This is a guest post by Martin Barrow, journalist and local authority foster carer.  Martin tweets as @MartinBarrow

When the Care Review was formally announced in January, one of the first actions of its chair, Josh MacAlister, was to ask the Competition and Markets Authority to investigate the children’s social care ‘market’ in England.  This was announced even before MacAlister takes up his post, which is not until March.

This may seem perverse, given the review’s ambition to “transform a system that is needed to give the most vulnerable children safety, stability and love,” to quote MacAlister himself. What has business or competition got to do with this?

Yet such a request makes sense, for children’s homes and foster care are big business these days. The Local Government Association has revealed that the six biggest providers earned £219 million in profit last year . This doesn’t include the millions of pounds in management fees and finance charges, which parent companies take from their businesses before profits are calculated.

Making profits out of children’s services

About 80 per cent of children’s homes are privately-owned and mostly run for profit. Foster care is following this trend, with private agencies now providing homes for one in every three children living with a foster family. Throw in residential special schools and children and young people’s mental health care, both now overwhelmingly privatised, and you can see why MacAlister is concerned. You can’t fix children’s services unless you understand the impact of private provision.

There is nothing new in private companies and organisations providing social services for children and young people. Over the past 40 years, business has increased its presence, as local authorities and voluntary organisations stepped back. Both Conservative and Labour governments have encouraged councils to outsource services, and the care of vulnerable children has been treated in much the same way as road maintenance and waste disposal, ostensibly cheaper and more efficient in private hands.

So why does it matter now? In my opinion, local authorities should never have been allowed to abrogate their responsibility to the children and young people in their care by passing them on to private companies. But the situation has become much more urgent in recent years and can no longer be ignored. For the care system is failing children and young people terribly.

Why it matters

In a series of damning reports published late last year, the outgoing Children’s Commissioner, Anne Longfield, said the reliance on private companies for provision of children’s homes and foster care had created a system that was “increasingly fragmented, uncoordinated and irrational.”

By outsourcing care, local authorities have lost control over quality, cost and location of the places that children in care are supposed to call ‘home.’ Many local authorities no longer have children’s homes of their own; as a consequence, children must often move many miles away from their families and other important people in their lives for somewhere to live. The most vulnerable are at risk of falling through gaps in the system and becoming the victims of criminal and sexual exploitation.

Perhaps there was a time when local authorities turned to family-owned and run children’s homes for help with the children in their care. These days, however, private provision is dominated by large companies, accountable to their shareholders, not to the children in their care or their families.

One of the largest is CareTech, a company listed on the London Stock Exchange with a value of around £600 million. It pays dividends and buys up other providers in the sector, notably Cambian. Its senior directors are each paid £1 million a year, like directors of other listed companies. CareTech’s business has boomed during the pandemic; last year it was paid almost £430 million by local authorities and its profits rose 20 per cent to £60 million. The company uses a number of different names – Branas Isaf, Park Foster Care, TLC, ROC – capitalising on the ‘local’ credentials of the many former family-run businesses it has acquired over the years.

The smell of easy money has attracted an even more voracious business model: most of CareTech’s biggest competitors are private equity firms. These are mostly private partnerships based offshore in tax havens like Jersey and Luxembourg.  You won’t find it on their websites but companies we know as National Fostering Agency, Polaris and Outcomes First are all owned by private equity firms such as Stirling Square Capital Partners, CapVest and August Equity.

It is increasingly common for one provider to have interests across all children’s service, from early intervention programmes through foster care, children’s homes, residential schools and mental health care. A child may bounce through the system, frequently changing homes and schools, based n decisions influenced by a provider with a financial interest in each move.

The average price for a place in a children’s home is now more than £4,000 a week; local authorities report paying between £7,000 and £8,000 a week for some children. Small wonder that companies are willing to play inflated prices for existing children’s homes and family-run foster care agencies. Recent takeovers imply a price of around £100,000 per child on the books. Even a small foster care agency with, say, 20 children may now be worth more than £2 million.  

Who picks up the bill for these colossal prices? Indirectly, you and me, and it has a direct impact on the amount of money available to pay for frontline care. Typically, children’s services providers owned by private equity have been loaded with debts, some running into hundreds of millions of pounds. The interest charges are covered by the fees charged to local authorities for care. Often the debt is held by the private equity firm: they borrow at discounted rates, guaranteed by a local authority’s strong credit rating, and lend to their children’s services business at rates of up to 17%. It is a very profitable arrangement.

Meanwhile, local authorities are having to struggling to square the books; many are on the verge of insolvency. Coventry City Council is the latest to report a £9 million ‘overspend’ in children’s services. There is little or no money to invest in foster care or children’s homes, so local authorities have no choice but to go private.

The future

It is obvious to everyone that this is unsustainable, as well as creating calamitous instability for children in care. Despite this, until recently there seemed to be no real appetite for change. Yet there are grounds for optimism.

The Care Review does at least present an opportunity for open debate about this issue, and the reference to the CMA makes it clear that it is high on MacAlister’s agenda for change. In addition, the newly-published NHS White Paper calls for an end to the ‘market’ in healthcare, which surely must be a signal to local authorities to think again about the marketisation of children. And as we begin to think about what services should look like beyond the pandemic, there is no reason why this should not include sustainable, local children’s services that don’t depend on private equity to put a roof over children’s heads.

Image: Thanks to GotCredit on flickr