Financial transparency and profit limitation in children's residential care: consultation analysis
Report produced by external analysts on the results from the financial transparency and profit limitation in children's residential care consultation.
4 Scope of the proposed legislation (Q1–Q3)
4.1 This chapter presents respondents’ views regarding the first three consultation questions on the types of residential services and the types of service providers that should be covered by the provisions.
Question 1: Do you agree that the provisions outlined should cover both children’s residential care home services and residential schools provided by persons other than a local authority? [Yes / No] Please explain your answer.
Question 2: Do you agree that both not-for-profit and private services should be included in these proposals? [Yes / No] Can you give reasons for this? Is there anyone else we would need to capture?
Question 3: Should the Bill provisions also cover other services such as secure care? [Yes / No] Can you give reasons for this?
4.2 It should be noted that many respondents offered general views on the provisions as a whole in their responses to this set of questions. These more general points have been included in the discussion presented in Chapter 3. This chapter, therefore, focuses specifically on respondents’ views on the types of services and types of providers that should be covered by the proposals to increase financial transparency.
4.3 Questions 1 and 3 focused on service type, while Question 2 focused on provider type. As such, the chapter covers Questions 1 and 3 first, before covering Question 2.
Residential care homes and residential schools (Q1)
4.4 Question 1 asked respondents if they agreed that the provisions outlined on financial transparency and profit limitation should cover both children’s residential care home services and residential schools provided by persons other than a local authority.
4.5 Table 3.1 shows that, overall, 20 respondents agreed, and 6 respondents did not. Among organisations, 15 out of 18 agreed. There was less consensus among individuals, with 5 out of 8 agreeing and 3 out of 8 disagreeing.
| Respondent type | Yes | No | Total |
|---|---|---|---|
| Care provider organisations | 5 | 1 | 6 |
| Public sector, regulatory and professional bodies | 6 | 0 | 6 |
| Other organisation types | 4 | 2 | 6 |
| Total organisations | 15 | 3 | 18 |
| Total individuals | 5 | 3 | 8 |
| Total, all respondents | 20 | 6 | 26 |
4.6 A follow-up question invited respondents to give reasons for their answer. Altogether, 23 respondents (17 organisations and 6 individuals) provided comments.
Provisions should cover residential care home services and residential schools
4.7 As shown in Table 3.1, most respondents thought that the provisions should cover both residential care home services and residential schools. Respondents offering this view mainly thought that this offered a consistent approach across different service types. They said that the principles of financial transparency and profit limitation should apply across the sector to all service types and all provider types. They also said that this was appropriate given that residential care homes and residential schools often provided comparable care, and providers were often involved in more than one type of service.
4.8 Respondents also said that a consistent cross-sector approach:
- Would enable comparisons across the sector in relation to costs and outcomes
- Was important for public understanding and confidence
- Would prevent the creation of ‘loopholes’, whereby providers could move from one service category to another in order to avoid being subject to the proposed provisions.
Provisions should not cover residential care home services and residential schools
4.9 Respondents who commented on why they had disagreed at Question 1 each made different points.
- One care provider organisation argued that not-for-profit organisations should be treated differently from private commercial organisations.
- One respondent in the other organisation types category thought the provisions did not go far enough.
- One individual said that a mixed economy of not-for-profit and commercial organisations offered benefits of flexibility, choice, innovation and ultimately better outcomes for children and young people.
- One individual said they wished to see a baseline review of costs in the residential care sector.
4.10 Thus, these respondents did not comment directly on the question of including both types of care services within the scope of the legislation. Rather, they made points of a more general nature, which are all covered elsewhere in this report.
Coverage: secure care and other services (Q3)
4.11 Question 3 asked respondents if they thought the provisions on financial transparency and profit limitation should cover other services such as secure care.
4.12 Table 3.3 shows that, overall, 27 respondents thought they should and 5 thought they should not. Most organisations (16 out of 19) and individuals (6 out of 8) thought the Bill provisions should also cover other services such as secure care.
| Respondent type | Yes | No | Total |
|---|---|---|---|
| Care provider organisations | 4 | 2 | 6 |
| Public sector, regulatory and professional bodies | 6 | 0 | 6 |
| Other organisation types | 6 | 1 | 7 |
| Total organisations | 16 | 3 | 19 |
| Total individuals | 6 | 2 | 8 |
| Total, all respondents | 22 | 5 | 27 |
4.13 Respondents were asked to give reasons for their answer. Altogether, 25 respondents (19 organisations and 6 individuals) commented at this question. Note that, although this question asked if ‘other services such as secure care’ should be included in the scope of the proposals, respondents did not generally suggest the inclusion of any other specific types of service – i.e. other than secure care – in their response to this question. However, some did so at Question 2 (see paragraph 4.30).
Provisions should cover secure care and other services
4.14 As with Question 1, the main view among those who thought the provisions should apply to other services, and secure care in particular, was that this offered consistency across the sector. With respect to secure care in particular, respondents argued that this was a form of residential care and should be subject to the same standards and requirements as other forms of care. It was also stated that some secure care providers also provided other types of care services, and it made sense for all parts of their business to be treated in the same way. Again, respondents argued that a consistent approach across the sector would avoid unintended consequences of suppliers moving from one area of service provision to another to avoid having to comply with any new provisions.
4.15 Some respondents commented more specifically on the nature of secure care and / or the nature of the secure care provider market in explaining their response:
- Some described secure care as a particular type of high-need / high-cost care for those with the most complex needs and said that scrutiny was important to ensure value for money for the public purse and quality of service for the children and young people receiving such care. Some also said that any provisions should take account of the distinct pressures and costs faced by this type of service.
