28 Feb 2024

Cash Crunch: The Local Authority Funding Crisis and its Implications for Adult Social Care

David Fothergill, deputy chairman of the Local Government Association, sets out his thoughts regarding the outlook for local authority funding of adult social care in 2024 given the rise of section 114 notices being given.

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Councils enter a precarious year financially, with an inevitable knock-on effect on adult social care services.

As we enter the new year, councils are particularly concerned about the impact of the increase in the National Living Wage (NLW) to adult social care budgets, and what it could mean for people who draw on care and support if services do not receive additional financial support.

With no additional funding in the Autumn Statement or provisional Local Government Finance settlement to balance the increase in the NLW, 2024/25 will be an incredibly challenging year for adult social care and could well tip many councils over the edge.

A recent LGA survey found that one in five council leaders and chief executives in England surveyed think it is very or fairly likely that their chief finance officer will need to issue a section 114 notice this year or next.

Councils enter a precarious year financially, with an inevitable knock-on effect on adult social care services
David Fothergill, deputy chairman of the Local Government Association

The LGA estimates that councils in England face a £4 billion funding gap over the next two years just to keep services standing still but last month’s Autumn Statement failed to provide the additional funding needed to protect services from further reductions.

This is despite councils of all political colours and types warning growing demand and cost pressures are threatening their financial sustainability, with significant impacts on people.

In 2024/25, councils will be able to increase general council tax by 3% without the need for a referendum. Those with social care responsibilities will again be able to increase the adult social care precept by up to a further 2% again.

This means that councils continue to face the tough choice about whether to increase council tax bills to bring in desperately needed funding to provide services when they are acutely aware of the significant burden that could place on some households.

Councils are calling on the government to urgently work with people who draw on care, unpaid carers, councils, providers, the workforce and the voluntary sector to help secure additional funding for social care in the forthcoming Local Government Finance Settlement.

The ADASS Autumn Survey recently found councils are predicting that adult social care will overspend by £515 million this year despite the increase in budgets.

The adult social care workforce provides committed and compassionate care and support around the clock. The sector contributes significantly to the economy and plays a key role in helping to release some of the pressures facing the NHS.

The increase in NLW uplift is rightly good news for care workers and we hope it will address some of the recruitment and retention challenges facing the adult social care workforce.

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