'Dysfunctional’ children’s social care market needs national and regional oversight, watchdog concludes

A major overhaul of the market, which is blighted by high costs, a lack of placements and high provider debt levels, is needed to reduce out-of-area placements and provide better value for money for the taxpayer, according to the competitions watchdog.

• Residential Care: Demand, supply and sufficiency

• Analysis: Care Review turns attention to reforming care sector market

The findings come following a year-long review by the CMA into the children’s social care market, backed by the Care Review.

Key findings 

The UK has “sleepwalked” into a system in which children are failing to get suitable placements in foster care and children’s homes, the report states, noting that “some children are also being placed too far away from where they previously lived or in placements that require them to be separated from their siblings”.

The shortage of placements within a “fragmented” commissioning system means councils, which are unable to use their role as the purchasers of placements to negotiate on prices or to plan properly for the future, are facing high costs across both foster care and children’s homes in England, Scotland and Wales.

The CMA says that large private sector providers of fostering services and children’s homes appear to be making higher profits in England and Wales than it “would expect in a well-functioning market”. 

“This suggests that local authorities may be paying more for these services than they need to, particularly with fostering services, which are cheaper when run by local authorities,” according to the report, which calls on government to support local authorities to retain greater in-house services.

However, it rejects calls to cap prices on children's social care placements amid fears this could lead to a further decrease in the number of placements available.

The CMA report proposes the creation of both national and regional bodies, created by the UK government and devolved governments in Wales and Scotland, to which local authorities would be legally obliged to sign-up. They would also be obliged to carry out "specified amount" of activity around commissioning through these bodies.

However, plans around how much activity should be carried out through such bodies, how many regional bodies would be set up and whether they would cover support for all children or just those with more complex needs would be "left open" for government to decide upon.

The report also highlights concerns over high debt levels among firms financed through private equity which “could lead to them getting into financial difficulties, which could impact the care provided to children”.

According to the report, companies deemed to be of greatest concern have been identified based on levels of profit to debt ratio, however, the CMA notes that further research must be undertaken to establish the significance of this risk to children's social care.

It recommends a body be set up with responsibilities - similar to those handed to the Care Quality Commission to identify financial risk in adult social care providers - to "holistically" examine issues across private children's social care providers.

Andrea Coscelli, chief executive of the CMA, said: "The UK has sleepwalked into a dysfunctional children’s social care market. This has left local authorities hamstrung in their efforts to find suitable and affordable placements in children’s homes or foster care.

“Local authorities cannot be left to face these challenges alone. 

“There are several areas where national governments should make changes to address issues in the sector, including new financial oversight of providers and the development of new bodies to support local authorities with commissioning. With children’s social care currently being reviewed across the UK we want to see our recommendations reflected in any changes to policy.”

Recommendations

Among its recommendations, which are unlikely to be passed by government until the Care Review publishes its recommendations in late spring, the CMA suggests:

• a system for assessing the financial health of the most difficult to replace providers of children’s homes and providing warnings to relevant authorities if a failure is likely;

• that options are actively explored for bringing foster care in-house;

• a review of the barriers to provision of children’s homes, as well as the recruitment and the retention of care staff and foster carers. 

The CMA criticises private providers over failing to invest in the recruitment, training and support of staff given their high profit margins.

Sector response

Responding to calls to improve recruitment and retention as part of the report, Jonathan Stanley, manager at the National Centre of Excellence for Residential Child Care, said a new qualification for staff was needed to encourage companies to improve pay.

“Low skill is determined by the low qualification threshold to meet current regulation. To enable the meeting of needs and to create a resilient children’s homes sector will need the upskilling of the children’s homes workforce. To do so will require a new professional qualification”.

Chair of the Care Review, Josh MacAlister has also raised concerns over the profiteering of private companies working within children’s social care and publicly backed the CMA’s review which will feed into his own publication.

MacAlister wrote on Twitter that the Care Review “shares the same concerns and analysis about the broken care ‘market’”. 

“We’re giving proper thought to the ideas for change in this report ahead of our conclusions,” he said.

Imran Hussain, director of policy and campaigns at Action for Children, added that greater focus should be given to early help services to reduce the number of placements needed.

He said: “For too long now councils have been paying over the odds to place children in homes at the 11th hour far away from their local area, due to a limited supply of housing and a broken care home market. We hope the government will take forward many of the reforms proposed by this review to improve the quality of care, give children stability and stymie soaring costs. 

“Looking at the bigger picture, it is clear that the high costs of children’s homes are draining money from council budgets which stops them from investing money in preventative services. This is counterproductive as early intervention services often prevent problems evolving into crises which can end up with children being taken into care.”

Charlotte Ramsden, president of the Association of Directors of Children’s Services, said she was “disappointed” at the CMA’s failure to recommend a price cap for expensive placements offered by private companies.

“Profiteering through public money on the basis of meeting children’s needs is unacceptable. Children’s services have long operated in a mixed economy with a range of providers involved in the delivery of services locally, yet multi-million pound mergers between providers are becoming increasingly common as is private equity. 

“ADCS has previously called for the introduction of legislation which prevents for-profit operations or as a minimum caps the level of fees chargeable in fostering and residential services. Whilst this cannot happen overnight and will take time to achieve, ADCS remains committed to the aspiration of moving to a not-for-profit model,” she added.

The Independent Children’s Homes Association (ICHA) said it supported the findings of the report.

Meanwhile, a position statement by the ICHA on costs and profits in the children’s residential care sector finds that the independent residential child care sector “grew following a significant withdrawal of local authority and voluntary providers from residential child care” over the last 25 years.

For businesses to secure investment funding in an open market, profit must exist, it states, highlighting that this includes companies funded through private equity. 

“The independent sector is consistently found to care for children and young people with complex needs at a lower cost than local authorities,” it adds.

The statement notes that while “the long-standing debate is not an area of focus for ICHA”, the organisation feels it must have a clear position on the topic.