Vulnerable children are being put at risk by private equity care home owners and their debt-fuelled business models, the industry watchdog said yesterday.
The Competition and Markets Authority (CMA) warned firms owned by investment tycoons were charging taxpayers excessive fees, despite their aggressive business tactics putting children’s welfare at risk.
There is a ‘real concern’ that high levels of debt could force hundreds of homes out of business, leaving the sector in crisis, it said.
The Competition and Markets Authority (CMA) warned firms owned by investment tycoons were charging taxpayers excessive fees, despite their aggressive business tactics putting children’s welfare at risk
Experts are worried the sector could face a Southern Cross-style collapse, when the UK’s largest adult care home company went bust following private equity ownership.
This put at risk the well-being and health of thousands upon thousands of elderly people.
CMA chief executive Andrea Coscelli said: ‘We are concerned this is a failing system. The levels of debt carried by private equity-owned firms is a real concern.’
The CMA also raised the alarm over fees charged by private companies, revealing the taxpayer was being forced to pay an average of £3,830 a week to look after each child –more than double the cost of sending a teenager to Eton College.
Firms were charging ‘more than they should’, enabling them to make fat profits – with margins of 23 per cent – on the back of caring for vulnerable children, it found.
The parents of a teenage girl who was tortured in a special needs home have accused its private equity owners of ‘cutting corners’ and failing to invest in staff
The CMA’s verdict came as a Daily Mail investigation found that failures in private equity-owned homes have resulted in children being sexually exploited, while others lived in homes with faeces-covered walls.
Firms owned by investment giants raked in £161 million in profits last year from taxpayer-funded fees despite collectively running dozens of failing children’s homes.
Council staff have accused private providers of holding them to ransom when beds run short – forcing them to pay fees of up to £10,000 a week. Industry leaders decried the ‘spectacular market failure’ and accused private equity providers of ‘gaming’ the system to rinse councils for more cash. According to Ofsted data, 55% of homes are not rated at the least good level.
MPs and industry leaders demanded that the government stop private equity firms making large profits. Tory MP David Simmonds, a member of the Commons finance committee, said: ‘Taxpayers must not be ripped off by providers profiteering off services for vulnerable people.’
Former children’s minister Robert Goodwill MP said: ‘Big chunks of money going to private equity companies means less money for children’s services in the community. I’m delighted that the Daily Mail is shining a bright light on this issue.’
Kathy Evans, chief executive of Children England, which represents children’s charities, described the issue as ‘shocking and enraging’, while Anntoinette Bramble, of the Local Government Association, said: ‘It is unacceptable that private equity providers are making excessive profits from placements for children.’
The law requires that councils look after children who cannot live safely in their families because of domestic violence, addiction or complex needs.
Private providers have taken over the care of vulnerable children in recent years, following the sale of cash-strapped care homes by local authorities.
The number of privately-owned homes has jumped from 19,080 in March 2011 to 27,190 in March 2019 – and seven out of ten of the UK’s biggest children’s home companies are now in the hands of private equity. Mail audits of Ofsted reports revealed that there were dozens of failing homes, including cases of abuse and management failure.
G Square Capital owned a Keys Group home where two girls were raped. The home was afflicted by poor management and many redundancies. Inspectors said there was ‘a total failure to keep young people safe’. Keys said the report was ‘historic’ and the home was now closed.
Another shocking case involved traumatised children who were left to live in bedrooms with blood and urine on the walls of a home managed by Witherslack. The home is owned privately by Livingbridge. The failures led to the home being closed after inspectors visited in July 2020 – less than two years after it opened.
Management failed to report abuse allegations at a Lancashire house owned by Waterland private capital and run by Sandcastle Care. The founder of Waterland is Dutch billionaire Rob Thielen, who has used his wealth to buy a 180ft superyacht and hire the Black Eyed Peas to play at his £1 million 50th birthday bash.
Waterland and Livingbridge declined comment.