Children's Residential Transformation Programme
Decision Maker: Children, Young People & Education Committee
Decision status: Recommendations Approved
Is Key decision?: Yes
Is subject to call in?: Yes
The report seeks approval from the Children, Young People and Education Committee to agree in principle to invest up to £1,000,000 by way of a loan to the organisation identified in the exempt Appendix 1 to this report to develop children’s residential accommodation in Wirral.
In March 2019, the Children Looked After Sufficiency Strategy (“the Strategy”) was approved by Cabinet. The Strategy set out priorities to strengthen and increase current placement provision within Wirral, including children’s residential accommodation. In accordance with the Strategy, a 6 -bed facility for children with disabilities has been established along with the commissioning of an external organisation to provide Tier 3 respite and short breaks support.
Following approval of the Strategy, collaborative work took place at a Liverpool City Region level to further develop and define a Market Reform Programme which would not only increase placement choice and quality but also seek to strengthen the voluntary/non-profit making position within the children’s care market.
A high level business proposal has been formulated with a view to providing a new, ethical, sustainable network of residential care homes that could significantly improve the life chances of children living in care. For Wirral, this plan involves the establishment of four children’s homes over two phases focussed on supporting the social, emotional and mental health needs of children and young people.
To provide the kickstart funding required to set up the homes in Wirral, the Committee is requested to support a loan on commercial terms in the sum of £1,000,000 for the building allocation, refurbishment and initial employee costs to enable a facility to be provided by an identified organisation in accordance with the relevant regulatory and commissioning requirements. The facility will then be enabled to gain accreditation as a registered facility for a residential care home and to seek admission to an established procurement framework (the North West Flexible Purchasing Scheme) to enable the Council and other local authorities to place children at the facility.
The proposal aims to support the strategic aims and objectives of the Wirral Plan 2025 ‘Brighter Futures’The Wirral Plan articulates a clear priority to secure Brighter Futures for all, regardless of their background. The proposals within this report are aimed at improving the local offer and availability of options of high-quality provision that meets the need of children looked after.
Resolved – That
agreement be given in principle to invest up to £1,000,000 by
way of a loan on commercial terms to enable the development of
children’s homes within Wirral for children looked
2) the Director of Children, Families and Education be requested to bring a further report to Committee after due diligence has been completed in respect of the proposals set out in the report.
Reasons for the decision:
Rising numbers of Children Looked After : The number of Children Looked After across the Liverpool City Region has increased by 18% since April 2016. Wirral has implemented a rigorous programme to reduce these numbers, however, the current number of children in care is 820, which is still high. With 11% fewer independent foster carers than in 2016 and with in-house foster carers reducing across the region, the number of carers is failing to grow in line with increases in Children Look After.
Increasing financial pressures and escalating growth trend: With demand outstripping supply, there is no incentive for providers to be competitive in their pricing resulting in costs escalating which show little sign of slowing. The current average weekly cost of a residential placement in the North West is £4,196 per week with some placements for more complex children costing over £6,000 per week.
Mixed quality of current provision: Whilst the Council tries to ensure that Wirral children are placed in provision rated good or outstanding by Ofsted, the mixed position of quality in the market means that this is not always possible. To mitigate this, the Council has put measures in place to ensure regular quality monitoring and review of placements. There remains a need to drive up quality so that children have holistic environments which support emotional well-being and education outcomes.
Inward-facing market reducing the council’s ability to procure local placements: Currently residential placements for Children Looked After are commissioned via an established procurement framework - the North West Flexible Purchasing Scheme. This framework operates competitive placement rates compared with other frameworks across the country. Many local authorities seek to reduce placement costs by commissioning via the North West Flexible Purchasing Scheme reducing the number of local placements available in Wirral. This results in the Council having to place children in out of borough homes away from their families and local communities. It also has a significant financial impact on the Council, given that out of borough placement unit costs are higher and require additional resources to support the child e.g. travel and time required by key workers such as social workers, Independent Reviewing Officers and support workers.
