Provider view: Key developments in foster care
By Harvey Gallagher, chief executive, Nationwide Association of Fostering Providers (NAFP)
The money local authorities have to spend from government grants, council tax, and business rates has fallen by 16 per cent since 2010. This means they have an increasingly limited capacity to respond to today’s significant inflationary pressures. These cost pressures feature in and distort all their actions.
Overwhelmingly, local authorities and independent fostering agencies (IFAs) work well together. The nature of mutual understanding, acceptance and collaboration has improved significantly over the last decade. Local authorities and IFAs negotiate around funding issues on a regular basis. The Competition and Market Authority’s (CMA) conclusion that independent fostering agency fees have been consistent since 2016, despite rising inflation, and therefore represent a real term fall in prices, mirrors our own research. However, the resources to address current inflationary pressures can only be provided by the government.
We agree with the CMA’s analysis that finds a “fragmented system by which services are commissioned, which means that local authorities are not able to leverage their role as the purchasers of placements or to plan properly for the future”. We have worked tirelessly to support local authorities to develop more effective commissioning and many have responded positively (see practice example). However, this is not yet widespread and commissioning remains an area of some inefficiency based on often weak evidence.
Foster care placements are commissioned through a range of contractual arrangements, old and new. Some include a process for agreeing uplifts of fees to IFAs, others do not. As a result, there are “legacy” arrangements for individual children where an uplift has not been awarded for over a decade. A child’s needs may reduce thanks to a positive, stable, well supported placement. Unusually, the commissioning system aims to reduce fees where foster carers and their IFAs have been successful in caring for a child.
Regional commissioning of IFAs has been in place for some time, yet evidence of its effectiveness is limited. It has simply led to a layered system, with procurement frameworks sitting on top of local and regional frameworks, with both local authorities and IFAs needing to employ additional staff just to manage these overly bureaucratic systems. NAFP has been advising local authorities to avoid this layering, but unfortunately this is something we continue to see.
One of the accusations directed at IFAs is that they are more expensive than local authority in-house fostering services. Previous reports on relative costs of local authority and IFA services – including that done by Martin Narey and Mark Owers in 2018 – found that IFAs care for older children with more complex needs and spend more on their services as part of a broader offer. The CMA acknowledges that meeting more complex needs is likely to involve higher costs, citing higher allowances paid to foster carers as a leading factor.
The Care Review final report states that “foster carers have told us that, generally, they get better support from for-profit independent fostering agencies”. When this all is considered, the difference in cost is not so significant that it should be a factor in choosing where a child needing foster care should live.
Local authorities tell us that they are unable to find the placements they need for children in care, where they need them, when they need them. This, in reality, may never be possible. Local authorities view the role of IFAs as topping up what they cannot provide directly through their own in-house services. There is sometimes a conversation about IFAs not being able to provide everything that local authorities need from them (NAFP is currently undertaking a study into referrals made by local authorities to IFAs – initial findings will be available shortly). We could be radical and turn this equation around: invite local authorities to commission most fostering services from IFAs – rather than being frustrated at what they cannot provide. The local authorities themselves could then top this up by directly providing the services that IFAs cannot.
Provider view: Key developments in residential child care
By Mark Kerr, deputy chief executive, Independent Children’s Homes Association (ICHA)
The residential child care sector has shown outstanding resilience throughout an unprecedented national and global emergency. However, as we recover from the pandemic our sector is unable to meet the needs of some of our most vulnerable children and young people.
At ICHA, we are extremely concerned about the increasing number of requests we receive from local authorities needing assistance finding specialist placements. In recent weeks, we have observed cases of children being inappropriately placed in Tier 4 mental health provision, secure or unregulated provision, because no appropriate placements were available.
A lack of placement sufficiency is the bottom line. Here, I explore some of the key contributing factors for this.
A workforce crisis
Like many other sectors, the residential child care sector is experiencing huge difficulty in recruitment. This workforce crisis has been building for many years and has now been exacerbated by knock-on effects and unforeseen external pressures following Brexit and the Covid-19 pandemic. Between March 2020 and December 2021, there has been a 53 per cent increase in unfilled staff positions in children’s health and social care.
