\u201cProfiteering from children\u2019s social care is nothing short of obscene. Decades of outsourcing mean essential services funded by taxpayers are being treated as a goldmine by investors,\u201d she said. \u201cThey\u2019re using the welfare of vulnerable children to line their pockets. Children\u2019s social care needs fundamental change, and it needs it soon.\u201d<\/p>\n
The analysis found that at least one in three fostering agency placements and one in five children\u2019s homes placements are run by firms backed by institutional finance, including private equity, hedge funds, venture capital and sovereign wealth funds.<\/p>\n
In total, 55% (11 out of 20) children\u2019s social care providers have a private equity or sovereign wealth fund owner, research by Revolution Consulting found<\/a>.<\/p>\n It also found that the four largest fostering companies all used shareholder loans, under which shareholders lend money to a business (without buying new shares) at interest rates that are typically much higher than bank rates.<\/p>\n Through this method, the companies have paid or reserved at least \u00a3205m to their shareholders and investors since 2020.<\/p>\n National Fostering<\/a> Group, the largest independent fostering provider in the UK with more than 4,000 places, is owned by Stirling Square Capital Partners, having previously passed through the hands of Graphite Capital and Sovereign Capital.<\/p>\n It has paid more than \u00a3116m in interest on investor loans since 2020, Common Wealth found, as well as \u00a371m in interest on preference shares (where a pre-agreed percentage of an investment is paid back to the investor over a fixed period).<\/p>\n BSN Social Care, majority-owned by MML Capital Partners, runs a chain of regional fostering agencies across the country supporting more than 850 children. It has paid more than \u00a37m interest on shareholder loans since 2020.<\/p>\n Reported interest rates on these loans range from 8% to 14%. The thinktank said this creates a tax shield by artificially depressing taxable profits, and was a \u201cmechanism for extracting wealth for investors\u201d.<\/p>\n Sophie Flinders, a senior data analyst at Common Wealth who led the analysis, said there was a clear case to ban private companies profiting from public and essential services.<\/p>\n \u201cIt\u2019s time to cut out the middleman and ensure that all spending on children\u2019s social care goes directly to improving the quality of care, not to lining shareholders\u2019 pockets,\u201d she said.<\/p>\n Egan added that \u201cinsourcing\u201d was vital, and that returning services to the public sector would \u201censure funding goes where it\u2019s needed and there\u2019s genuine accountability\u201d.<\/p>\n A Guardian investigation found that \u00a31 in every \u00a311<\/a> of UK government spending on contractors went to private equity-controlled companies last year, including key services such as transport, waste management and healthcare.<\/p>\n
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