The largest independent providers of children’s social care
brought in profits of more than £300 million last year, a new
report commissioned by the Local Government Association reveals
today.
It comes as councils face significant financial pressures in
children’s services as a result of rising numbers of children
needing increasingly expensive care.
The report by Revolution Consulting found council spending on
privately run children’s homes more than doubled in the past six
years.
In 2021/22, local authorities in England spent £1.5 billion on
independently-run residential care for vulnerable children – an
11 per cent increase on the previous year – and up from £736.6
million in 2015/16, representing a 105 per cent increase overall.
At the same time, the aggregate fee income of the 20 largest
independent children’s social care placement providers* was £1.63
billion last year, increasing by 6.5 per cent over the previous
year.
Figures show 19 per cent of this was recorded as profit –
amounting to £310 million overall.
The LGA, which represents councils, say it is “wrong” that some
providers are making huge profits when money should be invested
in support children.
The number of children in need of support from councils is now at
its highest level since before the pandemic – 82,170 looked after
children in England.
The LGA is calling for greater financial oversight of the largest
providers.
It says that despite the data obtained in the report, visibility
of financial information has made it difficult to provide a clear
picture of the care provider market.
The report also identifies a significant amount of mergers and
acquisitions taking place, which have led to concerns about the
lack of knowledge of what the impact of such activity is on
children living in provision.
This reinforces the need for greater transparency around
ownership, debt structure and profit making, the LGA says.
Cllr Louise Gittins, Chair of the LGA’s Children and Young People
Board, said:
“What matters most for children who can’t live with their birth
parents is that they feel safe, loved and supported, in homes
that best suit their needs. While many providers work hard to
make sure this is the case, it is wrong that some providers are
making excessive profit from providing these homes when money
should be spent on children.
“As the report shows, spending on residential care placements for
children has increased dramatically in recent years as councils
have sought to find the best homes for record numbers of children
in care, while mergers and acquisitions have seen some large
independent providers grow significantly.
“Yet while councils are having to divert more and more money away
from early help services and into homes for children in care, the
largest privately-run companies continue to bring in huge
profits.
“At the same time, there are growing concerns about the
increasing debt levels of some of the largest providers, in
particular those with private equity backing.
“Decreasing visibility of financial information makes it
increasingly difficult to understand the financial health of
these organisations that are largely funded by public money.
Furthermore, regulations have not kept pace with the changing
‘market’, leaving regulators with limited powers to monitor the
performance of large providers.”
Notes to editors
*excluding CareTech
Since the previous iteration of this report, Caretech has
delisted from the London stock market to return to private
ownership. Stock Market rules and practices often require more
detailed disclosure than normal company reporting rules. When
Caretech was taken private the provider decided to reduce the
segmental reporting that had previously given insight to the
children’s services operations separately from Caretech’s adult
services. For this version of the report Caretech 2021/22 income
and profit results for children’s services are therefore
unavailable. Solvency indicators are still available based on
21/22 for the whole Caretech group.
