Short Debate: Social Impact Bonds and Looked-after Children in Wales


Dydd Mercher, 14 Tachwedd 2012
Wednesday, 14 November 2012


Mark Drakeford: I am pleased to offer a minute during the debate to Joyce Watson, Aled Roberts and Ken Skates.

It is a much over-used term, but the contention of this short debate is that there is a looming crisis in the situation of looked-after children in Wales. In 2012, we take more children away from their families than at any time since the foundation of the welfare state. We take them away at an accelerating rate, with the numbers rising inexorably year after year since 1997. We take children away, moreover, at a rate well in excess of that across our border in England. The gap between the two nations has grown rapidly in the devolution era. The number of children removed from their families has risen in both places, but the increase in Wales has been five times as great as that in England. The result is that local authority budgets are so soaked up in responding to those already in the system that they have almost no capacity at all to work preventatively or to help families to stay together during periods of difficulty.

It is a deep and enduring dispute that characterises public policy towards children and families who come to the attention of the welfare state. On the one hand, there are the rescuers: those who believe that children from flawed families are best removed from them, early and decisively, in order to be offered a fresh and better start in life somewhere else. On the other hand there are the repairers: those who believe that families are best placed to care for their own and that state support ought to be directed towards keeping families together rather than splitting them apart.

The rescuers have been firmly in charge for a decade and a half. As I said earlier, year on year, since 1997, the rate at which children have been removed from their own families, and into local authority care, has been rising. A child in Wales now has almost one and a half times as great chance of being taken into local authority care than a child in England.

Of course, there will always be circumstances in which deliberate cruelty or wilful neglect mean that children will need to be removed to avoid harm and suffering, and nothing I have to say today suggests otherwise. However, the escalating rate of removal shows that something different is driving change in the system. The number of children looked after by Welsh local authorities has increased by over a third since 2003. I do not want to spend my time bamboozling people with figures that are hard to take in, but the number of children who have started to be looked after by local authorities in Wales has increased from 4,200 in 2003 to 5,725 this year. There has been a particular rise in the number of older looked-after children—a 64% rise in the number of 16 and 17-year-olds looked after by local authorities over that period.

Lurking behind all this is the baby P effect—the baby Peter scandal of 2008, which led to a 40% increase in the intake of children into local authority care in Wales in the first full year after that review. There have been further year-on-year increases since. Are these children chosen at random from the population as a whole? Of course they are not. They are taken overwhelmingly from poor families in poor places. In 2001, Torfaen had the highest rate of children being looked after by the local authority, with 146 children removed from their families for every 10,000 of the population. It was closely followed by Neath Port Talbot with 145. At the other end of the scale, unsurprisingly, is Monmouthshire, with only 42 children looked after by that local authority for every 10,000 inside its boundaries. The lowest rates, even in Monmouthshire, are twice as high as the lowest rates of the bottom English authority, and Neath Port Talbot, Torfaen, Merthyr Tydfil and others have significantly higher rates than those recorded in any English local authority, including those with very high rates of deprivation indeed.

The pattern is self-reinforcing, as council budgets are used up, almost entirely, in responding to the needs of those already caught up inside the system, with very little left over to invest in helping families to stay together. None of this would matter if we thought that the money we are spending was buying a better future for those children, but in fact what we know is that the longer the looked-after system hangs on to young people, the worse their outlook becomes, in terms of both education and health. While the funding that local authorities provide for children’s services concentrates on paying for highly expensive, intensive and ineffective forms of care, it is at the expense of those services that help families to stay together.

In a period of such acute funding restraint, it is a source of optimism to find that, in Cardiff, an experiment is being mounted to explore a social impact bond so that services that can be re-engineered in the direction of supporting families. Social impact bonds are investment funds, raised from socially motivated individuals and organisations. The bonds are used to create new services to help reduce the flow of children into the most expensive and least successful parts of the system, creating a self-reinforcing cycle of positive spending and outcomes.

