Four in five of the children’s homes in England are run for profit – here’s why that is a problem

The John Lewis Christmas ad has been an annual, headline-grabbing event in the UK since the retailer first launched a seasonal TV campaign in 2007. To date it has variously featured a pet penguin, a talking dragon and a trampolining dog. Its 2022 iteration, however, has garnered serious attention for the spotlight it shines on children in care.

The Beginner, as it is entitled, follows a middle-aged man who takes up skateboarding so that he can bond with the young girl he and his partner are about to foster. It has rightly been hailed as deeply moving. But, as journalist Danny Lavelle has pointed out: “It’s demoralising that one of the nation’s largest retailers is doing the government’s job for it.”

The challenges facing children’s social care in England are well documented. The number of looked-after children has, in fact, never been higher. The government’s own statistics reported 80,850 children in care in 2021 – an increase of 25% since 2010.

In addition, many councils are increasingly unable to cater to that need. They simply do not have the capacity to sort out local residential accommodation in line with the standards of care they are obliged to meet. The children’s care sector is experiencing what the government’s Office for Standards in Education, Children’s Services and Skills (Ofsted) has termed a “sufficiency crisis”.

Perhaps the most galling statistic, however, is the fact that around 80% – four in five – of all children’s homes in England are now being delivered by for-profit companies. These providers are often free to select which children to accommodate, where to set up services and at what cost. This, in turn, significantly limits local authorities’ capacity to shape the care that children receive.

This issue has been fiercely debated , but there has been surprisingly little empirical investigation. To resolve this knowledge gap, we have examined how outsourcing care homes to private companies has affected service quality across England. We have found that – on average – for-profit children’s homes receive worse Ofsted ratings and violate more statutory requirements than those run by charities and local councils.

Significant differences in quality

Our study is the first longitudinal analysis of the impact of outsourced children’s homes and Ofsted inspections in England. We created and analysed a comprehensive dataset of more than 13,000 Ofsted inspections of children’s homes in England over a seven-year period (2014–2021). We found three things.

First, for-profit children’s homes, on average, receive worse Ofsted ratings than local authority homes across all inspection domains. These include the overall experiences and progress of children and young people, the effectiveness of leadership, and the support and protection afforded to young people and children.

Second, for-profit children’s homes violate more statutory requirements and receive more recommendations to improve their services than their local authority counterparts.

Third, local authority children’s services which place a greater amount of their looked-after children with private companies receive worse Ofsted assessments than the local authorities who do not.

These findings beg the question as to why, when housing some of the most vulnerable children in society, the government would allow and even promote the for-profit provision of children’s homes. Proponents of this model claim that outsourcing to the private sector cultivates competition and enables diverse providers to “innovate” in how they deliver services. They claim this addresses the “inefficiency” of public sector services. It reduces costs and improves service quality.

Recent research from the What Works for Children’s Social Care and the Institute for Government thinktanks disproves these claims. It shows that local authorities (who commission these services) lack the internal capacity and expertise needed to monitor and shape how social care is provided by private companies. Work by the Competition and Markets Authority (the UK’s competition regulator) corroborates their assessment.

Further, it is unclear why the UK government allows for-profit provision in some sectors but not in others. State-funded schools, for example, are not allowed to be operated as profit-making entities. Why then is it desirable for children in care to be accommodated by for-profit companies?

Care work cannot easily be quantified as a commercial service

Research in adult social care shows that it is inherently difficult to align the incentives that underpin commercial enterprises with the needs of social care users. The very nature of social care work makes it challenging to define “outcomes” in the way you might for other commercial services and, as a business, to organise your operations accordingly.

This holds true too for children’s care. “Child-centred outcomes” in this context relate to the stability, wellbeing and long-term improvement of vulnerable children’s lives. However, there is no nationwide framework to shape how local authorities should achieve these outcomes. Instead, commissioning decisions tend be driven by costs – often with little room for negotiation due to the sufficiency crisis.

And because of this, outsourced social care provision is also hard to regulate. Local authorities – and even Ofsted – are severely limited in their ability to monitor the services these companies provide. As a result, the latter are free to let other priorities, such as maximising their profits, determine the quality of the care they provide.

Proponents of outsourcing care routinely dismiss these concerns. The Children’s Home Association (previously known as the Independent Children’s Home Association) recently claimed that “there is no significant degree of variance” in Ofsted ratings according to provider ownership.

Similarly, even though the 2022 Competition and Markets Authority report identified a series of market failures, it nonetheless concluded that “the evidence from regulatory inspections gives us no reason to believe that private provision is of lower quality, on average, than local authority provision”.

Our findings clearly show that Ofsted routinely criticises the care children receive in homes run for profit. This, of course, will come as no surprise to many commissioners, practitioners, social workers and other stakeholders who have long expressed their concerns.

The rise of children in need of support in England is known to have been exacerbated by austerity measures. Although the chancellor of the exchequer, Jeremy Hunt, announced some investment in social care in his autumn statement, experts have been quick to point out that he also avoided any real reform. The worry is that the sufficiency crisis the care sector faces will only be intensified.

The current operating model for children’s social care is not delivering what its advocates promised. And the nation’s most vulnerable children are paying the price.