TACT response to eliminating profit from the care of children in Wales

Author: TACT Communications

This is our response to the Consultation launched by the Welsh government to end profit-making in children’s social care.

The Welsh government has expressed their commitment to eliminate profit from the care of children and put forward a consultation where the initial focus is on the private provision of residential care for children, alongside independent sector foster care.

This consultation is part of the Welsh wider objective to redesign how they look after children and young people so the best is done for them, their families and communities.

We strongly believe that a child-centred, compassionate, and fair approach to the care system is one that works for children and does not make a profit from them, and our responses below reflect that.

 Consultation Questions:

  • Do you think that introducing provision in legislation that only allows ‘not-for-profit’ providers to register with CIW will support delivery of the Programme for Government commitment to eliminate profit from the care of children looked after?

We agree that market forces should be removed from the care of children. A key benefit will be to ensure that decision-makers in the sector focus on achieving the best outcomes for children separated from the need to generate an acceptable level of profit for shareholders or owners.

Decisions will not be influenced by the need to achieve high-profit margins, and this should increase the quality of care and outcomes for children.

Introducing a market for care has not increased sufficiency. Competition has created repetition and waste. The cost of care has risen and the outcomes of children in care remain unacceptably poor whilst profits for profitmaking IFAs have risen. However, we need to be cautious that we do not move to a sector that ultimately provides less choice and in which quality reduces because of this.

There are many ethical, local, Welsh-owned SME’s in Wales, including family-owned

Small businesses. The Government needs to acknowledge that the removal of profit is not a reflection of the quality of these agencies and the staff within them. But it removes the risk of placing Local Authorities that those SME’s may be acquired by large profit-driven companies at some point in the future, with the placing Local Authority and the children cared for within that agency has no control over that decision. It also removes the risk of placements being undermined by disorderly exits from the market due to high levels of debt incurred by many private companies.

One approach could be for the legislation to define ‘not-for-profit’ in terms of the types of organisations that would qualify.

Do you consider that the restriction should also be expressed in terms of the way that any trading surplus is expended? What would be the effects and implications of this?

 e welcome the focus on localism, services run locally with local accountability can meet the needs of its users via coproduction far more readily than large corporations. We are concerned that eradicating profit by changing the legislation for registration only may allow for large international organisations to

continue to run fostering and residential in Wales by opening up not-for-profit arms of their organisation and charging large amounts for back-office support back to the centre. The key decision makers for those charitable agencies will still be located in profitmaking environments, and so influenced by its culture and financial models. Legislation should look not just at registration, but also ensure that commissioning frameworks scope out the organisational structures of IFAs allowed to tender, with a strong emphasis on social value. Supply chains must be declared within the tender and only those IFAs whose suppliers are weighted towards local and ethical organisations can bid. Agencies that have overseas parent companies at the top of their structure should be prohibited from tendering.

In respect of trading surplus, it may be the case that within some charities, Welsh services benefit from the surplus generated by other parts of the UK. There needs to be clarity on the extent that this is happening. Restrictions on surplus may have unintended disbenefits of surplus also being stopped from moving the other way into Wales. Some organisations may decide that having Welsh services is less attractive if it cannot support other parts of the organisation effectively.

It may be more effective to focus on restricting the movement of surplus into private owners, with an emphasis on supply chains being local and not for profit (generating social value) and banning the movement of surplus – generated by Welsh fees to parent companies outside of Wales if those parent companies are profit making.

  • Do you think the primary legislation should include power for Welsh Ministers to amend the definition of ‘not-for-profit’ through subordinate legislation?


Yes. A clear definition is required to ensure that organisational and operating models benefit children in care in Wales and that public money spent in Wales is used to improve children’s outcomes as the primary concern.

Removing profit via registration will not fully eradicate profit nor will it solve the problems of sufficiency.

There needs to be an overhaul of how care is commissioned. This is not a shortage of carers as such but a shortage of specialist skilled provision for older children and children with high needs. The market has failed in its ability to meet the complex needs of those children, and often these needs are not being met within family settings close to the child’s community. This is also a failure of commissioning. Due to the sufficiency crisis,  Local Authorities have been reactive to meeting the need as and when it presents itself and has not been able to shape the market. Alongside the eradication of profit, the Welsh Government needs to review and reshape the commissioning of social care to ensure that placements are commissioned based on predicted need rather than reactive spot purchasing.

Block contracts with guaranteed service levels for the children with the most complex needs will provide financial security for the not-for-profit sector and reduce sufficiency and the greatest financial pressures for Local Authorities.

The Charitable sector needs support to grow and become a meaningful partner to Foster Wales. More open and supportive relationships, joint planning and working, and building sufficiency by the provision of Welsh Government’s grants and support and encouraging us to each other as partners rather than competition.

  • What are your views on the proposed timings for the primary legislation to come into effect?

 The timelines appear appropriate.

There needs to be detail published about the transitional period to ensure that children are not disrupted and that providers work in a way that puts the stability of their children first. Those providers who do not transition to not-for-profit must publish their transition plans for an orderly exit. This may require funding from Welsh Government to support premises where numbers are reduced to a level that becomes nonprofitable until the transition for the remaining children is complete.

Equally, there needs to be a clear assessment of what sufficiency is left once the transition period is over, and early planning to support not-for-profit growth to replace any profit providers that exit Wales.

  • Are there any issues in relation to transition for children looked after, local authorities and service providers you would like to draw our attention to?

 The transition phase will need to consider the risk of disruption for children who will remain in private provider placements during the transition period. For example, if a children’s home is no longer able to accept new referrals as a private provider, as children who are still in placement move on and the profit margins of that home decrease, at some point there is the risk of the provider deciding that they cannot take a financial loss on keeping the home open and so will close, disrupting the placement of the children who are still there. This is not hypothetical, we understand that these discussions are taking place already for some providers. Welsh Government may need to consider additional financial supports to prevent this, and Local Authorities should be identifying their children who are most at risk of disruption and opening up dialogue with providers early on.

  • What are your views on the issuing of guidance to support the implementation of the primary legislation?

 Restricting commissioning to not-for-profits will not address the sufficiency issue unless the way that placements are commissioned changes also. The vast majority of children are placed in foster care on a spot-purchasing basis. This is a lottery, with the quality of the match depending on the day and time a child is referred and who is available then.

As financial models for most IFAs are time sensitive (i.e. rely on predictions of income and children placed through the year) there is a great deal of pressure to place children quickly and the more experienced and skilled carers are not able to be kept on hold for children with highest needs, as to do so loses income. We accept that there will always be a need for emergency placements, but spot purchasing models do not finance IFAs to keep sufficiency for the children who are most at risk of being placed inappropriately and out of their area. Guidance needs to give focus on commissioning and market shaping so that predicted needs and commissioned beds are aligned, and those children with the greatest needs can access local care and not be moved miles away.

  • We would like to know your views on the effects that the legislative changes to eliminate profit from the care of children looked after will have on the Welsh language, specifically on opportunities for people to use Welsh and on treating the Welsh language no less favourably than English.

What effects do you think there would be?

How could positive effects be increased, or negative effects be mitigated?

 Valuing the Welsh language and culture should be at the heart of our practice, reflecting the importance of Welsh heritage for many of the children we care for. The focus on localism provides an opportunity to reflect on the diversity and languages of the communities that IFAs operate within. If the senior decision makers of organisations are located in Wales, they are likely to have greater focus and priority on the importance of the Welsh language.