A recent BBC investigation into foster care highlighted a “fierce argument” about the relative costs of independent sector foster care compared with local authority care. In the programme, a Liverpool councillor said that bringing the foster carers “in house” could save millions of pounds per year. Late last year, Luton Borough Council was the latest to draw comparisons, stating that independent fostering agencies (IFAs) cost as much as double or treble the cost of council-run foster care.
Such assertions are at odds with the 2018 study of comparative costs made as part of Sir Martin Narey and Mark Owers’ Fostering Stocktake. It found that although IFAs were, overall, a higher cost service, when a like-for-like comparison is made, then “…the cost differential between local authorities and IFA costs narrow considerably to the point where, in some instances, there is very little between them”.
Where do these apparently conflicting perspectives come from, and why are they important to commissioners of fostering services?
Taking a marginal view
The context in which the comparative cost is used is important. It is possible that if a council identifies two different potential carers during its placement-finding search on behalf of a specific child, one from the council’s in-house service, one from an IFA, then when it comes to comparing relative costs of those options the council may be looking only at the immediate incremental cash cost.
Although the council is likely to be relying on its existing fostering service and council infrastructure, it may view these as “sunk costs” – costs that have already been committed and paid. It may consider that the only real additional cash outlay for this one placement is the fee and allowance to be paid to the local authority carer when they have the child in placement.
The alternative placement option with the IFA, will however involve a fee quoted by the IFA. This will be a fully costed fee to cover not just their carer-related cost – which may include higher foster-carer fees and allowances than the equivalent in the council services – but also a contribution to all of the IFA’s services including its support and training of the carer, to the management of the service, to organisation overheads, and a contribution to profits and finance servicing costs.
The decision to place a child should be based on the best match for the child. In the reality of current local authority children’s services budget overspending, councils may be influenced by the cost comparison between in-house and IFA described above. It is however an “apples-and-pears” comparison.
A marginal cash cost mindset will always lead to a council wanting to use its own carers in preference to those of an IFA, but in any wider context of planning and budgeting of services all of the costs involved in delivery of a service must be recognised.
Commissioning and budgeting
Council commissioning strategies and budget forecasts need to be built on a clear and accurate understanding of the full cost of the in-house service as any other approach would be invalid or misrepresentative.
So when considering the cost of in-house fostering, in addition to the various foster carer fees and allowances, the council should account for the cost of the supervising social workers, the carer assessment and approval panel, the management of the service, also support services and training for carers and staff plus education and health related services. It is also appropriate to consider that the in-house service will rely on the council’s central premises, IT, HR, accounting, procurement, insurance, pension and governance services so a fair allocation of these council overhead costs is needed. The end result will be a higher unit cost of in-house foster care than the marginal carer-based cost. Councils often account for different parts of this total cost mix in different budgets and departments, so achieving a comprehensive view of local authority costs is a challenge.
The closeness of like-for-like costing of fostering between IFAs and in-house, especially for the older and more complex and challenging placements raises important strategic implications for commissioners. If the council service is not significantly cheaper – despite the IFA fee including a profit and financing element – then tough questions need to be asked, including:
Are the IFA business models inherently more efficient than those of individual local authorities, especially for the cohorts more likely to be placed with IFAs?
How can councils commission more effectively to share in those efficiencies and to facilitate greater availability of local placements?
Should local authorities (alone or in regional collaborations) try to emulate the IFA models?
Given the relative disparity in size between some large national IFAs and the size of individual council spending, what role should the government play in stewardship, oversight and commissioning of the sector?
- Andrew Rome, Revolution Consulting
FURTHER READING
- Foster care in England, Sir Martin Narey and Mark Owers, Department for Education, 2018
- Unit Costs of Health and Social Care, Personal Social Services Research Unit, University of Kent, 2018
- The cost of foster care: Investing in our children’s future, Robert Tapsfield and Felicity Collier, British Association for Adoption & Fostering/The Fostering Network, 2005
