Costs of new inspection regime for children in care ‘could be 9 times higher than funding’

The costs of accommodating teenagers in care in semi-independent housing could be over nine times more than the government has committed up to 2026 to fund new regulations, while thousands of care beds could be withdrawn, a new report reveals.

Ofsted will begin regulating semi-independent living homes for 16 and 17-year-old teenagers in care against new national standards, which will bring them in line with other types of accommodation for children in care. The regulatory regime will begin in October 2023.

The County Councils Network (CCN) and London Innovation and Improvement Alliance (LiiA), which produced the report and commissioned Newton to gather and analyse the evidence, said that they both support the introduction of standards.

However, they are concerned the costs of this new regulatory regime will be passed onto councils, placing further pressure on their children’s services budgets, while some councils could find it harder to place vulnerable children because the regulations could result in a lack of local capacity.

Newton – the authors of the report – analysed the national impact of the introduction of these regulations, which revealed:

• In some parts of the country, providers could leave the market due to the regulations and extra costs involved, such as registration and recruiting or upskilling staff with relevant qualifications. This could lead to a shortage of places in some areas, which could also drive up costs for councils and mean they have to place children further afield or in a different setting.
• According to a survey of providers of semi-independent living accommodation for the report, almost one in five – 19% – of existing beds will not be registered due to the new regulatory system being introduced. This would result in a fall in capacity of 3,676 beds across England based on the last national reported data.
• For those providers that intend to register their beds, over nine in ten plan on raising their prices to local authorities as a direct response to cover the additional costs of regulation. Evidence gathered from councils suggests that prices could rise between 15-30% over the next three years.
• As a result of these price increases, rising demand and indirect impacts of regulation on the market, Newton estimates the costs of the reforms could be nine times current funding allocations by 2026/27. Over the next three years government have allocated £41m per year. However, by 2026/27 councils will be spending £368m per year more than they currently do, even after accounting for government funding.
• The report also finds that for over half of over 16s currently in semi-independent living, this is not the best type of home to suit their needs. However, a lack of availability means that there are challenges for local authorities in securing more suitable alternatives (usually independent housing).

The CCN and LiiA warn that with costs being passed on to councils by providers, this will push more local authorities to overspend on their children in care budgets or be forced to cut services elsewhere to make up the shortfall. Many councils’ children’s services budgets have already reached breaking point, with almost 100 local authorities overspending on children in care in 2021/22.

Councils are therefore calling on the government to urgently provide more funding to local authorities so their children’s services budgets are not further stretched.

The number of young people in semi-independent living housing has increased markedly over the last five years, more than any other type of children’s provision. These settings were not centrally regulated until this year, unlike children’s homes or foster homes. This is partly as they were formerly a specialist type of home catering for the specific needs of certain young people, said the CCN. However, they now account for 20% of all children in care and care leavers living in a local authority sourced home, with costs rising by a fifth over the last three years.

Cllr Keith Glazier, Children’s Services Spokesperson for the County Councils Network, said:

“The introduction of a central inspection regime should allay concerns that children in care were in a two-tier system where young people were regulated up to the age of 16 and those older were not. But this new regulation has come at a significant cost to providers, who are looking to pass the cost onto local authorities.

Councils cannot afford this and, this will push many to breaking point at a time when other reforms to the children’s social care system are being introduced. Government should therefore fully fund this new inspection regime – the shortfall cannot be made up from vital local services.

At the same time, the report contains evidence that as many as one in five beds could be withdrawn by providers because of these incoming regulations. This will create local shortages in accommodation and could result in more children being placed in areas far from where they have grown up. We need an urgent solution to this issue, and we want to work with government and providers over the coming months to preserve as many beds as possible.

The report also allows us in local government to reflect on our own performance. Whilst we always try to place children in the most appropriate setting, it is clear that in some instances young people are housed in places that do not suit their needs. We want to work with government and providers to ensure there is sufficient accommodation capacity in local areas, as well as improving our own performance so there is a greater focus on prevention.”

Ben Byrne, Strategic Lead for the London Innovation and Improvement Alliance said:

“Our work to produce this report with the County Councils Network and Newton has thrown new light on the challenges local authorities face in supporting young people in semi-independent accommodation.

The analysis demonstrates that it will come at significant financial cost across all types of local authorities in England. A new burdens assessment needs to be undertaken urgently by the Department for Education with this new information to ensure that the reforms are fully funded.”

Chris Munday, Chair of the ADCS Resources & Strategy Policy Committee said:

“This report outlines many of the pressing issues ADCS has been highlighting with government regarding the move to regulate semi-independent accommodation for 16 and 17 year-olds. No child should live in unsafe, unsuitable accommodation and we should be working collectively to maintain a sharp focus on improving standards for all children in care. However, there is a very real risk that this will lead to providers terminating their services at a time when the system is already under extreme pressure as the number of children in our care increases year on year. Any loss of capacity in the supported accommodation sector at this time would be catastrophic.

ADCS supports the intention of improving services and support for young people to ensure they have the best possible experience, but we urge government to avoid any unintended consequences by allowing the sector more time, via a phased approach, to meet the standards. Crucially, this must be met with the right funding for the sector which remains wholly inadequate. We face an ever-shrinking number of private providers who can pick and choose which children to accept and at what cost despite local authorities being the sole purchaser. ADCS has long called for the government to initiate a shift away from profiteering in the placements market and invest, or help local authorities invest in, new, not for profit provision. The cost of placements is very worrying and financially problematic, but we also question whether the current offer meets the needs of children today, particularly where their needs are increasingly complex.”