Social Care Dominates Local Authority Spending Study Reveals

Local authorities across England are devoting more than three-quarters (78%) of their discretionary spending to social care provision, according to recently published financial data.

Research conducted by the Chartered Institute of Public Finance and Accountancy has found that councils are allocating approximately 78 pence of every pound from core funding sources to adult and children’s social care services.

The assessment examines what accountants term net revenue expenditure – the portion of council budgets derived from council tax and general government grants, excluding income from user fees and ring-fenced funding streams.

Key findings from the Financial Resilience Index 2025

• External debt across English local authorities rose 11%: External debt reached £106.9bn. As a share of net revenue expenditure, reserved dropped 4 percentage points (from 43.7% to 39.6%). This leaves the system more leveraged overall, with councils holding higher levels of debt against a reserve base that is broadly stable in cash terms but has decreased as proportion spend. Therefore, councils now have less resilience to manage new pressures or unexpected cost increases. Borrowing pressures have also been heightened by the use of Exceptional Financial Support (EFS).
• Social care dominates local authority budgets: County councils allocate an average of 86% of their net revenue expenditure (NRE) to adult and children’s social care, which is above the national average of 78%. This severely limits flexibility to resource other local priorities.
• SEND deficits reach critical levels: SEND-related Dedicated Schools Grant (DSG) deficits have hit record highs, with councils now holding more than 20 times the value of their unallocated reserves in accumulated deficits.
• Growing homelessness pressures: London boroughs and non-metropolitan districts face the most acute pressures, spending a record 12% of NRE on homelessness – compared to just 2–3% in metropolitan districts and unitary authorities.

CIPFA Senior Policy Manager, Joanne Pitt, said:
“The 2025 Financial Resilience Index shows a sector under sustained pressure. Demand-led costs in social care and SEND, combined with acute challenges like homelessness, are pushing councils closer to the edge. While the government’s move towards more transparent, needs-based, multi-year funding is welcome, there is still a long way to go.

“CIPFA urgently calls for a comprehensive, long-term plan, particularly for SEND, to give councils the certainty they require to model future risks and protect vital services.”

Infoshare+, Exec Chair, Steve Thorn, said:
“Local authorities are operating under the most challenging of circumstances right now and the Financial Resilience Index is crucial to understand the most pressing indicators of financial risk in the sector.

“The addition of a new indicator to understand homelessness has shone light on the size of the issue across our capital and non-metropolitan districts. The UK technology industry, that’s full of innovation and ideas, needs to work hand in hand with government at both a local and national level to implement practical, impactful solutions that help councils to support communities in a difficult economic climate.”