In a recent survey of ICHA and special schools association NASS members, almost half of respondents reported that they are unable to operate their homes and schools at desired staffing levels without relying on agency staff – with most operating more than 30 per cent below desired levels of permanent staff. Survey responses indicated that more than half of providers experienced staff turnover between 20-50 per cent in the last 12 months.
This workforce crisis inevitably impacts capacity in the sector and the ability of local authorities to meet their sufficiency duties. At least 30 per cent of ICHA members surveyed are considering reducing placement capacity, 15 per cent are considering closing children’s homes entirely, with some closures expected to be permanent. At a time of acute need for increased capacity in residential child care, our sector is struggling to staff existing homes let alone recruit staff necessary to support new provision.
Increasing costs
Providers are experiencing unprecedented external economic pressures that are impacting on day-to-day operational costs. There is no energy cap for children’s homes, who now face vast increases in energy bills. Further, vehicle fuel prices, grocery costs and other core expenses are increasing. We expect overall operational costs to continue to increase over the coming year.
Staff are rightly the most significant cost for children’s homes. While the workforce crisis is multi-faceted, the basic cost of appropriately staffing a children’s home has increased and will continue to do so – for local authorities as well as independent providers. Factors to consider include the increase in legal National Minimum Wage, the 1.25 per cent rise in National Insurance from April 2022 and 10-20 per cent rises in practitioners’ salaries to enable recruitment and retention.
Failing frameworks
On average, a commissioning framework contract runs for four years. During this time, providers are expected to provide placements at the fee level outlined within the tender process. If unforeseen costs are experienced, a provider may submit a fee uplift request. But there has been a trend in recent years where such fee uplift mechanisms only apply to new placements. Many of the cost increases faced by providers apply across all children in placement. By failing to recognise this, regional frameworks only penalise providers who wish to maintain permanence for children placed.
A further challenge is that new commissioning frameworks will expect providers to submit a fee for the life of the framework, normally four years. This effectively requires providers to forecast future economic change. In these times, who can predict what the cost of salaries, energy and other core facilities for a children’s home will be in 2025?
Unless fair, inflationary fee uplift mechanisms are included in commissioning frameworks, residential child care providers may be forced from the outset to set a fee that is too high. Equally, they may decide they are unable to join such a framework, instead falling back on spot purchase arrangements.
Inspection climate
ICHA members have indicated that Ofsted inspections are becoming increasingly tough at a time when children’s homes are still recovering from the impact of the pandemic. This is particularly the case where providers are caring for high need children and young people who pose risks to themselves or others.
Our State of the Sector survey found “risk associated with the child” to be the second most likely reason for rejecting a referral. The reality is children and young people with high risk profiles may increase notifiable incidents and increased focus from Ofsted.
Partnership working
Now more than ever, better partnership working between local authorities and independent providers of children’s residential care is of upmost importance. We must work together to address the barriers to improving sufficiency, especially for high need children and young people.
ICHA is currently working to improve partnership working across two regions and supporting individual local authorities who are exploring new ways of working with specialist independent providers to improve their sufficiency.
Local authority view: Care Review needs careful consideration
By Steve Crocker, president 2022/23, the Association of Directors of Children’s Services (ADCS)
Meeting the needs of children in our care is one of the most important responsibilities for local authorities. However, there are several longstanding barriers we face in meeting our statutory duties, not least because demand for placements far outstrips supply and we do not have the right homes, in the right places, at the right time. That local authorities are the only purchasers of placements and providers can pick which children to accept, has a knock-on effect. As a result, local authorities having to spot purchase costly placements is increasingly common as are highly bespoke arrangements to keep children safe in crisis situations. The association has been raising these issues for many years; change is needed.
