Hazlewoods

Health and Care update: Children’s residential services in England

Published: Thursday 28 November 2019

In this article, the Hazlewoods Health and Care team review data obtained from local authorities in England relating to children’s residential care services and fee rates.

MARKET OVERVIEW
The Children’s Social Care Data in England 2017 to 2018 report published by Ofsted highlighted that, of the 12 million children in England in 2018, around 1% were either in care (73,000) or on a child protection plan (50,000).

The number of children in care has continued to increase over a number of years, putting pressure on local authorities to provide placements. Whilst the majority of these placements come in the form of foster arrangements, a number of children are placed within residential settings, including children’s homes, secure units and semi-independent living accommodation.

The number of children’s homes registered has increased each year since 2016. This has been driven by increases in the number of independent ’for-profit provisions, with the number of local authority-run provisions steadily decreasing over the same period. Of the provisions available, almost 90% are smaller units (1 to 6 beds), with the most common provision being 3-4 bed units.

Demand for children’s social care services is growing, largely due to a rising child population. That said, political pressures on the government continue to increase focus on permanent care through either adoption, special guardianship orders or long-term fostering, particularly given the relative low cost of such provisions in comparison to residential settings

FREEDOM OF INFORMATION REQUEST
We contacted local authorities requesting information under the Freedom of Information Act 2000 specifically focused around the following:

details of lowest, highest and average weekly rates paid to independent children’s residential care services for 2018/19;
the percentage increase in weekly rates to independent providers compared to the previous year; and
the number of looked after children as at 31 March 2018 and, of those, what proportion are looked after by independent providers.

The analysis included below looks at the responses to our requests in further detail.

Average weekly rates across the regions ranged between £3,600 and just over £4,000 and, rather surprisingly, the North East region came out on top whilst the South East region was lowest. At £3,734, London is perhaps lower
than might be expected, however the data used by the local authorities to collate responses may well include out-of-county placements. The recent LaingBuisson Children’s Services UK Market Report notes a clear shift from ‘in area’ to ‘out of area’ placements in recent years, with 43% of looked after children in residential care being placed outside of the relevant council area at 31 March 2018, reflecting a shortage of suitable places in the locality.

FEE INCREASES
Of the 141 responses received, 100 reported no increase in fee rates year-on-year, representing almost three-quarters of responding local authorities. Of the remaining 41 responses, 25 reported a year-on-year increase of up to 5%,whilst 8 responders reported increases exceeding 10%. The latter may, in part, be driven by interpretation of the data request, which may simply be determined as the overall increase in cost year-on-year, which may be a function of the majority of placements being made on a spot basis (and often short-term), meaning inflationary y increases are not necessarily automatic.

The data received does appear to indicate a certain level of traction as far as rate increases are concerned. However, considered against the ever increasing cost pressures resulting from wage inflation pensions and regulatory fees, it generally suggests a continued squeeze on provider margins in the majority of locations.

LOOKED AFTER CHILDREN
Across the West Midlands, 85% of looked after children are supported by independent providers, with the next highest region being Yorkshire & Humber at 71%. Conversely, only around a third of looked after children across the east of England are within independent settings.

Given the trends discussed previously, we would anticipate the proportion of looked after children in independent residential care to increase in the future.

The LaingBuisson report notes a strong upward trend in the volume of homes (rather than places) in the last two years as many independent sector providers have expanded to meet higher demand.

OUTLOOK
The trend for reductions in the number of available places within local authority settings looks set to continue. This, coupled with the dual pressures of an expanding population and increasing levels of intervention by local authorities, offers opportunities for independent providers to expand provision.

Those providers who have the flexibility to expand and innovate to meet those demands, whilst at the same time achieving scale and cost efficiencies will thrive.

An area which, according to LaingBuisson, offers significant scope for demand growth is extension of transitional care for young people into adulthood (labelled as ’Staying Close’ for residential care), with eight pilots having been launched for this in 2017 and 2018.