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Cllr Alex Dale is the Cabinet Member for Children’s Services on Derbyshire County Council.

“£2.3million!”

I couldn’t believe my ears.

“No I’m really serious. £2.3million!”

These are the words of my Director of Children’s Services during a recent conversation describing… wait for it… a recent quote she had received for the annual cost of a single residential care placement for a single young person – the highest she had ever received, but entirely indicative of an environment where these costs are continuing to rise. (You’ll be pleased to know we didn’t accept the quote and found an alternative).

As eye wateringly high as that figure is, (a National-Lottery-jackpot-esque amount that I suspect most families could live comfortably on for decades), it probably won’t come as a great surprise to any readers who’ve been following the emerging national crisis within the children’s care placement market.

Indeed, 2020 reports from the National Centre for Excellence in Residential Childcare suggest that the average weekly cost of placements at private and voluntary sector settings has risen by 40 per cent since 2013. Since then, Covid has only served to heighten the problem, with even more pressure on Councils to find placements.

Why is this happening I hear you ask? The factors bringing about this distortion in the market are wide-ranging and tantamount to a perfect storm. Rising numbers of admissions to care outstripping discharges has meant that virtually all local authorities across the country have seen a significant rise in the number of children they look after (in Derbyshire, since 2017, we’ve seen a rise from around 600 to over 900).

The generation of in-house foster and residential placements by Councils has not kept pace at all, meaning there is increased competition between local authorities to find placements and a greater need for non-planned “spot purchasing” which comes at a higher premium.

It’s not surprising that the Children’s Commissioner for England has reported that private residential and fostering placements have accounted for 73 per cent of the growth in the number of children in care between 2011 and 2019.

In addition, we’re seeing the complexity of need rising in terms of mental health, special educational needs, disabilities, and other vulnerabilities, all adding to the cost of the provision. Secure mental health placements for young people who demonstrate the most serious concerns are rarer than gold dust to local authorities, with a waiting list of around 50 at any given time.

What impact is this having on Councils? Well, as an illustrative example, in Derbyshire we’ve increased the budget for Children’s Services by about £30 million since we took control in 2017 (from a very low base that we inherited), but that hasn’t stopped us overspending by several million pounds in each of the past four years.

But, as the Local Government Association reports, our experience is far from unique: “despite increasing their budgets for children’s services by diverting funds from other areas, councils are still overspending due to soaring demand for support which is likely to increase further as the long-term impacts of the pandemic become clearer”. They predict that future cost pressures in children’s social care for Councils will increase by around £600million each year until 2024/25.

Now pounds, shillings and pence will always matter to local Councils, but far more important is the experience of children in care themselves. And with the increased costs of private placements, there’s very little evidence of better levels of support or care. There will, of course, always be a need for higher cost residential care for those with more complex needs or increased vulnerabilities, but for most young people, the ideal placement is in the loving family home of an experienced foster carer, where they will thrive. But due to the perfect storm described above, more children who could easily and be far better placed in foster care are ending up in residential.

As Conservatives, we believe in the undeniable power of free markets with fair competition as a force for progress in the world. But as Conservatives, we also recognise that markets do sometimes fail, to the detriment of fair competition. In these circumstances, it is the duty of the state to intervene and regulate.

A recent interim report by the Competition and Markets Authority (CMA) found that because of the time pressures councils face, “their position in the market is inherently weak”. Indeed, their Chief Executive has said that “we are concerned this is a failing system, with children not being placed in the right homes while providers are being allowed to charge high prices and make big profits.”

The LGA has also reported on the profit issue, stating that the six largest independent providers of placements made a profit of £219 million last year and that some providers are achieving more than 20 per cent on their income.

And who’s paying for it? Well, all of us. Through our taxes. This is in essence a monopsony, where the state (aka the taxpayer), via Councils, is the only buyer.

It is welcome that the Government has taken some steps to try to understand this issue, including the commencement of a national Care Review, which then instigated the investigation currently ongoing by the CMA.

But we cannot afford to wait for reporting findings. We need action now.

What then is the answer? I can’t profess to know all of the solutions and I’m sure far greater minds than my own could tackle this problem. But for me, there are a few key principles and factors that must guide any response:

  • This requires reform of the market, not just more money throwing at the problem – because putting more cash against it is what Councils have been doing for the past few years and it’s not solving the problem.
  • We have to be bold and courageous when finding solutions – all options need to be on the table and it’s likely to need a combination of solutions. There will always be a place for private providers in the marketplace and I’d never seek to question that. But as anti-Conservative as it may sound, some consideration of a profit or charges cap on private providers must form part of the discussion.
  • A national drive on foster carer recruitment is essential. Foster carers are utterly amazing, but we need more of them. Lots. And we need the whole state working together to recruit them, rather than Councils fighting it out between them and against the private sector too.

Like many others, I welcomed the appointment of Nadhim Zahawi as our new Education Secretary. We need him now to grab this bull by the horns with a reforming zeal not seen for some time in that Department. Before it’s too late!