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The Labour government will force big companies in the children’s social care sector to disclose their financial performance metrics as it seeks to clamp down on profiteering.
Under new rules to be set out in parliament on Monday, some of the biggest companies operating children’s care homes in England will be required to share their financial metrics with the government, amid widespread reports of private providers charging extortionate prices to cash-strapped councils.
Education secretary Bridget Phillipson will also announce the introduction of a “backstop” law that will limit the profits that providers can make. The limit will be enforced if there is evidence that providers are not voluntarily putting an end to profiteering.
The Welsh government, by contrast, is in the process of implementing a blanket cap on profits of children’s care providers, by ensuring that all providers are not-for-profit.
“Our care system has suffered from years of drift and neglect. It’s bankrupting councils, letting families down, and above all, leaving too many children feeling forgotten, powerless and invisible,” Phillipson said.
“We will crack down on care providers making excessive profit, tackle unregistered and unsafe provision and ensure earlier intervention to keep families together and help children to thrive,” she said.
More than 80 per cent of children’s homes are run by for-profit companies, a rise of more than 20 percentage points since 2010, and a large proportion are owned by private equity groups. Some of these companies reported profit margins of up to 28 per cent in 2022, according to a report by Revolution Consulting.
Stuart Ashley, director of children’s services at Hampshire county council, said his local authority was being charged up to £30,000 a week for some children’s care. “These are children with very challenging behaviours, yes. But no child should cost £30,000 of taxpayers’ money to be cared for,” he said. “That’s profiteering.”
Ashley said that over the past few years demand had outstripped supply, in large part because of a decline in availability of foster carers during the cost of living crisis.
Local authority spending on children’s social care rose 42 per cent to £11.1bn in the decade to 2022. It is projected by the government to rise further to £14.1bn in 2024-25, causing intense strain on council budgets.
Private sector care providers are often located in region of the country where property prices are lower, which means that children are often sent miles away from home to receive care.
Phillipson will also announce that the education regulator Ofsted will be given powers to investigate multiple homes being run by the same company, and issue civil fines to those that provide unacceptable services.
The move comes as part of wider plans to overhaul the children’s care system by giving families more say over where children are housed, and seeking to keep them close together where possible.
The government will also announce that if a child is subject to a child protection inquiry, or on a protection plan, parents will need local authority permission to homeschool.
