Financial transparency and profit limitation in children's residential care: consultation analysis

8 Other comments (Q18)

8.1 A final consultation question asked respondents for any other comments on the residential childcare proposals in the Children (Care, Care Experience and Services Planning) (Scotland) Bill. The views expressed are summarised in this chapter.

Question 18: Do you have any other comments on the residential childcare proposals in the Children (Care, Care Experience and Services Planning) (Scotland) Bill?

8.2 Altogether 16 respondents (13 organisations and 3 individuals) provided substantive comments at Question 18, and in some cases the comments made were lengthy and detailed. However, these largely reiterated points that had been made repeatedly in response to other questions in the consultation – in relation to, for example, the need for clear definitions (profit, excessive profit, surplus, etc.), the need for further evidence gathering and engagement, the need for caution in implementation, and the need for a system-wide approach to improving quality and achieving best value for money in children’s services. This chapter does not repeat such points in detail but focuses on issues that are not covered elsewhere in this report. In particular:

• One care provider suggested that, as part of this focus on residential care, further work is needed to address the disparities that exist for young people transitioning between children and adult residential care services, which are funded in different ways. Funding for children’s services takes account of the wider costs of delivery including staff wages, training and the wider costs of maintaining the service; adult services are funded differently.
• The Scottish Government should provide funding to develop children's residential care services across Scotland. Local authorities do not currently have the financial resources to achieve this. This point was raised by public sector, regulatory and professional bodies, but also by respondents in the other organisation types category.
• One organisation with a focus on care-experienced children and young people noted that there are differences between local authorities across Scotland in their current use of private companies to provide residential care services. Some do not use profit-making companies at all to deliver children’s residential care since the publication of The Promise. Others have committed to cease using private companies to deliver children’s residential care. The Scottish Government should engage with these local authorities to understand how these transitions have been managed and what lessons can be learned.
• Another organisation with a focus on care-experienced children and young people thought that the proposed measures to limit profit in children’s residential care in Scotland are unlikely to improve some of the most significant challenges faced by children, young people, their families, and the children’s services workforce. They will also not necessarily result in less expenditure for local authorities. If private providers choose to leave the market, the result could lead to significant increases in public sector expenditure as the public sector seeks to replace any lost provision.
• One organisation in the other organisation types category pointed out that one of the findings of the Competition and Market Authority’s (CMA) 2022 review of children’s social care in England, Scotland and Wales was that there was no difference in either quality or cost of residential care provided publicly as compared with private for-profit provision. However, this organisation also noted that the CMA did not consider the wider body of evidence which suggests that private provider profits are subsidised through lower pay, poorer conditions and less generous pensions for staff, as compared with public providers.
• Any implementation plan needs to consider the capacity that will be required to manage, analyse and respond to financial disclosures at scale. Understanding profit across diverse provider structures, including inter-company arrangements and cross-subsidisation, will require highly specialist financial and accountancy experience. This experience will need to be available within government, but also to providers, to ensure accurate interpretation and compliance. Some organisations (both small providers, and larger providers with limited financial capacity) may struggle to engage with the technical and procedural aspects of the proposed changes.
• It is unclear who will be responsible for monitoring profit levels and enforcing compliance. Local authorities may be able to monitor the services they commission, but may have no oversight of providers operating outside their area, or services within their area that are serving children from outside Scotland.
• One individual respondent commented that the real reform needed is not in relation to financial regulation of providers, but in relation to commissioning. Local authorities need to be resourced and supported to (i) profile the market proactively, (ii) engage in open cost discussions with service providers, and (iii) plan placements to avoid reactive, last-minute decisions. In the view of this individual, this is how best value is secured, how quality is safeguarded, and how young people’s needs are truly met.