The King's Fund Social Care 360 report said higher costs were being driven by rising provider fees and more people receiving support.
Simon Bottery, author of Social Care 360 and senior fellow for social care at The King's Fund, said: ‘Local authorities have gone to great lengths over the past year to fulfil their statutory obligations. They have spent more money on social care, with that investment not just going towards the increase in provider fees but also expanding the number of people receiving care.
‘This will have improved the quality of life for the thousands of additional people now in receipt of care and given the challenging financial backdrop should be welcomed. However, it has come at great cost to local authority budgets and ultimately is not sustainable.'
The King's Fund found residential care provider fees paid by councils rose in real terms by an average of 3.6% to £1,823 a week for working age adults and for older people by 3.3% to £1,019 a week compared with 2023/24's figures. Homecare fees rose 3% to £23.56 an hour. An additional 30,000 people received publicly funded long-term care in 2024/25 compared to the previous year, representing a 3% rise from 859,000 to 889,000.
Total spending on social care by local authorities reached £34.5bn, a real terms increase of 4.1%.
The Chartered Institute of Public Finance and Accounting found councils external debt rose by 10% and their usable reserves fell by 4% last year. The King's Fund said councils were having to fund spending on social care through increases in charges on service users and cuts in other areas such as libraries, roads and waste disposal.
Despite this, half of councils with social care responsibility said they were likely to have to apply for emergency government bailout agreements within the next three years, according to a Local Government Association survey.
The report said social care remained in a ‘precarious' state and called on the Casey Commission to deliver sustainable reform.
A Department of Health and Social Care spokesperson said: ‘This Government is resolutely committed to building a National Care Service and Baroness Louise Casey is chairing an Independent commission into adult social care, with her first recommendations due to be published this year.
‘We inherited a social care system facing significant challenges and have acted quickly to deliver rapid short-term reform.
‘That's why, we have made over £4.6bn in additional funding by 2028/2029 available for local authorities for adult social care, which includes £500m for the first ever Fair Pay Agreement for care workers while providing £723mi to help people adapt their homes so they can live more independently, laying the foundations for a National Care Service.'
