The Scottish Government wants to take profit out of children’s care - here’s how to do it
Yesterday, Common Weal published a major new report looking into the level of profits and surpluses being extracted from the children’s care sector in Scotland. This work builds on the Scottish Government’s pledge to remove such profit extraction from children’s care and explains how it can be done.
In 2020, the Scottish Government made “The Promise”, a wide-ranging commitment to implement the the results of the 2016-2020 Independent Care Review. This promise extends across seven volumes of investigations into the state of the care sector in Scotland and what can be done to improve it. One of the commitments made was to to remove profit extraction from the children’s care sector. To quote the Promise specifically, the Scottish Government accepted that “Scotland must avoid the monetisation of the care of children and prevent the marketisation of care”; “Scotland needs to take a different approach to how it invests in its children and families. There is no place for profiting in how Scotland cares for its children.” and, “Scotland must make sure that its most vulnerable children are not profited from”.
In our new investigation, which you can read here, our Care Reform Group investigated the scale of the challenge and found that, on average, the private sector is extracting around £28,000 per children’s care place in Scotland every year. Even in the foster care sector - where, unlike in England, profiting from foster care is not just deemed unacceptable but is outright illegal, we found that an average of £9,000 is extracted per child per year.
The reasons cut deeply to the heart of how outwardly “not-for profit” companies operate not just in the care sector in Scotland but more generally.
The issue facing the Scottish Government is that while it may well be able to ban “profit” in children’s care or to set a cap on the amount of “profit” that companies are allowed to extract (which may well be set to zero), the term “profit” is itself a very narrow accounting term - it is merely the surplus a company has after expenditure is subtracted from income - and various other mechanisms can be used to extract public care money into the private sector. These include paying Directors exorbitant salaries instead of allowing them to extract a profit dividend, or by splitting the care company into a “non-for-profit” company that provides the care and a profit-making company that owns assets such as the care homes and then charges rent, management fees or high interest on loans to the not-for-profit company.
Our paper leads with 21 Key Points summarising the issues that the Scottish Government will have to tackle in order to meet their commitment to remove profit from children’s care and ends with 6 recommendations for action.
The most important of these action points is for the Scottish Government to accept that merely banning “profit” is not enough and that the various other means of extracting money from children’s care are so diverse that trying to regulate them all out of existence is likely to be futile - the easiest, best and most effective means of preventing private companies from profiting from children’s care in Scotland is to remove private companies from such care and to bring the whole sector into public ownership.
You can read our latest paper here, and further papers that we have published on the Scottish care sector including our still-ongoing campaign for a National Care Service worthy of that name here. You can also read the report in The Herald about our paper here.
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