Still profiting from vulnerable children

Legislation to help children in care is finally with us 11 years late. But it protects more profit-extracting loopholes than it closes.

On 17th June the Scottish Government introduced the horribly named Children (Care, Care Experience and Services Planning) (Scotland) Bill to the Scottish Parliament. This was almost nine years after Nicola Sturgeon first promised to improve the lives of children and young people with experience of the care system.

The Independent Care Review was then set up to consider how to do that. In 2020 it produced its report, The Promise, which was followed in 2021 by The Plan. The purpose of the Bill is to implement recommendations arising from The Promise and The Plan, for example reform of the Children’s Hearing system, which the Scottish Government believe require changes in the law.

Among them is the recommendation that profit should have no place in children’s care system. The policy memorandum accompanying the Bill starts well with this statement:

“The Promise is clear that there is no place for profiting in how Scotland cares for its children and that Scotland must avoid the monetisation of the care of children and prevent the marketisation of care by 2030”.

Unfortunately, the proposals which follow represent a complete policy muddle and will not deliver what was promised

On the one hand the proposals to achieve this in foster care do represent a step forward. Independent Fostering Agencies (IFAs) are the only type of care service in Scotland that are currently required to operate on a non-for-profit basis but this has never been enforced by the regulator responsible, the Care Inspectorate.

As a result, as Common Weal showed in our report on The Crisis in Foster Care in Scotland, profits continue to be siphoned out of some IFAs by profit-making parent companies. We are pleased that the Scottish Government has explicitly mentioned our report and acknowledged what is happening in the policy memorandum to the Bill.

To address these problems the Scottish Government is proposing that all IFAs should be required to register as charities with the Office of the Scottish Charity Regulator. It predicts this will release £6 to £10 million a year which can then be reinvested in foster care.

It also correctly argues that if any of the current IFAs decide to withdraw from the foster care market as a result, the foster carers contracted to work for them can be taken on by other IFAs or local authorities.

“We would like to see the Bill go further and the Scottish Government use its legislative powers to break all links between foster agencies and profit-making companies, the only sure way to ensure profit-extraction stops”

All this represents a significant step forward in government thinking but begs the question as to how the not-for-profit requirements will be enforced? More specifically, how will profit-making parent companies be prevented from continuing to extract money from IFAs through internal charges for legal and administrative services or borrowing large sums of money interest free as they do at present?

The Scottish Government is proposing that the Care Inspectorate should be responsible for delivering this and that after setting up new systems the costs of doing so will be minimal. If it's so simple, the CI could have done this years ago.

We would like to see the Bill go further and the Scottish Government use its legislative powers to break all links between IFAs and profit-making companies, the only sure way to ensure profit-extraction stops.

The proposals for children’s residential care by contrast are very different and will do nothing to prevent private companies extracting large profits.

For residential children’s services the Bill only gives Ministers the power to limit profit, not abolish it and that only after a period of collecting data about profit levels – a recipe for delay. In proposing this the Scottish Government has decided to follow England, who are proposing to limit profit, but not Wales who are in the process of abolishing private provision completely.

The Scottish Government’s justification for this stance is they believe profits are lower in Scotland (£28k a year per child) than England and the UK average of £44k a year. This is based on data from the Competition and Markets Authority. For context, £28k a year is four times the amount per child the Bill proposes to spend extending aftercare services to children who leave care before 16 over their lifetimes! Every pound extracted in profit is a pound less for helping a child who needs it.

The latest Looked After Children Statistics report that 1,324 children and young people were in residential care settings in 2024 and suggest that of these a minimum of 365 were in placements provided by the private sector. That is more than £10 million in private profit. So the total amount is significant and is more than will be saved by closing the profit-taking loopholes in foster care.

The explanation for this retreat from The Promise appears to lie in the Financial Memorandum to the Bill. This states that the Scottish Government is concerned that profit-making providers would walk away from service provision (with their buildings) if the profit extraction stopped.

The answer to that risk is for the Scottish Government to pledge to use emergency powers to take over such services and, if their current powers are not sufficient to do this, to add new emergency powers to the Bill.

The Bill contains no proposals to stop profit-making by private companies which operate services for care-experienced children in local communities rather than residential or foster care settings. Such services also monetise the care system.

Common Weal’s Care Reform Group will publish our full response to the Scottish Government’s proposals in due course. The consultation and the bill itself, however, present an opportunity for the public and other stakeholders to challenge the hold that profit-making companies now have over swathes of what are supposed to be public services and ensure that they are once again run for public benefit – and only ever in the interests of the children who need them.