Regulator to probe whether profit comes at expense of quality in children’s social care market

Competition and Markets Authority launches probe into children's home and fostering markets, with focus on lack of supply and costs of placements

Photo: Melpomene/Fotolia

The UK’s competition regulator will examine whether profits for private providers are coming at the expense of quality of care in the children’s social care market, in an investigation launched today.

The Competition and Markets Authority (CMA) study will probe the supply, price, commissioning and regulation of children’s home, fostering and unregulated accommodation placements, along with the environment for investing in services. It will cover England, Scotland and Wales.

The inquiry responds to longstanding concerns around the sufficiency of suitable placements for looked-after children, the increasing use of unregulated accommodation and the role of, and profits accrued by, private providers in children’s home and fostering markets, particularly those backed by private equity.

It is also a direct response to calls from children’s social care review lead Josh MacAlister, made in January, for the CMA to conduct such a study.

‘Overriding priority is better care’

CMA chief executive Andrea Coscelli said: “We are concerned that some children are not getting access to the right placements due to a lack of availability in the system, and that rising prices are putting further pressure on stretched local authority budgets.

“The CMA is in a unique position to use its powers to look into this. But children’s care is not a market like any other – our clear and overriding priority will be about identifying ways children can get better care.

“This will include examining the concerns raised about the role of private sector providers, which has grown in the last few years, as well as the role of public and third sector providers.”

Profits at expense of care?

The launch of the study drew conflicting responses from local government and provider leaders.

The CMA cited a study, published in January, by the Local Government Association, which found that some private children’s homes providers and independent fostering agencies were making profits of 20% on their income.

The authority said that its study would “examine whether high levels of profit have been made at the expense of investment in recruiting and retaining staff, and providing quality services”.

The LGA welcomed the review, and its focus on profit-making by private providers. Children and young people board chair Judith Blake said: “We are particularly pleased the review will investigate high levels of profit making, which is particularly apparent in fast-growing groups backed by private equity or those on the stock market. Some of these groups also have considerable debt levels, which should also be looked at.”

She said the children’s social care sector could not risk a “Southern Cross or Four Seasons situation”: a reference to the large private equity-backed care home providers that, respectively, collapsed in 2011 and went into administration in 2019.

‘Unacceptable level of risk’

Steve Crocker, chair of the Association of Directors of Children’s Services standards, performance and inspection policy committee, echoed Blake’s concerns over both risks and profits.

He said that “multi-million-pound mergers between providers are becoming commonplace and private equity is driving rapid changes in ownership, financial models and service delivery”, leading to “unacceptable level of risk in the system”.

He added: “It is wrong that private companies are able to generate significant profits on the back of vulnerable children.  This is difficult to reconcile as the impact of a decade of austerity continues to bite in local government alongside the impact of the pandemic. The CMA’s study, along with the recently launched Care Review, presents an opportunity to address these significant concerns. The system must be driven by children’s needs, not maximising profits.”

Avoiding blame

However, in its response to the announcement, the Independent Children’s Home Association said that the LGA report showed that providers reinvested their profits into improving the quality and quantity of services. It also cited evidence showing that “the vast majority of registered children’s homes are in fact cheaper to place in than the in-house local authority provision”.

ICHA chief executive Peter Sandiford said: “I believe the answer to the lack of sufficiency lies not in trying to apportion blame but in the whole social care system, a belief that is in accordance with the need to actually review the whole system.

He said commissioning needed to take place on a more “relational basis”, with sharing of business information and risk between councils and providers.

“Current procurement is experienced by many as being both controlling and disrespectful”, he added.

However, Sandiford said he was “optimistic” at the potential of the CMA review, the care review and a separate inquiry by the House of Commons education committee into children’s homes, to deliver whole-system change.

Tackling ‘unwarranted IFA concerns’

National Association of Fostering Providers chief executive Harvey Gallagher said he too welcomed the CMA study and the “opportunity to alleviate unwarranted concerns about the independent fostering sector, a sector in which 93% of agencies are judged good or outstanding by Ofsted and who provide excellent value for money in caring for young people experiencing some significant challenges”.

He added: “Fees in foster care seem to have risen little in the last decade, even though the needs of young people living with IFA foster carers have increased, and despite inflation and other cost pressures.

“There is much that can be improved about the way foster care is commissioned including the impact upon children of the placements chosen (the single most important factor), poor understanding of like-for-like costs and value for money, the role of local authority in-house fostering services in the wider sector – a CMA study which addresses these issues can only help.”

Working with care review

The CMA is due to issue a report on its study by March 2022, a similar timescale to the care review, and the authority and MacAlister said that the two inquiries would work together, share information and try and ensure requests for information from stakeholders are not duplicated.

MacAlister said today’s announcement was “extremely welcome”, adding: “The CMA have a unique remit and skill set to look into this issue and their work will explore specific concerns in relation to children’s homes, unregulated accommodation and fostering provision.

“The independent review of children’s social care will, by contrast, take a broader look across children’s social care, using the evidence gathered by the CMA and others to make recommendations that span the whole system.”

The review was also welcomed, on Twitter, by children’s minister Vicky Ford.

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7 Responses to Regulator to probe whether profit comes at expense of quality in children’s social care market

  1. Alice March 13, 2021 at 10:30 am #

    Bears and woods come to mind.

  2. Sandy March 14, 2021 at 11:00 am #

    I seemed to have missed the cart horse gate bolted reference.

  3. Nigel March 15, 2021 at 1:39 pm #

    And there we have it. Ms Ford linking her “intel” to the MacAlister pretend review. Here is the conclusion: ” the sector does not make excessive profits. Our evidence shows that substantial amount of any profits are re-invested in ensuring high care standards, better equiped premises and well trained staff. We see no real evidence that providers are making returns of up to 20% on their investment at the expense of good care experiences.” That didn’t need several months of expensive consultation now did it? I expect MacAlister to conclude that care costs could be reduced if providers were freed from excessive regulation and “unnecessary bureaucracy”.

  4. Led By Liars March 15, 2021 at 6:20 pm #


  5. Kate Burns March 16, 2021 at 9:42 am #

    I wonder if CMA will recognise that the ‘market’ is as close to a cartel as it can be without normalising fee fixing? A bit distasteful for polite conversation I appreciate but compassion isn’t exactly the core value for providers is it? The CMAs sole remit is to study competition and where it seems this doesn’t fuel the market take punitive action. Both one can seriously believe that a competition authority will identify that the current system of provision be broken up. I rather think that their recommendation will be that the market needs facilitate more private invested provision perhaps to ‘diversify’ the market or because of the squeeze on public funding. That the debate is accepted to be about “the market” says all really.

  6. Susan March 18, 2021 at 8:59 pm #

    Just read that MacAlister has agreed to clause in his £140,000 contract that he cannot recommend extra funding is needed and to not “embarass” DfE. What more does BASW need to accept this is not an independent review?

  7. Jon March 18, 2021 at 11:38 pm #

    I didn’t know this Susan. Any chance of an article on this Community Care?