Advice for the Observer: don't believe your own casuistry

That statistics get twisted to make a political case is hardly a surprise to adults. But a useful piece of advice is that you really do have to recall how you’ve twisted them.

Anntoinette Bramble, chair of the Local Government Association’s children and young people board, said: “The Competition and Markets Authority has confirmed our own findings that private equity providers are making extremely high profits and carrying concerning levels of debt that risks the stability of homes for children in care, which is paramount if they are to thrive.”

It’s not possible to both make high profits and also carry excessive debt. If your profits are high then debt isn’t a problem for it can be serviced. If debt levels are a problem then profits are not high enough to service it. It’s an either or situation here.

What they are actually doing is looking at gross profits and saying they’re high. Then at debt levels and saying they’re high. Without making the connection that gross profits are what you make before financing costs. Given that children’s homes do require the existence of a home they’re measuring profits before the cost of having a home, debt levels after.

Casuistry, of course.

Now that we know that the figures are being played it’s possible to ask how else they’re being fudged.

The Observer examined the most recent Ofsted inspection of private children’s care homes. It found that 114 homes were given the lowest “inadequate” rating, which triggers further investigations. Of those, about 20 were run by providers with links to private equity. It comes amid continued frustration with the “broken” provision of children’s care homes.

Note what we’re not told. How many of the homes are being run by private companies, how many of those are connected with private equity? That is, are the results from private equity worse than other methods of provision? Better? We’re simply not told. We’re just told that some private equity run homes aren’t good enough. Without the information to be able to see whether that result is better, worse, the same, as other organisational and or financing methods.

The last time this subject came up we were told:

The 10 largest providers of children’s social care placements made more than £300m in profits last year, according to research that will fuel concerns over profiteering by private providers.

From which we might - reasonably, but with no certainty - conclude that private equity is the majority of the sector, but very much the minority of those homes rated inadequate.

Which is a very different message from that being given in this piece in The Observer.

The LGA’s position is obvious. No bureaucracy likes to see itself being bypassed. So, the LGA is against private provision of children’s homes. The Observer however:

an Observer investigation has found.

Well, come on then, do an investigation. What is the portion - for that is what matters - of good bad and indifferent dependent upon the management and financing method? Instead of just repeating whatever spin it is the LGA would seem to want to spout.

Oh, and another suggestion. Those investigating need to be people who know the difference between gross and net profit. For if you’re too dim to grasp that then accounting really isn’t a subject for you.