Criminal Care? · 25 Jun 2019
Private profit from children’s services
Earlier this month we delivered a seminar about our programme to students on the Criminology Masters course at Oxford University. They, like many groups we present to, were surprised to learn that three quarters of children’s homes are owned by private companies and some of the questions probed our concerns around this. One of the students challenged us to explain why we were so concerned about private companies making a profit from providing a service which is clearly needed.
This question has been recently exercising a number of public and government bodies and I want to use this blog to pull together some of the points that have been raised.
There is a fundamental question about how we, as a society, feel about companies – some of which are large and based overseas – making profits from the care of the most vulnerable children in our society. This essentially moral question was raised by a number of stakeholders in the recent inquiry into the Funding of local authorities’ children’s services. The Association of Directors of Children’s Services was quoted in the inquiry report as questioning whether ‘the government and indeed wider society remains comfortable with the extraction of ever larger profit margins from the care of children and providers of vital care services being bought and sold on the open market’ (para. 105). It advocated for ‘a review of the ability of organisations and individuals to generate significant profits from the care of some of the most vulnerable children and young people in the country, particularly when set against a decade of year-on-year reductions for local authorities’ (para. 107).
One Director of Children’s Services described a ‘wild west’ market in residential care
The National Audit Office’s (NAO) Pressures on children’s social care (January 2019), which we discussed in a blog earlier this year, reported that the demand for residential care was growing but that costs were rising even more precipitously. The number of children placed into residential care increased by 9.2 per cent between 2013–14 and 2017–18; during the same period the cost of residential care went up by 22.5 per cent, from £1.02 billion to £1.25 billion in real terms (paras 1.24, 1.27 and 2.19). It is currently ‘unclear’ why these costs have been increasing (Funding of local authorities’ children’s services, Summary).
The Public Accounts Committee, in its March 2019 report Transforming children’s services, reported a lack of capacity in the residential care sector which was resulting in ‘bidding wars’ between local authorities for places. This competition was driving price increases which could have ‘extreme financial consequences in individual cases where there is an urgent need to find a placement for a child’. The report cited evidence from Oxfordshire County Council which spent £21,000 housing one child over Christmas 2018. Northumberland County Council reported to the Committee that the costs of placements beyond the county’s boundaries had increased by 116% over the past three years (para. 15).
One Director of Children’s Services we spoke to described a ‘wild west’ market in residential care. In such circumstances there is a reluctance to tackle private providers who can easily find business elsewhere. Concerns about making the sector unattractive to private providers were reflected in evidence given to the Housing, Communities and Local Government Committee’s inquiry into the funding of local authorities’ children’s services. In discussions about a potential non-profit making clause, which could prohibit or limit profits, the Children’s Commissioner for England, Anne Longfield, said it was ‘very enticing’ but ‘the main drawback with it is that we are where we are and we already have a shortage of places. We would fall over if we did not have the private sector within it’ (para. 108, Funding of local authorities’ children’s services).
The market is not working for children or for the public purse
In the Committee’s report Funding of local authorities’ children’s services (May 2019) the following key recommendations and conclusions were made in relation to residential care (Summary):
- The government should consider the barriers to creating more residential care placements to increase supply.
- There may also be a role for greater regulation of the children’s care market to ensure that costs do not rise disproportionally and that there is appropriate competition. The Competition and Markets Authority should investigate this market.
- A review of the commissioning and procurement system, which also assesses the merits of the various improvements, should be conducted by December 2019. The government and local authorities should introduce greater oversight of how different care placements affect outcomes for children and their value for money.
The Department for Education’s response to the issues appear to have been focused on putting the responsibility onto local authorities to collaborate in order to provide ‘cost-effective commissioning’ (para. 17, Transforming Children’s Services). The government seems unwilling to address the core problems of the absence of central oversight of the ‘market’ and the lack of transparency surrounding costs and profits.
As reported in our blog on the NAO’s findings and in our third briefing, Hearts and Heads, we are concerned about how the current market structure is affecting children and contributing towards criminalisation. Undoubtedly there is much more that many local authorities could be doing to fulfil their statutory duties on corporate parenting and fiscal control, however, it is up to the government to provide central oversight and control of a market that is not, at present, working for children or for the public purse.