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Cash-Strapped Councils and a Crisis in Children’s Care

A perfect storm of rising need, austerity and funding cuts has created a crisis in children’s social care, Sian Norris reports

Cash-Strapped Councils and a Crisis in Children’s Care

A perfect storm of rising need, austerity and funding cuts has created a crisis in children’s social care, Sian Norris reports

The horrific death of Arthur Labinjo-Hughes, who suffered devastating neglect and abuse from his father and stepmother, has put the spotlight once again on children’s services in England. 

Fingers have been pointed at social workers, teachers and police officers for failing to protect the six-year-old who was often forced to stand alone in the hallway of his family home for hours on end. 

The responsibility for the child’s death rests solely with his killers. It is, however, worth examining the impact of a decade of austerity on the same children’s services which have been criticised since his killers were sentenced.

Cuts to local government have put services under pressure over the last 10 years – understanding such pressure can help to avoid another horrific killing and save children’s lives. 

A Decade of Austerity

There are more looked-after children than ever before – 80,850 children in England, including children who have been adopted. 

However, despite the increased need, analysis by the charity Action for Children revealed how funding available for children’s services fell by £2.2 billion between 2010/11 and 2018/19, or a 23% reduction. This included a nearly 46% cut to early intervention services. 

The most deprived areas were hit hardest. Austerity measures led to a 60% cut in local authority funding from central government. These cuts meant a 17% fall in councils’ spending on local public services since 2010 – equal to 23% or nearly £300 per person. Almost this entire cut took place before 2015.

Councils have a legal duty to provide children’s services. In order to meet this duty, they were instructed to manage the cuts by making savings, and rely on making up the cuts’ impacts through council tax and business rates. 

Because wealthier regions charge higher council tax and rake in higher business rates, due to their residents’ assets and wealth, they were able to weather the austerity storm more easily. But in deprived areas – which are more likely to have higher rates of looked-after children – making up the funding shortfall has proven more challenging as they generate lower council tax revenues. 

Take Blackpool, one of the most deprived areas in England, with the highest rate of looked-after children of England’s unitary authorities. It has 220 children in care per 10,000 children. Its council tax revenue for this year was worth £64,724,000, to serve a population of 138,380, just under £470 per person. 

In contrast, England’s richest region – the Royal Borough of Kensington and Chelsea – has 36 looked-after children per 10,000 children. Its council tax revenue was £117,361,000 for a population of nearly 157,000 – or just more than £700 per person. 

Cities such as Birmingham, which records a large council tax revenue of £402,499,000 has a population of more than two million people – working out at £153.25 per person. The authority records 67 looked after children per 10,000 children. Liverpool, which has 157 looked-after children per 10,000 children, raised council tax revenue worth £199,035,000. It has a population of 906,000 people, or around £220 per person. 

‘Favourable Demographics’

Spending per person on acute children’s services is budgeted to be 2% higher than a decade ago, according to the Institute for Fiscal Studies. Councils have increased their spending by £1.1 billion in the past two years – but this combined with the cuts has led to councils overspending their budgets. Last year eight in 10 ended up overspending by £800 million collectively. The National Audit Office warned that 25 councils are on the cusp of bankruptcy.

There is one area where spending on children’s services has increased. While early intervention and places such as Sure Start centres have been cut, spending on children in care – be that residential or foster – soared by 40% between 2010/11 and 2018/19. This is in part because of the large increase in private provision of both foster and residential care for looked after children – an increase which can be costly for councils and profitable for investors.

Twenty years ago, 40% of children’s homes were privately run – it is now closer to 75%. About a third of children are placed in foster care using private agencies. A report by the Competition and Markets Authority revealed the significant profits private care homes and foster agencies are making, with local authorities paying for private providers to run these services. One pound in every five that English councils spend on private care is banked as profit.

In a November 2020 report published by the Children’s Commissioner, a local authority residential services manager explained how “private homes will charge what the market will allow. It’s not unusual for them to charge £8-9,000 [per week] because they can charge that. You know you’d usually be paying £6,000 [per week] but you’re going to have to take it because it’s Friday afternoon and there are no other options. The Commissioning team can see the cost breakdowns and can challenge this but ultimately if another local authority is prepared to pay that you have to take it because otherwise what do you do in that evening?”

A commissioning services manager shared how “we haven’t got the bargaining power to be able to say: ‘no, we’re not going to pay those prices’ because the next Friday one of us will. This provider popped up they were charging absurd prices, I think it was about £10,000 and we were all like ‘no, no, we’re never going to use that’ and literally within two weeks we were like: ‘can you take our child?’”

Byline Times has reported how the urgent need of children – some of whom will have endured neglect and abuse – to access residential or foster care is being touted by investment advisors as offering a “​​compelling buy and build strategy, favourable demographics, and significant consolidation opportunities”. Among the top 10 providers of children’s homes, seven are now owned by private equity firms. 

As such, vulnerable children are being treated as an investment opportunity by investors keen to make profits out of a perfect storm: austerity, deprivation, and cash-strapped councils. The six largest independent providers of placements made £219 million in profit last year.

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