Decision Maker: Cabinet Procurement and Insourcing Committee

Outcome: Implemented

Is Key Decision?: Yes

Is Callable In?: Yes

Date of Decision: July 7, 2025

Purpose: This proposal sets out how the Council intends to help meet the accommodation needs of the borough’s current and future Children Looked After through the development of two residential children’s homes in Hackney. The Council believe this will help to shape the market, make financial savings and enable greater choice to Hackney’s Children Looked After.  

Content: RESOLVED:   1.  To Agree to a competitive tender to commission a block contract for the provision of residential care for Children Looked After in Hackney. The service will provide 6 places in 2 homes that are owned by the Council. The contract term will be for 5 years with an option for two further annual extensions at an estimated maximum total cost of £17.86m.   Reasons For Decision   The London Borough of Hackney is seeking approval for the competitive procurement for the provision of a block contract that would provide 6 places for Children Looked After, in two homes located in Hackney that have been identified by the capital team as internal assets. The buildings would remain owned by London Borough of Hackney and would be rented to the prospective care provider for the duration of the contract on a peppercorn rent basis.   Children’s homes provide support and care for some of our most vulnerable children and young people. The Council wants each child in our care to be provided with the right home at the right time, and for residential care to be a positive and beneficial choice for children and young people. By developing our own resource the Council have an opportunity to deliver significant improvements to the outcomes for children living in children’s homes by developing and coproducing our own specification. By utilising buildings within our capital asset portfolio, the Council can ensure children are kept closer to their communities, reduce social worker travel time and costs, provide local training and employment opportunities and ensure that the children are supported by highly skilled staff who represent the cultural diversity of our borough.   The scoping phase of the work has been completed, liaising with other local authorities and some potential voluntary partners. That has resulted in an option appraisal (see Exempt Appendix 2) for different operating models. CLT have signed off the opportunity assessment (See Exempt Appendix 3) and agreed upon the operating model of the homes (namely to commission a partner to run the homes).   The London Borough of Hackney has not operated a children’s home in several decades. Historically, a Hackney children’s home operated in Oswald Street. Over time, a large number of local authorities, including Hackney have moved away from managing and operating children’s homes, following national scandals over abuse and a desire to place children in more family settings. Commissioning out this provision in the early days provided more competitive pricing, access to more specialist services that were nationally located. In addition 2010 austerity measures significantly curbed local authorities' abilities to invest in their own children’s home provisions which resulted in a move towards the private and voluntary sector. As things stand, there are only two registered children's homes in Hackney. One is a specialist disabled children’s home that was established for a specific sector of the community and the other is a very small, relatively new private market provider.   In 2023 the government launched its vision for the future of children’s social care in England: Stable Homes, Built on Love: Children’s Social Care Reform 2023. One of the six central pillars is ‘Putting love, relationships and a stable home at the heart of being a child in care’. Hackney is already part of the North East London Commissioning Partnership (NEL), which began in 2017/8. The partnership of 7 East London Boroughs and 2 independent children’s homes providers secured Department for Education Funding in 2019 to establish a network of local children’s homes, under an initial 8 year contract. To date, 5 homes have been established. Negotiations are underway for an extension of the contract. London Borough of Hackney has maintained a high level of utilisation of this block contract, securing value for money, however the changing and increasing complexity of needs of Children Looked After and the increase in demand for smaller homes with the use of deprivation of liberty orders has limited maximising this resource. In addition, none of the five homes are located in Hackney itself.   Aside from the NEL homes, there are no other block contracts for commissioning residential children’s homes within Hackney. The Hackney Children and Families Placement Management Unit (PMU) relies mostly on spot purchasing, which is high cost, difficult to manage, and has very little influence over the market as an individual local authority. Spot purchasing occurs on a case-by-case basis and often results in local authorities within the sub-region competing against each other for limited placements with trusted providers. This in turn drives up the price over time. When a residential children’s home is required, Placements Officers can contact upwards of 50 individual homes via email and telephone to identify a suitable placement for just one child. There are upwards of 200 children homes providers in the UK registered with the Independent Children’s Homes Association, and out of those providers approximately 100 individual homes are currently in London and rated good or outstanding, these providers are always approached first. However there has been an increase in demand for these homes, leading to the local authorities competing against each other for children’s homes spaces. Providers are therefore able to pick and choose which referrals they accept, as demand for good or outstanding homes is exceeding supply currently. Individual Local Authorities have limited influence over private providers who are able to increase their prices in the absence of a block contract. Over the last five years the national demand for good homes has outstripped the supply. This is also the case locally, where good and outstanding homes are constantly full and some have not been able to keep up with the increasing risk/needs of the children coming into care. This has resulted in local authorities having to use new home providers more often, who are not yet been inspected by Ofsted which carries with itself an additional level of risk but these providers as are newly established have a higher costing operating model and often struggle to provide value for money for local authorities.   In response to increasing concern about the privatisation of the children’s home market, in November 2024 the government announced plans to prevent companies that run children’s homes in England from making excessive profits. New proposed measures include requiring large providers to disclose their profits and introducing new powers for Ofsted to issue private providers, including unregistered homes, with civil fines to ‘deter unscrupulous behaviour’. Whilst this action is very welcome for the long-term picture, in the short-term, it may have the effect of driving some providers out of business, which will further exacerbate supply pressures.   The Council is aware that many neighbouring boroughs are investing in children’s homes. Newham Council have agreed up to £8m capital spend on this objective; Camden Council have existing provision in-borough in partnership with a third sector provider; Enfield Council have opened a new home in the past two years and have another one in development, in partnership with Barnardos; Tower Hamlets Council have a similar proposal going through governance; and Haringey Council has their own home and are planning for a new Short Breaks provision and Parent and Child residential.   The Council has considered the option of in-sourcing the provision. At this time, the financial, regulation and staffing risks, plus the timeframes required to deliver this, mean this is not our preferred option. However, this does remain our medium to long-term ambition. See Exempt Appendix 4 Insourcing/Outsourcing Options Appraisal for details.   Alternative Options Considered and Rejected   Do nothing: The Council could continue to spot purchase suppliers, but this is an inefficient commissioning arrangement, which does not secure better value for money, has poor quality control and is time inefficient. Neither does this option address challenges in local sufficiency, which will continue to result in children in care living at a distance.   The Council has considered the option of doing nothing and continuing with the current service. However, this represents poor costs and quality control, an ongoing reliance on spot purchasing and ongoing local sufficiency challenges, resulting in children in our care living at a distance and spiralling placement cost having an adverse and unsustainable impact on council budgets.   Operate the homes within the existing NEL consortium project: This would create local homes for Hackney children in care, thereby helping to improve outcomes for them; build on existing, established relationship with a partner provider and regional partnership - with admin resources for coordination and a shared vacancy risk structure already in place, which is in line with government’s vision of Regional Care Cooperatives; the provider would take on the responsibility of administration, regulation and staffing, and leaves the option open to in-source in the future. However, this option would still require the appropriate planning permission and capital investment; places for children created would have to be ‘shared’ with 7 partner boroughs in the NEL and the homes created within NEL to date have not been suitable for children with the most complex needs.