Rising children’s services demand and care placement costs are deepening English councils’ financial problems, a study issued this week has found.

Despite authorities budgeting to spend 11% more in real terms on children’s social care in 2023-24 than 2022-23, they are on course for a significant overspend on their financial plans, said the County Councils Network (CCN).

Children’s services also accounted for almost half of councils’ projected overspends for 2023-24, according to a survey of 31 authorities by the CCN and the Society of County Treasurers (SCT).

The CCN said this was driven by rising demand in the wake of the pandemic and rising placement costs for children in care.

Councils need ’emergency social care funding’

The situation was leaving some at risk of insolvency, said CCN, meaning they would have to make drastic cuts to non-discretionary services in order to meet their obligation to set a balanced budget.

While 13% of councils were not confident or unsure about setting a balanced budget in 2023-24, this rose to 64% in 2024-25.

Ahead of this month’s autumn statement, which will set out the government’s latest tax and spending plans, the CCN urged chancellor Jeremy Hunt to provide “emergency funding” for children’s social care for this year and next.

The findings were based on a survey answered by 31 of the SCT’s 41 members, with findings scaled up to represent the full membership.

Predicted children’s services overspend

The SCT and CCN found authorities were predicting an overspend of £639m for 2023-24, with £319m accounted for by children’s services alone, most of which was down to increased demand £207m, with £67m accounted for by increased costs.

The projected overspend was despite the fact that councils had increased their children’s social care budgets by £1.2bn this year in real terms, to £12.7bn, a 11% rise on 2022-23 budgeted levels, according to government figures.

The bulk of this increase (£700m) was due to services for looked-after children, with £200m related to safeguarding and £220m to family support, and the CCN said the projected overspend was driven by rising numbers of care placements and their increased costs.

While the number of children in care rose by 2% from 2021-22, figures have not been released for 2022-23.

Cafcass has reported a decline in the number of care applications over this time, though these figures do not take account of voluntarily accommodated children, whose numbers grew by 15% from 2021-22.

‘Broken care provider market’

“The number of vulnerable children requiring care has risen dramatically post-pandemic, while inflation and a broken provider market in statutory care placements mean councils face no choice but to pay spiralling fees,” said Barry Lewis, the CCN’s vice chair and finance spokesperson.

The “broken provider market” is a reference to the scarcity of placements that has resulted in more children placed far from home or in inappropriate placements and driven higher fees, as set out  by last year’s report on the sector by the Competition and Markets Authority.

The issue of rising placement was highlighted in a Local Government Association-commissioned report issued this week, which showed that council spending on independent children’s homes rose by 11%, to £1.5bn, in 2021-22, and had more than doubled since 2015-16.

Separately, council bodies, including the CCN, have raised concerns about the increasing costs, and looming shortages, of supported accommodation – semi-independent placements for children in care aged 16 and 17.

Government plans for care placements

The government has responded by providing councils with £259m from 2022-25 to expand children’s home capacity and £27m from 2023-25 to recruit more foster carers.

Over the longer-term, it plans to introduce regional care co-operatives (RCCs) to take responsibility from individual councils for both commissioning and delivering placements.

As recommended by the Independent Review of Children’s Social Care, these are intended to give councils, collectively, greater clout with providers, in order to improve the supply of appropriate placements and bear down on costs.

However, the Association of Directors of Children’s Services has criticised the idea, both because of the potential costs of establishing RCCs and the risks of them triggering a mass exit of providers.

More recently, the ADCS has welcomed the DfE taking a more “pragmatic approach” to RCCs, involving working with the sector to co-design the co-operatives, which are due to be tested in two regions from next year.