Labour to crackdown on businesses 'profiteering' from social services

Ministers have announced a crackdown on businesses ‘profiteering’ from children’s social care services.

It follows a number of scandals in which private equity firms running children’s homes were charging high fees to the taxpayer while providing sub-standard care.

From today, Ofsted will get new powers to issue civil fines to companies displaying exploitative practices.

In addition, new rules will require private providers to share their finances with the government, allowing ‘profiteering to be challenged’, the Department for Education said.

There will also be a ‘backstop’ law to put a limit on the profit they can make, that the Government will introduce if providers do not voluntarily end profiteering.

And the Government also is calling for more non-profit providers to enter the market, as an alternative to private equity.

Spending by local authorities on looked-after children has more than doubled in just over a decade, from £3.1billion in 2009/10 to £7billion in 2022/23, the DfE said.

The biggest 15 private providers make an average of 23 per cent profit, according to analysis by the Local Government Association.

In addition, there are more than 1,500 children in placements each costing the equivalent of half a million pounds every year.

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The new measures, to be set out in Parliament, are aimed at empowering social workers to take action against providers delivering ‘subpar standards of care at sky-high costs to councils’.

The DfE said a longstanding challenge in the system is some private providers ‘siphoning off money that should be going towards vulnerable children’.

It comes after the Competition and Markets Authority warned private equity firms that own care homes have been charging taxpayers excessive fees.

They have ‘risky’ debt-ridden business models, leading to fears homes could close, and some have been presiding over poor care.

In one example previously highlighted by the Daily Mail, children were allegedly abused and neglected at homes run by Hesley Group, which was owned by a private equity firm. 

Education Secretary Bridget Phillipson said: ‘Our care system... is bankrupting councils, letting families down, and above all, leaving too many children feeling forgotten, powerless and invisible.

‘We want to break down the barriers to opportunity and end the cycle of crisis.’