The recently published Independent Review of Children’s Social Care provides the opportunity to improve the children’s social care system. The ADCS has engaged with the review since its inception, and we are ready to work with the government, and others, on whatever comes next. There is much in the review that we agree with, for example, rebalancing the system towards earlier ‘family help’, backed by national funding, is something we have been wanting for some time. On the other hand, proposed changes to the way some placements are commissioned and run could benefit from further thinking through and being carefully tested and trialled before they are implemented widely.
The review proposes the creation of regional care co-operatives (RCCs) across England that will plan, create, run and commission fostering as well as residential placements, including secure welfare places, within a defined sub-regional area. Local authorities will have direct involvement in the running of RCCs and children will continue to be in their care. However, the practicalities of the transfer of duties, powers, budgets and potentially staff to these co-operative arrangements remain unclear, we will need to work through the specifics of this with government to better understand any unintended consequences for children, families and our staff, or challenges that may divert the focus from improving both the experiences and outcomes of children in our care.
The review envisages that RCCs will be able to transform the status quo with greater collaboration, co-ordination, and planning. Economies of scale and the clout to shape the market are at the heart of this proposal but it is not yet clear to us if anything other than a national approach will be able to achieve these aims, particularly in relation to the residential children’s home market where large players backed by private equity proliferate. It is not clear that groups of 10-20 local authorities would have the combined resource or expertise to influence increasingly common multi-national private equity investors and organisations.
Local authorities already work together, locally, regionally, and even sub-regionally, to commission a range of services with varying degrees of success. We are not opposed to exploring different arrangements and in doing so it is important that we learn from what works, and crucially, what doesn’t, so that we can apply this to new systems.
Moving beyond the Care Review: Ways forward for commissioning
By Andrew Rome, director, Revolution Consulting
The Care Review’s core recommendation for commissioning involves the consolidation of commissioning functions currently performed at smaller scale by individual local authorities into a network of regional care co-operatives (RCCs). These bodies are to take responsibility for sufficiency, running and creating new public sector services and commissioning of services from the independent sector.
Those functions are to be removed from local authorities, who will however remain involved in the running of RCCs and children will continue to be in the care of the local authority.
Clearly much detail needs to be thought though about the design and function of the new RCCs. Regional commissioning has already been with us for more than two decades, and most local authorities have experienced the challenges of how to work together with neighbouring authorities that have different scale and levels of needs, priorities and expectations of what is achievable.
RCC control and funding
If the new RCCs are to work then detailed rules and negotiations will be needed around relative control and funding of the RCC, ownership of its assets (including ownership of the new public sector services created), and how spending budgets are controlled and managed. Existing overspending of children’s services budgets is rife and it is difficult to envisage how individual authorities can take on responsibilities for the overspend of their regional partners as well as their own budget challenges.
The detailed relative roles and responsibilities of the local authorities and of the RCCs will be especially important to define. The worst outcome will be another layer of bureaucracy, and additional silo mentality.
Inherent in the Care Review’s recommendation is the need, highlighted by the CMA’s report, for better forecasting and data. The CMA and the review should have gone further in looking into the assessment tools available to look for those solutions that could be mandated for use by RCCs. Without a common language to describe and profile need, and without further directed research to examine the impact that different types and styles of services have on the different cohorts of need, then the current disjointed patchwork view of the sector will only be further fractured.
A particular challenge for RCCs will be how to deal with service providers that range in size and scale. Perhaps the most perplexing aspect of the recommendation to set up RCCs is that it tries to address the weakness identified by the CMA and the review that by having each authority undertaking their own commissioning the purchasing power of the state is diluted. With the largest providers in the sector likely to be operating and contracting with all or most of the new RCC areas, it will be essential for those RCCs to coordinate their activities in commissioning consistently in order to partner with those largest providers. Hence, in addition to the inter-authority negotiations needed to establish each RCC, a set of inter-RCC negotiations will be essential in order to start to influence relationships with any provider that has services across more than one RCC area. These are immense challenges.
Those inter-RCC arrangements will, for the larger provider relationships, be the equivalent to national commissioning and contracting discussions, and perhaps should give pause for reconsideration as to whether a national approach should be adopted from the outset for some of the functions envisaged for the RCCs.
