A ring-fenced Social Care Premium, funded nationally and spent locally

Adult and children's social care now consumes the majority of many councils' budgets, and its cost is rising faster than council income. Because council tax and central grants have to cover both social care and everything else — bins, libraries, roads, planning — every year that care costs rise, non-statutory services get cut to compensate. This is a demonstration policy proposal, written to illustrate the Policy section's format.

Council tax is based on 1991 property valuations and rises are capped without a local referendum, so it cannot flex to meet a fast-growing national cost. Central government grants have been repeatedly cut and are not consistently linked to demographic pressure. The result is 150-plus different councils each trying to absorb a shared national problem — an ageing population needing more care — through a patchwork of local budgets never designed for it.

Separate social care funding from general council budgets entirely. Introduce a national Social Care Premium — a distinct, transparent charge shown separately on tax bills — collected nationally, ring-fenced by law, and distributed to local authorities according to demographic need rather than local tax base. General council tax would then only need to cover local discretionary services, and could, in most areas, fall.

1. 01The Premium is calculated and collected alongside existing tax mechanisms, but held in a legally ring-fenced national fund that cannot be redirected to other spending.
2. 02Funds are distributed to local authorities using a needs-based formula (population age profile, existing care demand, deprivation) rather than local property values, so areas with older populations and lower tax bases aren't penalised twice.
3. 03An independent body, similar in remit to the OBR, publishes an annual report on the Premium's rate, sustainability, and whether it is keeping pace with demand — removing the incentive to quietly under-fund it before an election.
4. 04A three-year transition period allows councils to unwind the social care spending currently baked into general council tax, so bills are re-based rather than simply added to.

• Older and disabled people needing care, who would be funded by a stable, demand-linked national pot rather than whatever is left in a squeezed local budget.
• Council tax payers in areas with high care need and low property values, who currently face some of the sharpest service cuts despite paying comparable bills to wealthier areas.
• Local services like libraries, road maintenance and youth provision, which stop being the fallback source of savings whenever the care budget overruns.

This is not a new spending commitment so much as a re-labelling and ring-fencing of money already being spent on social care through council tax and grants, plus closing the funding gap the Local Government Association currently estimates at over £4bn over the next two years. That gap would need to be funded from general taxation — the honest, costed version of this policy does not pretend otherwise.

1. 01Legislate to create the ring-fenced national fund and the independent oversight body.
2. 02Commission the needs-based distribution formula, published in draft for consultation with local authorities.
3. 03Run a three-year phased transition, re-basing council tax bills as care spending moves off local books.
4. 04First independent adequacy report published at the end of year one, informing the Premium rate for year two.

• Adult and children's social care makes up the majority of total spending in a growing number of English local authorities.Source: Local Government Association
• English councils face a funding gap estimated at over £4bn across the next two financial years, driven substantially by social care demand.Source: LGA Funding Outlook