Who profits when a child comes into care?

There is a number in my portfolio that I find hard to say out loud.

Thirty thousand pounds a week. That is what Wiltshire has paid to keep one young person safe in secure accommodation. Over a year, £1.56m. For one child.

I have said before that this is not unique to Wiltshire. It isn't. But this week's research from the thinktank Common Wealth, reported in the Guardian, tells us something important about where that money actually goes.

What the research found

Private equity now owns, or part-owns, 11 of the 20 largest providers of fostering and children's homes in England.

The four biggest independent fostering agencies provide almost a quarter of all fostering placements in this country. Since 2020, they have paid out more than £200m to their shareholders and investors in interest payments.

Not in dividends. In interest.

The mechanism matters, so it is worth explaining. These companies are largely funded by shareholder loans. The owners lend money to the business rather than buying more shares in it. The business then pays interest back to the owners at rates reported to run between 8% and 14%.

That interest is a cost. Costs reduce taxable profit. So the money leaves the company, reaches the investors, and does so having attracted less tax on the way out than a dividend would. Common Wealth describes this as a mechanism for extracting wealth. It is hard to argue with the description.

The largest single example is the National Fostering Group, owned by Stirling Square Capital Partners. Since 2020 it has paid over £116m in interest on investor loans, plus £71m in interest on preference shares.

The analysis also found that at least one in three fostering agency placements, and one in five children's home placements, sit with firms backed by institutional finance — private equity, hedge funds, venture capital, sovereign wealth funds.

This is not a new discovery. It is a confirmed one.

The Competition and Markets Authority reported four years ago that the biggest private providers were making materially higher profits and charging materially higher prices, while carrying very high levels of debt.

The National Audit Office has since gone further and called it market failure. Council spending on children in residential care rose from £1.6bn in 2019/20 to £3.1bn in 2023/24. The number of children in those settings rose by around 10% over the same period.

Spending nearly doubled. Demand did not.

The Public Accounts Committee found that 84% of Ofsted-registered residential settings were privately owned in 2024/25. Average council spend per child in residential care has climbed to over £318,000 a year.

So the picture is consistent, and it has been consistent for some time. What has changed is that we can now see the plumbing.

What it looks like from a council

I want to be careful here, because there are two separate arguments and they get muddled.

The first is about money. Wiltshire's Families and Children's Services overspend last year was just over £5m. The bulk of that — £4.4m — was external residential care. We budget around £3,800 a week for an external residential placement. We are paying an average closer to £6,000. Supported accommodation costs rose by 109% after a regulatory change in September 2024 brought that provision into registration.

Every pound of that comes from the same council tax base that funds road repairs, libraries and adult social care. When a placement market extracts a premium, someone else's service pays for it.

The second argument is about children, and it is the one that actually matters.

A market that is short of the right beds does not just charge more. It places children a long way from home. It breaks placements when a provider decides a child no longer fits their model. It leaves councils choosing between an unsuitable placement and no placement at all. The Children's Commissioner found 669 children in unregistered placements on a single day last September, at around £10,500 a week each.

That is not a procurement problem. That is a child moving school, losing a social worker, and starting again.

Where I part company with the loudest voices

Unison's general secretary called profiteering in children's social care obscene. Common Wealth wants a pause on new for-profit provision and a public audit of illegal children's homes. Wales has committed to ending for-profit provision entirely by 2030.

I understand the anger. I share a good deal of it.

But I would ask lead members and campaigners to hold two things together.

Not every independent provider is an extraction vehicle. Some of the best children's homes I have visited are small, independent, and run by people who could earn more doing almost anything else. Some are charities. Some are family businesses. A blunt ban would take them out alongside the leveraged giants, and there is no scenario in which councils absorb 84% of residential provision overnight.

The problem is not that someone earns a living caring for children. The problem is a market where scarcity is profitable, where debt structures move public money offshore of scrutiny, and where councils bid against each other for beds that do not exist in sufficient number.

Fix the scarcity and much of the profiteering disappears on its own. Ban the profit without fixing the scarcity and children have nowhere to go.

What is actually changing

The Children's Wellbeing and Schools Act received Royal Assent in April. It gives government three tools that bear directly on this.

A financial oversight regime for the providers whose collapse would be hardest to absorb. They can be required to submit recovery and resolution plans. For the first time, councils will have some sight of whether a provider is financially sound.

New powers for Ofsted to issue monetary penalties, including for running unregistered homes, without waiting on prosecution.

And a reserve power to cap provider profits. The children's minister has said the government will judge the oversight regime first, then decide whether to switch the cap on. His public hints have not been subtle.

Alongside that, Regional Care Co-operatives are being rolled out to give groups of councils genuine collective purchasing power. Seven will be operating by the end of this year, covering more than 100 authorities.

The South West is not among them.

What I want to see

Turn the transparency on properly. The financial oversight regime needs to reach through the ownership structures, not stop at the trading company. Shareholder loans, preference shares, interest rates and the ultimate beneficial owner should all be visible to the councils placing children.

Hold the profit cap in reserve, and mean it. Excess profit that survives full transparency is a policy choice, not a market outcome.

Fund supply, not just oversight. Regulation redistributes the cost of a shortage. It does not end one. Capital for local provision does.

Bring the South West into the co-operative model. We are a region of large rural authorities with thin local markets and long distances. That is exactly the profile the model is designed for.

And in Wiltshire, we keep building. We committed capital to bring homes back into council hands. Three properties are secured. The first children have already moved in. Every child we can place well, close to home, in provision we control, is a child whose care is designed around them rather than around a return on capital.

That is the test. Not the margin. The child.