitals is due to a huge rise in the number of elderly people who cannot access care home beds.

The 2% rise in council tax would not require a referendum even though the previous parliament passed laws blocking any council tax rise of 2% or more that had not been put to local people in a referendum.

No details of how this earmarking of cash could be policed by the Treasury was available. Ministers have already announced, at the Conservative party conference, of the intention to devolve the business rate from 2020 while including some equalisation measures to ensure that poorer areas do not lose funding. The new proposal would take devolution a step further.

Hospitals and community services are already facing a deficit projected to reach an unsustainable £2.2bn this year. The Liberal Democrat former social care minister Norman Lamb had called for an NHS tax, saying social care faced a £5bn shortfall.

The scale of the crisis was recently spelt out by Milburn, a former Labour health secretary, in a Telegraph article. “Local councils – under huge financial pressures – have been cutting back funding to residential care homes over the past few years so that today it equates to as little as £2.00 per hour per resident. Many care homes have concluded they cannot make ends meet or provide a good enough service for that.

“In the last year 3,000 care home beds have been lost at a time when the demands from an ageing population are rising. The consequence is that more older people will end up in hospital beds which, on average, cost twice as much as a nursing home bed. That is financial madness and would merely intensify pressures on an already over-stretched NHS”.

In advocating the proposal, Milburn said: “The political attractions are obvious – the pressure will be on local councils, not HM Treasury, to deliver the goods. He will have averted a crisis that could see vital social services collapse and the NHS overwhelmed by the aftershocks. The pressure will be on local councils not HM Treasury to deliver the goods” .

The crisis has been generated mainly due to demography, but also because social care forms part of local government spending – which, unlike the NHS, was not ringfenced in the 2010 spending review. Spending has dropped by an average of 2.2% a year since 2009.

Money has been transferred from the NHS budget to social care (reaching £1bn last year), and without this the Kings Fund has calculated the real-terms fall would have been 3.6%. Most of this transferred money came from the NHS’s average annual real-terms increase of 0.84%. Understandably, many are worried about further reliance on an increasingly cash-strapped NHS to prop up social care.

The Kings Fund recently calculated “spending on social care for people of all ages as a share of GDP has fallen from 1.2% in 2009 and if cuts continue at the same rate it will have halved by the end of this parliament to barely more than a half of one per cent of GDP.”