Social care councils draw billions from reserves

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Councils with upper tier responsibilities are burning through their reserves due to social care pressures, while other authorities add to their pots, according to analysis by the Office of Budget Responsibility, released alongside this week’s budget.

The OBR study said that in 2016-17, English councils providing social care services took £1.4bn from reserves, while councils without social care responsibilities were able to add £0.2bn to their savings, creating an unfair playing field.

The expected drawdown on reserves over the next three years was also revised upwards by the OBR. In March it said councils would take £0.9bn overall from reserves during 2017 to 2020. It now expects that figure to be £1.7bn.

Many voices in the sector criticised chancellor Philip Hammond for failing to announce any extra money for adult and children’s social care in his budget statement.

The OBR analysis said: “One striking feature of the net reserves drawdown last year was the difference in behaviour between local authorities with and without social care responsibilities.”

Local authorities with upper-tier responsibilities also set aside less to repay debt in 2016- 17, while other authorities increased their voluntary provisions for repayment of principal.

The OBR said: “As authorities are under statutory obligations to balance their budgets, we assume some of these drawdowns eventually (by 2020- 21) taper off to zero.”

Simon Edwards, director of the County Councils Network, told Room151 that county councils have been hit even harder than unitary authorities. He said: “These figures once again illustrate the extreme financial pressures county authorities have been under.

“Other upper tier councils, outside of two-tier areas, have made the most of their savings in the services that district councils have responsibility for so counties have been forced to draw down reserves to unsafe and unsustainable levels.

“In the long-term, it is clear that using reserves and council tax to mask the funding inequalities between counties and other parts of the country is just not sustainable. We will work with government to ensure that the promised fair funding review brings greater equity and is implemented in a timely manner.”

Margaret Lee, executive director of corporate and customer services at Essex County Council, told Room151: “Those authorities with social care responsibilities (both adults and children’s) are particularly susceptible to demand pressures outstripping the available funds, and that is likely to worsen over the next few years.

‘There is no doubt that local authorities are now under huge pressure to balance their books against a very stark picture of increasing need.”

The OBR said that, because of the squeeze on local authority finances, it had previously expected reserves drawdowns to occur earlier than has been the case, the “corner does now seem to have been turned”, its report said.

It added that prior to 2015- 16, when £0.4 was drawn down in total, English local authorities last reduced their overall level of reserves in 2009-10.

Lee said: “At the start of the austerity period, local authorities, more than other public sector bodies, focussed on efficiency and transformation programmes which delivered both savings and improved services.

“This meant that there was less need to draw down on reserves at that time – indeed, in many case, so successful were authorities in delivering these programmes, that they were able to increase reserves.

“However, the low hanging fruit has been cashed in, as has the fruit in the middle of the tree. We are now all giraffes with long necks finding the fruit at the top, and that is getting scarce.”

Responding to the exclusion of social care funding from the autumn budget, Margaret Willcox, president of the Association of Directors of Adult Social Services (ADASS), said: “By the end of this financial year, £6bn will have been cut from councils’ adult social care budgets since 2010—with need for our services growing all that time.

“The government has committed to publishing the long-awaited Green Paper on social care next summer, but much more needs to be done to secure extra recurring money to address funding gaps, continuing service pressures and the stability of the care market.”