Children's residential care - financial transparency and profit limitation: consultation

Part 2 - Profit

The Promise is clear that Scotland must avoid the monetisation of the care of children, and so in light of the financial information that will be collected, the Children and Young People (Care and Services Planning) (Scotland) Bill will also give Scottish Ministers the power to limit profit should they consider it necessary to do so.

Scottish Ministers will only consider it necessary to introduce regulations to limit profit in residential childcare if:

• the thorough analysis of financial information shows that excessive levels of profit are being made;
• subject to consideration of the public interest in ensuring that residential care services are providing care on terms which represent value for money;
• subject to the consideration of the results of a further public consultation which would include consideration of what an appropriate profit limit would be.

This seeks to ensure that excessive levels of profit are not made from local authorities and from finite public funds, in relation to the provision of accommodation and services for vulnerable looked after children in Scotland. This approach is in line with the powers being introduced for England via the UK Children’s Wellbeing and Schools Bill.

Engagement with organisations operating within residential childcare has indicated that the total amount charged per placement in residential childcare will often include a varying degree of running costs which go beyond cost recovery. The Scottish Government understands that many organisations will reinvest surplus finance in order to make enhancements to their services which will benefit children and young people, such as upskilling their workforce or making improvements to homes/buildings.

The Scottish Government is keen to understand the necessity to organisations of being able to operate in this way and why. We are, therefore, keen to engage the sector in developing an understanding and definition of what constitutes profit, surplus, reinvestment etc., and how and where that could differ from ‘profiteering’ – which could more closely relate to making excessive profit. Developing this type of definition would underpin the financial transparency assessment and whether Ministers need to take further action as enabled through the Bill.

The profit limiting provisions in the Bill, should Ministers determine it necessary to use them, would apply to all relevant private and not-for-profit children’s residential care services and would be assessed on an annual basis following receipt of the financial transparency return.

Questions on profit

Q12: Do you agree with the proposed measures outlined above? Yes/No

Could you please explain your reasons for your answer?

Q13: How would you define profit for these purposes?

Q14: Could this impact a residential childcare service’s ability to meet their aims/function and objectives?

Q15: What challenges would services face in trying to reduce profit/surplus and how could this be supported?

Q16: What impacts could these provisions have, both positive and negative, on providing the best care for Children and Young People?

Q17: Do you have any comments on the partial Business and Regulatory Impact Assessment?

Q18: Do you have any other comments on the residential childcare proposals in the Children and Young People (Care and Services Planning) (Scotland) Bill?

Thank you for responding to this consultation.