Who benefits from the privatisation of health and social care?

Researcher Benjamin Goodair first attended LSE in 2017 as a master’s student studying social policy. It was during this time that Benjamin became convinced of the impact of government policy on individuals – especially in the areas of health and social care. “It was at LSE that I became aware that academics can critically research to reveal the relationship between people and legislative power,” he says. “I also really liked that social policy as a discipline speaks truth to power and holds governments to account.”

Now a Postdoctoral Fellow in the Centre for Analysis of Social Exclusion (CASE) at LSE, Benjamin’s work focuses on the privatisation of health and social care services. His most recent study explores the ownership of children’s homes in England and how who owns a home can have a major impact on the wellbeing of the children in its care.

Profit ...has a role in creating a market which doesn't respond to the needs of children.

Prioritising profit over children's needs

After sampling 4,356 children’s homes in operation in England between 2014 and 2023, Benjamin and colleagues found that the number of for-profit homes had more than doubled, whilst the number of third-sector and publicly-owned homes had declined or stagnated. They found that a quarter of all children’s homes are now owned by investment firms.

Based on a ratio between children and places, the research uncovered that instead of opening homes in inner-city areas of high need, investment firms are increasingly opening homes in rural areas in the north of England, where property prices are lowest. This has left major urban centres such as London, Bristol and Birmingham without the necessary provision.

“These gaps in provision mean children are placed in homes far away from their families. They lose touch with their friends and might have to change schools. It might be harder for their social worker to stay in touch or for their family to visit. On average, this is a bad thing for a child,” explains Benjamin.

“The profit motive – which we think is strongest in the investment-owned children's homes – has a role in creating a market which doesn't respond to the needs of children.”

And it’s not just children’s homes where a focus on profits has been damaging for users. Another study Benjamin was recently involved with revealed a similar lack of focus on user needs in the adult care sector. Here, the researchers found that 804 of the 816 adult care homes that had been shut down since 2011 by the sector regulator, the Care Quality Commission (CQC), for providing sub-standard care were homes run by for-profit providers. “This was one of the most dramatic findings I’ve ever seen,” says Benjamin.

These gaps in provision mean children are placed in homes far away from their families. They lose touch with their friends and might have to change schools.

A system that exacerbates socio-economic inequality

So, why does Benjamin think the privatisation of care seems to correlate with a reduction in quality? “I look at this in two different ways,” he says. “One is at a provider level, and the other is at a system level. At a provider level, we can see in adult care homes and children's homes that for-profit providers, on average, deliver worse quality care than public or charity providers. I put this down to the incentives being different.

“It's hard to regulate quality of care well, and when you can't, that opens a gap for different providers to undercut on quality to make more money because it's cheaper for them. According to the sort of values that we would want in a care home, it's just more likely that a company that’s set up with shareholders is more accountable to profit than a charity or a government-owned organisation which is accountable to democratically elected politicians. It's not deterministic; it's just on average what we see in our data.”

On a system level, Benjamin describes how private providers will often “cream skim” the more lucrative users who can pay for their own care, creating inequalities across the market.

“You end up with a system that is less accessible in the areas that aren't lucrative and less responsive to the users who aren't lucrative. This often relates to the socio-economic backgrounds of places and people, and you end up with richer places and more affluent people being offered care and the poorer areas not.”

The healthcare sector faces a similar quandary. A 2023 study Benjamin co-authored found a steady increase in the amount the NHS spends on for-profit companies, with data showing £11 billion flowing from the NHS to for-profit private companies between 2013 and 2019. The research also found that privatisation corresponds with more people dying of treatable causes, with an estimated 557 additional deaths calculated that might be attributed to increases in privatisation between 2013 and 2019.

For-profit providers, on average, deliver worse quality care than public or charity providers.

How can government ensure all children in need can access high-quality care?

While the privatisation of health and social care services may have been introduced with good intentions to create competition and inspire innovation, the research suggests financial incentives have put private providers at an advantage.

So, what is the solution? Benjamin sees two possible paths – either reduce the profit motive and eliminate it from public services or make the financial incentives more aligned with what we think public services require: namely, high quality, efficient services that are equitable and equally accessible.

The first option would see services licensed more strictly. For example, through contracts that enforce a preference for non-profit or public providers or through strict pricing arrangements that would hurt the bottom line of companies trying to extract a profit from services.

The second option would require more of a relational approach, where the private sector would be treated as “partners” brought into a contracting relationship and would be involved in co-designing a service. This would mean working with the private sector rather than contracting against them. The hope is this would create more harmonious relationships and prevent private companies from skimming off certain services or users.

“My opinion is that the first option, to eradicate the profit motive, would be the better and only meaningful approach, but also potentially riskier,” muses Benjamin.

“When you get to a stage where 80-90 per cent of a service is delivered by the private market [as with several services in the social care sector], there's a genuine risk that if you reform against them, people suffer as a result. That risk can also be hyped up and over-amplified, but I think it's real. You don't want to create conditions where the private sector can't deliver care services overnight, because then you leave thousands of people potentially having to scramble around when their service is closed down.”

As debates over the role of private providers in public services continue, Benjamin’s research offers a clear challenge for policymakers: confront the incentives shaping today’s care market or risk widening the gap between need and provision.

His work underscores that the future of health and social care hinges not just on who delivers services, but on the values that guide them. With further scrutiny, smarter regulation and a willingness to rethink how relationships are built, there is an opportunity to design a system where quality, equity and accountability come first.

Benjamin Goodair was speaking to Charlotte Kelloway, Media Relations Manager at LSE.

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