A False Economy

Residential child care is often in the news, and nearly always for thewrong reasons. Good residential care services can still be found behind thedramatic headlines about ‘failing’ care homes and ‘delinquent’ young people.But the best work in this area is going unnoticed or has been undermined bya preoccupation with inappropriate performance targets and cost cutting.

This is one of the key conclusions reached by nef (the new economics foundation) which has used the concept of Social Return on Investment (SROI) to examine closely how young people are benefiting from the work of two of the UK’s well-regarded care homes – Bryn Melyn Care Ltd and Shaftesbury Young People.

SROI analysis is a process for understanding, measuring and reporting on the social, environmental and economic value created by an intervention, and provides a valuable framework for measuring the long-term change created by public policy. In applying this form of analysis to residential care, nef has found that policy-makers are putting some of society’s most vulnerable young people at even greater risk of exclusion because they are failing to grasp the benefits that high-quality care homes bring to children and to wider society.

The Commission for Social Care Inspection reported in 2005 that the performance of the UK’s residential care homes was improving. But it also found that the improvements made were not translating into better outcomes for children. nef’s research suggests that the Government and some local authorities are paying lip service to a ‘child-centred’ approach while making cuts that betray a lack of understanding of what young people in care really need and value. How we care for the young and old in the future is arguably one of the greatest challenges the public sector faces; although focussed on residential child care the findings from this research have more far-reaching implications.

Measuring What Matters

The research behind this report was conducted under the umbrella of Measuring What Matters – a nef programme investigating how government policy-making could be improved by measuring and valuing what matters most to people, communities, the environment and local economies. Measuring What Matters seeks to move away from a culture within government that is short-term and target-driven, 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) across three policy areas including children in care.

In this case, nef’s research was motivated in part by the lack of accountability that young people perceive in residential care services. Although the need for better consultation and a more child-centred ethos is regularly expounded, this tends to be restricted to the design and delivery of services. There is no mechanism or system through which young people can hold providers, local authorities or central government to account for the kinds of services they receive.

The approach taken by nef was to use two case studies, nominated by expert partners, as examples of good child-centred practice within specialist therapeutic provision. Residential care is often seen as the worst, last-resort option for children in the UK. Specialist therapeutic provision – one of the more expensive options within an expensive service – is often squeezed financially. It can be hard to show the benefits of such intervention when looking at ‘hard outcomes’ because the young people involved come from severely disadvantaged backgrounds – not only in relation to their families of origin, but also in their care pathways and experiences of other services, such as education.

nef set out to answer two main questions:

• Is there a more meaningful way of looking at the benefits of this kind of provision for young people, one that takes better account of their own experiences?
• If so, does such a method show specialist therapeutic provision to be worth the financial investment it demands?

Findings

Our economic analysis has found:

• For every additional pound invested in higher-quality residential care, between £4 and £6.10 worth of additional social value is generated.
• In one of the case studies we were able to aggregate this across the population of young people in residential care, which suggested that the total value of these services is equivalent to almost £700 million over 20 years. Put another way, what is saved on other social costs by investment in this kind of residential care would be enough to pay for the country’s entire annual care bill for children in care.
• Although a small-scale study, this approach highlights the false economy inherent in bargaining down unit costs, at the expense of quality. We found that providers could almost double what they were charging each week and it would still represent a positive return. 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 are greater than the cost.

The cost-cutting environment in which these projects operate is taking its toll, however. 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. Policy has recently acknowledged the importance of promoting children’s well-being, and child-centred approaches are being promoted as a way to maximise this. It is these very methods, however, that are being sacrificed in the competitive tendering process. Providers are being forced to view essential psychotherapeutic and advocacy services as ‘nice to have’, and staff are being pressurised to slim down their offering to compete on price.

A new way of measuring

Gaps in data made our research very challenging. Outcomes data tend not to be collected systematically. Even when information is gathered, it tends not to cover or measure the things that matter most to young people, and outcomes and indicators are not sufficiently tailored to the strengths of children in residential care as well as to their needs. In particular our research has found that:

• Official studies rarely include an economic component, and this is generally an under-researched area – even though it represents a large portion of children’s funding. Our economic analysis focuses on those aspects of a young person’s life for which data exist. But with the exception of relationships in one of the analyses, this study has had to exclude many of the things that are essential to our well-being: social networks, a sense of autonomy and competence, feeling loved and cared for, and so on. Measuring What Matters is not just about better indicators, therefore. We advocate using a ‘jigsaw’ approach to gathering evidence that combines qualitative, quantitative and economic data. This is because there is value in understanding the whole story of a project as it emerges from this kind of research, not just the headline indicators of benefit.
• Even if national data were made available to allow comparisons with other providers, the attribution of outcomes to different interventions would be impossible without better baseline information. Even with such information it would be difficult to rate the work that a single organisation is doing in this sector because so much will depend on its particular circumstances and the profile of the young people it works with. An organisation might report poorer-than-average outcomes and yet it could still be generating significant value once its particular challenges are taken into account.
• Appropriate benchmarks need to be used. For example, for children in care (particularly those with the most complex needs) other ‘in difficulty’ groups might be a more appropriate benchmark than the general population of young people.

