Concern grows about the market in children’s residential care

At the start of this programme we raised concerns about the large private companies who control the children’s residential care sector. We exposed the huge profits some of these companies were making and the lack of transparency and accountability that were allowing bad practices to remain hidden and damaging children (see our scoping briefing).

Over the last four years we have spoken to hundreds of people who have voiced concerns relating to these issues and we have shown how the current “market” in residential children’s care is contributing to the unnecessary criminalisation of children. For more on this, see our June 2019 blog on private profit and the blog written by the journalist and foster carer, Martin Barrow, on the rise of CareTech, one of the major players in the market.

A report published by the Local Government Association on 27 February 2020 provides financial analysis and comment which reinforce the points we have been making over the last four years. Profit making and Risk in Independent Children’s Social Care Placement Providers is an interesting and extremely worrying read. Key points to note are:

• The six largest independent providers of children’s social care services made £215 million in profit last year, with some providers achieving profit of more than 20 per cent on their income. There is evidence that some investors have made above-average returns on their investments. This is in contrast to many smaller providers who experience much lower levels of profit.
• The larger providers are merging rapidly. In just three years, eight of the biggest providers merged to become the three largest groups. At the start of the study in November 2019 the analysts (Revolution Consulting Ltd) were looking at 29 different legal entities. By the end of the research period these entities had already consolidated into just 16 different groups.
• Six of the 10 largest independent groups of providers of children’s residential and fostering placements had more debts and liabilities than tangible assets last year raising concerns about their viability.
• Councils are concerned about the levels of debt and financial risk being employed by these big companies and about the fact that there is no system in place to track the impact of mergers on the market and issues such as quality and children’s outcomes.

At the end of the month, we will be publishing a new briefing on how child criminal exploitation and abuse is affecting children in residential care. Our research has shown that people involved in crime, including those operating “county lines”, are taking advantage of failings in children’s social care and central government oversight to exploit and abuse children in residential care. Many of the problems relate to the fact that companies are profit- rather than care-driven and that the government has allowed a “market” to develop according to market forces rather than the needs and best interests of children. We’ll blog more about this when we publish the report.

The LGA analysis should be a wake-up call for the government. It is essential that government starts to take back control of the children’s residential care sector in order to provide long-term stability and a system that is focused on providing children with excellent care rather than private profit.

Claire Sands

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