Mrs Townsend was moved against the advice of her doctor

Margaret Sheather, executive director of Gloucestershire social services, said a government shortage in funding has seen local authorities forced to contribute more.

The public inquiry is into the death of 88-year-old Violet Townsend, who died five days after being transferred from her care home - against the wishes of her doctor and family.

She had been a resident at Magdalene House in Gloucester for eight years, and was one of nine residents with a social services-funded place.

The growing demands on care homes and expectations of standards have made it clear there is a shortfall in funding Margaret Sheather

The home, run by Gloucester Charities Trust, told social services in April 2002 it could not continue to subsidise the nine residents.

The council said social services was unable to come up with the money because of the effect on other homes in the county, which provided a "good service at the standard rate."

Mrs Townsend moved to Woolstrop House in Quedgeley, near Gloucester, on 6 February and died on 11 February.

Mrs Sheather said the situation had shifted "quite quickly" in the last four to five years.

�1bn shortfall

"The growing demands on care homes and expectations of standards have made it clear there is a shortfall in funding.

"There have been significant additions to social services funding in recent years, but these have mainly been tied to innovation, rather than to correcting underlying problems in the funding structure.

"While these grants have certainly produced major shifts in styles of provision, councils still needed to do more for themselves," she added.

The inquiry also heard that there was a shortfall of �1bn nationally for care for the elderly.

Kim Carey, head of adult care at the council, told the inquiry that the council had made "effective use" of government grants.

"We are trying to develop services to meet local needs," he added.

The panel will consider the specifics of Mrs Townsend's case on Tuesday.