The privatisation of children’s social care services is definitive proof that the elite puts profit before its responsibilities – even to society’s most acutely vulnerable.

The neoliberal policies of privatisation and the shrinking of the state were the long-established norm in 2006. (Carol Yepes / Getty Images)

The children’s care sector has been in the news recently because of the spiraling cost of running children’s homes during the pandemic. Before that, it was because the large, private providers have an outrageous average profit margin of 22.6 percent, while at the same time facing debt mountains that increase their risk of sudden bankruptcy. And before that, it was because forty percent of children are placed miles outside the reach of their social support networks, leaving them vulnerable to criminals and abusers.

None of these problems have been fixed yet. So how did we get in this mess?

In 2006, the Blair government released a green paper, Care Matters, proposing the privatisation of children’s social care. The new Social Work Practices (SWPs) could be social enterprises, such as professional partnerships or non-profits, or private sector firms such as shareholder-owned corporations or owner-operated businesses. In other words, they could be run by anyone but the state.

At the time, the social workers assigned to looked-after children were changing frequently, and research had suggested that it would be possible to improve the mental health outcomes of the children by keeping the same adults assigned to look after them for longer periods of time. Mental health problems are a frequent difficulty for children in care: it’s reasonable to assume that alongside the immediate suffering those children experience, mental health problems contribute to higher rates of unemployment, imprisonment, and other outcomes that can reduce their quality of life in adulthood and rob society of their best contributions.

The proposed private Social Work Practices were supposed to fix this problem by improving retention of staff, who would be more involved in decision-making, and thus have better morale. The private practices were also supposed to make the process less bureaucratic and more responsive to the needs of the children. The children, the proposal hoped, would receive more consistent care.

While acknowledging that some local authorities had already put together small, specialised teams that aimed to provide exactly this stability to children under their care, the Care Matters paper asserted that it was necessary to move this service outside of government and into the private sector. The authors argued that social workers were torn between doing what was best for the children and defending the council’s pre-existing policies and practices, serving two masters and, as a result, failing to serve the children well. The authors were apparently blind to the fact that a move into the private sector would only replace the master of established policy with the demand to make a profit.

If the private care provision was to be run by corporations, then the need to satisfy shareholders would inevitably lead management to form policies to maximise profits, even at the expense of the children’s wellbeing. If the Social Work Practices were to be run as partnerships between the social workers and other staff, the conflict of interests would be direct, as every penny they spent on the children would be a penny out of their own pockets. Far from eliminating the need for social workers to serve contradictory goals, privatisation would replace one set of conflicts with another, harming the children in different ways.

The neoliberal policies of privatisation and the shrinking of the state were the long-established norm in 2006. Unsurprisingly, then, the government decided to run a trial of five privatised SWPs for looked-after children in the north of England.

The results were disappointing. In a 2012 evaluation of the scheme, researchers concluded that:

A policy of contracting children’s services out to small independent organizations does not appear to be consistent with the goal of increasing continuity for children in out-of-home care. Staff in these organizations are likely to experience [job] insecurity which may contribute to high turnover, and children experience transfer of their care from one provider to another. Moreover, incentives to reduce placement costs can result in more disruption for children.

This last remark refers to the one practice in the pilot scheme which attempted to cut costs by placing children in privatised care homes. Predictably, the children under the care of that practice were moved from home to home more frequently, as the practice shopped around for the best deal. Far from increasing the stability of care for those children, it uprooted them more often, placing them into new homes, in new neighborhoods, with new carers. And to think a change of social worker was considered disruptive!

The researchers evaluating the pilot concluded that there was no reason why small teams couldn’t operate just as effectively from within local authorities, assuming they were properly resourced. (The practices in the pilot scheme had been spared from dealing with complex child protection cases.)

By the time the pilot scheme was over, however, the Conservative-Liberal Democrat coalition government was in power. Despite being aware of the above research, which was funded by the Department for Education, they embraced the idea of privatising all aspects of children’s social care, except for Independent Review Officers and adoption services.

Their decision caused an outcry. First, the unusually short, six-week public consultation period struck many as suggesting shady dealings. Then, when responses from the public came in, ninety-four percent of people were against privatisation, while senior social work academics, charities, and one of Britain’s largest trade unions also came out against the plans.

In the face of overwhelming opposition, the government caved, and newspapers proclaimed that children’s social care would stay under public control. Quietly, however, the government U-turned a few weeks later.

When the government issued its new guidance, profit-seeking companies would still be allowed to participate in all the same aspects of children’s social care—they would just have to set up a non-profit to act as their subsidiary. They could then rent their buildings, management, and administrative skills to that subsidiary at whatever price they chose.