Recommendations

In a previous paper, nef has called for the introduction of a public benefit model for public service delivery. This research provides further evidence that such a framework is required. A public benefit model is distinct from either the market or the 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:

• Commissioning for outcomes: the sustainability of small and niche providers would be reflected in any measures of efficiency used to make public sector purchasing decisions.
• 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.
• Measuring what matters: 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’.

In the light of the above findings, we have three main recommendations, which we believe would move towards a system where social, environmental and economic outcomes were maximised for children in care.

1. Commissioning of residential care services should be based on achieving positive long-term outcomes as opposed to short-term cost savings.

The current approach to purchasing is failing young people. Standards are not improved by the creation of an ‘efficient market’ in service provision; they are improved by developing an explicit theory of change and using it to identify those indicators that capture progress against key outcomes. Markets are incapable of taking the holistic approach suggested above and are biased towards short-term outputs, rather than long-term outcomes.

Efficiency savings targets, which were ramped up in the 2007 Comprehensive Spending Review, have put intolerable pressure on local authorities to deliver more services for less money. These targets need to be rethought – particularly in relation to services for the most 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 many European countries, where many residential children’s homes are run by the independent sector.

Current performance indicators in the UK create perverse incentives in decisionmaking that are not always in the interests of the child. Promoting competition may discourage cooperation between local authorities – something that is desperately needed. There needs to be an investment strategy that enables smaller, third-sector providers to continue providing essential services to children in care. 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. There is, therefore, 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 also 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 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, the current emphasis is potentially misleading. Further research on the relationship between scale and outcomes would be required to understand this better.

2. Residential care should be designed around the principles of coproduction, with young people themselves playing a full and active part in shaping services.

The stigmatisation of the residential care sector has led to it being undermined, rather than integrated into the system as part of a range of options for young people. 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.

We also need to ensure that young people are fully involved in the design, delivery and measurement of services. nef wants to see a blurring of the distinction between clients and recipients, and between producers and consumers of services, through a reconfiguration of the way in which services are developed and delivered. Services seem to be most effective when people get to act in both roles – as providers as well as recipients. We need to devolve real responsibility, leadership and authority to ‘users’, encouraging 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.

Although it is still an emerging area, co-production has gained great currency in recent years. But bringing about systemic change based on this approach is no easy task; it would require a deep change in culture rather than just the implementation of a set of recommendations.

The system of measurement should be strengthened so that we can begin to measure – and build on – what really matters in children’s care services.

Frontline staff consistently told us that targets rarely reflect the impact they believe their work is having. In this situation they are unlikely to respond to what the data are telling them. New measurement systems need to be embedded in the strategic planning process to ensure that performance is meaningfully monitored and services are improved. What we measure determines what we prioritise, where we invest resources and what lessons we learn about improving services. Getting what we measure right is essential to improve outcomes for children and young people, including those hard-to-quantify aspects such as health, well-being and quality of relationships. More research is required to demonstrate their link to so-called ‘harder outcomes’, such as health and education, to encourage policy-makers to take them seriously.

Approaches to measurement need to be consistent across organisations. It would be helpful if one model were adopted and promoted as the sector standard – a model that is consistent with other areas of service; for example, 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 are what are required. 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. We also want to see a re-examination of how risks are managed in residential care, as well as the extent to which this is crowding out other considerations. Conversely, it would also require recognising that there can be no innovation and learning without some degree of failure.

Conclusions

In spite of its poor image, residential care continues to be an important part of overall provision for children. It can be the most appropriate setting for older children with more complex emotional and behavioural problems, and is often their preferred choice. The differences in approach between the UK and other parts of Europe may reflect, in part, how children are valued in society. A debate has emerged on this topic in recent times and should continue. The extent to which children feel valued or not is likely to be core to their well-being – collectively and individually – and will be reflected in the types of policies and services that emerge.

The Children and Young Persons Bill which, at the time of writing (mid july 2008) was completing its passage through Parliament includes a clear commitment to diverse and appropriate supply of placements, yet local authorities with tight budgets have to balance priorities between more visible, vote-winning public services – such as roads and refuse collection – and what they spend on residential care, there is a clear choice to be made here, which gets to the heart of what we value as a society. The real costs of these decisions have to be borne, by and large, by vulnerable groups and future generations that are not consulted in decision-making.