Those close to the challenges besetting children's services appeared before Parliament's Education Committee in the spring to delve into some of the function's thorniest issues.

The growing impact of children's services on local authority overspend pressures was highlighted – a problem also connected to the substantial growth in very high-cost children's care placements. John Pearce, president of the Association of Directors of Children's Services at the time, told the committee: ‘More than 90% of councils now have at least one child whose placement cost is £10,000 a week or more. The overall growth in those types of placements has been huge.'

He called for ‘a complete rebalancing of the market model in residential care, with much more sufficiency within local authority and not-for-profit provision'.

While the committee was not able to produce its intended report before the dissolution of Parliament, it wrote to children's minister David Johnston and strongly urged the next government in power to read the evidence given to the committee.

The letter said 85% of children's homes are owned by private companies, ‘and we have heard evidence that the largest providers of placements are "making materially higher profits, and charging materially higher prices" than would be expected in a well-functioning market'. It added that ‘whilst the committee understands the need for businesses to make profit, action must be taken to prevent excess profiteering made from the care of children'.

Local authorities are issuing section 114 notices at an alarming rate, the letter continued, ‘with the cost of children's social care overtaking adult's social care in many areas'. It concluded: ‘Measures must be taken to strengthen the local authority position, and to encourage in-house growth of children's services.'

Speaking to The MJ, Hampshire CC's deputy director of children's services Steph How said providers were often pushing for and getting staff ratios that are in excess of the council's own assessed needs for a child: ‘We will often have a provider dictate to us what they will deliver for a child which can be incongruent to our assessment of need. We are left with no option. They will say we will take this child if you agree to fund three to one provision, for example. Now our assessed need may well be that we don't require three to one provision.'

How can the burgeoning costs be tackled? Director of children's services at Hampshire CC Stuart Ashley was one of the people who gave evidence to the parliamentary inquiry. He told The MJ he believes there is a role for the voluntary sector. ‘I'd like to see the voluntary sector come into partnership with local authorities more – people like Barnardos coming back into the care market, because they'd do so for the right reasons. They have that moral imperative.'

The children are in the care of the state and it is wrong for the state to allow profit to come from that, he believes. ‘These are children, they're not commodities. These are the most vulnerable and, sadly at times, some of the most damaged children in society. We shouldn't allow profit from it.'

He added: ‘If I can't have what I want, can't we put a sensible cap on profit that allows a vibrant marketplace but not exploitation of local authorities? It's not reasonable to pay £30-40,000 per week for a child to be cared for, but we know that's what happens in exceptional cases. Those are the sort of prices that get charged. That to me is unjustifiable.'

Last week, in its Manifesto for Counties, the County Councils' Network's (CCN) key asks for the political parties in the run up to polling day (see Analysis, p10-11) included a call for price caps and regulation around ‘surge pricing'. And over the last few years a flurry of reports have highlighted significant problems in the functioning of the placements market. The Competition and Markets Authority's (CMA) 2022 report recommended improving commissioning, reviewing regulatory and planning requirements and improving market oversight.

Leader of Kent CC Roger Gough is children's services spokesperson for the CCN. He said children in care spending for Kent CC is up 51.8% since 2019-20 through to 2023-24.

‘And our budget for the current year assumes another 27.7% increase. The costs of residential, even though it's a relatively small percentage of the children, is up 76.5%, well ahead of growth in fostering [costs]. It's a big, big increase.'

What could the incoming Government do to sort out this seemingly intractable problem? Speaking to The MJ ahead of the CCN's manifesto call for price caps, Gough said: ‘There is no single magic solution. Local authorities too are looking more to their own residential provision and getting back into that sector a bit. I think there is a case for that. You can't have the old style very large children's homes. That's not something Ofsted would support.'

He added: ‘You are talking about much more of a multiplicity of provision. I think a degree of building some of that back in is needed. I think what is also required is a very concerted approach to the needs of some of these very high-cost young people and that may involve a whole number of agencies, some national, some local.

