House investigation into children’s care market raised in Parliament

Exclusive research conducted by The House into profiteering in children’s care homes has led to calls for more financial oversight in the sector, after being raised in the House of Lords.

In a recent debate on private equity in children’s care homes, Labour peer Baroness Wilcox cited figures published in The House magazine which show the average annual cost for one child’s residential placement is now £281,000, rising by 25 per cent over the last two years. She said that “clearly, swift steps need to be taken to bring down those costs” and requested clarity on a timeline for a new financial oversight regime.

In response, education minister Baroness Barran said: “Bringing forward the legislative changes necessary to implement a new regime depends on parliamentary time.” However, she added government is “not wasting any time in trying to support the foster market”.

Labour peer Lord Sikka also demanded an investigation into the role of investment companies in care homes and healthcare. He said: “Profiteering, asset stripping and tax avoidance are the basic business model in private equity. Studies have shown that private equity in care homes is making profits in the range of between 30 and 40 per cent of the revenues. That is clearly unacceptable and is very poor value for public money.”

The House spent months investigating how the private sector is profiting from children’s social care services in England, with some councils being pushed to near-bankruptcy. Last October, freedom of information requests were sent to 95 of the 174 care-commissioning councils in England and Wales to gauge the current state of children’s social care. Sixty-nine councils responded.

The investigation found that it cost five times more to keep a child in care compared to keeping an adult in prison. While this cost had been hiked by 25 per cent over two years, simultaneously the biggest care operators were recording 23 per cent profit margins.

See the Children edition of The House for the full article.