Recommendation 5

Despite private providers providing most care home places, the Department does not fully understand their financial position. Private sector providers are responsible for 84% of children’s homes and 74% of places for children in England. Seven of the ten largest children’s homes providers are owned by private equity, which means less financial transparency, a focus on generating profits and potentially high debt levels. The Department recognises private providers play an important role and that it needs to understand more about their financial standing to effectively oversee the market. This includes companies’ debt levels and financial risks and, should it introduce a profit cap, profit levels. In 2022, the Competition and Markets Authority found that the fifteen largest children’s social care providers had average profit rates of 22.6% for children’s homes, with their prices increasing by an average of 3.5% above inflation each year. However, there are many small and medium sized providers who do not make the same scale of profit. The Children’s Wellbeing and Schools Bill will introduce a financial oversight scheme, but the Department has not set out how it will use this beyond watching for warning signs of provider failure. This contrasts with other sectors. For example, the Care Quality Commission oversees adult social care providers and has a dedicated financial sustainability team overseeing around 30% of its market. 5 recommendation The Department should set out how it will better understand the profits, motivations and debt positions of private providers and how it will then proactively address risks across the market.