One of the biggest questions about the next five years is whether the publicly owned and provided status of the NHS will be protected as Boris Johnson powers on with his Brexit timetable. The health service is one of the most emotive issues in British politics, and one of the few things that affects almost all the members of our society, from the poorest to the richest.

NHS privatisation is not some far-off, theoretical possibility used for party political purposes. On the contrary, the private sector – and private equity in particular – has already shown that it can profit from the privatisation of public services. Children’s services are an important – and worrying – example.

Since David Cameron’s austerity policies began a decade ago, local authorities around the country have had to reduce capital costs, after they lost 60% of their central government funding. This often meant that maintaining facilities such as children’s homes was seen as unaffordable – and cutting them was far less controversial than doing the same with the NHS, for example. Shut down a hospital and there is uproar. Close down several children’s homes, and there is barely a mention of it in the local paper.

Austerity is ongoing and its full effects on children’s services are yet to be seen. As recently as 2018, for example, one local authority announced the closure of four children’s homes with no plans to replace them. This after a period where, from 2009 to 2017, the number of children in care increased from 64,460 to 75,420. And even when they are replaced rather than just closed down, these homes can fall into private hands, in some cases being simultaneously profitable and inadequate: it was found last month that councils paid £2.3m to failing providers. This creates a worrying conflict of interest among these homes’ owners, especially if quality of care turns out to be inversely related to profitability.

While the difference between children’s homes and the NHS may exist in the public mind, it does not in the business plans of some private providers. CareTech Holdings plc, for example, earns a third of its revenue through children’s homes but more than half of its earnings are from providing services to adults with learning disabilities. Most of CareTech’s largest shareholders are global hedge funds and private equity firms such as Liontrust Investment Partners and Teleios Capital Partners. CareTech recently moved to control an even larger chunk of the UK market when it bought Cambian Group for £372m. True to the private equity model, the business is now highly leveraged with a net debt of £300m and £7m being spent on “financial expenses” (such as interest payments) last year.

As private equity firms see that money can be made from Britain’s health and social care sector, this may pave the way for them to roll out services across the NHS, resulting in privatisation in all but name.

Although there have been concerns about the quality of care provided by some privately owned children’s homes, it is important to acknowledge that Ofsted ratings of privately run homes are sometimes better than local authority-owned facilities. But my concern is not just about the quality of care provided in the short term. In the long term, as the system becomes more and more dependent on the flow of private money with an aggressive profit focus, those providers may change what they are offering and children in care will suffer. And there will be no public sector left to pick up the pieces.

In the absence of the required government investment, those who want to guarantee high-quality, sustainable care for vulnerable children need to think about the best way to work with private providers. We should be focusing on smaller providers with sector expertise (former social workers or children’s charities, for example) backed by social impact capital that limits profit taking and reinvests revenues to improve the service. “Social impact bonds” have been proven to deliver sustainable returns to investors, savings to local authorities and, above all, improvements to the lives of children in care. One scheme in Essex resulted in 96,000 fewer days spent in care, and cost savings of £17.9m. A similar scheme was implemented in Manchester.

Some on the left will be instinctively repulsed by any profit-making in these most sensitive of settings. I understand that reaction, but allowing modest profits that are then reinvested to improve vital services may be the only way to protect the future of children in care.

Across the political divide, consensus is building that something needs to change. Earlier this month Michael Farmer, a former treasurer of the Conservative party, described children’s services as being at “breaking point”. It’s time we all agreed on that – before we find ourselves saying the same thing about our local hospital.

Shadim Hussain is a member of the government’s steering group on adoption, and CEO of My Foster Family


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