The Local Government Association (LGA) has called for financial oversight of England’s privately-run children’s care homes after research showed some of the biggest private equity-owned providers were collectively making hundreds of millions a year in profits. Children’s care provision is increasingly dominated by private providers. Nearly three in four children’s homes and two in five fostering households are provided by private firms or charities
“Providers should … not be making excessive profit from providing placements for children,” said Judith Blake, chair of the LGA’s Children and Young People board.
A study published on Friday by the LGA found the six biggest private children’s care providers made £219m in profits last year. Some providers recorded profits of more than 20% of income, it said. Councils – which have collectively overspent by £3bn on children’s services in the past five years – were concerned that private providers were charging above-inflation rates for placements, the LGA said.
It also warned that the increasing indebtedness of some of the largest private providers risked triggering a Southern Cross-style financial collapse, potentially leaving vulnerable children without a home. Four of the seven largest provider groups had debt and liability levels that exceeded their assets. The failure of the Southern Cross adult residential home chain in 2011, in part because of its inability to repay heavy loans taken out to finance rapid expansion plans, led to many of its thousands of elderly and vulnerable residents having to be rehoused. In the aftermath of its collapse, regulators were given oversight powers to monitor the financial health of England’s biggest private care providers to try to ensure adult care home markets remained stable. No such oversight exists for children’s care homes.
Kathy Evans, chief executive of Children England, which represents children’s charities, said: “The largest private care providers made £219m in profit last year, while the councils responsible for children in care struggled to even balance their books. That’s how chronically unsustainable this market is.”