The findings of a study, by the University of Oxford’s department for social policy and intervention, are based on analysis of more than 13,000 Ofsted inspections of homes between 2014 and 2021.
This finds that for-profit providers are less likely to receive an "outstanding" rating and more likely to be graded as "requires improvement" or "inadequate" by inspectors, compared with local authority and third sector run homes.
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While more than a fifth of council and 17 per cent of charity-run homes achieved Ofsted’s highest rating, this proportion dips to 13 per cent among for-profit providers.
The study finds that leadership and management in more than one in 10 profit-making homes is "inadequate", compared with 7.7 per cent of those run by local authorities and 8.3 per cent in the third sector.
Not-for-profit homes are also more likely to be graded as "inadequate" for their efforts to protect children and less likely to be considering "outstanding".
While almost a fifth of council-run homes achieved the inspectorate’s top grade for child protection, this proportion slumps to just over one in 10 among profit-making homes.
For-profit homes also have fewer places and are registered for less time than their counterparts in the public and charity sectors, according to academics.
NEW: A study from @DSPI_Oxford has found:
— University of Oxford (@UniofOxford) October 5, 2022
- For-profit children's homes are generally rated of lower quality than other provision types
- For-profit children's homes violate more requirements
- Ofsted ratings are negatively correlated with for-profit outsourcing
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"It is well known that huge profits are being made by companies running these homes, but the response has typically been that the quality of the services justify the costs,” said lead author Anders Bach-Mortensen.
“Our research suggests quality is not the same in both sectors and should be of concern to commissioners.”
Currently around eight in 10 children’s homes in England are run by profit-making firms.
“Our analysis shows the outsourcing of these services has not delivered as promised in terms of securing high service quality for children in care,” added study co-author Benjamin Goodair.
“This is a cause for concern because most children are currently accommodated by for-profit providers."
Responding to the findings, Peter Sandiford, chief executive of the Children’s Homes Association, said the report had been published “at a time of significant public discourse on who provides children’s social care services, and it is right that debate is based on evidence”.
“We are currently reviewing the analysis, particularly the assumptions and data treatment decisions that were made in the analysis, to inform learning across the sector,” he said, adding: “There are limitations to how the results of this analysis of Ofsted judgements can be generalised to the sector today, and the paper therefore cannot be taken as an accurate representation of the current state of the sector.”
“The CHA has a significant focus on breaking down silos and improving partnership working across children’s social care. We are currently working with 25 local authorities across the country to improve partnership working between all providers in the sector. These projects offer significant opportunity to improve the quality of children’s residential care and most importantly outcomes for children and young people.
“This research provides valuable contribution to our understanding of inspection judgments of children’s homes historically. But we believe we must focus on the quality of the children’s residential care today and our aspirations for the future. The most recent Ofsted data demonstrate the progress that has been made by the independent sector in improving quality, a point that the research paper in question fails to acknowledge.
“It is a matter of individual choice which ratings are considered for comparison e.g. proportion of homes rated as "good"/"outstanding" or proportion rated as "requires improvement"/"inadequate". But the most recent data show that all forms of provision can improve. The CHA are working hard to support the whole sector to do so,” Sandiford said.
Steve Crocker, president of the Association of Directors of Children’s Services (ADCS), added: “This important research fills a gap in our knowledge about the impact of the creeping privatisation of the children’s residential care market. Researchers raise several important issues worthy of further discussion and debate, especially around the quality of care and the ability of local authorities to find the upfront investment in building new public sector provision. These findings should certainly be considered by the government as it continues to develop its response to the independent review of children’s social care.
“Children’s services have long operated in a mixed economy with what were previously small scale private, voluntary, charitable and community providers involved in the delivery of services locally, however, ADCS remains concerned about the growing levels of risk in the system due to rapid changes in ownership, leading to a dash by new owners for excess profits and considerable levels of borrowing and debts held by some private companies offering care placements. Should any of these providers fail, no single local authority could step in, and it would be children who suffer the greatest consequence.
“ADCS has long held the position that the government needs to step in to abolish excess profit making in this sector and invest, or help cash strapped local authorities invest in, new, not for profit provision.”
In March the ADCS raised concerns over a failure by the Competitions and Markets Authority to act against high costs charged by private social care providers.
Concerns were raised as it emerged that the largest 15 private providers have seen profit margins of 22.6 per cent on average from 2016 to 2020. Typical weekly prices for placements rose from £2,977 to £3,830 over the period.