Lack of sufficiency within current market: The Council has an average of 8% in externally commissioned residential placements. As at the end of April 2021, 61 residential placements were commissioned with 26 children (42.6%) living inborough and 35 children placed out of borough. Of the 35 children living out of borough, 27 live more than 20 miles away from the Wirral, as far away as Scotland, Cumbria and Durham rupturing ties with their local community, peers, schools and at times family. These ‘at a distance’ placements hinder the Council’s ability to monitor value for money, quality standards and most importantly the progress and outcomes of the young person. Whilst in some circumstances it is in the child’s best interest to be out of area, for safeguarding reasons and/or matching reasons, a proportion of out of area placements relate to lack of current local options.
Increase in private provision within the market and use of growth acquisition models across children’s care sector: A large proportion of the children’s residential market is owned by small number of private companies. Within the North West, five private providers provide 30% of all residential placements.
There is also risk that the Competition and Markets Authority may investigate the influence on the market that the large private providers of accommodation for Children Looked After. This could lead to the large private providers needing to de merge into a larger number of smaller providers, leading to the removal of economies of scale and potentially higher charges for local authorities. The consequence of this would be that future profitability would potentially need to be gained through higher prices and lower service investment.
It is considered that steps need to be carried out to create alternative means of meeting the demand for accommodation for Children Looked After in order to decrease reliance on the main 5 private providers.
Alternative options considered:
This option has been considered and discounted given that the current situation is unsustainable. As outlined above, rising costs in the placement market, the increasing needs of children and young people to live in good quality homes and a proportion of private ownership within the market, means that there is not a sufficient supply of suitable accommodation for Wirral children.
Given the current level of demand and level of need within Wirral, doing nothing would over time result in an increase in commissioning pressures with children being placed in potentially lower quality accommodation, associated with increase budgetary pressures.
Operate a single in-house model for Wirral children only. This option is being implemented within the Accommodation Programme and plans are in place to build a 6-bed in-house residential facility for Children Looked After with disabilities through the refurbishment of Willowtree Short Breaks Service.
For the proposal outlined in this report, this option has been considered and discounted for several reasons:
· Meeting the needs of children and young people: Previous in-house delivery models were ceased because of the challenge in ensuring that children were suitably matched to accommodation which met their needs. The fundamental need which determines a child’s placement in residential provision is how the home will best support the needs of the child or young person. There is a rigorous process of matching which ensures that children can be suitably accommodated where their needs are best met. This process is integral to securing a placement.
· Financial: Where appropriate matching is not possible, homes can accrue voids which increases costs, and which can put them under financial pressure. Current large-scale providers mitigate this risk through economies of scale and throughwide reaching market presence. Any in-house provision would need to have a sufficient risk mitigation strategy which would manage the financial impact of voids. Placing children in homes which does not meet their need to prevent voids, runs the risk of challenge by Ofsted and potential closure.
· Resources: Any in-house provision is fully managed and resourced by the Council. Employees are directly employed under Local Authority statutory terms and conditions, including access to the Local Authority Pension Scheme. Attracting employees to roles in residential settings can also be a challenge and Councils often do not have the support functions to intensively recruit staff. Significant back-office support would be required for a large-scale in-house model including senior management oversight, Information Technology infrastructure, building and asset regulatory work, finance and Human Resources functions. All of this would add a significant resource burden onto the Council’s own core support functions.
· Reputation: For in-house provision, responsibility for the registration, compliance and support for children and young people would lie solely with the Council. Failing to meet the rigorous requirements as set out with Ofsted resulting in poor inspection judgements could have detrimental impact on the reputation of the Council. Local community challenges, neighbourhood disturbances and failing to improve outcomes and meet the needs of children and young people could lead to further reputational damage.
Commissioning an external provider to provide the Services in Council owned property:
This option is being progressed following agreement from the Children Young People and Education Committee to support the NHS England proposal to develop a new three bedded specialist service to support and prevent children going into Tier 4 mental health provision.
The option of using current Council assets has been considered and discounted given that no appropriate buildings have been found. Work has been undertaken by officers to ensure that all avenues for local suitable housing options have been explored. The purchase of a building or land remains an option and will be considered as part of the £1,000,000 investment. The challenge with owning and maintaining a property are the costs associated with the development and maintenance of the provision, meeting the requirements of Ofsted for the building and the potential lack of interest from providers to deliver a service without the associated asset.
