DN2 Children’s Services Social Impact Bond

Children in need of care are found to face wide-ranging adverse outcomes throughout their lives, including in education, employment, health, and crime. In England, safeguarding these vulnerable children and young people is a statutory responsibility of local authorities under the Children Act 1989. However, reductions in central government grants, coupled with local authorities’ limited revenue-generating options, have resulted in significant budgetary constraints to provide these vital services over the years. In particular, local authorities deploy substantial resources to support a small cohort of children and young people with the most complex needs.

While the rate of looked after children under 18 per 10,000 children varies widely across DN2 areas (Nottinghamshire: 59, Nottingham: 99, Derby: 108), the combination of rising child populations and their increasingly complex needs have translated into a rise in demand across 3 authorities. Notably, the number of children in care has increased by 25% between 2017 and 2020 in Nottinghamshire, reaching 1,000 for the first time. While the number appears to have stabilised after peaking in 2020, the pandemic also introduced further instability in the children’s social care system.

Reflecting the limited supply of internal placements, a marked increase in use of high-cost external services including residential homes has further added to existing budgetary pressures in services targeted at children and young people, currently constituting 18% of Nottinghamshire Council’s annual budget.

Against the backdrop of rising demand amidst budgetary pressures, a rethinking of commissioning approaches was necessary. Under the commitment to remodel children’s social care, Derby City Council, Nottingham City Council and Nottinghamshire Country Council (DN2) have built an innovative regional partnership in 2016 to improve outcomes for vulnerable children and young people.

DN2 Children’s Services Social Impact Bond is a product of this partnership and aims to provide children and young people aged between 10 and 17 with a stable and nurturing environment that is conducive to their well-being and improved educational outcomes. This evidence-led and practice-informed programme introduces a new model of commissioning through a social impact bond (SIB), linking payment to outcomes over a two-years period across 4 targeted interventions. The interventions are predicated on the proven hypothesis that young people achieve better outcomes if they live in an appropriate family environment and thus seek to:

• prevent children being taken into care; or to
• support reunification back with birth parents / carers.

Or, if the young person is in long-term care:

• to support children to remain living with a foster family (and thus prevent escalation into residential care); or
• to support in enabling a child to step down from residential care into foster care.

Outcome payments are made from the Life Chances Fund (27.5%) and local councils’ budgets (72.5%).

Despite the delay in launching the programme, which ultimately led to it commencing during the pandemic, the programme reached 56 children and young people during its first year, above the minimum number of 55 stipulated in the contract with the provider. The mix of referrals across the 4 cohorts has proven to be different to that envisaged with a far greater proportion being to support young people in care to remain with foster families. This reflects one of the impacts that pandemic has had on overall foster care capacity and on foster placement stability. The provider and investor have helpfully recognised the need for this flexibility within the overall total of referrals across the programme.

In addition to providing children with stable environment and improving their outcomes, this programme also has a potential to incur fiscal savings through preventing costly entries into residential care (average cost over £4,000 per week) and stabilising foster care (average cost less than £1,000 per week). The weekly outcome payments payable via this programme in order to prevent escalation from foster care to residential home care results in a mix of cashable savings and significant cost avoidance. Within Nottinghamshire, these savings from the programme are reported through monthly project and financial monitoring processes. At present, the Council’s Medium Term Financial Strategy reflects £250,000 savings attached to this SIB programme for the two fiscal years 2021/22 and 2022/23.

An impact evaluation was planned for September 2022, coinciding with the completion of one full cycle of the project delivery (up to 2 years). Stakeholders plan to procure an external evaluator through the accumulation of the Life Chances Fund grant.

The programme targets 4 different cohorts of children and young people and delivers tailored interventions, outcome payments of which are made per full week of children being out of different types of care. The diagram below shows the breakdown of referrals for each authority and cohort group, along with the contractual minimum.