Looked-after Children - Children, Schools and Families Committee Contents


Supplementary memorandum submitted by the New Economics Foundation (nef)

1.  EXECUTIVE SUMMARY

  1.1  This submission from nef (the new economics foundation) supplements our earlier response to the Children, Schools and Families Committee Inquiry into Looked After Children. It draws on research we have undertaken as part of the Measuring What Matters programme, which examines how systems of measurement can be used to improve decision-making and create greater public benefit in social, environmental and economic terms.

  1.2  Our research suggests that investing in higher-quality residential care can yield substantial social returns in the medium term. In fact, the case studies found that for every additional pound invested in higher-quality residential care, between £4.00 and £6.10 worth of additional social value was generated over the medium term. And yet many local authorities are in the process of moving away from high-quality residential care, opting instead for seemingly cheaper options. There is a real danger that this will prevent some children and young people from receiving the most appropriate type of placement. In order to ensure the best outcomes—for young people and for stakeholders more broadly—those policies and processes that are contributing to the declining use of high-quality residential care need to be identified and amended.

  1.3  Commissioning and the efficiency agenda look to be two such processes. As it stands, the competitive tendering process pits providers against each other for contracts on the grounds of short-term costs. Centrally-driven efficiency targets reinforce this by putting pressure on local authorities to deliver more services for less money. The result is that both commissioners and providers make decisions on the basis of price. This has created a set of perverse incentives: firstly, it disincentivises the development and provision of services whose impact takes longer to materialise—such as high-quality residential care; secondly, it systematically favours larger providers who are able to reap scale economies—exerting further market pressure on those niche providers of specialist residential care services. The current commissioning system is therefore, in effect, undervaluing high-quality residential care. This jeopardises the health and well-being of young people in care.

  1.4  These findings are of broader significance because they suggest that measurement itself needs to be overhauled. Even if one accepts that cost-effectiveness should be the determining criterion for the commissioning of public services, our research shows that high-quality provision geared towards the overall needs of service-users and other relevant stakeholders actually provides a considerably higher social return than provision that delivers short-term cost-savings. If the commissioning process is to encourage this type of value-creation, it needs to shift its focus from outputs to outcomes. This will require the collection of more outcomes data, as well as the construction of new indicators that more accurately reflect the things that matter most to children and young people in care. We believe that the principles of Social Return on Investment (SROI) piloted by nef in public services should form the basis of a new public-benefit model for delivering public services.

2.  INTRODUCTION

  2.1  This submission from nef (the new economics foundation) supplements our earlier response to the Children, Schools and Families Committee Inquiry into Looked After Children. It first explains the findings of the research project that provided the basis for our initial submission, and then draws out some key policy recommendations. In particular, it focuses on the implications of our findings for the commissioning of residential care services.

  2.2  nef is an independent think-and-do-tank that undertakes innovative research on economic, environmental and social issues. This submission has been co-ordinated by the Measuring and Evaluation team, and is based on work undertaken as part of the Measuring What Matters programme. The remit of the programme is to investigate how public policy-making could be improved by measuring and valuing what matters most to people, communities, local economies and the environment. It seeks to initiate a move away from a culture within government that is short-term and target-driven, and towards one that enables the pursuit of real social, environmental and economic well-being. The programme has piloted the use of Social Return on Investment (SROI) analysis across three different policy areas, one of which is residential care for young people.

  2.3  The approach adopted for the residential childcare strand has been to undertake two case studies. A selection of independent care providers were nominated by expert partners as examples of good child-centred practice, and two were then chosen so as to ensure the inclusion of providers from both the private and voluntary sectors.1 Social Return on Investment (SROI) analysis was then used to assess the impact of each organisation. SROI is a process of understanding, measuring and reporting on the social, environmental and economic value that is created by an intervention. It measures long-term impact, and seeks to ensure that those delivering services manage performance against a set of indicators that are relevant to stakeholders. The purpose of the case studies was not to make judgements about the effectiveness of one sector vis-a"-vis the other, but rather, to pilot the use of SROI as a general analytic framework for commissioning. Our findings suggest that the current system is ill-equipped to recognise certain types of value-creation, and that this may be hampering well-intentioned attempts to improve the lives of young people in care.

3.  RESIDENTIAL CHILD CARE & COMMISSIONING

3.1  Investing in higher-quality residential care, investing in social value

  Our SROI analysis focused on two providers of higher-quality residential care: Shaftesbury Young People—a specialist voluntary sector provider of services for children and young people; and Bryn Melyn Care Limited—a privately-run therapeutic community providing services to children with complex emotional and behavioural needs. Both organisations were found to be generating significant levels of added social value. The headline figures are as follows:

    —  For Shaftesbury Young People, every pound invested in their services generated between £4.40 and £6.10 worth of additional social value over a 20-year period.

    —  For Bryn Melyn Care Limited, every pound invested in their services generated an additional £4.00 worth of social value over a 20-year period.

