Written evidence submitted by The County Councils Network (CCH0005)

1. The County Councils Network (CCN) is the voice of England’s counties, which are some of the largest councils in the country. A cross-party organisation, CCN develops policy, commissions research, and presents evidence-based solutions nationally on behalf of the largest grouping of local authorities in England.
2. In total, the 20 county councils and 17 unitary councils that make up CCN represent 26 million residents, and deliver high-quality services that matter the most to local communities including children’s services.
3. CCN and its members have long raised concerns about the financial stability of children’s care homes, and welcome this intervention from the National Audit Office and the Public Accounts Committee. We were pleased that the Committee has mad a call for evidence, and below we provide details of research we have published in recent year which we hope will be of use to the Committee.

Rising cost of Children’s Care Placements

4. The soaring cost of children’s care placements has had a significant impact on local authority finances over the past decade.  In November 2023, CCN’s annual submission to government ahead of the Budget contained the results of a survey showing that the biggest pressure on CCN member councils’ spending was now from children’s services.  At that time councils were forecasting an in-year overspend of £639m across the year – an average of £16m per council. Almost half (45%) of overspends were the result of rising costs and demand in children’s services, accounting for £319m of the projected overspend, higher even than for adult social care (25%) which has traditionally been a higher source of concern and attention.[1]
5. Whilst overspends in children’s services have become more common in recent years, the scale of the projected overspends since 2023 is unprecedented. They are being driven by a combination of growing demand for statutory care placements, a lack of suitable accommodation, and escalating care fees within a broken provider market.   In 2022 CCN’s work with Newton on the report The Future Of Children’s Social Care – a study which helped to inform the findings of the Independent Review of Children’s Social Care – showed how the percentage of council budgets spent on statutory services for children in care had risen from 42% to 51% between 2014-15 and 2019-20, with that report predicting at the time that this would continue to rise to nearly 60% across the 2020s.[2]
6. Subsequently these pressures in children’s services have continued to mount and are set to grow further over the course of the parliament.  Projections calculated for CCN in autumn 2024 by Pixel Management based on data from PricewaterhouseCoopers LLP (PwC), showed that children’s services spending in England could increase by £8.4bn from 2022/3 to 2029/30 - £12.8bn to £21.2bn - representing an increase of 65.8%. CCN authorities could face a £3.3bn increase in spending need over the same period, representing growth of 66.6%.[3]
7. Specifically, spending on children looked after is set to rise at even greater rate over this time from £6.6bn to £12bn (82%).[4]  Much of this spending need is being driven by increases in the numbers of children in care, which have been steadily rising over the past decade.  In order to balance their budgets whilst keeping pace with the increased demand, councils have been forced to reduce non-statutory services – mainly those services providing prevention and early intervention.  This trend has been particularly felt by councils serving county areas: in a 2020 report, Children’s Services Funding and Early Intervention, CCN highlighted how between 2015 and 2020 total local authority grant funding for children’s social care declined by over 35% in CCN member authority areas, compared to just over a quarter across England.[5]
8. These projections are backed up by more recent anecdotal reporting from our member councils.  One county authority which regularly tracks of the cost of its twenty most expensive residential care placements as a barometer of its spending, showed a 157% rise in its highest cost placement (£11,000 to £28,300) in just three years between 2022 and 2025.  Even more concerningly, the lowest cost of these twenty had risen by an even steeper 178%, whilst the total number of residential placements needed by the county had more than doubled over the same time.  Other CCN councils have confirmed that they have been experiencing similar trends.