- Some specifically pointed out that while all current providers of secure care in Scotland are not-for-profit organisations, this may not always be the case in the future. Including secure care within the scope of the provisions was thus seen as ‘future-proofing’ for any subsequent changes in the care provider market.
4.16 One respondent in the other organisation types category noted that all secure care was currently commissioned via Scotland Excel (SXL), which already offered a high level of scrutiny, but said that inclusion in the proposed provisions would ensure consistency across the sector.
4.17 However, there was also some concern expressed by respondents about the need to maintain provision during any implementation period, given the current challenges in sourcing suitable placements for children and young people in need of secure care.
4.18 Some respondents noted the Scottish Government’s existing commitment to implementing the Reimagining Secure Care Report and to consulting on secure care, but said that the Children (Care, Care Experience and Services Planning) (Scotland) Bill nevertheless presented an opportunity to remove profit from this type of care ahead of any further service changes.
4.19 One respondent (a care provider organisation) answered ‘yes’, but said that registered charities should be exempt, given their existing governance arrangements.
Provisions should NOT cover secure care and other services
4.20 Those who did not think secure care should be covered by the provisions commented on both the nature of the service and the nature of service providers in explaining their response.
- Firstly, respondents said that all current providers of secure care in Scotland are charitable bodies. As such, they were subject to charities law and OSCR rules and scrutiny, and there was no risk of ‘profiteering’.
- Secondly, respondents noted the distinct nature of secure care provision. Respondents described this as a high cost, complex, and highly regulated service, with a fundamentally different cost base to other residential care services and said that it should not therefore be subject to the same financial provisions as other forms of residential care. There was a concern that such a move risked destabilising provision and creating a shortfall in available places.
Coverage: not-for-profit and private services (Q2)
4.21 Question 2 asked respondents if they agreed that both not-for-profit and private services should be included in these proposals.
4.22 Table 3.2 shows that, overall, 20 respondents agreed and 6 disagreed. Most organisations (15 out of 19) and most individuals (5 out of 7) agreed.
| Respondent type | Yes | No | Total |
|---|---|---|---|
| Care provider organisations | 3 | 3 | 6 |
| Public sector, regulatory and professional bodies | 6 | 0 | 6 |
| Other organisation types | 6 | 1 | 7 |
| Total organisations | 15 | 4 | 19 |
| Total individuals | 5 | 2 | 7 |
| Total, all respondents | 20 | 6 | 26 |
4.23 Two follow-up questions asked respondents (i) for the reasons for their answer, and (ii) if they thought there was anyone else (i.e. any other service type) that should be captured by the provisions. Altogether, 25 respondents (19 organisations and 6 individuals) commented at part (i), while 16 respondents (10 organisations and 6 individuals) commented at part (ii).
Provisions should cover both not-for-profit and private services
4.24 As with Questions 1 and 3, which focused on service type, respondents who thought the provisions should apply to both not-for-profit and private services stressed the importance of consistency across the sector. The said that all providers should be subject to the same rules. Some said that it was important for accountability that the same rules apply to any body receiving public funds. Respondents also made the following additional points:
- Some not-for-profit organisations operate in a similar way to commercial operators, with some generating significant surpluses, and that this merited scrutiny.
- Transparency across the whole sector was essential for understanding costs and profits and achieving best value and would support equitable commissioning decisions.
- Including both not-for-profit and private services would avoid loopholes, which might allow private organisations to restructure parts of their business as not-for-profit organisations to avoid the requirements of the provisions.
4.25 Some respondents who thought both not-for-profit and private services should be included in the provisions nevertheless raised issues or expressed concerns about the implementation of any provisions. Some noted the need for any provisions to take account of (i) the various business models, structures, and governance arrangements of not-for-profit and private organisations, and (ii) the potential interaction with charity law and Office of the Scottish Charity Regulator (OSCR) scrutiny for registered charities.
4.26 Respondents who answered ‘yes’ at Question 2 also put forward two other options for achieving greater scrutiny in the sector:
- Putting requirements in place via contractual arrangements rather than legislation (suggested by a respondent in the other organisation types category).
- Requiring all children’s care services to be provided by charitable organisations and regulated via OSCR (suggested by a respondent in the public sector, regulatory and professional body category).
Provisions should NOT cover both not-for-profit and private services
4.27 Those who did not think the provision should apply to not-for-profit organisations highlighted particular characteristics of organisations with charitable status as reasons for excluding them, saying, for example, that such entities are already heavily regulated via charities law and OSCR; that their operations are overseen by a board of governors or trustees; that they have no shareholders and invest any surpluses back into services; and that they are treated differently to commercial organisations for tax purposes.
4.28 These respondents thought the provisions represented unnecessary cost and bureaucracy for such organisations for no gain, and they argued that the focus should be on private companies extracting profit from care services.
4.29 There was, however, also a view that the provisions should apply to any not-for-profit providers with a parent organisation based outside of Scotland.
Other types of organisations that should be included in the provisions
4.30 A second follow-up question asked respondents about any other types of organisation that should be included in the provisions. Respondents answered this question in a number of different ways:
- Some used the opportunity to reiterate views about wishing to see financial transparency and profit limitation applied widely to, for example, all childcare services, all children’s services, all services for looked after children, all social work / social care services, all residential care services, etc.
- Some focused on service types, suggesting that the following should be included: secure transport, respite and support services, specialist day education services, boarding school placements, and adoption and foster care services.
- Some focused on provider types, suggesting that the following should be included: local authorities, organisations not signed up to SXL, and organisations with parent companies registered outside of Scotland.
4.31 Finally, one respondent in the other organisation types category raised the issue of how the provisions would apply to directly purchased care including that funded by self-directed support. They said that the provisions should apply to all services for vulnerable children and / or all services funded by public money, regardless of how they are commissioned.