The CHA excludes ‘organisations involving tax havens’ from its membership

The membership body for children’s homes in England and Wales, which represents residential childcare providers across the public, private and independent sectors, will no longer represent ‘organisations with corporate structures involving tax havens’ according to a statement from The Children’s Homes Association.

The change in membership criteria, which will take effect from 6th April 2024, means that in order to be a member of The Children’s Homes Association, residential childcare organisations are required to be ultimately owned in the UK, to have wholly or majority shareholders who are registered as UK tax payers, and not to receive loans or investments that originate from a tax haven.

The statement published by the association highlights the importance of continued investment from the independent for-profit sector, which is responsible for the majority of the children’s homes in the country and made up mostly of small and highly specialised care services that ’transform young lives’, but attributes the change in membership criteria to concerns about the way corporate structures have evolved for a small minority of very large provider organisations.

Dr Mark Kerr, Interim CEO of The Children’s Homes Association said of the change, “We believe in the importance and value of a mixed economy of children’s social care which relies on public, charity, and independent for-profit provision. Most people do not realise that the private sector in residential childcare is itself diverse and varied including mostly small providers who run just one children’s home, right through to medium-sized and larger providers who run multiple homes. An amazing range of specialist expertise exists in the sector and the continuation of investment from private organisations is vital to ensuring the right care is available for our society’s most vulnerable children. However, we are also committed to social value and believe that organisations delivering tax-funded care services should fairly contribute to the system that makes care possible in the first place. This significant change in our membership criteria reflects our commitment to social value and most importantly to a secure and stable care system for our society’s most vulnerable”

Full statement: Announcement of changes to The Children’s Homes Association’s membership criteria from 6th April 2024

The Children’s Homes Association continually reviews and reflects upon the role we hold and the ways we can best support and represent our sector, and those in its care, guided by our vision for exemplary residential childcare. We believe in the importance and value of a mixed economy of children’s social care which includes public, charity, and independent for-profit provision.

Residential childcare exists to transform the lives of society’s most vulnerable children and young people. Our sector provides these children and young people with safety, nurture, transformative care, and opportunities for a positive future, all of which may otherwise not be possible. We are only able to provide this life-changing care because our society has made a commitment to fund such care when it is needed, something every tax-paying citizen, not to mention care professional, can take pride in.

As in all sectors of publicly funded care, improving lives is an ultimate priority that sits within a context of cost and use of public funds. When care is successful our whole society benefits. If a single care leaver experiences a negative life-course trajectory, the lifetime costs to the public purse are modelled to be over £3 million to the Treasury, in addition to the cost of their time in care. Residential childcare facilitates positive life-course trajectories for thousands of children and young people every year.

The children’s social care sector has significantly evolved in recent years. The policy and regulatory environments have changed. The profiles of children and young people placed in residential care show increased and unprecedented levels of need and risk. The residential sector is diverse, as it must be, given the diversity of the population of children and young people it cares for.

The majority of residential provision suitable for our most complex children and young people is developed in the independent, for-profit sector. At this time of unprecedented demand for increasingly specialist services, without continued investment from this independent sector there will not be sufficient expansion of provision, ultimately denying children and young people their best chance of a positive future, and in turn creating a multi-billion pound ‘ticking time bomb’ of potential lifetime financial costs of care to the state.

The private sector itself is diverse and varied, involving organisations of different types and sizes. The majority of private providers are small organisations, operating just one or a small number of children’s homes. Many provide highly specialised therapeutic services with expertise built up over decades. Some private providers are larger organisations that operate a number of homes over a large geographical area. The organisational types and ownership structures of these organisations also vary and have changed over time.

The Children’s Homes Association is committed to a mixed economy of children’s social care. However, we must always remember that taxes fund children’s social care and therefore, a healthy mixed economy of providers requires transparent and ethical business models. We believe that organisations which deliver social care should contribute to the tax-funded care system that pays them.

Today’s care markets originated from the NHS and Community Care Act (1990) which introduced a mechanism by which competition was to take place in health and social welfare provision through a purchaser/provider split. This mechanism, which shaped today’s mixed economy of care, was conceived and introduced before any presence of private equity, investment and capital lending models in the sector (models which are ultimately funded via tax havens). Critically, it was never anticipated that providers of health and care services, funded by taxation and making a profit, would not pay tax on that profit. The Children’s Homes Association is taking the position that this must not be the case. Further, the fees local authorities pay providers for care should be spent responsibly on providing the highest possible quality of that care, and on operating a stable and sustainable care organisation that is able to commit to the care of children and young people over long periods of time. It is not appropriate for those fees to be spent on unreasonably high levels of interest, which can exist in private equity / investment / lending models, and again see funds drained from the country and care system.

Following a review of the sector, The Children’s Homes Association has concluded that while we reaffirm our commitment to a mixed economy of children’s social care and are proud to represent so many excellent providers across the private, public and charity sectors, corporate structures involving tax havens are contrary to the concept of social value and the ethics of social care and therefore do not align with the values and vision of The Children’s Homes Association.

We are therefore announcing that from 6th April 2024, our membership criteria have been amended to include the following requirements:

To be a member of The Children’s Homes Association, organisations must:

• Be ultimately owned in the U.K.
• Have wholly or majority shareholders who are registered as a U.K tax payer
• Not receive loans or investments that originate from a tax haven