Councils across England face insolvency without national rules to regulate mounting care placement costs, the Association of Directors of Children’s Services’ (ADCS) president has warned.
John Pearce told Community Care that these should include a calculated fair cost for care and rules on provider behaviour, in an interview at this year’s National Children and Adult Services Conference (NCASC).
Though he said the idea had not yet gained traction with the Department for Education, children’s minister David Johnston subsequently told NCASC that the DfE may be open to the idea.
Pearce’s comments came on the day that Nottingham council declared that it would not be able to set a balanced budget this year, citing children’s social care demand and costs as a cause.
At the same time, the Local Government Association released research showing authorities as a whole were on course to exceed their approximately £4.7bn care placement budgets by £680m (14%), following a similar overspend last year.
The association’s report, based on a survey of 124 of the 153 councils, also showed the proportion of placements costing £10,000 a week or more rose from 0.2% of the total in 2018-19 to 1.6% in 2022-23.
Factors driving placement costs
The situation is the result of councils lacking sufficient placements of the right kind in the right places to meet children’s needs. This has been driven by factors including:
- Fifteen consecutive year-on-year rises in the care population.
- More and more children with complex needs going into care and requiring more intensive provision, such as solo placements, high staff ratios or, increasingly, deprivation of their liberty.
- Reductions in the numbers of secure children’s home and inpatient mental health beds, removing alternative options for these children.
- A fall in the number of mainstream fostering households.
- A mismatch between the location of children’s homes and areas of need.
Councils’ lack of choice over placements has pushed up prices, particularly for children’s homes.
While the number of registered places in homes rose by 11% from 2016-22 (source: Ofsted), council spending on private providers – who run the vast majority – grew by 105% over this period (source: Revolution Consulting).
Government response criticised
In response, the government has provided councils with £259m from 2022-25 to deliver more children’s home places and adopted proposals from the Independent Review of Children’s Social Care to test the creation of regional care co-operatives (RCC).
These would take over individual councils’ responsibilities for commissioning and providing placements, in order to pool expertise and planning capacity and give local government greater scope to dictate terms to providers.
However, the ADCS has warned that there is “no evidence” that RCCs would address pressures on the placement market, creating them would be “costly and time consuming” and they risked triggering a mass exist of providers.
In his speech to the NCASC yesterday, Pearce said there was no DfE plan to tackle the “unmanageable costs of children’s
social care homes”.
Risk of widespread council insolvency
Speaking later to Community Care, he said: “We’ve been very clear around our concerns about regional care co-operatives – but even if you set them aside, they are going to take five years [to set up] by which time no local authority in the country will be financially solvent.”
Those comments came as Nottingham council issued a section 114 notice, stating that it could not meet its legal obligation to deliver a balanced budget in 2023-24, with the volume and complexity of children’s social care packages a key driver.
As a result, it must cease new spending commitments and will need to come up with a plan to bring its budget into balance. This will likely involve further government intervention, to which it is already subject due to past financial problems.
Need for national rules on care placements
Pearce said the DfE should follow the action it had taken in relation to agency social work by setting national rules to govern the market.
This should include open-book accounting – where providers seeking contracts show commissioners their costings and profit calculations – and the modelling of a fair cost of care, providing the basis for price caps.
He also said there should be rules around provider behaviour, citing the practice of services charging for empty beds in homes as one he would like to end. Pearce added:
We need to move away from the Wild West, where the providers can do what they want.”
He said that while the ADCS had put forward proposals along these lines to the DfE, “to date none of these have been taken forward”.
Minister holds open possibility of action
However, Johnston subsequently told the NCASC that the DfE was looking into what action it could take in relation to placement costs.
“We are very aware of the pressures that the cost of children’s social care are putting on you at the moment,” he said.
“We are looking at how the market operates, the extent to which profiteering is taking place and what we can do about that and looking at, at a minimum, what standards we can have in the market.”
He added: “I can’t give you lots of details now. I have a team who is looking at this issue and trying to find out exactly what is going on.
“We’ve all got our examples of very expensive placements and not bearing any relation to the cost of those placements. So watch this space as we know this is an area that needs our focus.”
Rising number of high-cost placements
In its report, the LGA said high-cost placements (over £10,000 a week) had become increasingly prevalent, with 91% of authorities saying they had at least one in 2022-23, up from 23% in 2018-19.
The key drivers of high-cost placements were a lack of choice of placement – cited by 98% of authorities – children exhibiting “challenging behaviours” (93%) and children having complex or significant mental health issues (92%).
On behalf of providers, the Children’s Home Association (CHA) said: “The operational costs for children’s residential care have increased at an unprecedented level over the last four years.
‘Multiple factors’ behind cost rise – provider body
“There are multiple factors that have impacted on the cost of providing children’s residential care as with all organisations. Inflation on supplies and salaries have been significant.
“Both the CHA and the LGA have made the government aware of the impact of the lack of sufficient funding in this sector.
“Unless this lack of funding is addressed it will not be possible to address the issues impacting both the cost, quality and availability of placements for children and young people in need of residential care.”
Children’s social care reforms
In its response to the LGA report, the DfE pointed to its children’s social care reform agenda, set out earlier this year in the Stable Homes, Built on Love paper.
“Our ambitious reforms to children’s social care will focus on more early support for families, reducing the need for crisis response at a later stage, with plans backed by £200m to test and refine our approach,” said a spokesperson.
“We are also investing £259m to support local authorities to create more placements for children in high-quality and safe homes.”