How can we avoid failures in private sector care for the most vulnerable?

As private companies provide increasing amounts of statutory care, Andrew Rome considers measures to avoid financial collapse and closures

Andrew Rome, founder of Revolution Consulting

Today, private sector bodies provide a significant proportion of care for the most vulnerable in society.

This includes nursing homes and residential care for older adults and people with physical and learning disabilities; and children’s homes, fostering agencies and residential special schools for looked-after children and children with disabilities.

So common is private care that in some areas, commissioned provision is often the dominant type of care.

‘A far cry’

This is a far cry from what was envisaged in the early days of the welfare state.

In the Beveridge reform era after the Second World War, and the beginnings of the state taking responsibility for those needing support, the current role of the private sector would not have occurred to anyone.

And prior to this, historical models saw the majority of services provided by charities, philanthropists or the church – financial difficulty and the prospect of closures were not major concerns.

Our economy operates on the basis that government will never run out of money as it can either borrow more, or tax more heavily.

Andrew Rome will be part of a panel on day 1 of Community Care Live Birmingham discussing how to avoid market failure. Issues addressed will include:

  • how commissioners can support and develop a sustainable market
  • understanding what ‘good’ and ‘bad’ efficiency look like
  • reconciling short and long-term needs and pressures
  • identifying risks and evaluating potential solutions
  • lessons to be learnt from the collapse of Southern Cross

Find out more

This is of some reassurance to local authorities and grant-funded bodies, even in a period of cuts. But private sector bodies, and to some degree voluntary bodies, are more dependent on their own sources of income.


In recent years, we have therefore seen services for some of our most vulnerable citizens under threat.

Last year, research by the Institute of Public Care at Oxford Brookes University and Revolution Consulting highlighted emerging financial weaknesses amongst many children’s homes providers.

In the adult sector, there was the high profile case of Southern Cross and ongoing concerns about Four Seasons.

The power to decide if a private or voluntary sector body continues to operate or closes the doors lies with shareholders, trustees or the funding banks and financial institutions. The owners and landlords of the properties that services operate from may also wield significant power.

A particular home or part of a failing care business may be sold to another provider so the service can continue under new ownership. But there are no guarantees for service users or those who commission placements. Homes can – and have – fail and close.

Disruption of stable and settled placements for the vulnerable is deeply unsatisfactory. Plus, the uncertainty and worry of working must have a negative influence on the managers and staff who are working with children and adults in need of support in placements that are in a precarious financial situation


Private companies are providing services that are regarded as so important that local authorities have statutory duties to provide or commission them. They are so essential that specific registration and inspection regulations exist for them in statute.

Last November, the chancellor’s Autumn statement included an exceptional new right for local authorities to raise extra funding for adult social care, in recognition of a sector showing signs of severe financial strain.

But, in an unstable sector, questions arise over how we go about monitoring the likelihood of failures. Indeed, should we even try or should private companies simply face market forces?

If we do try, where should responsibility sit? Is it for central government, regulators, or commissioning and purchasing authorities acting alone, or in concert?

And what should the monitoring activity aim to achieve?

Is any level of provider failure acceptable if a vulnerable person is affected?

One size can’t fit all

Private sector care encompasses a range of provider types. There are the private individuals who have financed one or two homes. There are large chains with foreign private equity backing with finances that may involve multiple levels of complex debt instruments. Is there a way to monitor financial health across such a broad spectrum?

Perhaps government should consider forms of legislation to do so. This might set out minimum levels for capitalization of assets or measures that its cash flow is sufficient to meet its obligations. It might require a level of shareholder guarantee, or introduce a levy on fees paid to a central emergency fund that would act as insurance for the risk of financial case.

There are many questions and no straightforward answers. But these issues need to be debated and addressed if we are to continue to use this model to support vulnerable children and adults.

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