Last year, the largest private organizations that offer children’s homes in England earned profits exceeding £300 million. There is growing concern about the living conditions of some children placed in these homes and the increasing expenses for local authorities.
Last year, the total fee income for the 20 largest independent children’s homes operators amounted to £1.63bn, which was a 6.5% rise from the previous year. An independent analysis revealed that £310m, or 19%, of this income was recorded as profit. Approximately half of the top 20 providers have ownership from private equity or sovereign wealth funds.
The amount of money that the Council in England has spent on privately-operated homes for children has significantly increased by over two times in a span of six years. In the fiscal year 2021-22, the budget for residential care provided by independent facilities for children in need rose by 11% compared to the previous year.
The current number of children in care in England has reached its highest point since before the pandemic, with a total of 82,170. Additionally, councils have expressed worries about the financial debt of some major providers.
The LGA hired Resolution Consulting to produce a report expressing concern over the strain on council budgets caused by rising fees. The report also addressed worries about the lack of financial transparency in the sector, stemming from a notable increase in mergers and acquisitions.
Your Chapter Holdings, previously known as Care 4 Children, saw a significant increase in profits last year. According to recent reports, their profits rose from £1.7m to £2.2m. This change in name came after facing criticism for the company’s quality of care.
In a recent report, Ofsted cautioned that Your Chapter had not adequately made progress in one of its homes, which was rated as “inadequate.” The report noted, “There are significant and/or widespread deficiencies that put children and young people at risk or do not promote and protect their well-being.”
The provider’s spokesperson stated that they are constantly working to enhance their services and offer top-quality care and education to the children and youth under their care.
Katharine Sacks-Jones, CEO of the Become charity, expressed concerns about the state of the care system for children and young care leavers. She raised questions about the chronic lack of foster homes, difficulties faced by local councils, and increasing profits for private providers. It is known that children placed in private care are often separated from their communities and important people in their lives.
Children who are in the care system and have gone through a lot of trauma should not be treated as a commodity. The money used for their care should be dedicated to creating a system that offers them the necessary support and stability.
In 2022-23, local government officials state that they allocated £12.8 billion towards children’s social care, which is a significant increase from the £6.6 billion devoted in 2012-13. Prominent leaders express concern that this expenditure is impacting other areas of the budget.
According to Louise Gittins, the chair of LGA’s children and young people board, the top priority for children who are unable to live with their biological parents is to feel secure, loved, and well-supported in homes that cater to their specific needs. While some providers are dedicated to ensuring this, it is unacceptable for others to excessively profit from this situation.
According to the report, there has been a significant rise in spending on residential care for children in recent years. This is due to councils trying to place a record number of children in care in the best possible homes. Additionally, the industry has seen growth through mergers and acquisitions, resulting in some large independent providers expanding significantly. However, while councils are allocating more funds towards care homes for children, this means less money is available for early help services. Furthermore, the biggest privately-owned companies are still making substantial profits.
The Children’s Homes Association expressed similar worries, specifically concerning the high levels of debt held by major private equity providers. However, they clarified that this does not represent the entire sector.
According to our records, most of our members are small-scale providers who operate on narrow margins in order to sustain their organizations. Importantly, they do not have a substantial amount of debt. The independent sector consistently offers care at a lower cost compared to local authorities. This is especially significant considering the high level of need among the children and young people they serve, showing that they offer good value for money.