Concerns over rise in children’s home debt

Six of the 10 largest independent groups of providers of children’s residential and fostering placements are in large amounts of debt, research published by the Local Government Association (LGA) revealed today (February 27).

According to the LGA, nearly three in four children’s homes, and almost a third of fostering places, are now provided by private organisations. These are increasingly operated using the private equity model that relies on large debt to drive growth.

The LGA said councils are concerned that the debt, combined with placement costs rising above inflation, is putting the stability of placements for children in care at risk.

While Children England’s CEO, Kathy Evans, said the many organisations who do care are trapped in the marketing system.

She said: ‘That such a frightening and brutally commercial report is needed to describe the system that cares for our society’s children when they can’t live at home should come as a shock. To both those unfamiliar with the marketisation of care and those of us trying desperately to keep children at the heart of it.

‘Care is not a product, it is a verb. Caring well for a vulnerable child in the most formative and distressing period of their young life requires strong human relationships, not cold commercial transactions.

‘Caring for children is not something over which anyone should want to compete, and many people and organisations who really do care are trapped in this market system. ‘

But the research also found that the six largest independent providers of children’s social care made £215m in profit last year, with some making more than 20% profit on their income, after eight of the biggest providers merged to become the three largest groups.

Cllr Judith Blake, chair of the LGA’s Children and Young People Board said much of the growth has been fuelled by ‘enormous loans’, which providers may not be able to pay back.

‘A varied market for homes for children in care helps councils to make sure these children get the right homes for their needs, and both in-house and independent provision is key.

‘Fewer and fewer providers are now dominating that market. Much of the growth of those providers has been fuelled by enormous loans, which will at some point need paying back yet this research shows many of them do not have the assets to do that.

‘Providers should also not be making excessive profits from providing placements for children. What matters most is that children feel safe, loved and supported, in placements that best suit their needs and that provide good value for money.’

The LGA is asking for greater transparency around placement costs as well as national oversight of the companies providing homes for children in care.

It is calling for the creation of a watchdog similar to the CQC, which was formed following the collapse of adult care home provider Southern Cross in 2011, to ensure all partners are playing their part in delivering the best for children in care.

Cllr Blake said: ‘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 and an oversight scheme is needed to help catch providers before they fall, and ensure company changes don’t risk the quality of provision.

‘The government’s promised review of the children’s care system needs to look at how the market for children’s social care placements is impacting on children’s outcomes.

‘It should also consider how we can better support in-house provision and smaller providers, and work with councils and providers to improve the transparency of costs.’

Ms Evans said she is expecting the government’s forthcoming care review to help reform the system.

‘We cannot simply point fingers of blame at the people who run, commission or work in the organisations trying their best to care for children in the system today.

‘It has taken more than 30 years of dangerous and counterproductive marketisation of care to end up in the alarming situation this report describes. It demands an urgent, wholesale commitment to reimagining the right way to organise and fund care long into the future.

‘I agree with LGA that urgent action is warranted to safeguard against the worst excesses and risks in the ‘marketplace’ today, but we must look to the government’s promised care review to have the courage and vision to think again about the whole system – and as well as a sense of chronic urgency.’

A spokesman for the Department for Education said:

‘The safety and suitability of a child’s placement in care is our absolute priority, which is why we are reviewing the system so children receive the best possible care.

‘The Government has pledged an extra £1 billion of new funding for adult and children’s social care, to help support local authorities to meet rising demand, fund more care home places and social workers and protect the most vulnerable in society.’

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