Large-scale contracting out of children’s services ‘on the doorstep’, report says

Healthcare consultancy highlights potential appeal of children’s social care market to investors


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.

Spending decreases

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.”

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18 Responses to Large-scale contracting out of children’s services ‘on the doorstep’, report says

  1. londonboy November 23, 2017 at 11:26 am #

    Issues around differing values of those in markets and those who care are almost irreconcilable.
    Policymakers are extremely naive if they think they are solving anyone’s problems by metaphorically “giving the work of shepherds to the wolf pack”

    Every serious case review mentions poor information sharing as a reason for child deaths. A private company should not have access to information about vulnerable children and families nor should they be able to withdraw from serious case reviews and the like for commercial or insurance reasons reasons.

    Services that are contracted out attract VAT that those that stay in house do not. There are very serious issues around governance and the relationships between stakeholders. Market mechanisms may be found but to whose benefit?

    Risk cannot be ‘divested’ to another – it says with the risk holder so LAs underwrite all risks of failure. ( child deaths? )

  2. Tom J November 23, 2017 at 4:39 pm #

    The good news for the provider is that they can cut corners and reduce standards as much as they want, and increase caseloads for social workers as much as they want; AND the HCPC will take FIRM ACTION ( Not against the provider silly, but against the individual social worker should anything go wrong).

    If I were G4S I’d be very grateful for the wonderful works of the social worker funded HCPC.

  3. Ray Jones November 23, 2017 at 4:40 pm #

    This is crazy, is ideologically driven, and will leave children and families – and those who seek to help them – worse off and in greater difficulty.

    Unless there is some magic alchemy at play here of which the rest of us are not aware you do not improve and enhance services by having (1) to make big budget cuts and (2) at the same time adding more overhead costs and then (3) also taking money out of services to give as a profit to owners of these commercial companies who are now being told here is another pot of public funding to raid.

    Commissioning and contracting generates additional costs as the local authority has to build and maintain a contract setting, letting and management capacity which is an additional cost to them compared to directly providing the services. The company getting the contract also has a cost of contract management and reporting back to the local authority. And while all this is going on complexity and confusion of accountability is being created at the same time as transparency is being lost … none of which will make the services for children and families safer or more secure.

    In addition to more costs, there is the money to be taken out of services as profit (probably targeted as 10% or more of the contract price) and with this profit to be achieved by reducing staff costs through lower staff numbers, staff grades and poorer terms and conditions of employment. Hardly a recipe for enhancing – or even maintaining – service standards and performance. Just look at what is happening already in private prisons and the contracted-out commercially-managed welfare benefits assessments and administration, not to mention the travesty and tragedy of privatising 70% of what had been the probation service.

    What comes to drive management attention is not a public service or professional ethic but the requirement to generate a profit and to focus primarily on the financial bottom line within these companies in what is already being called an ‘industry’ rather than a ‘service’ led by management accountants and with an international ownership by distant venture capitalists and global corporations.

    And it is noteworthy that setting up children’s trusts and community interest companies outside of local authorities is seen by Laing Buisson, who prepared this market report, as a positive development on the journey of marketising and privatising statutory children’s social work and social services. The trusts and CICs always had the potential to be Trojan horses opening the gates for this new market place.

    Pretty shocking too that LaingBuisson were paid by the Department for Education a couple of year’s ago to advise the government about how this marketisation process might be driven forward and with this explicitly an aim of the government which despite changes of prime minister and ministers has not (yet) been halted.

  4. steven walker November 23, 2017 at 4:46 pm #

    This is the same Tory dogma we have become familiar with over the past 7 years, run down public services so they cannot do anything other than fail, then offer the solution as the market/privateers who claim to be efficient and effective. The reality is what we have seen with Health care and Young Offenders institutions: abject failure, abuse, dangerous practice while creaming off profits from the public purse. When the motive for involvement is profit then money is further removed from a dwindling budget, meaning staff will be under more pressure, standards will slip, and the result will be catastrophic for struggling families.

    • Rob November 24, 2017 at 9:27 am #

      Spot on.

  5. julia November 23, 2017 at 10:43 pm #

    So the local authority pays from ever reducing budgets to private companies, in order to fulfil its statutory duties, but a slice of the monies will be siphoned off to provide profit for the shareholders. How will this benefit, either the vulnerable families we support, or the social workers who will be expected to do even more for even less?

  6. Phil Sanderson November 24, 2017 at 5:38 am #

    The vultures are circling

  7. Julie L November 24, 2017 at 9:37 am #

    I hear that Norfolk are also looking at doing something like this through a social impact bond. They are looking for external funding (A few £m from the National Lottery) to set up the scheme which will be aimed to reduce the number of looked after children days.
    Whilst Norfolk has a high number of children in care, the emphasis seems to be that they have got it wrong and want to reduce this number. However, the facts are that if a SW makes an assessment and determines that a child needs to be looked after, then they would seek agreement from their team manager, then the managers manager, and then they would have to present the case to a Panel of seniors to see if they agree with the assessment proposal. Most of these would then go through the court process leading to agreement of a Care Order. This has gone on for years in one form or another, so if they do have too many children in care it can hardly be blamed on the SW. I also understand that Norfolk has been trying to get its care numbers down for years but have been unsuccessful.
    I don’t doubt that some of this is due to the fact that early intervention hasn’t worked over years but again this should not be blamed on the hard working social workers, many who feel obliged to work excess hours on a regular basis to ensure they are doing what is necessary on their caseloads.
    Sadly, this process is being discussed amongst senior management and county councillors, and no doubt the Department for Education, but there is no discussion with practitioners.
    The fact that Norfolk have failed to significantly reduce care numbers over a number of years, despite increased focus on this, would indicate that most of the young people in care are there because they need it. Therefore, how will a private initiative reduce these numbers without cutting corners or undermining placements?
    What happened to stability, consistency and permanency for our looked after children? Also, how can anyone agree that it is a good idea to provide national lottery monies to enable a company to make a profit out of a statutory service when surely if there are monies available from the lottery it should be used for charitable purposes, not to subsidise a statutory service?
    I remember when they used to say that ‘every child matters’ but guess for the sake of profit, the mantra will be every empty care bed matters!

