This report will explore the following key issues regarding the children’s social care industry in the UK:

• What are the key determinants driving the industry?

• Was the market affected by the recession and how has it recovered since? Have there been any structural changes as a consequence?

• How has the government influenced and shaped the development of the sector?

• What are the key issues the UK industry needs to address to improve efficiency and performance?

• What does the future hold for the UK children’s social care industry?

Every local authority (LA) must protect and promote the welfare of children in need in its area. To do this, they must work with families to provide support services that will enable children to be raised in their own families. In Northern Ireland, Health and Social Care Trusts (HSCTs) have a duty to safeguard and promote the welfare of children in need in their area.

Children in need are defined in law as children who are aged under 18 and:

• need local authority services to achieve or maintain a reasonable standard of health or development

• need local authority services to prevent significant or further harm to health or development

• are disabled

The local authority must keep a register of children with disabilities in its area, but does not have to keep a register of all children in need.

The local authority can provide a range of services for children in need, including:

• day care facilities for children under five years old and not yet at school

• after-school and holiday care or activities for school-age children

• advice, guidance and counselling

• occupational, social, cultural, or recreational activities

• home helps and laundry facilities

• assistance with travelling to and from home to use any services provided by the local authority

• assistance for the child and family to have a holiday

• family centres

• financial assistance, usually in the form of a loan

• respite care

• looking after the child

The local authority can also provide the following services to all children in its area, not just children in need:

• day care facilities for children under five years old and not yet at school

• after-school and holiday care or activities for school-age children

In England, if a child stays for at least three months away from their family in a place of care, for example a:

• NHS hospital

• residential school

• care home

• independent hospital

The local authority may be able to provide the following services:

• advice, guidance, counselling

• family visits to the place of care

• visits home

• help to organise a holiday for family members to be together

The local authority must publish information about the services it provides for children in need and their families. This must be made available to people who might benefit from the services.

In addition to the above services, the local authority - or in Northern Ireland a local HSCT - has a duty to provide services it considers appropriate for the following children:

• disabled children

• children who might otherwise be made subject to care proceedings

• children who are likely to be involved in crime

In England, from 1 April 2011, local authorities must provide breaks from caring (respite care) for the parents of disabled children.

A child is being ‘looked after’ by the local authority when the local authority arranges for the child to live somewhere other than at home. There are two ways in which a child can be looked after by the local authority: the first is called ‘being accommodated’, the other is where the child is the subject of a court order.

When a child is accommodated by the local authority this is a voluntary arrangement between the local authority and the family. This means that parents maintain all rights and responsibilities for the child, not the local authority. A parent can therefore remove their child from the accommodation at any time.

A local authority has a duty to accommodate a child in need if:

• there is no one with legal responsibility for the child; or

• the child is lost or has been abandoned; or

• the person who has been caring for the child cannot continue to provide suitable care and accommodation for whatever reason; or

• the child has reached 16 years old and the child's welfare is likely to be placed seriously at risk if the local authority does not provide the child with accommodation.

If a local authority has a duty to accommodate a child in need, the children's services department must accommodate the child itself. It cannot refuse to do so and refer the child to the housing department as a homeless person instead.

The child might live in a foster home or a children’s home. The foster home could be the home of relatives or friends of the family.

When a court has made an order in relation to the child, known as a care order, the local authority will take on responsibility for the child and make arrangements for where the child should live. In Northern Ireland, the local authority has the right to overrule the parent if it considers it necessary to safeguard or promote the child's welfare.

All values quoted in this report are at current prices unless otherwise specified.

The term billion is used to represent one thousand million.

Some numbers in tables do not add exactly due to rounding.

Reports are researched and written by MBD’s in-house, specialist business-to-business consultants. Research is based on both an analysis of official information and on original, trade research, providing both a quantitative and qualitative view of the market. MBD’s unique range of frequently updated reports provide an integrated body of ongoing research, enabling deep understanding of the prevailing trends and of the drivers of these trends based on trade opinion.

The following abbreviations appear in this report:

The children’s social care sector provides essential services to children and young adults, including foster care, adoption services, residential care, and specialist services to disabled children, such as special education. Virtually all provision of children’s social care is funded by the statutory sector, with local authorities responsible for providing or commissioning children’s services.

Children’s social care has changed substantially. The advent of effective contraception and the legalisation of abortion in 1967 resulted in a collapse in demand for children’s homes (then orphanages), and social attitudes have subsequently turned against institutional care.

Margaret Thatcher’s governments of the 1980s sought to develop a more mixed economy of social services provision for children. Before this time, there had been a mix of statutory and charitable social care services for children. The Conservative governments introduced funding streams that were only available to voluntary organisations, such as the Intermediate Treatment Fund for services for adolescents in trouble, while also cutting LA revenue and capital budgets. This occurred when children’s charities expanded and moved away from their traditions of providing residential care for children to increasingly work with families.

Local authorities now place the vast majority of looked-after children in foster care, which is seen as providing better outcomes for children, while also being substantially less expensive for the local authority.