Of course, there are large numbers of technical details that remain to be resolved. However, Social Finance, an organisation working with three major local authorities in England, has drawn up a technical guide to the bond application in this policy area. It outlines a set of services that could reduce preventable family breakdown and the number of young people entering care. It would help us in Wales to reduce the number of children who we export across our border to be looked after elsewhere. As well as exporting children out of country, we export large numbers of children out of county, far from their families and communities, to which, in the end, we know they are overwhelmingly likely to return.

Financially, the bond reduces local authority costs by stemming the flow into care, and by re-ordering the care services provided to existing looked-after children. The funds released in this way are accumulated over the period of the bond, so that its capital investment can be repaid at the end of the period, together with any return on that investment. At the end of the period, services have been re-engineered in a way that allows the local authority to use its own funds, released from unproductive spending into the long-term continuation of the services created through the bond. The technical aspects, therefore, do not need to detain us; they have been worked out already.

Much of what has been created adds to expertise already existing in Wales, to allow for site-specific design to be carried out. What is necessary now is for the political will to be summoned to take the social impact bond possibility from the drawing board into a practical experiment. That is why the progress in Cardiff is so encouraging and why it is so important. However, there is an urgency in all of this, because without an urgent response, the position for children and their families, given the scale of the problem that I have tried to outline this afternoon, will undoubtedly get worse before it can begin to get better.




Joyce Watson: I thank Mark for his contribution. I understand why some people will be uncomfortable discussing children in care and private profit in the same breath, but we cannot bury our heads in the sand. Private companies already compete to take on children from local authorities that do not have free beds. That was one of the issues to come out of the horrific sex abuse case in Rochdale, where children from all over Britain, supposedly monitored by social workers at the local authorities, were all living in 47 homes in the borough. It is an industry.

What matters is what delivers the best care and support for children in care. As always with payment for success, we have to be precise and cautious about how we define that success. If you look at the PIP implant fiasco, you will see that patients were initially happy with the outcomes. Was that a success? You only have to look at the corruption at A4e, for that matter. Therefore, we should pursue policies that deliver the best outcomes for looked-after children and social impact bonds may offer that, but we must be cautious about how we ask service providers to demonstrate success in achieving those outcomes.




Aled Roberts: I also thank Mark Drakeford for bringing this matter to our attention this afternoon. I recognise many of the issues that he has raised from my former life. There is a great deal of frustration at local authority level with regard to the scale of the problem. We set up a children’s department in Wrexham. The focus, following cross-party agreement, was that we would create a prevention department, so that we could frontload interventions before coming to a crisis. The sad impact of the baby P issue was that, in effect, a lot of those preventive services were withdrawn because of the scale of the acute service need. We all recognise, in effect, that if we take a child into care we have failed. The outlook for that child, whether it is educational achievement or a whole range of facets, is adversely affected by state intervention.

I do not think, as Joyce has said, that we should rule out private financing in this way. We need to be careful, because the other issue is the involvement of private fostering companies, which has also had an impact on costs as far as local authorities are concerned. If there is good practice within an individual authority, I would hope that it is the role of the Welsh Government to ensure that that best practice is rolled out across Wales for the benefit of these children.




Kenneth Skates: Mark Drakeford, thank you for allowing me to speak in this important debate. I only want to make a few points. The first is that I am hugely supportive of the principle behind social impact bonds and welcome your debate today. Having worked with the Deputy Minister for Children and Social Services on the When I Am Ready scheme for care leavers after the age of 18, this has been in my mind as a much better model that we could adopt to support local authorities and other service deliverers in a time of financial restraint.

You have already mentioned some startling figures concerning the rise in the number of children being taken into care. Significant public service funding pressures are anticipated in the coming years, because of the poorer outcomes often associated with young people in care. The obvious difficulty with this kind of outcome-based contract is defining in a way that is clear for both the bond holder and the commissioner how to quantifiably measure the outcomes of the policies being followed.

