‘Concerning’ profit and debt levels in children’s care

The Local Government Association has said that the government’s review of children’s social care needs to consider the impact of increasing private equity and stock market involvement in the system.

Council leaders have highlighted new research showing that the six largest independent providers of placements made £219 million in profit last year.

A report by the LGA shows that some independent providers of children’s residential and fostering placements are achieving profits of more than 20 per cent on their income, while four of the seven largest groups of independent providers had more debts and liabilities than tangible assets.

Nearly three in four children’s homes and two in five fostering households are now provided by independent organisations, which includes private and charitable companies. Councils have been reporting increasing difficulty in finding suitable places for children in care, particularly for older children and those with more complex or challenging needs. They have also identified some placement costs rising far beyond inflation, putting pressure on budgets that are already at breaking point.

Rising demand means that despite increasing budgets, councils still overspent on children’s social care by more than £3 billion over the past five years. Four in five councils have reported rising costs for fostering and residential placements for children in care due to coronavirus pressures last year.

The Department for Education has launched an independent review of children’s social care, which council leaders say must lead to greater national oversight of companies providing homes for children in care, like the role the Care Quality Commission (CQC) holds for adult social care provision.

Judith Blake, chair of the LGA’s Children and Young People Board, said: “The largest providers of children’s placements are growing rapidly and continuing to acquire other providers. The potential risks involved in their considerable debt levels is an issue that the government must consider alongside greater financial support for children’s services.

“We cannot risk a Southern Cross or Four Seasons situation in children’s social care. Stability for children in care is paramount if we are to help them to thrive. An oversight scheme is needed to help catch providers before they fall and ensure company changes don’t risk the quality of provision.

“Providers should also not be making excessive profit from providing placements for children. What matters most is that children feel safe, loved and supported, in placements that best suit their needs. Councils, providers, central government and Ofsted all have a role to play in developing a diverse market that makes sure we have the homes children need.

“The government’s review of the children’s social care system is a positive step. It must consider how to support councils and independent providers to deliver the homes our children in care need, how the current market is impacting on children’s experiences, and how we can make sure children get the support they need to thrive.”