Gateshead Council backs crackdown on children's care homes making 'extreme profits'
by Daniel Holland · ChronicleLiveA crackdown on “excess profiteering” from children’s homes has been welcomed by a North East council faced with escalating bills.
Education secretary Bridget Phillipson this week warned that she will “go further and harder” in taking on companies making “extreme profits at the cost of vulnerable children”, as the Government announced plans for a new backstop law that will limit profits if providers do not voluntarily curb their gains. The Houghton and Sunderland South MP said on Monday that a care crisis was bankrupting councils and “letting families down”, with analysis by the Local Government Association (LGA) showing that the 15 biggest private providers make an average of 23% profit and that there are more than 1,500 children in placements each costing more than £500,000 a year.
Struggling Gateshead Council expects to spend £54.4 million on children’s care in 2024/24, an overspend of more than £3 million, and faces an overall budget shortfall of more than £34 million by 2030. A report to the authority’s cabinet this week said that the high numbers of Gateshead children being put into care, which stood at 510 at the end of September, meant the council was short of places and was therefore making "significant overspends” procuring private providers – sometimes resulting in children being sent out of the area.
While that number has fallen to a 10-month low, civic centre officials said that the numbers of children in costly external residential provision have not reduced and that they are now planning to open more council-owned children’s homes.
Labour councillor Gary Haley, Gateshead Council’s cabinet member for children and young people, said: “It is well documented that the cost of social care is the biggest spend for councils, and this includes how we care for our looked after children. It is unacceptable that some would seek to exploit councils like this, charging excessive fees in order to line their own pockets, especially given this is about the most vulnerable children in society. Ultimately this hits the children hardest, as councils then have less money to spend on those that need it most.
“As a council we are committed to ensuring all our looked after children are placed in the best care possible, ideally housing them with families locally through fostering. Where this is not possible, our aim is to ensure children can stay in Gateshead and be looked after in our own children’s homes. These children have had the worst starts in life and as their corporate parent it is paramount we give them the best care we can.
“We are looking to open a small number of council owned and operated children’s homes across the borough in coming months, therefore ensuring the welfare of our children is prioritised without profit being the objective.”
Ron Beadle, leader of the town’s Liberal Democrat opposition, also backed the Government’s crackdown and efforts to ensure more children are looked after locally. He told a cabinet meeting on Tuesday that the level of profiteering in the children’s care sector was a “disgrace”. According to the LGA, children’s and adult social care services across the country face extra cost pressures of £3.4 billion in 2025/26 compared to 2024/25. There were 83,630 children in the care of councils as of March 31 this year, Department for Education figures show, a 4.5 per cent increase since 2020.
Ms Phillipson told the House of Commons on Monday: “Children’s social care is struggling under an impossible weight. We have more children in care in this country than ever before, and with more and more money following children into the most expensive part of the system, resources are sucked out of preventative services, pushing yet more young people into care, and so the vicious cycle continues – higher costs, poorer outcomes.”
She continued: “We will give Ofsted the powers to move more quickly against unregistered care providers and tackle patterns of poor care. These are actions to fix the care market. But be in no doubt, if companies continue to make extreme profits at the cost of vulnerable children, I will go further and harder.
"We will introduce new powers that allow Government to directly cap the level of profit from children’s social care placements. At their best, private providers can help improve the lives of vulnerable children, but where the focus drifts towards exploitation in the pursuit of profit, be in no doubt I will act.”
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