Financial transparency and profit limitation in children's residential care

I am pleased to introduce the Scottish Government’s consultation on financial transparency and profit limitation, as provided for within the Children (Care, Care Experience and Services Planning) (Scotland) Bill.

The Bill has been introduced by the Scottish Government as part of the Government’s commitment to implement the recommendations of the Independent Care Review (also referred to as “The Promise”) by 2030.  A key link between this consultation and the Bill is that The Promise makes clear that there is no place for profiting in how Scotland cares for its children and that Scotland must avoid the monetisation of the care of children and prevent the marketisation of care by 2030.

The Competition and Markets Authority published its report and recommendations arising from its market study into children’s social care in England, Scotland and Wales on 10th March 2022. The study launched in March 2021 in response to two major concerns that had been raised with them about how the placements market was operating. First, that local authorities were too often unable to access appropriate placements to meet the needs of children in their care. Second, that the prices paid by local authorities were high and this, combined with growing numbers of looked-after children, was placing significant strain on local authority budgets, limiting their scope to fund other important activities in children’s services and beyond.

The UK and Welsh Governments have both delivered legislation to Parliament recently to tackle financial transparency and/or profit from care in their own ways to respond to their unique challenges.  Indeed, financial transparency and profit is an issue which is being pursued more broadly through our Bill, with provisions in relation to foster care included.  The Care Reform (Scotland) Bill, recently passed by the Scottish Parliament, also included provisions on financial transparency in relation to adult care.

So, it is within this context that I bring forward this consultation to seek views on this Bill’s provisions which subject to Parliament’s agreement will:

• enable Scottish Ministers to make provision by regulations to require providers of relevant residential childcare services run by persons other than Local Authorities to provide financial and other information pertaining to the operation of those services, and submit those returns to Scottish Ministers, including in such form as set out in the regulations, and;
• in light of that information, the Bill will also enable Scottish Ministers to introduce regulations to limit the profits of the providers of those services, in accordance with a framework to be set out in those regulations, where the Scottish Ministers consider it necessary to do so, having regard among other things to the public interest in securing that providers are providing care on terms which represent value for money.

As our recent ‘Reimagining Secure Care’ response highlights, there is a need for us to consider care holistically  across the whole spectrum of care provision in Scotland., I recognise that for many children and young people residential care will be the most appropriate care setting  to provide the right support to children and their families in order to meet their specific needs. I know that Scotland’s collective care workforce is passionate in ensuring care is provided for every child in a setting that best meets their needs and upholds their rights.  So, it is vital that we build on the strengths of residential care as it continues to form an integral part of that broader approach to care provision.

As part of this change, we must collectively work to understand exactly how residential care is being provided in Scotland. We know that the needs of children and young people are becoming increasingly complex and that this has an impact on  ensuring the most suitable placements are sought for children and young people  at a time where the financial environment continues to be challenging across the public sector.

I know that Scotland’s residential care sector has also had to adapt and respond to emerging need. Take, for example, the continuation of cross-border placements from other UK jurisdictions into Scotland.  Whilst this is an issue emanating from a lack of capacity elsewhere in the UK, the Scottish Government is developing a regulatory framework to provide safeguards and protections for young people in those placements, which will be brought forward to Parliament in late 2025.  Scottish care homes and the workforce have also had to flex to absorb children and young people seeking asylum in Scotland through the National Transfer Scheme and other routes, bringing with them a new set of complex needs and supports. 

I realise that the combination of these, and other, challenges has resulted in many Scottish local authorities increasing reliance on private and third sector provision.  So, I am keen that we take this opportunity to shine a light on the services which private and third sector organisations provide and the gaps in provision that they fill, with a view to also understanding the true costs of care as we look to build Scotland’s care continuum. 

So, I fully recognise that broader and deeply inter-connected issues will need to be worked through, alongside this consultation and Bill,  to ensure the resilience and sustainability of residential care in Scotland at a time where we know that local authorities and the workforce are under huge pressure.  These Bill provisions are, therefore, only one strand of wider activity to understand the complex issues at play. 

Meantime, I am optimistic about the appetite across all within the sector to strengthen children’s residential care and invite as many of you as possible to engage with this consultation and supporting processes.

Natalie Don-Innes

Minister for Children, Young People and The Promise