Councils could face a further diversion of money from other services in to the struggling social care system.
An efficiency review launched by the Treasury has ordered Whitehall departments to model the impact of savings of 3-6% in their spending,
But in the case of local government, the Treasury said it “recognises the important role that social care spending plays and so efficiencies found within local government will be used to help meet existing pressures”.
Money was in December switched out of the new homes bonus to shore up social care.
The savings drive was foreshadowed in the final budget of former chancellor George Osborne, but the issue was not subsequently raised and there had been some hopes it had been discarded by his successor Philip Hammond.
Mr Hammond (pictured) faced criticism from the sector for failing to relieve social care’s funding crisis in his autumn statement.
Institute for Fiscal Studies associate director David Phillips warned of deep cuts to some service areas.
He said: “Adult social takes up about one-third of local government’s non-education funding from grants, business rates and council tax.
“So, savings are to be found from the other two-thirds [but] some areas can’t really be cut, like debt servicing costs, and some areas will likely be harder to cut than others, like children’s social services, which is about another 15%-20% of council spending. So it might mean very deep cuts to other service areas.”
Pixel Financial Management director Adrian Jenkins said: “We were not expecting more cuts in this spending review period, we thought we were done with this.
“There has to be a question over how they do it. The government has got into trouble over social care by just passing cuts to local government. The result is that while local government has protected social care it hasn’t been able to give it any growth to keep pace with demand.”
Sean Nolan, director of local government and policing at the Chartered Institute of Public Finance & Accountancy, said: “Austerity has not gone away and that is the overall context, that whatever government there is there will be tough choices to be made.
“There is not enough detail yet from the Treasury to know how this applies to local government, but to think that local government can find the efficiency savings needed to pay for social care flies in the face of evidence of the pressures it is under.”
Mr Jenkins said he would expect the Treasury would ask the Department for Communities & Local Government to assess the impact of efficiency savings, but “DCLG has been criticised in the past that it did not sufficiently understand the impact of cuts on ground in local government.
“Based on where cuts have been made to date, I think cuts will come from corporate areas, housing, highways and planning.”
The Treasury said NHS and schools budgets would be protected from the savings review.