Councils warn of £13bn funding gap by 2020 due to cuts and rising social care costs

New powers for local councils could see a hike in council tax Credit: PA

Local authorities in England have warned that a £13 billion funding gap means council tax bills could rise dramatically by the end of the decade.

New powers will allow local authorities to raise council tax by 2 per cent - a potential rise of almost £200 a family - but even then, councils say, they will be unable to make up the difference.

The shortfall is driven by cuts in grants from Whitehall, and by the escalating cost of adult social care, which is predicted to outstrip available funding by £2.9 billion by 2020, according to the Local Government Association (LGA).

Even taking advantage of the full surcharge, under powers announced by Chancellor George Osborne in his spending review, councils will still only bring in just £1.6 billion more by 2020.

That would be at a cost of £96 a year to the average Band D council tax payer.

On top of the expected 1.99% annual rise in core council tax, the average Band D bills could soar by £195 a household by the end of the decade and still not close the hole in budgets, according to the LGA.

Councils say the escalating cost of adult social care will add substantially to the shortfall Credit: PA

There are also concerns that changes to council taxes could widen the divide in service standards, as councillors in poorer parts of the country avoided rises which could be unaffordable to their residents.

LGA deputy chairman David Simmonds - Tory leader of Hillingdon in west London - warned this would exacerbate the "postcode lottery" in social care.

But a spokesman from the Department for Communities and Local Government said the spending review "offers a £3.5 billion package for adult social care" and that "in reality councils will have almost £200 billion to spend on local services over the lifetime of this parliament".

Mr Osborne told MPs that his settlement would leave councils in 2020 able to spend the same in cash terms as they do now.

He encouraged town halls to sell assets like shops or golf courses and dip into reserves to help pay for services.

But the LGA said that, after inflation is taken into account, councils in England will lose 24 per cent of their core funding from central government by 2020, on top of a 40 per cent cut between 2010 and 2015.