I wrote recently of the way our local councils were being effectively held to ransom by private providers of children’s residential homes and the impact on local authorities in Teesside. Now there’s some good news, with one local council – Stockton – taking steps to reduce their dependence on those private firms who have come under fire for “picking and choosing” looked after youngsters for their facilities.
Stockton Council’s budget figures show it is paying £8.8m for private firms to house and look after 65 of its youngsters in care. The high costs have led one councillor, Lisa Evans, to criticise some firms as a £6m package for a special needs school and more Stockton placements was backed.
Quality and influence over placements
Councils have a legal duty to look after youngsters taken into care by providing accommodation and ensuring their welfare. But Cllr Evans questioned the quality and influence the council had over some of its youngsters’ placements.
The cabinet member for children and young people said:
“I speak to colleagues locally and nationally and I think all local authorities are in the same position. It’s very much led by the private sector at the moment which doesn’t feel right to me. They’re looking at financial considerations and, for some of these providers, that’s their main consideration.”
Costs
The total numbers of youngsters in care across Stockton have held steady since 2019 at about 550. But officials say cost pressures have now risen to beyond £20m – with the highest of these charges going to external private placements.
Earlier this month, children’s services director, Martin Gray, said:
“It’s where there is not enough choice in the market, it’s very much a provider-led market-place, and fees have been escalating over the past few years. It’s a significant challenge everywhere.”
Stockton currently has 65 youngsters in external privately-run children’s homes at an annual cost (2020-2021) of £8.8 million – one of the smallest cohorts of children in the care system, but by far the costliest to finance. These pressures have seen Stockton leaders agree to borrow £6m to extend provision to house more of its young people in the borough. Lisa Evans told colleagues she’d wanted to push the strategy for a long time. She said:
“It’s bringing some children back into the borough who don’t need to be outside – but it’s also bringing them into settings where we have some control and influence on the quality of those settings.”
Scrutiny over high profits
The council’s move comes as the residential children’s home market comes under scrutiny from the Competition and Markets Authority (CMA). An October report by the watchdog showed some providers were earning “significant profits” from councils – with concerns some of the larger firms are earning higher profits than the CMA would expect.
Caretech Holdings
More damning evidence that children’s homes are seen as cash cows came in a report from last week’s Times that the UK’s largest private provider of children’s care homes sent more than £2 million to its founders’ offshore company in the Caribbean while accepting huge sums in government Covid support. Caretech Holdings PLC has recorded soaring profits in the past two years despite having care homes for the most vulnerable in society that are among the worst-rated in the country.
An investigation by The Times found that the two brothers who founded the company have channelled millions through an offshore structure, potentially reducing UK tax payments. This coincided with the company, whose income is largely taxpayer-funded through local authority payments paid via its more than 160 homes, recording an operating profit of £79.5 million last year — a 49 per cent year-on-year increase.
Analysis of Ofsted reports showed that concerns about substandard care were raised about homes operated by the firm’s biggest subsidiary, Cambian Group PLC, in the past year. One of these homes was in Stockton-on-Tees underlining the council’s concern. During the past two years, dividends of £2.24 million were paid to a holding company, Westminster Holdings, linked to Farouq and Haroon Sheikh, the brothers who set up Cartech in 1993.
Records reveal that it was incorporated in Nevis, a tiny Caribbean island with a population of 11,000 that has become a popular hub for offshore financial services, partly owing to its secrecy legislation. The filings show that the holding company is wholly owned by a trust based in Guernsey, an island that enjoys low levels of personal and corporate taxation. Beneficiaries of the trust include the brothers and their wives and children, according to Caretech documents. Tax experts said that the legal structure likely served as a “dividend trap” meaning that profits were incurred overseas and therefore not liable to UK income tax. Last year the company’s profit margin after tax was a “mere 7 per cent profit,” according to the firm.
Anne Longfield, former Children’s Commissioner for England, said:
“The children’s social care market is broken and failing many vulnerable children. Costs are soaring, there is a chronic shortage of places for teenagers with the most complex needs, and investment in early intervention has been cut. Meanwhile many private providers are making eye-watering profits. This is financially unsustainable and wrong.”
In reply Caretech did not deny the figures but pointed to ‘rising external costs’ due to the Covid pandemic and also, as their lawyers stated, the fact that “Last August, Westminster Holdings Ltd sold off shares worth £4.65 million as part of the Sheikhs’ family estate planning in relation to their adult children”.
So at least one group of children will gain tangible benefit.