Cost of Residential Care

9. Whilst the majority of children in the care system are placed in foster care, the most sizeable cost for local authorities is for residential care placements such as those in children’s homes, semi-independent placements or secure units.  CCN and IMPOWER’s 2024 report, The Way We Care, showed that since 2019 as the number of children in care overall rose by 7%, the numbers in these types of residential placement has risen by 45%.  This is partly because recruitment of foster carers and adopters has not kept pace with the growth of looked after children (although there has been a slight rise in kinship carers), but also partly due to the rising complexity in the needs of children coming into care. IMPOWER’s projections suggest that on current trends by 2029/30 as many as 23% of looked after children may be in residential care.[6]   Without this capacity in children’s homes the sector would be yet more reliant on other forms of care and accommodation, including unregulated provision.
10. This trend is important for two reasons:

• children placed in residential care experience poorer outcomes than the wider cohort of looked after children on average;
• residential care costs substantially more on average than other types of placement and is a prime driver of the pressures on local authority children’s services budgets.

11. The Way We Care showed that CCN members have experienced above inflation increases in the unit costs of independently provided care placements, in particular residential homes. Since 2019, the average cost of residential placements for children in care has risen by 55%: from £3,935 per child per week to £6,108 – over £300,000 per year.[7]  A key driver of these rising costs has simply been supply and demand.  The rapid growth of numbers of children needing care placements has led to a scarcity of available places.  This has meant there is extensive competition between local authorities for those that are available, further driving up the price.
12. The rapid growth in demand for care overall has outstripped supply, compounding the scarcity of available places, leading to competition across local authorities for care and placements which often need to be sourced at greater distance from the child’s home.
13. The Way We Care also found that both the absolute and proportional numbers of children being sent over 20 miles to access a placement increased between 2019 and 2023.[8]  This is likely to be a further compounding factor for the outcomes for children placed in residential care. Children living at a distance from their home – and indeed local authority – are more likely to experience disruption to their schooling, and experience more difficulties in keeping friends and contact with their wider families, impacting their life chances.

Quality vs Cost and Regional Care Co-operatives

14. In a survey of CCN’s member authorities for the Way We Care report there was a ’consistent view’ that as costs have risen, while outcomes for children remain poor, spend on residential care increasingly does not represent value for money overall.   This is supported by a separate CCN and IMPOWER study, Valuing Care: Using data to improve children and young people’s lives, which showed there is currently little correlation between what councils pay for a children’s home placement and the level and complexity of children’s needs.[9]
15. Crucially this can lead to local authorities ‘overpaying’ for a placement where there is greater support included in the cost than the child’s needs would suggest are required.  The report makes a number of suggestions for how local authorities can better use data to improve their commissioning from providers and ensure children are located in the right placement for their needs.
16. The previous Government’s solution to market dysfunction, which has subsequently been continued by the new Government, has been to pilot the development of Regional Care Co-operatives (RCC).  CCN is supportive of this initiative in principle and welcomes the progress being made by the Greater Manchester RCC.  However, the early feedback from our authorities involved in the fledgling South East RCC suggest that getting the boundaries right for collaboration is important.  The South East RCC brings together authorities from across the south coast, but does not include London, even though the main competition for placements in areas such as Kent, for example, is more likely to be from the London Boroughs of Bromley or Bexley rather than Brighton or West Sussex.
17. This may compound a problem in the present system that disadvantages CCN’s member authorities, which may often have sufficient placements for their own looked after children within their local authority, but are often forced to send these children further away from home due to being outbid by other neighbouring authorities which do not have such sufficiency.  This is a particular problem for authorities neighbouring London and several of England’s larger cities, where higher property prices act as a deterrent to independent providers locating children’s homes in these more urban areas.
18. As such the Home Counties in particular often find this inflates the cost of their local provision as they are competing for placements with London Boroughs which at present receive higher levels of funding for their children’s services through existing local government funding mechanisms.  Additionally this acts as a disincentive for providers to sign longer term funding contracts with their own local authorities whilst demand – and therefore competition – remains high.
19. Nonetheless the RCC model so far shows promise and it is also hoped that it will be able to not only address market deficiencies, but also act as a closer bridge between not only local authorities and providers, but also other co-commissioning partners such as health.

