Limiting profits for private companies risks “reducing incentives to bring new capacity to an already underserved market”, according to a major report by the Competition and Markets Authority (CMA) into profiteering in the children’s social care system.
They would also be “very difficult to design and administer effectively” due to varying levels of need between individual children.
Charlotte Ramsden, president of the Association of Directors of Children’s Services (ADCS), said the CMA’s failure to recommend a price cap on expensive placements for vulnerable children is “disappointing”.
The ADCS has long called for an end to profiteering from children’s social care by large private providers.
Ramsden said it “remains committed to the aspiration of moving to a not-for-profit model”.
“Profiteering through public money on the basis of meeting children’s needs is unacceptable.
“Children’s services have long operated in a mixed economy with a range of providers involved in the delivery of services locally, yet multi-million pound mergers between providers are becoming increasingly common as is private equity. ADCS has previously called for the introduction of legislation which prevents for-profit operations or as a minimum caps the level of fees chargeable in fostering and residential services,” Ramsden added.
The CMA’s failure to recommend a price cap to the government comes despite its report, which has been backed by the Care Review, noting that large private sector providers appear to be making higher profits in England and Wales than it “would expect in a well-functioning market”.
The largest 15 providers of children’s homes placements have, on average, seen profit margins of 22.6 per cent from 2016 to 2020 with average prices increasing from £2,977 to £3,830 per week over the period.
In foster care, the profit margins of the largest independent fostering agencies have remained at an average of 19.4 per cent over the same period, according to the watchdog.
