Six of the 10 largest independent groups of providers of children’s residential and fostering placements had more debts and liabilities than tangible assets last year, raising concerns about their viability, according to LGA-commissioned research.
The LGA is concerned that this is placing at risk the stability of placements for children in care. It is calling for greater national oversight of such companies, similar to the role the Care Quality Commission (CQC) holds for adult social care provision.
Nearly three in four children’s homes and almost a third of fostering places are now provided by private organisations. The research also shows that, in just three years, eight of the biggest providers merged to become the three largest groups. The six largest independent providers of children’s social care services made £215 million in profit last year, with some achieving more than 20 per cent profit on their income.
Cllr Judith Blake, Chair of the LGA’s Children and Young People Board, said: “A varied market for homes for children in care helps councils make sure these children get the right homes for their needs, and both in-house and independent provision are key.
“Fewer providers are now dominating that market. Much of their growth has been fuelled by enormous loans, which will need paying back at some point, yet this research shows many of them do not have the assets to do that.
“An oversight scheme is needed to help catch any providers before they fall and ensure company changes don’t risk the quality of provision. Providers should also not be making excessive profit from providing placements for children.
“The Government’s review of the children’s care system needs to look at how the market for children’s social care placements is impacting on children’s outcomes. It should also consider how we can work with councils and providers to improve transparency of costs.”