Such a challenge, in my view, is not insurmountable. I believe that social impact bonds are an innovative way of attracting new investment and getting service deliverers to think more creatively about policies for looked-after children and care leavers. It could overlap neatly with much of the excellent work being done through the invest-to-save funding programme being pushed forward by the Minister for Finance.




The Deputy Minister for Children and Social Services (Gwenda Thomas): I am grateful to Mark Drakeford for proposing this debate today and for the contributions by Joyce Watson, Aled Roberts and Ken Skates. It is a timely and helpful opportunity to think about innovative new ways to deliver improvement for our public services. I particularly welcome, given the importance of our role as corporate parents, any opportunity to look at ways to change for the better the lives of children on the edge of care and looked-after children in Wales. I am sure that we do not want to give the impression that there are any children in care today who do not need to be. We need to think of the work that front-line workers do with children and the way they care for them on a daily basis.

You will recall, for example, that only last month we discussed a proposed new scheme to support looked-after children in Wales in their transition from care to independent living, which is currently out for consultation. It is important that we keep raising the profile of these important issues to support such developments for the children we are all responsible for, and accountable to, as good corporate parents.

We know that there are pressures on the care system. The strain faced by families is evident in the increase in the number of looked-after children in recent years, as Mark Drakeford has clearly spelt out for us this afternoon. There are a number of contributory factors, but poverty and debt is an underlying issue for many of these families. Children on the edge of care, looked-after children and care leavers, as children and young people of the state, must be a key priority for national and local government. The safety and protection of a child is of paramount importance. As corporate parents, we also have an important role in ensuring that these children have the same opportunities and life chances as their peers. Our programme for government and ‘Sustainable Social Services: a Framework for Action’ set out our plans to improve the lives of looked-after children. Our social services Bill, which I will introduce in January, will provide the legal framework for that transformation.


It is important that we look at new ways to support families with complex needs earlier to stay together. Early intervention support for families and new and innovative models of service are at the heart of our reforms for sustainable social services in Wales. Our unique and innovative work in integrated family support and Families First are key examples of improved collaboration and multi-agency working. These are providing a holistic range of protective, preventative and remedial services in tackling issues faced by families with complex needs sooner. This early intervention is key to reducing the need for more invasive intervention at a later stage.

In this context of the need for new and imaginative ways of funding and delivering services, social impact bonds are a very interesting idea. They potentially offer both new avenues of funding and a new partnership approach to delivering improvement. I explicitly identified this potential in ‘Sustainable Social Services’ last year when I committed us to exploring how social impact bonds can play an important role in developing new models of service. Of course, social impact bonds are very new, and we are not yet in the position of having a great deal of evaluation of their success or otherwise. The best-known example in England, in HMP Peterborough Prison, has claimed some early indications of success in reducing reoffending, but we await a full evaluation. Examples overseas, in the United States and Australia, are similarly in their early phases. That is why I will be very interested in the feasibility study recently announced by Cardiff Council into the potential of social impact bonds to fund foster placements for children and young people with complex needs. I am pleased that Cardiff shares with us the view that early intervention and working with families is the best way forward. Any success it has in this work could have much wider lessons for Wales as a whole.

Of course, social impact bonds are about investment for return. Here in Wales we believe the return should be primarily seen in the social context. We recognise the strengths of a diverse provider base, but the ultimate purpose of social care cannot be profit. Social impact bonds may offer us the chance to use new sources of finance to deliver social benefits without these risks. I have also been closely following the early development of the wellbeing bond, as an example of this social return, through the Wales Council for Voluntary Action. This proposal uses an existing fund—the communities investment fund—to test out the model within Wales. My officials have been encouraged by the meetings that they have attended as this proposal is being worked through. There are clear indications of enthusiasm from the social care sector for the scheme and I wish the WCVA and its partners every success as it moves forward.


Ultimately, however, the success of social impact bonds will be in practical results. Will they bring in new sources of finance to support improvement? Will they drive improvements in care and support new, innovative models of service? I, like my colleague, the Member for Cardiff West, who has championed innovation so consistently, await the answers with great interest.