In the Budget the new Government confirmed its commitment to children's social care reform, with plans to be set out in next year's Spending Review. This is welcome news for local authorities – last year the County Councils Network (CCN) highlighted that for the first-time children's services had become the largest area of overspends within council budgets.

This week, the CCN and IMPOWER have released a new report focused on the myriad challenges within the system, what is driving them, what can be done to address them, and, crucially, the consequences of not doing so. 

It finds that last year councils across England spent £6.6bn on looked-after children, a record amount, driven by the rapidly increasing costs in provision of residential care. If nothing changes, new analysis in the report shows the numbers of children entering residential homes could increase to over 22,000 by 2030, with councils spending £12bn a year on looked-after children by the end of the decade. 

Worse still, this record expenditure has not yielded better outcomes. Long-term life chances for care leavers across education, health and employment are far poorer than the rest of the population. Tellingly, no single council surveyed as part of this work felt their present expenditure on residential care represented good value for money, a position supported by the report's key finding of little correlation between children's needs and the cost of their care. 

There are very different views in the sector around the drivers of these challenges and potential solutions. Some suggest that measures such as building more in-house residential capacity or the eradication of ‘profit' provide stand-alone solutions. Others believe that the answer lies in smarter commissioning approaches and market management. The conclusion of this report is that there is no single ‘magic bullet' and many different parts of the system require reform at both a national and local level. 

This report suggests more focus is needed on developing partnerships with providers and health agencies with a long-term focus, sharing risk and investment and incentivising improvements. Key to this are approaches which shift the focus onto the needs and strengths of young people. Too often the system currently incentivises ‘risk aversion' from councils and providers alike – putting in place contingencies for the worst-case scenario such as multiple staff to child ratios which do not correlate with children's needs and strengths, while generating substantially more cost.

Northamptonshire's Circle to Success programme has used child-level profiling to focus on the needs and strengths of over 700 children and young people. This has allowed frontline teams to work with young people to make changes to care (such as moving into foster homes from residential settings) and to match them with the right care and support. Over 22 months this work has led to positive changes for over 70 young people and a cost reduction of over £7m. 

Readers of The MJ with a particularly good memory may also recall that last year a trailblazing partnership called Homes and Horizons – which brings together local government, health and care providers to deliver a new model for young people in care – this won the ‘Innovation in Partnerships' category at the magazine's annual awards.

The project is a 10-year partnership between Somerset Council, Somerset NHS Foundation Trust, and a not-for-profit provider focused on supporting children and young people with complex needs requiring residential care. Somerset Council provide residential homes for Homes2Inspire to manage, and dedicated child and adolescent mental health service and educational psychology teams providing dedicated wraparound support to young people living in these homes.

Some other councils are adopting a similar approach, working alongside health, education, and providers to establish long-term relationships which offer blended care, geared towards supporting young people out of crisis care as safely and as quickly as possible. 

But for many others relationships with providers and partners have a very short-term and transactional focus, in a context of perpetual crisis.

That is why a key recommendation from our report is for government to invest the £2.6bn recommended in the 2022 Independent Review of Children's Social Care, which would allow councils to focus on keeping more families together and preventing the need for intervention from statutory services. Other key recommendations set out in this report:

• A phased transition towards all young people being cared for in their local area or region, (where safe and appropriate) with legislative and regulatory changes in support.

• A renewed national focus on foster carer recruitment and retention and support to kinship carers to reduce the current reliance on residential care and give more young people the chance to live with families.

• Changes to regulation and legislation at a national level to support the shift proposed, including a focus on excess profits the ending of placements at short notice.

• A national banding system linking levels and types of need and care costs, allowing a consistent assessment of the ‘value' of care at a local, regional and national level.

With a new government in place, there is a real chance to mark 2025 as a turning point for children's services. The CCN is clear that reform must be outlined and implemented within the next 18 months, and our report shows what is required both nationally and locally to turn the system sustainable and more importantly, improve the lives of young people. 

Dominic Luscombe, Director, IMPOWER and Jonathan Rallings, Senior Policy Advisor, County Councils Network