Truly lousy analysis of profits in children's homes

Another year and another repeat:

The biggest private providers of children’s homes in England made profits of more than £300m last year, as concern mounts over the conditions some children are being placed in and the spiralling costs for councils.

Gosh, what horrors, the capitalists are making out like bandits. And now to make the same criticism the last time they told us this. This is not just to pick nits, this is a lousy analysis, entirely scabrous even.

For the report manages the remarkable feat of detailing the vast profits being made and also worries about the financial condition of the companies, whether they make enough to keep going as a valid concern. Which is, we admit, really a very wild piece of contortionism.

As we’ve said before:

It’s a report from Revolution Consulting which looks at the operating profits, not net profits, of the care home providers. That is, it looks at the excess of revenue over cost before accounting for mortgages, interest upon them, depreciation or maintenance of buildings and so on. You know, things that are a considerable portion of costs concerning anything with the word “home” in it. By using Ebitda as the measure it, in effect, looks only at the current account, not the capital. Which is, as a measure of profitability, absurd.

As this year’s version of the report says:

Some financial analyses go further in also looking to eliminate rental costs of property, but this study has not taken that further step. Several providers report sizeable operating lease costs, often in relation to rental of property used by the provider. These costs raise the possibility that and profit or loss on renting property to the operating business is not included in the reporting we have accessed.

They’re not including property costs.

Or even, they’re not including the costs of buying property via debt (ie, a mortgage or the like) when estimating profitability but are looking at debt levels when measuring going concern basis. Which is, as we say, a contortion too far.

The aims here are, obviously enough, to a) complain about the capitalists and b) insist that the bureaucracy should have more power over the sector. Which is why such effort has to be made to scratch that itch.

But then this is how government is done these days, isn’t it? A rickety construction of figures in order to sway opinion and logic and reality be damned.

There are things we’d like to know about the private, capitalist provision of children’s homes. Is this method better, cheaper or more responsive than council provision of the same thing? If it is then we should use it, if it isn’t then we should not. But note what this current reports says about such matters - nothing. It’s performative number crunching intended to persuade, nothing else.

But as we say, that’s how government is done these days.