Unhampered by public attention, all local authorities were now free to cut costs by placing children in private care homes; something that would become unavoidable when the government slashed local authority budgets in half, as part of its ideological drive to shrink the size of the state. Today, seventy-five percent of looked-after children are in privatised children’s homes—and that brings us back to the slew of terrible stories that have appeared in the news in recent years.

The Consequences of Privatisation

In 2019, the Independent reported that forty percent of children in care were housed outside of their local area. Typically, this means moving to a different town or a distant part of a large city. Worse, 2,000 children were housed at least 100 miles from home.

While there may be legitimate reasons for moving children out of their local area, like protection from specific individuals, that doesn’t appear to be the case here. Separate research shows that children’s homes are being systematically undersupplied in London, while large numbers of out-of-area children are housed in north-west England, where property prices are much lower. This would appear to confirm the article in the Independent, which reports that the three authorities in the UK to export the most children are the expensive London boroughs of Westminster, Hammersmith and Fulham, and Tower Hamlets, while the much cheaper Lancashire and Kent authorities take four children for each one they send out-of-area.

This is what people mean when they say that the free market is efficient. Companies cut costs by providing the worst service they can get away with, so that they can make a bigger profit or else undercut their competitors. In turn, their competitors have to provide an equally bad service in order to compete. The service’s users—in this case, looked-after children—suffer a worse experience as a result.

For any child, being moved away from their social support network would leave them distressed. But for children in care, this seems likely to cause exactly the kind of psychological harm that the authors of the pilot scheme wished to prevent.

Another way that private companies maximise their profits is borrowing money to invest in lucrative opportunities, gambling that they’ll be able to pay off the loan with what they make back. The large private care home providers have used this strategy to expand aggressively, getting into so much debt that the Competition and Markets Authority (CMA) is concerned about firms going bust and leaving children suddenly homeless.

These children’s care businesses are only able to take out such large loans in the first place because they’re making huge profits. As mentioned above, on average, the fifteen largest providers are making a 22.6 percent operating profit, giving them plenty of spare income. They’re able to achieve these profits partly by refusing to house children from expensive regions near their loved ones, partly by hiring fewer staff than state-run homes, and partly by cherry picking only the most profitable cases.

In January 2021, the Johnson government announced that it had hired the CMA to review the children’s care sector and make recommendations for its improvement, in light of all the highlighted problems. In its report, the CMA recommend new regulations that force children’s care home businesses to keep a larger cash reserve, and to produce a contingency plan in case of financial difficulties.

This will undoubtedly reduce the risk of children being left suddenly homeless. But the care homes are only in danger of going bankrupt because they’re run as private businesses—so why didn’t the CMA recommend bringing them into public ownership, to remove the danger completely? Why go down the route of reducing harm over eliminating it?

It seems unlikely that the government ever had any intention of allowing children’s care homes to come back into public ownership. The Department for Education contract signed by the review’s leader explicitly states that the DfE ‘cannot assume any additional funding from the exchequer’, and also that the recommendations have to be ‘affordable’, a measure vague enough to mean whatever the government wants it to, and certainly that it shouldn’t invest in thousands of care homes.

Previously viable businesses go bankrupt even in the best of times, and the boom-and-bust cycle of capitalism means that there’s a large increase in bankruptcies every five or ten years. As long as children’s care homes are run by private businesses, it’s not a question of whether vulnerable children will have their lives turned upside down, but of how many, and how often. And that’s without considering that investors might see better opportunities elsewhere and decide to leave the market even in good times.

Instead of using its lower borrowing costs to set up its own homes—or better yet, expropriating the existing homes from the greedy profiteers—the government is happy to use our resources to pay the mortgages on hundreds of millions of pounds’ worth of homes for private equity firms.

The Lessons

The obvious conclusion to draw from all this is that privatisation is harming the children that we were told it would protect. But there are broader lessons here, too. Successive governments, of both major parties, have implemented and continued the privatisation programme, despite experts and ninety-four percent of the public being against it, and despite having objective proof that it leads to worse results.

They can get away with this because the structure of our democracy leaves them widely unaccountable, and because the party that enacts policies which please the investing, capitalist class—the sort of people who invest in private care homes—is destined to receive not only large donations from the rich, but also unwavering support from the majority of the media, especially when it matters, like at election time.

Ideas such as ‘the free market is efficient’ and ‘businesses are more innovative’ are destined to become accepted truisms among the ruling class, and large swathes of the public, when the well-off receive their incomes from private enterprise. Armed with such a belief system, politicians can proclaim to themselves and the world that their pro-business policies are for the benefit of all. This is true even when these ‘truisms’ have been conclusively and repeatedly proved false.

Children in care are a group we should protect most fiercely. But in our perverse system of capitalist democracy, they’re just a resource for the rich to exploit—and whose wellbeing our politicians are more than happy to trade for donations and brownie points.

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