The Guardian view on children’s homes: no place for profit

Treating the most vulnerable young people as a money-making opportunity is wrong. The care review must lead to change

It is impossible, even for an appointee regarded by critics as too close to government and with overly restricted terms of reference, to look at children’s homes without being appalled by what is going on. That is the conclusion to be drawn from remarks this week by Josh MacAlister, who is several months into a long-awaited review of children’s social care. He warned that the sector is broken and that operators must cut “indefensible” levels of profit and improve young people’s experiences.

Recent years have seen numerous reports and complaints by official bodies about a dysfunctional system, in which councils on the verge of bankruptcy pay ever increasing prices (up 40% since 2013, to about £200,000 a year per child) while profits soar. The top 20 private providers are making £250m profit annually from the provision of children’s residential care in England, Wales and Scotland and the delivery of fostering services.

Opaque ownership structures make the money hard to track. Research earlier this year found some providers recording profits of more than 20% of income, while four of the seven largest provider groups had debt and liability levels that exceeded their assets, leading to concerns about future stability. Private operators now control around three-quarters of all children’s home places in England and Wales. Councils frequently have no other option than to pay whatever they ask.

Even if the children in these homes were thriving, excess profits would be a problem, particularly given the dire state of local government finances. But far worse than the waste of financial resources is the attitude to human lives and relationships that goes with it. While most children’s homes, along with most private fostering agencies, get a good or outstanding rating, Ofsted – which oversees them – believes that the current regulatory regime is unfit for purpose, casting doubt on these reports’ reliability. On its own, the fact that 60% of children are moved out of their local area when placed in a home, with all the disruption to social life and education that this entails, shows that something has gone terribly wrong.

One of the final pieces of work carried out by the former children’s commissioner Anne Longfield included painful-to-read evidence about the distress caused by such disruptions. In March, the Competition and Markets Authority launched its own study of the sector, which ought to lead to a full investigation. In his speech to the Independent Children’s Homes Association this week, Mr MacAlister urged operators to “act with responsibility”.

Such appeals will not be enough to fix this broken system. Nor will tweaking the rules provide a long-term solution. Ministers should seize the initiative and put the weight of national government behind councils, with a policy of rebuilding local provision. Increased financial oversight, as already exists in the adult social care sector, must be introduced. The scandal of unregulated placements for older teenagers should be brought to a close. There can be no excuses for allowing companies to make hundreds of millions of pounds out of children who have been failed again and again.

This article was amended because an earlier version, based on information provided by the review, said that “private companies are making an estimated £250m profit annually from the care of 16,000 children in children’s homes in England, Wales and Scotland”. The review has clarified that this profit was made by the top 20 private providers and encompasses the provision of fostering and other services, as well as children’s homes.

.