Are you on the right tracks to avoid risk?

Since the ODPM’s announcement last December that it was cutting funding of Supporting People by £100m, the supported housing sector has been in a period of uncertainty. Administering authorities (the local funders of your supported housing services) are grappling with how to reduce their spending while still meeting strategic needs. Registered social landlords and other providers face a parallel challenge: they need to continue to provide quality services and at the same time adapt to increasingly severe pressure on costs and intense competition.

This task is difficult enough for large specialist Supporting People providers, but it is particularly difficult for RSLs for whom Supporting People is only a small proportion of their work. That’s partly because supported housing needs more intensive management than general needs due to its very different cost structure and small and tenuous margins.

In this situation it is instructive to look at other sectors that have been through a similar period of tension to see whether there are lessons to be learned. Although there are obviously many differences, a look at how the national rail network has developed since privatisation, for example, suggests a number of useful pointers for the future.

Although train usage has increased, so has the level of public subsidy, now three times the level under British Rail. There has been massive investment and many new trains, but this has not been achieved in a balanced manner and has led to idle new trains with no revenue funding to run them.

Operators running the trains and those maintaining the track had conflicting objectives. A combination of harsh cost cuts and poor risk management led to the Hatfield disaster, resulting in four deaths.

The rail sector is now experiencing a considerable scaling back of the original objectives underlying privatisation. There is evidence that the Treasury will be looking for subsidy cuts after the general election which will be achieved through rationalisation, service cuts and higher prices. There is much uncertainty, with new franchises having so far always been awarded to the cheapest bidder, whatever may be said about quality. The number of franchises is being cut with the largest one now operated on a management contract with a 2% fee for the operator.

There have also been massive job losses as it has become clear to everyone involved that the efficiency gains to be made through reducing the number of contractors, bringing work in-house and having better trained staff are very significant. This has in turn enabled big reductions in overheads.

Many clients are coming forward who are a higher risk to the community. They need a careful and robust risk assessment to prevent serious incidents

So for Supporting People, where are we now in comparison? On the positive side, an initial increase in funding has enabled a greater number of clients to access services.

On the other hand, the large number of agencies and local authorities involved, as well as the much greater need for information to flow between them, have led to a considerable increase in the basic costs of “doing business”. While many local authority staff have experience of the support sector and know-how to make it work, others take contract advice from central legal teams more used to setting contracts for refuse collection, or seek to impose their own views on providers on how to deliver services, ignoring years of experience of “what works”. All this is contrary to the objectives of the Gershon review of public services.

Moreover, clients are coming forward with increasingly complex needs and present a higher risk to themselves, our staff and the wider community. They need a careful and robust risk assessment – without it, the potential for serious incident is much greater.

Taking the rail example as a cautionary tale, RSLs should be concerned about four major areas of significant risk in the Supporting People sector:

• The sector size is volatile with unstable funding
• It is a contract business requiring different culture and skills from general needs
• The operational risks are high
• Safety management and staff/resident relationships can be difficult

Signposts from other sectors suggest supplier rationalisation and greater standardisation are likely, enabling overhead costs to be reduced. Experience elsewhere indicates that larger specialists and smaller niche providers may survive better than medium-sized generalists as they understand the risks better and have greater ability to manage the cost/risk tradeoffs. The sooner we all recognise the above risks and address their implications, the better.