Pressures on local authorities to produce good outcomes for children with shrinking budgets could open the door to large-scale contracting out of services, a report by healthcare consultancy Laing Buisson has said.
The children’s services market report, published this week, analysed the state of the marketplace in children’s social care. It said authorities trying to provide high-quality services for children while maintaining value “is expected to drive forward more dynamic contract partnerships between local authorities and large independent sector providers”.
It added there was “momentum” towards outcomes-based delivery supported by payment by results and that the children’s social care market was at a scale and maturity “that makes it increasingly attractive to investors”.
“The appeal of the sector is clear to market analysts – a sizeable market, an outsourcing of provision to the independent sector, increasing demand and a lack of supply… with the ability of the best providers to attract the talent to deliver the highest quality services, be they teachers or foster carers,” the report said.
A government review on public sector value last week highlighted a successful payment-by-results scheme in Birmingham. The Step Down programme is funded through a social impact bond, and the provider, a social capital investment fund, only gets paid if a foster placement remains stable after 52 weeks. The report said the project had saved the council £880,000, with 70% of the placements made through the project remaining stable.
Laing Buisson said local authorities will look at new ways to get results they need while the funding outlook for children’s services remains tight and pressure to deliver good outcomes increases.
Central government funding for children’s services has fallen £2.4 billion since 2010, while local authority spending has decreased by £1.6 billion, with a £2 billion funding gap expected by 2020. The Autumn Budget gave little respite for children’s services, with no mention of extra funding.
The report said while this year’s general election result may impact future austerity, the pre-election plans put forward by the Conservatives “suggest real decreases in spending may be hard to avoid”. This means financial pressure on local authorities trying to provide services is unlikely to relax in the short term, the report said.
‘Scale and scope’
In the wake of this pressure, the report said experienced providers which could offer “scale and scope” with services would likely be in demand from local authorities seeking long-term solutions to councils’ quality and budget demands.
“There have been one or two examples of large-scale outsourcing contracts within the sector, and ‘winds of change’ suggest large-scale contracting is on the doorstep.”
It highlighted a “structural shift” in children’s services taking place as increasing numbers are run by independent trusts and community interest companies and – as the government hopes a third of all children’s services will be run under alternative arrangements by 2020 – these organisations will be under the spotlight.
“A wide number of councils and regional commissioning groups are expected to tender for ‘single provider’ contracts to deliver care services in their area, whether these are specialised strands of children’s care services or a variety of services. There will also be an increased number of newly established non-profit organisations taking over ‘wholesale’ children’s services from councils to elicit improvements,” the report said.
It added that the experiences of new, large-scale, single providers for children’s services would be the litmus test for future developments.
Economic and fiscal climate
The role of private providers in children’s social care – in particular child protection – has been a recurring debate in the sector in recent years. A protracted battle over the Children and Social Work Act 2017 included concerns over how the ‘exemption clause’ could open the door to private providers running child protection, and the government had to row back on plans to allow councils to outsource children’s services to private providers in a 2014 consultation.
Philip Blackburn, report author and economist at Laing Buisson, said: “In the current economic and fiscal climate, children’s services and special education providers which can deliver high quality services and value for money are well placed to meet the needs of commissioners in the sector. Certainly, the commissioning and provider landscapes appear to be developing to support larger-scale preferred provider contracting, and away from variable spot purchasing.
“At the same time, early intervention to reduce the need for care and improve outcomes for children and families remains a vital policy area as pressures on the care system remain high, and deserves a high priority for funding from central and local government.”