Councils will be able to levy a 2% social care precept on tax to cover social care costs and access an extra £1.5bn to pool budgets.

Delivering his Spending Review, chancellor George Osborne vowed to deliver ‘unprecedented support to health, social care and our pensioners’.

He confirmed rumours that local authorities would be permitted to hike local levies up to two points if funds raised are ‘spent exclusively on adult social care’.

The Government anticipates as much as £2bn could be raised to plug spending gaps by the end of this parliament in 2020 if councils impose the 2% precept.

‘The health service cannot function effectively without good social care,’ Mr Osborne said.

‘The truth we need to confront is this: many local authorities are not going to be able to meet the growing social care needs unless they have new sources of funding.’

Speaking in the Commons, Mr Osborne also revealed funding available to support the pooling of health and social care budgets through the Better Care Fund would rise by an extra £1.5bn by 2019/2020.

He said a key government objective was to ‘deliver a modern, integrated health and social care system that supports people with every stage of their lives’.

‘By the end of this parliament, social care spending will have risen in real terms,’ he pledged.

However Newcastle City Council leader, Nick Forbes, branded the precept a ‘smoke and mirrors trick’ to ‘shift the burden of paying for social care from central to local government’.

‘The problem with funding care through council tax is that areas with a low council tax base will be unable to bridge the gap,’ he added.

‘This is a sticking plaster over a gaping wound. The fundamental problem is that there is not enough money in the care system. As a result, the NHS will come under increasing pressure. These cuts are short sighted, counter-productive and will cost the country in the long run.’

Ahead of the Spending Review, president of the Association of Directors of Adult Social Services Ray James said the social care precept would be ‘inadequate’. He instead said the sector required cash to cover the living wage and £6bn in previously earmarked funding.

Mr Osborne’s announcements on social care followed confirmation that £22bn efficiency savings would be found in the NHS. The NHS budget will also climb from £101bn to £120bn by 2020/21, with £6bn additional funding delivered next year.

The Local Government Association has anticipated care services face a shortfall of more than £2.9bn by 2020.

Leading health think tank the Kings Fund had warned that current standards of care would not even be sustained without significant funding.