Excessive private profiteering and financial instability in children’s social care market
Published by Professional Social Work magazine, 18 March, 2022
The UK has “sleepwalked into a dysfunctional children’s social care market” where a shortage of places enables private providers to charge excessive fees.
The warning comes from the Competitions and Markets Authority CMA) which additionally raised concern over the “financial resilience” and long-term viability of some private equity-funded providers.
In the final report of its year-long Children’s social care market study, the CMA also calls on the government to support councils to explore bringing foster care services back in-house.
The CMA says a shortage of placements means some children are not getting appropriate care and often have to travel far from where they live.
This and a fragmented commissioning system has created a market where private providers are “making materially higher profits and charging materially higher prices than we would expect if this market were functioning effectively,” the CMA report warns.
It says the largest children’s homes providers have seen their profit margins go up 22.6 per cent and weekly placement rates rise from £2,977 to £3,830 between 2016 and 2020.
The review found problems were particularly acute in England and Wales and called for the creation of a new body to help local authorities with commissioning.
Andrea Coscelli, chief executive of the CMA, said: “The UK has sleepwalked into a dysfunctional children’s social care market. This has left local authorities hamstrung in their efforts to find suitable and affordable placements in children’s homes or foster care.
“We have also identified issues with the financial stability of children’s home providers. It is important to manage the risk of children’s homes providers going bust and local authorities having to pick up the pieces.”
Two out of five fostering placements are provided by more than 300 privately and voluntarily-run fostering agencies in England. Private companies run more than 80 per cent of children’s homes.
Two years ago England’s Children’s Commissioner warned some are owned by private equity companies carrying “significant amounts of debt”.
The Local Government Association has also previously expressed concern at the “increasing private equity and stock market involvement in the system”.
Amongst its recommendations, the CMA is calling for an early warning system to assess the financial health of the most difficult to replace providers.
However, it shied away from recommending banning private provision or putting limits on profits, saying this would “further reduce the incentives of private providers to invest in creating new capacity”.
The report noted that the Scottish and Welsh governments have committed to reduce profit-making providers in the sector.
But it added: “These decisions are rightly for democratically elected governments to make and will involve considerations that go beyond our scope as a competition authority.”
BASW England, however, criticised the CMA for not being bolder in its recommendations.
It said: "The CMA report, whilst acknowledging the significant vulnerabilities in respect of investment flight of providers and the unacceptable risks this poses to children, does not challenge the current model. The current model places the government in the role of enabling reliable profits for providers to ensure private equity capture.
"The model is flawed. Wales and Scotland are reversing privatisation - why not England?"
The CMA called for a review of regulation, saying there is evidence in England that it is a “poor fit for the reality of the placement market” today.
It cited examples of “costly, time-consuming” processes which may be “preventing the market from working as well as it should, without providing meaningful protections for children”.
Such moves, however, are likely to cause alarm bells among children's rights campaigners and fuel concerns that hard-fought rights will be watered down or lost.
Carolyne Willow, of Article 39, said: “The last government review of regulations protecting children in care was hastily undertaken in 2020 and led to the deletion and dilution of 65 safeguards, and not a single extra protection.
"Briefings to ministers from civil servants told them they were minor changes and bureaucratic burdens. Both the High Court and the Court of Appeal roundly rejected this deregulation narrative.
"Child protection policy, seen in its widest sense, should not be driven by what makes the market work best, but what children and their families need and the duties government and others have arising from the United Nations Convention on the Rights of the Child.
"When the UK ratified that treaty in 1991, it took on obligations under international law to make it a reality for every child without discrimination.”
The Independent Review of Children's Social Care in England has also expressed concern about the "increasing role of private provision" in the sector.
It said it will consider "all options" when it makes its final recommendations this spring and has also asked the What Works Centre for Children's Social Care to look at "effective models of commissioning".