‘Stop Using Council Tax To Pay For Spiralling Social Care Costs’, Think Tank Says
Removing social care costs from council budgets could create a path towards fairer property tax and a better funded social care system, think tank shows.
In a report out today, the Social Market Foundation – a cross-party think tank – argues that social care costs should be taken out of English council budgets. Doing so would result in an average council tax cut of around £356 per household, with highest cuts in the South West (£413) and lowest in London (£243).
Earlier this year, PM Andy Burnham said his government would look at options to pay for a reformed social care system. The new system is likely to need greater, shared funding, as currently those who need care in later life face losing all their assets above £14,250, which can include losing their home (for residential care).
Despite the lack of generosity within the system, old age social care costs are a huge burden on local authorities, and only set to increase with Britain’s increasing ageing population. In 2024/25, roughly £9.2 billion is spent on adult social care for those over 65 – that’s around 22% of total council tax receipts for that year.
Huge spending requirements on social care make it difficult for councils to fulfil their other functions – from filling potholes to litter picking – leaving the general public frustrated that they are paying council tax without receiving basic services, and raising questions on whether council tax is fit for purpose. Property valuations and council tax bands have also not been changed since 1991, leading to some absurd imbalances in people’s council tax liabilities. This creates a situation where Buckingham Palace’s annual council tax bill is less than a typical three-bedroom semi in Hartlepool.
But changes to council tax, including moves to make it more progressive, have long been resisted, because it is set to produce stark winners and losers, with some households paying far more than they do at present. The report argues that removing social care costs from council tax opens up much needed political space to make these reforms possible.
The SMF report shows that when social care costs are taken out of council budgets, it has an overall progressive effect. Local authorities with lower home values, and therefore weaker council tax revenues generally spend more on old age social care as a proportion of tax income. The most affluent areas generally stand to save relatively little. 9 out of the bottom 10 local authorities that will save the least (less that £200 per household) are in London, and include the likes of Wandsworth, Westminster, Islington, Lambeth and Hackney. In contrast, East Lindsey (East Midlands), New Forest (South East), East Devon (South West), are among the top 10 highest savers, saving upwards of £500 per household.
The report also looks at how removing social care from council tax bills would impact on different proposals to reform council tax. For example, creating a single continuous tax based on current property values (as proposed by the Resolution Foundation) results in an estimated 38% of properties losing out under the current system, but just 23% after social care is removed – making reforms much more politically viable.
Alongside changes to council tax, a new national funding settlement for social care would allow the cost to be shared across the country more fairly with risk pooled more widely.
Barney Dowling, Researcher at Social Market Foundation, said: “Everyday we see stories that remind us that the social contract is broken – people feel they are contributing far more to the state than they get out of it. We see story after story about the frustration of residents not getting basic services from their councils, overburdened local authorities, and struggles of those facing sky-high social care costs.
These are not unconnected issues, and our report makes clear that taking social care costs out of council budgets could pave the way for ambitious and progressive reforms that go hand-in-hand, rather than tinkering at the margins of each system.
Councils budgets should be responsible for resident services and local amenities, while the social care burden should be shared across the country more fairly and risk can be pooled more widely. Our research shows how to maximise the political feasibility of reform, by minimising the share of households that may have to pay substantially more.”
Jané Mackenzie, Poverty Premium Lead at Trust for London, said: “Council tax hits those on the lowest incomes hardest, and at a time of surging living costs, it stretches those households thin. Bold, innovative ideas like those put forward in this research are exactly what’s needed if we’re serious about tackling poverty. We hope this report helps spark a conversation about how we fund local services, support people in later life, and build a fairer council tax system, without pushing people into poverty.”