  8. londonboy November 24, 2017 at 9:44 am #

    It cannot happen. There has to be a change in policy.

  9. Anita Singh November 24, 2017 at 4:05 pm #

    Well the Tories have created profit making schemes for more of their cronies with just about every public sector service. There is a profit to be made out of the elderly and disabled who need social care, profits out of children in foster care and more profit from NHS treatment. So let’s go for gold and add Child Abuse to the list. Yes Child Abuse is to become a lucrative profit making business.

    And of course we can find quick fix schemes so that we can earn extra bonuses for the CEOs who will be whipping us into shape for brushing as much child abuse as we can under the carpet, as that will mean a pat on the back from our ever caring government for being very cost-effective and adding value for money.

    What a wonderful future we are creating for our children.

  10. June Thoburn November 26, 2017 at 10:42 am #

    Agree with all the above. And as a Norfolk resident, especially Julie L. As Ray J and Steve W say, whilst some of these ruses that purport to be ‘not for profit’ may appear to offer lower costs initially, once they have forced the Local authority and Charities provision out, prices have to go up to ensure profit. The ‘payment by results’ dabbling with Troubled Families was a gimmic that cost more in ‘accountability checking’ costs than it saved and ‘social impact bonds’ to provide services for the most vulnerable families are unproven and highly likely to do likewise in taking valuable finance,and staff resources away from helping families. Attempts to show ‘causation’ and cost saving in terms of reducing children in care are notoriously difficult and have rather a ‘magical thinking’ feel about them. Anif I remember rightly, DfE a little while back said that it was not endorsing the Lang Buisson report ( even though it wasted precious resources in funding it). Why no mention of this in the Comm Care article? Hopefully Comm Care will provide column inches for a follow up article giving voice to the colmments from readers.

  11. Mohammed November 26, 2017 at 12:46 pm #

    Capitalist Deception:
    Underfund public services…services reach breaking point…Gov’t says we need private investment…masses too busy working out how next untility bill will be paid to put up a fight…media fails to ask the right questions of our politicians (editors usually pals with Capitalists)…media busy bombarding masses with news of next big sale or sports match or where we can get the next loan …keeps us further distracted…

    Outcome: Privatisation of essential public services.

  12. paul Smart November 26, 2017 at 6:09 pm #

    The successful campaign to get the ‘innovation’ clause removed was always going to be a temporary stemming of the ideological tide.

    Private companies have a duty to ensure a profit for shareholders. Local authorities have been squeezed over recent years and many now have panels which say they are about provision, but are cash focused.

    This government had an ideological drive under Cameron (whatever happened to him? Written out of history) to privatise, sorry outsource, all public services by 2020. May continues this, although she is in charge of nothing.

    Social workers and others are having the professionalism stamped out of them in the name of ideology and profit. It really is that simple.

  13. Paul Bywaters November 27, 2017 at 10:49 am #

    Just a small point: there is no evidence as far as I can see that the success of the small Step Down scheme in Birmingham was a result of the method of funding.

  14. londonboy November 27, 2017 at 1:32 pm #

    One of the the most cynical phrases one hears bandied around to explain a complete failure to create workable policy mechanisms that address massive fragmentation of services is ‘local solutions to local problems’ yet these new service delivery vehicles are driven from the top -nothing local at all. They are imposed on LAs and noone asks families what they want.

    I’m not even sure the DfE is in favour of them anymore because they have realised these mechanisms are a distraction when it comes to working with families – the focus should be about quality of services not how they are delivered.

    My understanding is that at least one of the new trusts has a major hole in its accounts around VAT and discussions are being done at a national level about how to plug the gap. Too many short cuts and quick fixes by people in power who know nothing about the sector?

  15. Kathy Evans November 27, 2017 at 3:32 pm #

    Laing Buisson’s driving purpose is to sell ‘investment’ opportunities in private care and health companies….. and they could potentially (arguably, if there are any lawyers reading), be done for “misselling” those prospects given how regulalry they say the prospects are rosy, when in fact many ‘investors’ have been losing their shirts, and banks have been writing off care companies’ unrepayable debts.

    Of course it’s nauseating to see and read of a situation what most of us generally react to with deepfelt, emotional alarm (rising care numbers and plummetting public budgets) described as a lucrative business opportunity for others. I object to it, campaigned (time and time again!) to stop it…and will continue to do so unflinchingly. But don’t fall for their sales rhetoric either – the market prospects for profiteers are not good at all – they are desperate…and ultimately doomed. And if you want to know more about why, you can download my book chapter that explains it here

    • jane Tunstill November 28, 2017 at 1:27 pm #

      As though the concept of selling slabs of human misery for profit isn’t morally offensive enough, we all, as you say, (including this gruesome govt-) know it cant work in children’s services . We have their official acknowledgement after all. Let ‘s not forget the DfE pulled the ‘payment by results in Children’s Centres ‘ pilot , as not viable!

  16. Lou McIntosh December 1, 2017 at 4:35 pm #

    Agree with you all and thanks for making all these points so well. How can we mobilise against these potentially disastrous and unethical, ideologically driven structural shifts? The NHS is in equivalent danger.