Currently, around 11% of the 69,540 children in care in England are placed in residential care, which includes regulated children’s homes, including secure children’s homes, but also a range of other regulated and unregulated residential settings.

Children entering residential care tend to do so relatively late in their childhood, having suffered abuse and neglect, and with highly complex needs – including special educational needs. It is vital that the residential care system is able to provide the best possible care for these children and improve their outcomes.

Since 2004, all local authorities have been required to appoint Independent Reviewing Officers (IROs) to protect children's interests throughout the care planning process. The requirement to appoint IROs arose from concerns that looked after children could 'drift', with care plans that either did not meet their needs or were not implemented. Even where care plans had been agreed by a court, they had no ongoing role in ensuring the local authority put them into practice. Given these concerns, it was decided that every looked after child should have an IRO - an adult with oversight of their individual care plan and empowered to act on their behalf in challenging the local authority. Although IROs are appointed by the local authority, they must be independent from the immediate line management of the case.

Children's homes, foster care, and special education services are all being increasingly outsourced to independent sector providers as councils seek better value for money with restricted budgets. This has created market opportunities for private companies to move into ‘niche’ children’s services, or even mainstream services, providing foster care or residential school provision for children with complex needs.

Outsourcing remains a growing trend and, as the nationwide average budget expands by a reported 1.5%, the average budget cut for adult services is closer to 3%. Over the last 20 years, the private sector’s share of children’s homes has more than doubled, with LAs now running only 23% of homes.

From April 2013, the National Institute for Health and Care Excellence (NICE) was given new responsibilities to produce guidance and quality standards for social care. NICE guidelines make evidence-based recommendations on what is working in the sector, in terms of both the effectiveness and cost-effectiveness of interventions and services. According to the institute, new guidelines take around two years to produce and are expected to be published some time this year.

NICE set up the Social Care External Network, which provides opportunities for social care organisations to exchange information and for NICE to gain advice from the sector on adoption and dissemination strategies for quality standards. Action for Children, the Association of Directors of Children’s Services, Children England, and the National Children’s Bureau are all members of the network. The network also provides advice on the integration of social care guidelines and quality standards into sector-led improvement and other quality initiatives.

The Department for Education launched the Innovation Programme in October 2013 to act as a catalyst for developing more effective ways of supporting vulnerable children in England. In June 2014, the DfE appointed the Spring Consortium as its delivery partner for the programme, consisting of the Innovation Unit, Deloitte, and Mutual Ventures. The two-year programme has financial support guaranteed until 2016 - £30 million in 2014 and £100 million in 2015 - and is seeking to inspire whole system change. By 2018, it hopes to achieve:

• Better life chances for children receiving help from the social care system

• Stronger incentives and mechanisms for innovation, experimentation, and replication of successful new approaches

• Better value for money across children’s social care

The Spring Consortium identified two key focus areas where there are particular challenges in prevailing practice and clear scope for radical innovation and change. These are:

• Rethinking children’s social care: Improving the quality and impact of children’s social work

• Rethinking support for adolescents in or on the edge of care: Improving the quality and impact of services that provide a stable effective launch pad for adolescents to transition successfully into adulthood.

During the last few years, the government has continued to move forward with the privatisation of children’s social services, including child protection investigations and assessments. After initial proposals were met with public criticism, the government issued revised regulations in 2014 forcing private sector companies to set up a not-for-profit subsidiary to provide children’s social care services. However, companies are still able to make money by charging a subsidiary for management, administration, and estates services at a cost determined by the parent company. The ability to delegate most services functions aims to help authorities set up more flexible and innovative delivery structures. Local authority provision is expected to further reduce as expenditure is predicted to be restricted by a further 12% from April 2016, according to the Local Government Association.

Legislation has significantly changed the provision of social care in the UK. The Children Act 1989 remains the core legislative framework for children looked after by local authorities. The act allocates duties to safeguard children to parents, courts, local authorities, and other agencies, while also setting out the designation of ‘children in need’. A child is deemed as being in need if they are disabled or unlikely to achieve a reasonable standard of health or development unless specialist services are provided. Local authorities are obliged to provide day care for such children aged under five years old not attending school, and are also required to make provisions for out-of-school activities for these children.

Vitally, section 20 of the Children Act 1989 gives local authorities the responsibility to provide accommodation for any child designated as in need who has nobody with parental responsibility to care for them, or who would be deemed at risk if left in the care of their parent(s). Local authorities are also required to take into account the views of children when making decisions about their care. Where parents refuse to allow their child to be taken into care, the local authority may apply to a court for a care order.

Key analysis: From April 2016, the introduction of the Social Services and Well-being (Wales) Act 2014 will replace some parts of the Children Act 1989. The act reforms the law governing adult and children’s social care in Wales, bringing together all legislation about how social care in Wales is to be provided. When part six of the act comes into force, it will affect current children in need, looked-after children, and leaving care functions of Welsh LAs - differing from part three of the Children Act 1989 that will still apply in England.