At least as important as the myriad of negotiations that will be needed to set up RCCs will be the tone of the approach to providers. The CMA, although recognising that profit levels in recent years amongst larger providers indicate that commissioning and purchasing improvement is required, did not recommend banning profits. The CMA essentially directed the review towards actions to bring about a more competitive sector, this being the classic economist’s approach to ensuring prices (and thus profits) are more constrained by a properly competitive market.
The language of the review is that of “getting a grip”, of “take back control”, of “profiteering” (a term not used by the CMA and received by many providers as an offensive generalisation used in the review) and culminates with a direct penalty on profit via the recommendation to introduce a windfall tax. If the way in which the sector has developed over the last 20 years teaches us one thing, it is that “command and control” purchasing has not worked, and that approaches seeking to partner with the know-how and efficiencies of providers on a risk sharing basis offer much greater opportunities for economic effectiveness and improved outcomes for children. The illogical windfall tax proposal of the review simply risks adding to the debt burden of providers and increasing the risk of failure that the CMA and the review both identify.
The language of the review and its attitude towards the provider sector seems a poor place to start with what is intended to be a once in a generation reset of a sector that is clearly set to continue its dependence on a mixed economy of provision.
CARE REVIEW KEY SECTOR ANALYSIS AND PROPOSED REFORMS FOR COMMISSIONING
Drawing on evidence from the Competitions and Markets Authority (CMA) that found care packages too often fail to meet children’s needs or deliver good value, and research commissioned by the review and conducted by What Works Centre for Children’s Social Care (WWCSC), which looked at local authority sufficiency strategies, the Care Review identifies four main problems with the way the children’s care market operates:
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Weak oversight WWCSC identified that only 56 per cent of local authorities have an up to date sufficiency strategy, and many report that their sufficiency statements are rarely considered or commented on by Ofsted. The CMA has expressed concern about the risk of unmanaged exit by large children’s home providers due to their levels of debt and dominance of the market. The review also states that the fostering market is on the same trajectory of becoming increasingly dominated by large providers.
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High cost and profiteering The CMA found that profits in the children’s residential home sector increased from £702 to £910 per child per week, between 2016 and 2020. There are also few indicators to suggest that high prices are leading to better quality homes for children or better recruitment and retention of children’s home staff.
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Poor planning Local authorities have a legal duty to plan for the homes that children in care might need, in the form of what is called a “sufficiency duty”. However, 44 per cent of local authorities fail to publish their sufficiency strategy, while a lack of capability and capacity to plan and follow through on these plans is failing children, states the review.
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Lack of co-ordination Some local authorities have already recognised the benefits of operating at a larger scale in order to better plan and shape the care market. However, where voluntary regional arrangements are used, local authorities continue to have their own parallel process of sourcing a home when the need is urgent. Providers can refuse to engage with pan-local and regional processes, knowing that heightened demand means a local authority will need the home. Taken together, this means that voluntary regional arrangements are having limited impact, concludes the review.
Regional commissioning
Central to the Care Review proposals is the creation of regional care co-operatives (RCCs), new bodies that would consolidate functions currently performed by individual local authorities.
RCCs would be responsible for ensuring there is sufficient care provision in an area and planning for future needs; establishing and running new public sector fostering, residential and secure placements; and commissioning voluntary and private sector provided care.
Under the plans, local authorities would have direct involvement in the running of RCCs and children would continue to be in the care of councils. By working at greater scale, the review says RCCs would be better able to shape the type and availability of care packages in a region and ensure this matches the needs of children.
“The RCC will be better placed to do this than individual local authorities because it will have a better understanding of the needs of its population and financial confidence to pay for the ongoing capacity safe in the knowledge that there will be enough children with similar needs who will need the home,” the review states. “If homes are unoccupied then the region can share the costs of having available capacity. Providers will lose dominance because they will need to deal with fewer commissioners than 152 local authorities.”
By Derren Hayes