He noted the relevant findings in a series of reports, including the CMA's, along with ‘some of the most serious case reviews', the 2022 independent review of children's social care by Josh MacAlister, and the Government's response Stable Homes Built on Love.

The problem is a lack of funding, he points out. ‘Resourcing is on a much smaller scale than that [called for] in the MacAlister review and elsewhere, so probably you will only make progress relatively slowly. You could speed some of that up and resource it further. I don't think it's a case of a wholly new direction.'

He said he is ‘probably less reflexively critical' of Regional Care Cooperatives (RCCs) – a model for providing homes for children where responsibility for planning, commissioning and delivery sits at regional level – than some in local government.

Referencing RCCs, director of local government at Newton Europe Luke Tregidgo said: ‘The work that was done for Stable Homes Built on Love, and the work by the CMA, talked about the idea of economies of scale and that if we purchase things at a larger scale it will drive benefits. There is obviously an economic logic to that. But I don't think those things impact that leverage. It isn't going to change the fact that you are trying to house children at the point of maximum crisis, and at very short notice. So think about how your in-house provision helps you to try to put a buffer into the market.'

He said even those authorities who have a good mix of types of provision will often struggle with the price they are paying, particularly recently.

‘The research has highlighted the almost exponential growth in unit costs, way above inflation.'

What approaches to tackling escalating prices are showing promise? He said one strategy is to focus on foster carer retention. ‘There is a national challenge and crisis around foster care that is a real problem. In simple terms the number of people leaving foster care is massively outstripping the number of carers they are recruiting. One authority was losing 31 foster carers a year prior to us working together. We halved the number of deregistrations from 31 to 15. Newton Europe worked with the council to work out how to take bespoke and wrap-around support to those individual carers and what is it they need to continue to support the children.'

To aid foster carer recruitment, Tregidgo said Newton Europe can bring ‘an approach about getting avenues to the most effective market engagement, because we often find the agencies are beating us on things like search engine optimisation and digital and online presence – particularly on things like timeliness of response [to enquiries from prospective foster parents]'.

Very expensive placements are often for adolescent children. Tregidgo said there is a view that questions if these children should be brought into care at all. ‘Does it actually safeguard them? Does bringing them into care and depriving them of their liberty keep them any safer or does it exacerbate the situation?' Finally, he highlights the importance of negotiating with providers. ‘There was one authority where we just weren't really negotiating. We only negotiated 14% of the time when a provider comes back with a price. Every time we did negotiate we got a discount, and that average discount was 8%.'

He continued: ‘Often negotiating teams have been cut back, or sometimes centralised, so some of that children's experience has been lost. There is over-provision of support. There's sometimes a disconnect between the needs of the young person and what we're actually procuring to support those children. We are seeing things that can be done to address some of that.'

Finally, the Education Committee's recent letter to the minister puts the focus firmly on managing demand at the ‘front door' – pointing out early intervention has fallen by £3.7bn since 2010-11. It added: ‘This trend must be reversed in order to prevent rising numbers of children entering the care system in future.' The care placements costs conundrum will not be solved without a whole system approach.

Demand and capacity of homes for children in care

• Semi-independent living is an increasingly common home type used by local authorities to accommodate children and young people
• 1in 5 of all children accommodated in a local authority-sourced home live in semi-independent living
• More than one-third of 16-22-year-olds accommodated in a local authority sourced home live in semi-independent living.
• From March 2019 to March 2022, the number of all children in care and care leavers has risen by 8%; while the number of semi-independent living beds has grown by 21.3%.

The growth in semi-independent living is driven by:

• An 18.5% increase in the use of semi-independent living to house separated migrant children.
• A 4.3% increase in the use of semi-independent living to house 16- and 17-year-old non-migrant children.
• A 1.5% decrease in the use of semi-independent living to house under-16-year-olds and 18-22-year-old non-migrants.

Source: Demand and capacity of homes for children in care: County Councils Network, London Innovation and Improvement Alliance and Newton Europe – July 2023 report