Vulnerable children put at risk as private equity sharks rake in millions

Watchdog fears homes loaded with debt will be forced to close

VULNERABLE children are being put at risk by private equity care home owners and their debt-fuelled business models, the industry watchdog said yesterday.

The Competition and Markets Authority (CMA) warned firms owned by investment tycoons were charging taxpayers excessive fees, despite their aggressive business tactics putting children’s welfare at risk.

There is a ‘real concern’ that high levels of debt could force hundreds of homes out of business, leaving the sector in crisis, it said.

Experts are worried the sector could face a Southern Cross-style collapse, when the UK’s largest adult care home company went bust following private equity ownership.

This put the wellbeing of thousands of elderly residents at risk.

CMA chief executive Andrea Coscelli said: ‘We are concerned this is a failing system. The levels of debt carried by private equityowned firms is a real concern.’

The CMA also raised the alarm over fees charged by private companies, revealing the taxpayer was being forced to pay an average of £3,830 a week to look after each child –more

‘Shocking and enraging’

than double the cost of sending a teenager to Eton College. Firms were charging ‘more than they should’, enabling them to make fat profits – with margins of 23 per cent – on the back of caring for vulnerable children, it found.

The CMA’s verdict came as a Daily Mail investigation found that failures in private equity-owned homes have resulted in children being sexually exploited, while others lived in homes with faeces-covered walls.

Firms owned by investment giants raked in £161 million in profits last year from taxpayer-funded fees despite collectively running dozens of failing children’s homes.

Council staff have accused private providers of holding them to ransom when beds run short – forcing them to pay fees of up to £10,000 a week. Industry leaders decried the ‘spectacular market failure’ and accused private equity providers of ‘gaming’ the system to rinse councils for more cash. A fifth of homes are not rated at least good, according to Ofsted data.

MPs and industry leaders called on the Government to put a halt to private equity companies raking in excess profits. Tory MP David Simmons, a member of the education committee, said: ‘Taxpayers must not be ripped off by providers profiteering off services for vulnerable people.’

Former children’s minister Robert Goodwill MP said: ‘Big chunks of money going to private equity companies means less money for children’s services in the community. I’m delighted that the Daily Mail is shining a bright light on this issue.’

Kathy Evans, chief executive of Children England, which represents children’s charities, described the issue as ‘shocking and enraging’, while Anntoinette Bramble, of the Local Government Association, said: ‘It is unacceptable that private equity providers are making excessive profits from placements for children.’ Councils have a statutory duty to look after children who are unable to live safely in the family home, due to domestic violence, issues surrounding addiction, or because they have complex needs.

In recent years the care of vulnerable children has become dominated by private providers, after cash-strapped local authorities sold off their care homes.

The number of privately owned homes has jumped from 19,080 in March 2011 to 27,190 in March 2019 – and seven out of ten of the UK’s biggest children’s home companies are now in the hands of private equity. A Mail audit of Ofsted reports found dozens of failing homes owned by the venture capital firms, including appalling cases of abuse and management failure.

Two girls living in a Keys Group home, owned by G Square Capital, were raped due to failings at a home hit by poor management and mass redundancies. Inspectors said there was ‘a total failure to keep young people safe’. Keys said the report was ‘historic’ and the home was now closed.

In another shocking case, traumatised children were left living in bedrooms with blood and faeces smeared on the walls in a home run by Witherslack, which is owned by private equity firm Livingbridge. The failures led to the home being closed after inspectors visited in July 2020 – less than two years after it opened.

At a home in Lancashire, run by Sandcastle Care, and owned by Waterland private equity, management failed to report allegations of abuse, among a range of failures. The founder of Waterland is Dutch billionaire Rob Thielen, who has used his wealth to buy a 180ft superyacht and hire the Black Eyed Peas to play at his £1 million 50th birthday bash.

Waterland and Livingbridge declined to comment.