Excessive Profit

20. CCN fully accepts the evidence collated by the LGA in 2023 showing that there is c£300m of “excessive profit” being made from the market by some providers.[10]  This is an issue that needs to be addressed as soon as possible, and CCN’s views on the Government’s proposals to do this are set out below.
21. However, we would also underline that this is only a small proportion of total council children’s social care budgets, which in the same year represented £12.6bn, with £6.6bn of this spent on looked after children.  Eliminating this entire ‘excess’ profit would not significantly alter the underlying problems of high demand and low supply during a period where numbers of children in the care system sit at record highs.  It is important that fundamental structural reform of the care systems is accompanied by more targeted measures at addressing specific aspects of market dysfunction.
22. CCN supports the measures set out in Keeping Children Safe, Helping Families Thrive designed to tackle dysfunction in the children’s market.[11]  However, we would urge restraint for when the proposed ‘price gap’ is employed.  Moving too quickly may lead to providers exiting the market and have an impact on placement availability and ultimately, cost.  From this angle CCN believes the Government has got the balance about right in having the ‘stick’ of price caps held in reserve, but offering the space for other broader reforms to make the difference first.
23. Additionally, though, any moves to address market unsustainability needs to include supporting measures to rebalance the system away from ‘late’ intervention and towards early help, as identified earlier in this response. CCN welcomed the £270m Children’s Services Prevention Grant announced late last year, but this must be seen as a ‘down payment’ by the Govt on the investment on the £2.6bn recommended by Josh McAlister’s Independent Commission, which is what will facilitate real change.
24. Measures to achieve such change should include Foster Carer Recruitment, increased use of Kinship Care arrangements, and improved commissioning practice, all of which we are pleased to see are incorporated into the Government’s broad policy agenda.  We would also welcome more focus on and investment in reunification approaches that can get children out of care and back with their families as soon as possible where it is safe to do so.

Registration and Regulatory Issues

25. One contributory factor to increasing cost is the prevention, reduction or delay of children’s home provision arising from the registration process.  This includes limited access to guidance, inflexible rules around the registration process (e.g. a manager must be in-situ before an application process can begin), and additional difficulties in establishing more bespoke provision that doesn’t fit a standard template (e.g. ‘blended’ care settings).
26. Additionally, the planning process can provide particular challenges with disproportionate requirements and bureaucracy adding to delays in development.   Planning can be a particular problem for children’s services teams at CCN’s county council members operating in two-tier areas, where the local authority planning function is situated separately in the lower-tier District council.
27. In a survey of CCN Member Councils conducted for The Way We Care, the current inspection regime was cited as one of the top three factors driving rising independent residential care costs.  In particular:

• the needs of individual children are not always fully considered in judgement, which drives risk averse behaviours by providers, weighting regulatory risk over the best interests of children and young people;
• conversely there are no consequences from inspection where a provider consistently ends placements in a disorderly or inappropriate manner (often due to the risk aversion mentioned above);
• the rigidity of definition around the role of children’s homes, precluding the delivery of bespoke, needs-led ‘blended care’ solutions.

Conclusion

28. In conclusion, the accelerating cost of children’s care placements is an issue which is placing ever more pressure on local authorities. The Government’s moves to help address the increasing dysfunction in the market has been welcome, but the pace of change needs to be faster given the extent to which the problem is growing.  The Way We Care included the following policy recommendations for national government to help address this issue (with more detail on each contained in the full report, which is available to download from CCN’s website)[12]:             

• Provide the full £2.6bn investment in early intervention and prevention recommended by the Independent Commission for Children’s Social Care;
• Deliver a comprehensive modernisation of the regulatory regime, a review of children’s homes registration, and a review of foster care sufficiency;
• Provider funding and support to local authorities on forecasting, sufficiency planning, and market-shaping;
• Establish a national banding system and needs codification relating to children’s care placements, formally linking levels of need, provision, and cost;
• Establish a requirement for all children and young people to be cared for within their local area or region;
• Develop a national standard for purchasing frameworks;
• Establish a national taskforce with NHS, CQC and DfE leadership to improve the whole-system approach to children with complex needs.