Use of flexible lot on North West Purchasing Framework to block contract:
This option is to enter block contract with providers to purchase a set number of beds at a fixed price, via the North West Flexible Purchasing Scheme. Whilst this option provides control over provision and matching of beds available it is likely (from market insight) that there would be a lack of provider interest in this option as demand is higher than supply so there is no reason for providers to offer single local authorities block contracts at a fixed price. This option has also been discounted, given the lack of available provision within the current market.
Enter into a Joint venture with a service provider:
The Council could enter a Joint Venture with a corporate partner (public or private) to establish and run thechildren’s homes as a formal partnership. The Council and its Joint Venture partner would need to decide whether to establish a separate legal entity as a vehicle for the joint venture. The four basic legal forms are:
1. Limited liability company.
2. Limited liability partnership.
3. Partnership (or limited partnership).
4. A purely contractual co-operation agreement.
The Council would need to provide a business case to support the decision to enter the Joint Venture and be quite clear on the scope and purpose of the Joint Venture and the relative bargaining strengths of the parties to the Joint Venture. The main documents required to establish a corporate joint venture will be the joint venture agreement or shareholders’ agreement and the company’s articles of association. These documents should cover, between them, several constitutional aspects of the joint venture company and its day-to-day operations.
This is a very technical and time-consuming option, which is not warranted, given the level of investment proposed. The proposal outlined in this report does not require the Council to be involved in the direct delivery of services for children. The agreement is to support a loan on commercial terms to allow the initial infrastructure to be established.
Inter-Local Authority option [Collaboration/contractual Agreement]:
The option of entering into a formal contractual agreement with local authorities, such as the Regional Adoption Agency model has been discounted given there is no current commitment to enter an inter-agency arrangement of this nature. The preferred option recommended in this report offers the possibility in future phases of scalability and inter- local authority commissioning as the new homes are rolled out.
Local Authority Trading Company (LATC).
If the Council wanted to set up children’s homes and trade services to third parties on the open market, it would be required under s.4 of the Localism Act 2011 and under the provisions of s95 of the Local Government Act 2003 to set up a corporate vehicle. The type of vehicle which may be used includes:
· Company limited by shares or guarantee;
· Social Enterprise;
· Unlimited company;
· Community Interest Company.
Before setting up a corporate vehicle the Council must be able to provide a strong business case to support the proposal. This option has not been pursued given the potential long run-in time for delivery and the overly technical nature of the approach, which is not required for the loan investment.
The Teckal exemption applies where a contracting authority contracts with a legally distinct entity, usually a company that the authority has set up (either on its own or in concert with others) to provide services to the Council. The conditions for the exemption are that:
· The service provider carries out the principal part of its activities with the authority;
· The authority exercises the same kind of control over the service provider as it does over its own departments; and
· There is no private sector ownership of the service provider nor any intention that there should be any.
The Teckal exemption allows public authorities to enter service contracts with wholly owned companies without having to conduct a competitive tender exercise under the relevant procurement regulations. This option has been ruled out on the basis that as the Council would not wish to maintain control of the management arrangements for the service provider.
Innovation Partnership: The Council could consider procuring a “partner” under an innovative partnership to provide the Services but if this option was pursued, the following would need to apply:
• the Council must seek innovative ideas, where solutions are not already available on the market. This “need” must be expressly stated in the contract notice alongside the minimum requirements, performance levels and maximum costs; and
• there must also be an intention to include both the development of the outcome and its subsequent purchase (subject to meeting agreed performance levels and maximum costs) in the procurement;
• the procedure selects partners on a competitive basis and have them develop an innovative solution tailored to their requirements. The competitive phase will take place at the very beginning of the procedure, when the most suitable partner(s) are selected on the basis of their skills, abilities and price;
• the partner(s) will develop the new solution, as required, in collaboration with the Council. This research and development phase can be divided into several stages, during which the number of partners may be gradually reduced, depending on whether they meet certain pre-determined criteria;
• the partner will then provide the final solution (commercial phase);
• the outcome of the procedure may not deliver a partner or solution that differs from the organisation / solution that has already been identified.
An Innovation Partnership is not appropriate for the current scenario, given that the Council has already identified a partner which (subject to a finalised business case) it can enter into a commercial loan arrangement.
Publication date: 17/06/2021
Date of decision: 15/06/2021
Decided at meeting: 15/06/2021 - Children, Young People & Education Committee
Effective from: 23/06/2021