  For each of the case studies, we were able to break the value-generated down into its sub-components:

    —  For Shaftesbury Young People, the main contribution was made in the form of reduced drug-use. The benefits of this to young people and society constituted 42% of the total value generated. The other main contributions were increased wages and taxes (35%), and reduced crime-related costs (14%).

    —  For Bryn Melyn Care Limited, the added-value was evenly split between two main impacts: reduced severity and frequency of crime, and an improvement in the quality and stability of relationships—again with reference to both young people and society.

  It was of course necessary to limit the kinds of impacts to those areas where data exist. Some outcomes have therefore been omitted from the analysis. The incorporation of other stakeholders into the analysis—such as parents, carers, or siblings—would also alter the findings. The point, however, is that each of these organisations appear to be providing real "Value for Money" when we look at a few key outcomes over the medium-term, and that with better data (and the more comprehensive analysis this would allow), these figures would almost certainly reveal themselves to be underestimates of the actual value being created.

3.2  Competitive commissioning and false economies of scale

  These findings are of great relevance to the commissioning and provision of residential child care services. As it stands, the competitive tendering process pits providers against each other for contracts from local authorities. The rationale behind this is that contestability will improve the quality of services (and bring their supply and demand into equilibrium) by driving poorly performing providers out of the market. In reality, however, there is reason to believe that the current system is actually eroding the effectiveness of local public services. Our research has identified two pathways through which this is occurring:

3.2.1  The role of price in placement decisions

  As nef has argued elsewhere, contestability means that providers compete on the grounds of short-term costs.2 Centrally-driven efficiency targets reinforce this by putting pressure on local authorities to deliver more services for less money. In such an environment, both commissioners and providers are encouraged to make decisions on the basis of price. This in turn disincentivises the development and provision of certain types of services—namely, those that require greater financial investment and/or take longer to make their mark.

  Higher-quality residential care for young people is one such type of service. As our SROI analysis has indicated (Section 3.1), investing in child-centred models of care is likely to produce substantial benefits in the long-term by improving the health and well-being of young people, and reducing their involvement with social services in the future. And yet the provision of these services is falling because unit-costs are high when calculated on the basis of outputs over the short-term. In this way, the role of price in the current system is incentivising a move away from what might be very effective and valuable public services.

3.2.2  The competitive advantage of large-scale providers

  In addition to obscuring the benefits of certain types of intervention, the role of price in the contestability model also favours larger organisations. This is because economies-of-scale enable them to achieve lower costs per unit. The corollary of this is that smaller and medium-sized service providers—whether they are from the private, public or voluntary sector—are at a competitive disadvantage. Because those organisations that specialise in high-quality services are usually smaller in size, this serves as another channel through which potentially effective providers are squeezed-out of the market.

  Although they are only illustrative, our two case studies highlight this dynamic at work in the market for children and young people's residential care services. Smaller and medium-sized providers that promote health and well-being benefits are being forced to compete on the grounds of unit-costs with placements that do not provide the same quality of care. This in turn is putting pressure on providers to divest essential psychotherapeutic and advocacy services. One of the providers that we examined, Shaftesbury Young People, has itself recently lost out on contracts to larger providers because it could not compete on price—and this is in spite of the substantial benefits it looks to be creating for its service-users and other stakeholders. Based on our SROI case studies, we found that providers of high-quality residential care services could almost double what they were charging each week and they would still offer a positive social return on investment. (By this we mean that when the benefits are aggregated across all government spending and into the future, the knock-on social and economic savings exceed the cost). This suggests that the drive to bargain-down unit-costs may in actual fact be the pursuit of a false economy.

3.3  Commissioning for better outcomes with SROI

  These findings are significant because they undermine the perceived trade-off between cost-effectiveness and quality-maximisation. Even if one accepts that cost-effectiveness should be the determining criterion for the commissioning of public services, our research shows that high-quality provision geared towards the overall needs of service-users and other relevant stakeholders actually provides a considerably higher social return than provision that delivers short-term cost-savings. The implication is that the commissioning process needs to shift its focus to outcomes if it is to encourage value-creation and the improvement of public services. This will require the collection of more outcomes data, as well as the construction of new indicators that more accurately reflect the things that matter most to children and young people in care.

3.4  Conclusion

  We can only have a complete understanding of the appropriateness of investment in the care system if we have a means of measuring the return on that investment. Commissioning therefore needs to look beyond unit costs and short-term efficiency gains and be informed about the real social, economic and environmental consequences of their decisions.

4.  POLICY RECOMMENDATIONS

  4.1  In a previous paper, nef has called for the introduction of a public-benefit model for public service delivery.3 This research provides further evidence that such a framework is required. A public-benefit model is distinct from market or welfare-statist models in that it recognises the pursuit of outcomes—rather than outputs or efficiencies—as the key to improving services. It also seeks to involve service-users as co-producers rather than mere "consumers" of public services. Such a model is of great relevance to the care sector, and specifically would involve:

    Taking an SROI approach:

    Triple bottom-line indicators would be built into contracts and used to encourage providers to maximise value-creation in the broadest sense, unlocking innovation and triggering a new "race to the top".

