NASS CEO, Claire Dorer OBE, responds to the Government's proposed reforms to children's social care announced on 18th November 2024.
Yesterday, Secretary for State for Education Bridget Phillipson announced the "biggest shake up of children’s social care in a generation". This may prove to be true but detail is still thin on the ground at this point with elements of the work announced, e.g. Regional Care Co-operatives, first being introduced via the last ‘once in a generation’ social care programme ‘Stable Homes’ in 2023. I’m not trying to be cynical – reform is needed urgently and is welcomed – but the lack of concrete detail yesterday was filled with a fair amount of hyperbole about why the system is in crisis and whose fault it is. I heard a lot of emotive language used in the House of Commons yesterday and a rush to establish who the ‘good guys’ and the ‘bad guys’ are. To my mind, this is not a good starting place for a systemic change that has to take all partners with it if it is to make a real difference to children and families.
Of course, I am not a neutral party in this. NASS represents schools run by some of the companies heavily criticised yesterday for ‘profiteering’ in children’s social care. I don’t think it’s unreasonable for people to hold moral objections to profit generation in children’s services. When it’s put forward as the basis for public policy, I watch very closely to see if the evidence for the case for change is accurate and sound and that the alternatives suggested are feasible. I don’t think we have yet established a solid base for this latest round of reforms.
There was much in yesterday’s announcement to be celebrated. Children and families are poorly served by the social care system with a long-term lack of investment in early support and workforce development. Measures to change this will, if effective, be a positive development. Children should not be placed in unregistered, illegal homes and we welcome further measures to eradicate this.
Yesterday’s headlines were full of accounts of ‘profiteering’ companies. I heard a lot of talk of the ‘big 5’ companies making 30% profit a year and set out to find the source of those figures. The DfE press release draws on Andrew Rome’s excellent reports for the Local Government Association, looking at profitability and debt in the top 20 (by income) providers of social care. The latest report is from September 2023, at which point, the average profit margin was 19%, down from 19.8% in 2022 – some way away from the 30% quoted. Whilst the most profitable firm generated a 26% profit margin, there was significant variation across the 20, which included at least one voluntary sector organisation. Bridget Phillipson quoted the ONS figure of 8.8% several times – the average profit margin for all private firms in the UK last year. However, if you look at the ONS’s average figure for service industries, it’s 15% - much closer to the average being made by the top 20 than the quoted 30%.
Why does this matter?
It doesn’t change the basic question of the role of profit in children’s social care but it challenges the basis for the adjectives that were attached to social care companies yesterday. For a start, what makes this ‘profiteering’, rather than ‘profit making’? The former implies a deliberate attempt to charge high prices to manipulate an opportunity. If this was the case, we’d expect to see the top 20 companies consistently charging more than other private providers and to be charging a lot more than local authority and voluntary sector providers. Going back to the Competitions and Markets Authority investigation in 2022, one of their important conclusions was that placements in private children’s homes do NOT cost more than children’s homes. I didn’t hear this quoted yesterday but I did hear an increasingly fervent range of adjectives attached to the word ‘profiteering’, starting with ‘shameful’, moving to ‘extreme’ and ending up as ‘reckless’. If we can’t establish that these homes are more expensive then surely the focus on profits means that quality is worse? We certainly heard a lot of these accusations yesterday. However, to again go back to the CMA report, they found that the quality of homes in the private sector was no different to that in local authority or voluntary homes.
The private sector has effectively been told by Government to reduce profits or else face legislation that will impose profit capping. This is something that the CMA expressly warned against doing in 2022. Their assessment was that profits were high largely because of a national insufficiency of places for children with more complex needs. In market terms, from the CMA’s perspective, we need more competition and more providers, not fewer. If Government wants to change this pattern, it needs to massively invest in supporting providers from the local authority and voluntary sectors to set up new homes. This is not something we heard announced yesterday. However, we did hear other commentators note the risk of driving providers out of the market before sufficient other provision exists and the possibility of profits being hidden in future accounts. Unless policy steps away from the hyperbole, we run the risk of making life worse for children and young people – something we have a duty to avoid, if not at all costs, at least not just because we have a moral objection to some providers. We need to be able to have sophisticated discussions about profit – how it is generated, how much of it is re-invested in new homes and schools. We need to be clear about the similarities and differences between surplus and profit and the role of efficiency in service provision and we need to be able to do this logically and factually, owning when our views are driven by our own set of morals and values. It’s possible to do and I am hoping NASS will have a seat around the table and an opportunity to create great evidence-based policy that makes a lasting difference to children, young people and their families.