nef‘s research suggests that the Government and some local authorities are claiming to endorse a ‘Child-Centred’ approach while making cuts that betray a lack of understanding of what young people in care really need and value. And as nef‘s research shows, this lack of understanding will inevitably lead to long-term social and economic costs. Behind the dramatic headlines about failing care homes and delinquent young people, good providers of residential care services face being pushed out in the drive to cut costs. 

nef applied ‘Social Return on Investment’ (SROI) analysis to the work of two of the UK’s well-regarded care homes – Bryn Melyn Care Ltd, with homes in Shropshire and in South Wales and Shaftsbury Young People in London. The analysis reveals the true value of the services provided by the care homes:

• Between £4 and £6.10 worth of additional social value is generated for every additional pound invested in higher-quality residential care.
• Almost £700 million could be saved over a 20-year period on other social costs by investment in the right kind of residential care – enough to pay for the country’s entire annual care bill for children in care.
• Providers of quality care could almost double what they charge each week and it would still represent a positive return via the benefits and costs savings delivered in the long-term through the prevention of negative knock-on social and economic costs.

Balancing public spending between more visible, vote-winning public services, such as roads and refuse collection, and residential care are choices that go to the heart of what we value as a society; the efficiency savings targets being imposed on Local Authorities are increasingly forcing them to focus on narrow, short-term financial gains rather than long-term gain. And, the consequences of cost-saving decisions made now, will be borne by vulnerable groups and future generations.

“The government is attempting to promote a ‘child-centred’ approach whilst at the same time being seduced by an efficiency myth, effectively supporting a new ‘trade’ in children. If we allow this to continue and fail to deliver for these vulnerable children now, a range of public services will inevitably pick up the tab in the future. We urgently need a new model of investment in care, one that values the long-term benefits delivered to society as a whole.” says Eilís Lawlor, nef researcher and author of the report.

The cost-cutting environment in which the care providers analysed in nef‘s report operate is talking its toll. One of the providers included in the research, Shaftesbury Young People, recently lost out on a contract because it could not compete on price. Activities that promote children’s well-being are seen as being ‘nice to have’ rather than essential, and providers are forced to slim down their services so that they can compete on price.

A False Economy presents a number of recommendations that would, if implemented, provide a new public benefit model for investment in care, one that recognises the outcomes delivered, rather than ‘outputs’ or efficiencies, as the key to improving services. Crucially, it would seek to involve young people as co-producers rather than mere consumers of public services.

Commissioning of residential care services should be designed to value positive long-term outcomes as opposed to short-term cost savings. To achieve this, government should:

• Rethink the savings targets imposed on local authorities after the 2007 Comprehensive Spending Review, and then establish a system in which providers cost their services and local authorities purchase those services that are most suitable. This approach is used in several European countries, where residential children’s homes are run by the independent sector.
• Remove performance indicators that create perverse incentives in decision making that favour bigger, cheaper services and replace them with outcomes measures that recognise the value of specialised providers in delivering essential services. In particular, the current pre-occupation with risk must be re-balanced alongside other considerations so that it no longer crowds-out quality and long-term outcomes.
• Introduce incentives for local authorities to pursue ‘public benefit’, even if it does not directly benefit their area of control.

Residential care should be designed around the principles of co-production, with young people themselves playing a full and active part in shaping services:

• The use of residential care as a last resort needs to be reconsidered. Better use of residential care as a positive option can improve outcomes for many young people.
• Young people should be fully involved in the design, delivery and measurement of services. nef recommends that services are developed and delivered in new ways that break down the barriers between clients and recipients, and between producers and consumers of services.
• There needs to be a clearer picture of where value is being created, in ways that contribute to strategic planning, permeates management systems and shapes the organisation’s actions.
• New measurement systems should be embedded in the strategic planning process of care providers and local authorities to ensure that performance is monitored meaningfully, and that services deliver positive long-term outcomes for young people.

 “There are real world benefits of investing in good residential care where this is needed: a safe and secure future for young people, better chances of getting a job and contributing to society. These things don’t show up on the balance sheet today- local authorities currently have no framework for seeing the real costs, or the real benefits. This report shows how to put what matters back at the heart of the way services are commissioned and delivered, and reap the benefits in the long run.” Concludes Eilís Lawlor

Download the report A False Economy