UK
Private care providers accused of profiteering and crippling council budgets


Ruby Hinchliffe
Wed, 22 November 2023 

holding hands

Private children’s care providers have been accused of profiteering, charging desperate councils with more than a million pounds a year in one case.

Buckinghamshire council said it was on track to spend £1.7m on one child’s round-the-clock care and accommodation this year.

Council leader Martin Tett said care services make up 70pc of the authority’s expenditure, and that he anticipates £50m of overspend by Christmas.

It comes as Chancellor Jeremy Hunt is under pressure to provide emergency funding for children’s services in the Autumn Statement.

Mr Tett said: “It’s crippling my budget. We had one child’s case where the annualised cost was going to be £3.2m. Fortunately, we eventually found a lower cost placement.

“The private providers which source us these services are very expensive, and they know councils are desperate.

“When people complain about a pothole not being fixed and ask what they get for paying their council tax – this is it.

The Local Government Association (LGA) has also blamed private equity-backed providers, who they say have “jacked up” their prices in the face of rising demand for children’s care services after the pandemic.

Last year, the biggest independent children’s care providers made a collective £300m profit according to a report commissioned by the LGA. It also found that councils’ spend on privately run children’s homes has more than doubled over the past six years.

The £1.7m Mr Tett’s council will spend on one child this year relates to a 15-year-old boy with mental health difficulties and a long history of serious self-harm. He needs round-the-clock, supervised care to keep him safe.

Currently, his medical diagnosis says he does not meet the threshold to be detained under Section 3 of the Mental Health Act – if it did, this would trigger automatic health funding for his treatment.

He has received some hospital care, but was discharged and so the council is now his legal guardian. His care costs £40,000 a week, most of which goes on three specialist staff per shift per day.

The council said it explored cheaper care options, but that it did not provide an adequate level of safety. The cost of the child’s care to date for this financial year is around £800,000. If costs stay at £40,000 per week, they will reach £1.75m.

Buckinghamshire council would not reveal the name of the provider, and does not break this down in its accounts. In its most recent filing, the council says it spent £112.8m on children’s services in 2021.

It also paid its corporate director of children’s services £177,300, with pension contributions of £45,488.

A spokesman for The Children’s Homes Association, which represents private, social and charitable children’s care providers, said around 50pc of its members are micro-businesses struggling to make single-digit margins.

Meanwhile, private equity-backed providers – they admitted – are “able to make significantly higher margins”.

Care Tech, which owns 400 children’s homes in the UK, was taken private last year giving it a valuation of £1.2bn.

Another firm, Outcomes First Group, is backed by Stirling Square Capital Partners, while Keys Group is owned by G-Square Capital.

The Telegraph approached all three of these firms for comment. Care Tech declined, while the other two firms did not respond.

‘There are only a couple of big providers, so they can just name their price’

Roger Gough, the leader of Kent county council, said he has seen “mostly a cost, not demand, increase” in the private childcare sector.

“Most pressure is to do with increased unit costs. Placement costs have rocketed, with cost increases in the private-equity space playing a very significant part.”

Mr Gough’s council is looking at an overspend of £43.7m, but is currently taking actions to address it.

He added: “Roads, visible services, maintenance of estates – these will suffer significantly.

“Support from the Government has tended to decline because it also has huge cost pressures. Last year’s winter was tough, roads have gotten worse.

“We’re hoping HS2 reallocation will fund this, otherwise residents’ daily lives will come under strain because of it.”

Others argue demand for children’s services has risen in tandem with placement costs. Shaun Davies, the chairman of LGA, said every council he has spoken to has seen a “huge increase” in requests for special educational needs and support.

Mr Davies, who is also the leader of Telford & Wrekin council, said: “Private care placements are costing hundreds of thousands of pounds a year. There are only a couple of big providers, so they can just name their price.”

Councils are also spending money on legal fees where parents challenge councils’ childcare provisions, Mr Davies said.

He added: “Providers make their priciest services seem all shiny and nice, knowing full-well they won’t have to pay for it.”