Children’s Social Care in the UK is often portrayed as a market that’s failing children, straining the public purse, and enabling profiteering providers to thrive. While the sector absolutely has its challenges, in the last three years we’ve met countless providers, charities and commissioners who’ve shown us the incredible child-centred work that often goes unrecognised. A commissioner’s poignant story about ‘Baby J’ and the immense challenge of finding a loving, stable home for her, has been the guiding light for our work at Better Society Capital. We’ve been actively working with government, commissioners, providers and socially conscious investors to develop solutions that will enable greater investment in preventative services that keep families together, as well as investment in high-quality provision of children’s homes in the areas that need it most.
What’s are the challenges in Children’s Social Care?
Despite the £12.2 billion spent by local authorities on children’s services in 2022-23[i], looked-after children face some of the UK’s worst outcomes with 32% of care leavers in England not in education, employment or training[ii], 52% face a criminal conviction by the age of 24[iii], and 72% have a diagnosable mental health disorder[iv]. It’s worth clarifying that these poor outcomes are rooted in children’s experiences before they enter the care system, including experiencing neglect, domestic abuse, or a disability.
The combination of 1) under-investing in preventative services to keep families together and therefore children out of the care system, 2) a significant shortage of foster carers and 3) rapid growth in the demand for children’s residential care, have resulted in a system that isn’t working for children, social care teams or government.
For example, in children’s residential care, we’ve seen rapid growth in the number of homes run by private equity-backed, for-profit providers who now operate 45% of all children’s homes[v]. We’ve also seen 1,000% growth in the number of children’s placements costing £10,000+ per week and more than 900 children are placed in unregulated homes due to a lack of available placements[vi]. Additionally, 44% of children are placed out-of-area[vii], which often disrupts their connections with family, school and support networks. Beyond the negative impact this has on children, these trends are causing considerable financial strain for local authorities, with 46% of councils reporting they overspent their budgets by 20% or more, often due to children's services costs[viii].
What needs to change in Children’s Social Care?
The challenges vary across the country, with some local authorities coping in areas where others are struggling. There is no one-size-fits-all solution, but the consistent message from providers, commissioners and government is that we need to:
1) Increase investment in preventative services and fostering, to tackle the rapid growth in the number of looked-after children and their rapid progression to being placed in children’s homes.
2) Ensure we have high-quality children’s homes in the right locations, which enables children to stay closer to home and in their communities, when appropriate.
3) Increase the provision of children’s services and homes run by VCSEs (Voluntary, Community and Social Enterprise) and profit-with-purpose providers, who are impact-aligned and provide value-for-money, thereby reducing the prevalence of profiteering providers[ix].
4) Improve partnerships between providers and local authorities, to tackle both the challenges in commissioning practices and to reinstate local authorities’ ability to influence the types of children’s services being delivered, in-line with local needs.
The Lighthouse Pedagogy Trust, a social investment-backed high-quality provider of children's social care
How do we make this happen?
These changes require, and are now receiving, multi-stakeholder action. There are three key workstreams underway that we at Better Society Capital are supporting:
1) Cross-departmental initiatives in government to tackle the key barriers that VCSEs and profit-with-purpose providers face in opening and running children’s homes in the right locations. These initiatives include addressing the onerous planning requirements, expanding programmes to address the significant workforce shortage, and reducing costly delays in the Ofsted registration process.
2) Scaling the amount of social investment available for preventative services and high-quality provision, including through a national Children’s Care Social Investment vehicle. This type of social investment vehicle would echo the Everyone In pilot, which we have collaborated on successfully with MHCLG since 2021. With the Secretary of State for Education, The Rt Hon Bridget Phillipson MP’s recent support for providers backed by social investment to come forward and help strengthen the children’s social care system, we have the opportunity to rebalance the market towards impact-aligned providers.
3) Supporting place-based solutions that are rooted in a local area’s needs. This includes working with existing and prospective local and combined authorities and the pathfinder Regional Care Cooperatives to understand their local sufficiency strategy, support partnership working with providers and investors, and enable integrated commissioning across care, health and education.
[i] Pro Bono Economics. (2024) Struggling against the tide: Children’s services spending, 2011-2023. Link.
[ii] Rees Centre, University of Oxford. (2023). Care leavers considerably less likely to be in education, employment, or training. Link.
[iii] Children’s Commissioner for England. (2022). New findings on how children in care interact with the criminal justice system. Link.
[iv] National Institute for Health and Care Excellence. (2021). Looked after children and young people: Guidance. Link.
[v] Bloomberg. (2024). Private Equity is making big money from UK’s most vulnerable. Link.
[vi] Ofsted. (2024). Unregistered children’s homes. Link.
[vii] Outsourcing Children’s Social Care Tracker. (2024). Link.
[viii] House of Commons Levelling Up, Housing and Communities Committee. (2023). Financial distress in local authorities. Link.
[ix] A few case studies on high-quality providers of children’s homes include Lighthouse Pedagogy Trust in Sutton, We are Juno CIC in Liverpool and Social adventures in Salford.