    Placing people at centre stage:

    Public services would be co-produced by commissioners, providers and service-users; service-users in particular would be seen as capable of making key contributions to the change that the service seeks to bring about.

    Providing more appropriate measures of efficiency:

    The sustainability of small and niche providers would be reflected in any measures of efficiency used to make public-sector purchasing decisions.

  4.2  Based on the findings presented in this submission, nef makes the following three recommendations for policy going forward:

4.2.1  Commissioning of residential care services should be based on achieving positive long-term outcomes

  Commissioners need better information in order to understand: (a) the link between different types of care and outcomes for young people; and (b) the impact that placement decisions have on young people's life-chances. Good market-management should take the sustainability of providers into account.

4.2.2  Residential care services should be designed in keeping with principles of "co-production", with young people playing a full and active part in shaping services

  Young people need to be involved in the design, delivery and measurement of services so that residential care can shake-off its reputation as an intervention of last resort and the care sector can make effective use of it as part of a range of options.

4.2.3  The system of measurement should be strengthened so that we can begin to measure what matters and maximise the value created by children's care services

  What we measure determines what we prioritise, where we invest resources and what lessons we learn about improving services. Getting it right is therefore essential to improving outcomes for children and young people. This will require changes to be made on the part of both decision-makers and service providers.

  4.3  Our specific recommendations within each of these areas are as follows:

4.3.1  Commissioning for outcomes

  Efficiency savings targets—which were ramped up in the Comprehensive Spending Review—need to be rethought. This is especially important in relation to services aimed at vulnerable groups. We would be better off with a system in which providers cost their services and local authorities choose to purchase those that are most suitable. This is the approach used in those European countries where many residential children's homes are run by the independent sector.

  The pursuit of public-benefit needs to be freed from departmental silos. As it stands, outcomes which lead to savings for central government or more than one local government area are not being adequately valued. This is because the emphasis on competition is discouraging cooperation between local authorities. There is a need for cross-silo procurement and for local authorities to be incentivised to pursue public benefit even if it does not directly benefit their area of control.

  Regional commissioning needs closer scrutiny. Though it may improve stability for young people, it may also be a natural environment for big organisations to thrive in. While large providers still have a minority of placements, an awareness of the impact of scale is required—particularly if smaller providers are losing share. The over-emphasis on sectoral distinctions in evaluation also needs to be addressed: insofar as large voluntary providers might have more in common with large private providers than they do with small voluntary providers, then the current emphasis is potentially misleading. Further research on the relationship between scale and outcomes would be required in order to understand this better.

4.3.2  Service-design and co-production

  The use of residential care as a "last resort" needs to be reconsidered because better use of residential care as a positive option may help improve outcomes for many young people. Investment is needed in this form of care to tackle the problem of low morale among workers.

  The way residential care services are developed and delivered needs to be re-configured. Services seem to be most effective when people get to act as providers as well as recipients. We therefore need to devolve real responsibility, leadership and authority to "users", and encourage self-organisation rather than direction from above. This is consistent with an SROI approach to measurement; engaging stakeholders in a project is about more than consultation. There is a need to create a continuing dialogue that contributes to strategic planning, permeates management systems and shapes the organisation's understanding of where value is created.

4.3.3  Measuring what matters

  New measurement systems need to be embedded in organisations' strategic planning processes to ensure that performance is meaningfully monitored and services are improved. Frontline staff have consistently told us that targets fail to reflect the impact they believe their work is having. In this situation they are unlikely to respond to what the data are telling them.

  More research is required to demonstrate the link between hard-to-quantify outcomes such as health and well-being and so-called `harder outcomes' such as education. This will help encourage policy-makers to take them seriously.

  Approaches to measurement need to be consistent across organisations. It would therefore be helpful if one model were adopted and promoted as the sector standard—providing that it is a model consistent with other related areas of service eg drugs and alcohol.

  Current indicators focus too much on procedures, processes and outputs. Outcome indicators that measure "distance travelled" by the beneficiaries of a project need to be developed. Providers should be required to systematically track young people after they leave care, and they should be funded to do so.

  Risk and failure need to be put in perspective. In the case of residential child care, this would require re-examining how risks are managed and assessing the extent to which this is crowding-out other considerations. Conversely, it would also require recognising that there can be no innovation and learning with some degree of failure.

  Findings of the Measuring What Matters programme will be published over the coming months.

REFERENCES

1  The original intention was to include a local authority partner but this did not prove possible given the timescale of the research.

2  Ryan-Collins J et al (2007) Unintended Consequences: How the efficiency agenda erodes local public services, and a new public benefit model to restore them (London: nef).

3  Ibid.

June 2008





 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2009
Prepared 20 April 2009