Social Care finance
“Until now we have funded ‘failure demand’ with annually increasing budgets. That is no longer an option. Tackling fundamental inequalities has to be a key objective of public service reform.”
In June this year, we will mark 15 years since the publication of Christie’s report on the Future Delivery of Public Services. The remarkable longevity of the report, epitomised by the quote above, reflects that the need for change in public sector spending still exists today. Social care embodies the challenges we face, yet serves as part of a solution sitting under our nose that is too often neglected, overlooked and undervalued as a service fundamental to public service reform.
Since inception, our Health and Social Care Partnerships have faced critical financial pressures that have threatened the future of some of the most valuable services provided to our citizens and communities. Following budget setting in 2025-26, COSLA and Health and Social Care Scotland demonstrated that there was a £497.5m budget gap. Increases in the demand and complexity of care, prescribing pressures and inflationary impacts have all contributed to the deterioration of Partnership’s financial sustainability. This position did not arrive overnight. Audit Scotland reported a £357m gap in 2023-24, and a £457m gap in 2024-25. That’s a cumulative gap of over £1bn and an untenable, systemic issue we have warned of for several years.
National budget setting does not recognise the pressures being faced, the value of social care to our population, and the contribution to the efficiency of our wider health system. In 2026-27, like several years before, the only funding made available to our Health and Social Care Partnerships from the Scottish Government was to enable the payment of the Real Living Wage in commissioned social care, which we only managed to get fully funded through a late amendment to the Budget Bill. This funding is welcome, but cannot be applied to the baseline operational pressures that exist as it is will go directly to the workforce to pay them the Real Living Wage, meaning the financial gap will continue to deteriorate.
The continued rise in complexity, demand and an ageing demographic will ensure these pressures will not fade away. Indeed, an ageing demographic provides significant challenges to the entire Scottish public sector, but most acutely in social care, where demand will rise at an unprecedented rate. With a population living longer, these pressures – to an extent – are inevitable. Social care must be afforded the capacity to deliver what’s needed whilst we strive for a healthier population as a true upstream, preventative lever to financial sustainability.
(Scottish Fiscal Commission, 2025)
Most alarmingly, the year-on-year increases in the budget gap follow the delivery of a significant number of savings and budget contributions that have failed to touch the sides and tackle the root problems. Again, in last month’s report, Audit Scotland stated that £276m of savings were delivered in 2024-25, an increase from £170m the year previous. Councils have also had to bear the brunt of the financial pressures in social care where hundreds of millions in additional contributions have been passed through to Partnerships at the expense of other Council services – £161m in 2024-25 alone. Some of these services will be community supports which are preventative and benefit social care and wider society alike.
Clearly, we cannot cut our way to financial sustainability, nor can we ever suitably fund the incoming projected demand. Christie warned us of prioritising firefighting ‘failure demand’ so this should come as no surprise.
Transformation is critical if we are to ensure the longevity of social care. COSLA and Local Government are committed to the Population Health Framework and Service Renewal Framework where we work for a shift in funding priorities to high impact, upstream, best value services. Of course, a benefit to social care is keeping people at home, healthier and happier, and subsequently reducing more costly interventions in acute care. But true upstream investment in areas such as housing, education, leisure services and active travel can all benefit the wider determinants of health, reduce demand and deliver sustainability.
That being said, we must manage expectation when discussing transformation in social care alone. At it’s core, social care is a deeply human service; carers providing hands-on support to vulnerable people. No amount of transformation will change the core of the service, and it is this core that faces the most acute financial challenges. It is easy to say that transformation is needed when a system has never met optimum delivery, has never functioned efficiently, and never realised it’s full potential. Does the system need transformed, or does the existing social care system, fully funded and financially sustainable, meet our needs?
Difficult decisions will need to be made in the near future to shift spending away from failure demand to high impact, preventative services that benefit population health and reduce the demands of an ageing demographic and rising complexities. This should have been done before now. We must also remain realistic, and regardless of this being achieved, there will still be a rising demand in social care in the years to come. It’s why we lobbied for a £750m investment in the sector in the Budget this year – to begin to build the capacity needed to meet these demands.
As the new Parliament comes into effect, this lobbying position will be reiterated through COSLA’s Manifesto, and we will continue to convey the importance of the role of social care in the future of public sector sustainability in Scotland.
Councillor Paul Kelly, COSLA Spokesperson for Health and Social Care
#CareCreates
