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The Independent Children's Homes Association has accused councils of "ignoring" guidance governing local authority purchasing of children's home places from independent providers.

ICHA has claimed authorities are failing to adopt the national contract for ­residential homes, which was launched by the government last November and is not compulsory.

Although the guidance states fee changes should be in line with inflation, evidence gathered by the ICHA shows some councils are imposing zero or below-inflation increases for 2008-9, leaving providers "suffering severely".

Authorities say they must make efficiency savings, according to correspondence between councils and independent providers.

Poor trading climate

An ICHA survey found that half its members believed the current trading climate was poor or very poor, while more than three-quarters predicted a decline in bed provision over the next trading year (see graphs). Almost half also rated the forthcoming trading climate for 2008-9 as poor or very poor.

In a letter to junior children's minister Kevin Brennan and others, including Ofsted's chief inspector, Christine Gilbert, ICHA executive officer Roy Williamson said: "Despite optimism over the national contract and its attempt to establish formulae for a fair inflationary uplift, many local authorities have imposed a zero uplift."

Williamson called on councils to make "realistic" inflationary awards to providers. He said the national contract should become compulsory and accused councils of "cherry-picking" the parts that suited them.

The Department for Children, Schools and Families has promised to review the contract during its first year. A spokesperson said: "Balancing quality with the cost of a service is a matter for local commissioners to resolve."

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