Some firms ‘profiteering’ from children’s homes, says minister

'Not unusual' for councils to pay £8,000 plus a week for placements, starving investment in early help, warns Will Quince, as government plans to reform market

Screen with the word 'profits' written on it along with various related symbols
Photo: Melpomene/Fotolia

Children’s homes are profiteering from a “broken” market in which demand far exceeds supply, the children’s minister has warned.

This is driving huge spending on placements by local authorities, with fees of £8,000 plus a week “not unusual”, Will Quince told the House of Commons’ education select committee last week.

As a result, councils lack funds to invest in early intervention, to help children stay with their families, he said.

Sitting alongside the minister, Department for Education (DfE) director of children’s social care Fran Oram said the government would bring forward reforms to ensure the market functions much more in the interests of children.

Profit warnings

These would be based on the recommendations of the Competition and Markets Authority (CMA) report into the children’s social care market – due this week – and that of the Independent Review of Children’s Social Care, expected around May.

Both the CMA, in its interim report, and care review lead Josh MacAlister have issued warnings about the high level of profits in the children’s home market.

Quince said that the government was already taking steps to tackle the issue by investing £259m in building children’s homes from 2022-25.

The majority of this will be spent on secure children’s homes, of which there are only 13 in England and for which there are 25 children waiting for a place at any one time, Ofsted has said previously.

The minister told the committee that the shortages meant that councils were having to send children “many many miles away” for a secure bed.

Providers question minister’s claims

However, his claims about fee levels were challenged by Independent Children’s Homes Association (ICHA) chief executive officer Peter Sandiford, who said “the quoting of outlier costs for a small number of cases does not reflect the cost for the sector generally.”

“Yes, some placements do cost in excess of £8,000, but these high costs are dictated by the extreme needs of the children that the local authorities cannot meet,” he said. “Such high-level needs and risks require significant specialized care twenty four hours a day to ensure they are kept safe and their needs are met.

“It is important to note such levels of need are often a result of previously failing to invest in the right provision at the right time.  When used as an early intervention rather than as a last resort, a children’s home is a cost effective and impactful intervention.”

He added that average fees for council-run homes were higher (£4,865 per week) were higher than the average for the private sector and voluntary sectors (£4,153), according to the latest analysis of the unit costs of social care services produced by the Personal Social Services Research Unit. These figures do not account for differences in need between children.

‘Eye watering levels of borrowing and debts’

The Association of Directors of Children’s Services (ADCS), which has long raised concerns about profit levels for children’s care placements said said that “meeting children’s needs, not maximizing profits should always be the priority”.

Association president Charlotte Ramsden also warned that the ownership of children’s homes by private equity providers with “eye watering levels of borrowing and debts” created significant risks of providers failing.

While welcoming the government’s funding to build children’s homes, she said this needed to be followed by  “a comprehensive placement strategy”, with investment to ensure “the right placements are available in the right locations and at the right time”.


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5 Responses to Some firms ‘profiteering’ from children’s homes, says minister

  1. Abdul March 8, 2022 at 9:51 am #

    A narrative not supported by ADASS.

  2. Andy March 8, 2022 at 11:40 am #

    Those headline weekly figures for various residential services for children do not reflect the full costs of such provision.
    I can remember way back in 2006 when I worked in youth offending services learning about the TOTAL annual costs of interventions for the most vulnerable individual families – direct children’s care/placement options, courts, police, social work plus any number of other associated agencies. The figures very quickly run into truly eye-watering and jaw-dropping sums which if widely known to the general public would probably cause riots!
    The solution is a fundamental reorientation of social work/social welfare towards a range of (much, much) earlier supports and interventions. We prioritise and professionalise acute interventions over a preventative ethos.

  3. Andy March 10, 2022 at 11:12 am #

    Local authorities were enthusiastic champions of privatisation and couldn’t sell off or close their provisions fast enough. They sacked their own staff and forced people like me to join a “social enterprise” provider or become unemployed. They then trumpeted how much money they had “saved” in wages and building costs. No regard for children at the time for them. Some managers even left our LA to head up private services. So it’s a bit rich now to complain about profiteering when many people told them what the consequences would be eventually. I remember a Labour Councillor telling us the days of the gravy train being over and we should be embracing the new “flexibility”. He didn’t need to add “we are all Thatherites now” for emphasis. There will be a few tweaks to the current arrangements, Labour will support them to show how prudent they are with public funding and the debt ridden hedge funds will carry on until they decide there is not much more to squeeze from the ‘sector’ and move on to leech on another service. The fundamentals will remain intact. I admire CC journalists for their resilience in reporting these stories month in month out. I know where my head would be if I had to sift through this stuff regularly.

  4. Pat March 11, 2022 at 11:35 am #

    Both Labour and Conservative governments set up and enabled a care market entrusted to dividend paying “providers”. In turn they act as they should by maximising profits. I fail to see the new epiphany here. Private capital in a restricted competition market is hardly going to act altruistically is it? Hedge fund cartels have gobbled up most before them. There are diminishing returns now given that there isn’t much more left to squeeze so they are looking at a way out anyway. This is a dance to route them on their way on their own terms, nothing more.

  5. David March 31, 2022 at 12:04 am #

    Primary cost driver is the purchase of 7 or 8 bedroomed properties with large gardens (+ maintenance costs) to accommodate 3, 4 or 5 children, some of whom can be challenging or have complex needs, e.g. trauma. Emotional & psychological support and ensuring children are safe and secure means most children have one to one supervision most of the time. Each child has a plan which includes contact with family members. Social workers have been frustrated with courts who are obsessed with contact, sometimes 3x a week or once a week that may not be in tne child’s best interests. As most children are placed out of county, 8,000 miles per year for contact is not unusual. Another primary cost driver is lease vehicles that often do 25,000 miles per year, e.g. school, activities, contact.
    Each children’s home needs 16 – 18 staff; shift patterns are 7.30am – 11pm + sleep ins + waking nights. Employee costs per month is £25-28,000 including training & meetings. Hourly rate is less than £12 per hour subject to enhancements and inflation. Costs are likely to increase by 10%, e.g. fuel, food.
    Foster care is the only other viable cost effective option but it can take 6 months before placement and the drop out rate is high during the induction phase. Average age of foster parents is 54. At least one prospective foster parent is obligated to give up work or reduce hours to provide care.
    What is in the child’s best interests? Early intervention definitely (its a safeguarding issue & a cost issue if nothing is done) more foster parents who can work parttime within 20 miles of the child’s community, probably.
    Failures or excessive demand creates opportunities. Private sector has stepped up and filled the gap and provided good care. What we know is that it can take time to build capacity and capabilities to deliver better outcomes. Shortage of trained residential care workers can be a problem hence why pay rates may be higher in some areas.
    You can’t cut costs so you can spend what you saved on early intervention without making significant compromises. Focus must be on improvements in every area of the child care system so that processes are optimised to improve outcomes for vulnerable children.This will reduce costs over the medium & long term, e.g. resilience, avoiding abusive relationships, minimising use of drugs & alcohol.