The fostering stocktake has left many underwhelmed. But it may also have put to bed claims that placements with independent fostering providers cost significantly more than in-house ones.

“Fostering is overdue a fundamental review and this should be a priority for the Department for Education.” This sentence was written by Sir Martin Narey in his review of children’s residential care, published in the summer of 2016.

His words appeared at the end of a lengthy diversion away from children’s home finances into the costs of independent foster care provision: Sir Martin cited concerns he had encountered over “excessive” profits among firms involved in independent fostering provision.

Sir Martin went on to jointly manage the fostering review – or stocktake – which has now been published 18 months on. Those looking for “fundamental” reform in fostering promised by a “fundamental review” – and stoked by the recent education select committee inquiry into fostering – have found themselves disappointed. The stocktake’s headline conclusion? “The reality is that fostering is a success story.”

Foster care pay? Adequate. Allegations procedures? Fit for purpose. The education select committee MPs were moved by one young person’s care experience of being separated from a younger brother. By contrast the stocktake authors appeared dispassionate in their conviction that siblings can thrive when placed separately.

A couple of curve balls emerged. Independent reviewing officers? Get rid of them. Fostering panels? Not really fit for purpose. And children were losing out because carers were stymied in their parenting by “depressing” regulation of how they should express physical affection. It would be fine for a toddler foster child to get into bed with their carer if they needed a cuddle to feel better, the authors asserted.

But what of the context of Sir Martin’s original assertion that a fundamental review of fostering is needed? What does the review say about the vast difference in costs between local authority placements and those provided by independent fostering agencies – and of the excessive profit-making alleged of the latter? Let us skip ahead to Chapter 5 on commissioning and find out.

Data submitted to the Department for Education by local authorities might suggest that in-house provision is much cheaper, the report notes. “But the reliability of these costs depends on the extent to which they are directly comparable, not least because of a tendency for some local authorities not fully to take account of their overhead costs. In our own study of costs, we discovered that local authorities’ estimates of overhead costs varied from an absurdly small 1% to a more realistic 16%.”

To assess the differences in costs the stocktake managers carried out their own investigation. They took a sample of nine local authorities and eight IFAs (agreed with the Association of Directors of Children’s Services, the Local Government Association, the Nationwide Association of Fostering Providers and the Department for Education.) “We considered it to be reasonably representative,” the authors said.

So, what did they find?

Firstly, there was a massive range in how much local authorities paid their own foster carers. Allowances payed to in-house carers varied significantly and “sometimes inexplicably” with one local authority paying, on average, less than £200 per week compared with another which paid more than £450 per week.

Secondly, IFA carers are paid on average more than their local authority counterparts: in the stocktake sample IFA payments to carers ranged from £385 to £585 per week. “For independent fostering agencies, the main cost driver, amounting typically to 55% of their total costs, and 18 percentage points greater than for local authorities, was the fees and allowances they paid to carers,” the report points out.

Thirdly, taking into account all the costs, the stocktake authors were “confident in concluding that the average weekly cost of a local authority placement was £475 compared with £798 for IFA placements”. A difference of £323.

“On the face of it, one can see why ADCS are so certain that IFA costs are much greater than in house costs,” the authors say.

“But such a conclusion fails to take account of some substantial differences. Crucially, and reflecting the greater challenge of children cared for in the IFA sector, the IFAs in our sample spent significantly more than local authorities on carer allowances and fees.” Earlier in the report it was acknowledged that “IFAs themselves generally know their place in the market and seek to provide places for children with more complex needs.” And the authors confirm that, “We are clear - and based on Department for Education analysis of national level data - that IFAs are caring for more demanding children.”

You can see a breakdown of all the average costs associated with placements in a table on page 62 of the report. After spending an extra £125 a week paying their carers, IFAs also spent an extra £110 on “placement management” which includes costs of training and of supervising social workers who have fewer foster carers to manage than their council equivalents. IFAs also spent about £22 more per placement week on recruitment.

“Taking account of these differences, the cost differential between local authorities and IFA costs narrow considerably to the point where, in some instances, there is very little between them.” IFAs may be more expensive, “but by a relatively small amount”. Indeed, “The cost difference is smaller than the variance in costs between and across local authorities and between and across IFAs.”

Instead the stocktake almost lays the blame for the high costs attached to some placements at the door of local authorities. Framework agreements meant to enable councils to make savings through collective buying power “are all too frequently set aside” when buying individual and short notice placements.

The report even cited one example of two local authorities competing in a bidding war to obtain an agency foster carer to look after a child with complex needs. “Bluntly, the quality of local authority commissioning is not good enough,” the authors say. And it is being hampered further by an unwillingness to share their framework contracts with one another. “The secrecy and the variation in prices negotiated by different local authorities benefit providers, not councils.”

While the stocktake found that day to day operating profits, “may not be excessive” there was an extra piece of the picture to consider. Some IFAs had built up substantial debt through acquisition of smaller agencies. “Servicing that debt must, we assume, contribute to the prices charged by the operating businesses,” it noted, before adding, “Disappointingly, competition from other IFAs, both private and charitable has not, as one would expect, always undercut the prices of the debt-burdened operators.” Again, such a problem could be rectified by better commissioning, the report suggests.

But many IFAs will still be disappointed to read of the authors’ approval of the “in-house first” policy whereby local authorities will try and place a child with their own carers first before considering an IFA placement, even if an IFA may provide a more appropriate carer for the child. “This practice is roundly criticised by some IFAs who believe that it compromises the interests of the child,” the authors not. “But, in any event, we consider such an approach to be entirely sensible.” The reason? Cost. “The marginal additional cost for a local authority using an in house carer, rather than contracting with an IFA and paying the IFA’s full cost fee, is very significant indeed, amounting, typically, to around £500 a week,” the authors say. “Local authorities cannot ignore that.”

What is meant by marginal costs is not clear from the report. But I think a lot of local authorities will know what it means in practice. End of the day phone calls pleading with carers to take a child out of their age range “just for a few nights – because there is nowhere else for them to go”. Or asking for a carer to take a second or third child even though they need all their time and energy to focus on the one child or siblings they have in placement right now. Eventually one of them will be pressured into saying yes. Marginal saving? Maybe, but at what cost to the child?


Foster care in England: A Review for the Department for Education by Sir Martin Narey and Mark Owers

Anne Sayer, This Week in Fostering