The Care Standards Act 2000 changed how health and social care, including children’s social care, is regulated in the UK. The act established the Care Standards Commission as the independent regulator of social care and private and voluntary healthcare services in England. The CSC was responsible for registering and inspecting children’s homes, local authority fostering and adoption services, and independent sector fostering agencies.

The CSC was subsequently replaced by the Care Quality Commission, which has been responsible for regulating health and social care in England since April 2009. However, responsibility for the regulation of children’s social services was transferred to Ofsted, which registers and inspects all adoption support agencies, children’s homes, independent fostering agencies, residential family centres, and voluntary adoption agencies. Ofsted is also responsible for the regulation of special education in its role as the schools regulator,

The Children Act 2004 brought in a number of amendments to the 1989 Act of the same name. A significant driver of the act was the inquiry into the death of Victoria Climbié, an eight-year-old girl who was murdered by her guardians in February 2000 after an extended period of abuse, which was not prevented despite signs of abuse being noticed by the police and the social services department of four local authorities. The act created the office of the Children’s Commissioner for England, who bears overall responsibility for all government children’s welfare and education functions, with council directors of children’s services bearing statutory responsibility on a local level. The act was intended to increase co-operation between agencies working with children, creating a nationwide government database holding information on all children in England - although this was decommissioned by the coalition government in 2010.

The main legislation from the act relevant to promoting the welfare and safeguarding of children are set out below:

• Section 10 - Requires each local authority to make arrangements to promote cooperation between the authority, each of the authority’s relevant partners, and such other persons or bodies working with children in the LA’s area as the authority considers appropriate.

• Section 11 - Places duties on a range of organisations and individuals to ensure their functions, and any services they contract out, are discharged with regard to the need to safeguard and promote the welfare of children.

• Section 13 - Requires each LA to establish a Local Safeguarding Children Board (LSCB) for their area and specifies the organisation and individuals (other than the LA) that the Secretary of State may prescribe in regulations that should be represented on LSCBs.

• Section 14: The objectives of the LSCBs are:

• To coordinate what is done by each person or body represented on the board for the purposes of safeguarding and promoting the welfare of children in the area of the LA

• To ensure the effectiveness of what is done by each such person or body for the purposes of safeguarding and promoting the welfare of children.

After 13 months of debating, the Children and Families Act 2014 became law in March 2014 and from September 2014, the law came into force with transitional arrangements put in place by each local authority. The most fundamental social care change is the way the act aims to reshape the adoption system. The DfE hopes that it will help the estimated 6,000 children who seek adoption find families more quickly.

The act requires local authorities to consider placing children with family or friend carers in the first instance and, if this isn’t appropriate or sustainable, to then try to place children in foster-to-adopt arrangements with their prospective adopters. However, the act has drawn criticism by removing the requirement for councils to give ‘due consideration’ to children’s racial, religious, cultural, or linguistic backgrounds when matching them with adopters.

The act also introduced new rights for adoptive families to support and leave from work, with local authorities also required to provide adoptive families with personal budgets if they are asked to do so by their respective family.

The act has also allowed young people to remain in foster care until their 21^st birthday, but local authorities are able to reject these arrangements if they deem them to not be in the best interest of the young person.

Finally, the act made changes to support for those with special educational needs (SEN) by creating education, health, and care (EHC) plans to replace SEN statements. These plans will need to be regularly reviewed and cover people up to the age of 25 years old. The objective is to give families a greater involvement in decisions about their support and to encourage social care, education, and health services to work together more closely in supporting those with special needs or disabilities. The act will almost certainly lead to even greater privatisation of service supply, as the burden on LAs will greatly increase while expenditure levels are further reduced. Transition to the reformed SEN system is intended to be complete by April 2018.

In September 2014, the DfE published proposed revisions to the Children’s Homes Regulations 2001, including the introduction of new quality standards. A consultation was open to local authorities, providers, managers, staff of children’s residential care services, social workers, voluntary sector organisations, children in care, and representative bodies until November 2014.

In March 2015, the DfE published the response from the consultation period and stated that the standards had largely been accepted in principle, although some questioned the relevance of the ‘Quality and Purpose of Care Standard’, as the main purpose of some homes is therapeutic rather than care, and the ‘Enjoy and Achieve Standard’. The ‘Quality and Purpose of Care Standard’ remained in the framework as children consulted over the period felt that a “children’s home should feel like and look like a home”, although there have been some changes to the guidance. The new Quality Standards for Children’s Homes came into effect from the 1^st April 2015.

In October 2015, the prime minister David Cameron and the education secretary Nicky Morgan announced that there would be a comprehensive review into children’s residential care. The independent review will be led by Sir Martin Narey, the former CEO of Barnardo's, who has advised the government on its adoption reforms. The review will look at which children should be in residential care, how it can be improved, and how government can achieve the very best for every single child in a care home. The review is due to report in spring 2016 after a consultation period was held between 28 October and 31 December 2015.