From children in need, to profit margins

Article from In Common newsletter for The National

In our most recent policy paper on the crisis in Scottish foster care, we discovered that multiple private companies are profiting from the foster care system.

This means that money intended for the most vulnerable children in society is being diverted into the pockets of wealthy investors. Imagine that – using funds earmarked for children in need, and through a few loopholes, some of that money ends up in a tax-haven equity fund. The scariest part? It is all completely legal.

Unfortunately, this recent discovery is an all-too-familiar story: Public funds finding their way into private hands. The foster care system is just another example on a growing list.

Independent foster care agencies are required to be non-profit, but nothing prevents them from being owned by profit-making companies. This is where money begins to be siphoned away. Through costly service fees, financial charges, and interest-free unsecured loans, funds start to flow out of the foster care system and into private profit margins and equity funds.

Not only is this a blatant example of profit extraction – something we in Scotland see in nearly every corner of public service – but it also hampers the efforts of local councils in delivering high-quality foster care.

These independent agencies compete with each other and have the resources to attract the most carers onto their books. As a result, council services are often unaware of the carers available in their own areas and may have to look further afield to find a suitable match for a child. This can mean a child is placed far from their home, making it much harder for them to maintain contact with their family, remain in the same school, and stay connected to their community – leading to poorer outcomes.

“funds start to flow out of the foster care system and into private profit margins and equity funds.”

Not only is money being drained from the care system into private hands, but these agencies are at times actively working against the care provided by local authorities.

Yet, this is a pattern we in Scotland are sadly accustomed to. We see it time and again when consultancy firms are paid vast sums to make decisions or provide advice that could and should have been handled in-house by the Scottish Government, thereby saving public money.

Take, for example, the CalMac ferry debacle. More recently, consultancy firm Ernst & Young was awarded £250,000 to determine whether the ferry company deserved a renewed contract without going through the usual competitive tendering process. A quarter of a million spent to decide where to spend money on something else.

And let’s not forget the Scottish Government’s go-to consultancy firm – KPMG – who are routinely brought in for high-level projects. They were awarded a £543,000 contract to develop their now sunk vision for a National Care Service, despite the UK Government having previously found the organisation dishonest in some of its dealings, almost banning it from bidding for public tenders.

Not only are these consultancy firms being paid exorbitant fees for work that the Government should be capable of handling internally, but the recommendations they produce – particularly in the case of KPMG – almost always point in the same direction: Privatisation. Why privatisation? Because for a global company like KPMG, which has numerous private-sector clients, steering the Scottish Government towards privatising public services ensures they are looking out for their private clients' interests.

And now, to top it all off, this week we have learned that education services within the Scottish Prison Service will also be privatised. Fife College, which has held the contract for several years and consistently delivered high-quality courses, has lost out to PeoplePlus – an organisation mired in controversy. Under its previous name, A4e, it was involved in fraud scandals and is currently being sued by claimants in England for breach of contract. Some might say a pattern is emerging.

At a time when reducing the prison population is a priority, cutting reoffending is crucial, and education plays a vital role in achieving both. Yet, privatised education is a step backwards. While it may save a few pounds in the short term, the long-term consequences of reducing the quality of education will be severe. Why be so short-sighted?

The growing entanglement of private companies leeching off public funds – just as we see in the foster care system and the ferry contracts – is merely a snapshot of what is happening across Scottish public services. So why is this allowed to happen?

The Scottish Government was quick to point out that the profit extraction from the foster care system is entirely legal. But the real question should be: Why is it legal, and why does the Scottish Government continue to allow it? If we want better public services we need to stop the greedy hands of private companies getting their piece of the pie first.