The government may need to change the local government finance system to accommodate its proposals on social care

23-05-2017


Rob Whiteman, CIPFA Chief Executive, said: “CIPFA welcomes that the Conservative manifesto challenges some of the fiscal sacred cows of state funded benefits for wealthy pensioners. It also makes financial sense to deal with the current illogicality of different approaches to the charging of residential care and home care. 

“However, to implement the new policies, councils will urgently need to know the full details of how the policy will work in practice. At present, local government borrowing is allowed solely for capital investment purposes; it is illegal for councils to borrow to provide services. Because social care is the single largest controllable cost to upper tier councils deferring much of the income to cover these services will make a material difference to councils' balance sheets.  

“Whilst many councils will fund the services now and receive income in future years through using their balances and reserves, the government may need to legislate to allow for councils, at times, to borrow to fund services that will be paid for at a later date. Councils will also need to know whether the administration and financing costs will be recovered as a charge to social care users or borne by council tax payers. 

“Also, property values at times fall under market conditions and local government will need to know how any gap would be indemnified should the equity in a home fall below £100,000 in the years after the deferred charge for social care services is agreed. 

“Overall, we will need to see the final proposals, including the recently announced cap on the costs, to assess whether this provides adequate resources in the long term to fund social care services on a sustainable footing. In the meantime however, it is a major policy change in local government finance that a large service will become a balance sheet item funded in future years rather than funded by current incoming revenue. With some councils already close to the position where they must by statute freeze expenditure because their current budget is not balanced, the government will also have to reconsider the legislative framework for local government finance."