UK has “sleepwalked” into a “dysfunctional” children’s social care system, CMA says

A year after it began its ‘market study’ into the children’s social care market, the CMA has condemned a “dysfunctional” system which leaves local authorities unable to get suitable placements for children.

The final report from the competitions watchdog found there is a shortage of appropriate places in children’s homes and with foster carers, meaning that some children are not getting the right care from their placement. Some children are also being placed too far away from where they previously lived or in placements that require them to be separated from their siblings.

This shortage also means that high prices are often being paid by local authorities, who are responsible for placing children in appropriate settings, with these costs picked up by taxpayers.

The CMA’s analysis finds that the main reason for this is the fragmented system by which services are commissioned, which means that local authorities are not able to leverage their role as the purchasers of placements or to plan properly for the future.

To address these issues, the watchdog is recommending that the UK Government, Scottish and Welsh Governments create or develop national and regional organisations that could support local authorities with their responsibilities in this sector. It says these would improve commissioning by carrying out and publishing national and regional analysis and providing local authorities and collective bodies with guidance and by supporting them to meet more placement needs in their local area.

The CMA says it is also concerned about the financial resilience of some private providers of children’s homes in England and Wales, particularly those financed through private equity. High levels of debt among these firms could lead to them getting into financial difficulties, which could impact the care provided to children.

Andrea Coscelli, Chief Executive of the CMA, said the UK has “sleepwalked into a dysfunctional children’s social care market.”

“This has left local authorities hamstrung in their efforts to find suitable and affordable placements in children’s homes or foster care.

“We have also identified issues with the financial stability of children’s home providers. It is important to manage the risk of children’s homes providers going bust and local authorities having to pick up the pieces.”

Coscelli said, with children’s social care currently being reviewed across the UK, the CMA wants to see its recommendations reflected in any changes to policy. “Local authorities cannot be left to face these challenges alone. There are several areas where national governments should make changes to address issues in the sector, including new financial oversight of providers and the development of new bodies to support local authorities with commissioning.”

The watchdog’s ‘study’ of the social care market came after newly appointed Chair of the Review of Children’s Social Care Josh MacAlister wrote to the body in January 2021, saying an investigation by the authority would “provide invaluable evidence to my review”.

However, despite finding concerns with the way the sector was running, the CMA decided not to proceed to a full market investigation into children’s social care provision.

The study looked at the provision of children’s social care in England, Scotland and Wales, across which there are over 100,000 looked-after children. The current annual cost for children’s social care services is around £5.7 billion in England, £680 million in Scotland and £350 million in Wales.

The CMA’s market study found that large private sector providers of fostering services and children homes appear to be making higher profits in England and Wales than the CMA would expect in a well-functioning market. This suggests that local authorities may be paying more for these services than they need to, particularly with fostering services, which are cheaper when run by local authorities.

The market study highlights and reflects the significant differences in the policy context for children’s social care between England, Scotland and Wales. The devolved administrations in Scotland and Wales have each committed to move away from the model of for-profit provision in children’s social care, and national organisations already exist in these nations to support local authorities. The recommendations the CMA makes will be relevant for each nation as they move through their own policy reform processes.

The Association of Directors of Children’s Services (ADCS) which gave evidence to the study, said the report from the watchdog reiterates several important issues that ADCS has been raising with Government for many years; specifically around the access and costs of suitable placements for children in care and rising profits for the largest providers.
ADCS President Charlotte Ramsden said, as the sole purchasers of placements, local authorities pay thousands of pounds a week for placements for children in their care, but providers can “pick and choose which referrals to accept and at what cost due to demand.”

“The report rightly highlights the important role national government needs to play in contributing to these challenges being addressed. Recommendations in respect of the increased role of local authorities in recruiting more foster carers and for government to support this are welcome, as is the identification of profit making in this crucial work.

“ADCS remains concerned about the growing levels of risk in the system due to rapid changes in ownership and considerable levels of borrowing and debts held by some private companies. Should any of these providers fail, no single local authority could step in, and it would be children who suffer the greatest consequence.

However, the ADCS President said they were “disappointed” that the watchdog did not go further in recommending limits on profits or prices.

“Profiteering through public money on the basis of meeting children’s needs is unacceptable.

“Children’s services have long operated in a mixed economy with a range of providers involved in the delivery of services locally, yet multi-million pound mergers between providers are becoming increasingly common as is private equity.

“ADCS has previously called for the introduction of legislation which prevents for-profit operations or as a minimum caps the level of fees chargeable in fostering and residential services. Whilst this cannot happen overnight and will take time to achieve, ADCS remains committed to the aspiration of moving to a not-for-profit model.”