Today's discussion about the news

No one has said that, Rick.

You sure?

"I think the number I heard this week was a profit margin if about 30%. What definition of profit that is, I don't know, but it sounds (a) about right to pique the interests of PE and (b) too high"

Brian has also chipped in in a similar vein with that table. More generally there's a lot of grumbling about nasty businesses making 'too much' profit e.g. Tesco et al's profits vis a vis the new NIC rates.

It's not someone making a profit that is the problem. Local authorities are legally required to provide care and then given not enough money to provide it and restricted from raising the money by other means. Trying to solve that problem by pretending businesses can run sustainably at just above cost is madness.

This is roughly where I am too.

My wife works in this sector and has worked for all types of organisations. And yes, it's a thankless task being a foster carer. However some people find it rewarding and it can be the most effective income for them.

Question is would paying foster carers more mean enough of an increase in people willing (and allowed) to do it, to offset a reduction in care home costs?

Most people who work in fostering think so.

But there is a pathological resistance to spending money on social care. My wife once presented to her council leaders how much money each external placement cost, how much is saved for each additional council foster placement, what her existing recruitment budget was, how effective that was at attracting new carers, and that even if they quadrupled the recruitment budget or something like that, they would still save money.

The budget didn't change.

Similar conversations are had when if comes to carers transferring from council to charity/private agencies. Thet get paid slightly more, it costs the council twice as much. But will they make their own rates competitive so they save most of that money from lost carers?

No.

This is what happens when lay people make decisions about stuff.

You're being disingenuous. You didn't just say profits look high (they don't). The idea that there is some prescribed margin that is morally better than another is slightly ridiculous.

Er, I do think profits look high. It is higher than the profit margin in patent law, for example. Or in energy generation, accountancy, groceries, retail, etc.

Probably it's okay for banking.

It's merely an opinion. If the profit magin in care homes was 10% or 15% I might have a different view.

Because? It feels like you are setting an arbitrary number based on nothing more than feelings. For example, care homes have considerable capital expenditure to plan for, which all comes out of profit: you can't rent generic office space for a care home.

It isn't me that's decided to investigate profiteering based on huge cost increases in an industry now dominated by PE. I suppose someone has assessed that as a smoking gun, if profits were previously more modest.

What do you think?

OK. I see what you're saying. There may be market failure, but the private companies operating in the sector are acting as private companies could be expected to act.

The thing is that the market is distorted by its being a quasi-monopoly of the big players, and the LAs' can't realistically pull the "we're not going to buy at that price" gambit that the NHS has recently done with a cancer drug that it's deemed too expensive. (See the contrast in the US where without that monopolistic buying power, 'big pharma' has enormous power to price gouge at the expense of the ultimate consumer, the lowly patient. Whilst the refusal to buy it might well cause suffering, the NHS isn't under a legal obligation to supply that drug, unlike LAs have to do with care home placements.)

As @First.Aspect says, and I equally admit, questioning whether the market has been distorted doesn't offer a solution, and certainly not in the short term, but not to question it only perpetuates the problem (if it's found to have been subject to rapacious business practices).

My guess would be that the businesses correctly worked out that a sector that put legal obligations on LAs was ripe for quasi monopolising the supply (see also how veterinary practices are evolving, much to the concern of many people) to considerably increase the profit margin, meanwhile keeping carers' wages at subsistence levels.

I agree to an extent, in that pet owners aren't mandated to have pets, and as you might haver seen in the news, some people are choosing to have pets put down rather than pay sky-high fees (in the news because a vet committed suicide because of that development). But the way that PE is effectively moving into a monopoly position is similar - identify a lucrative market that people (in this case, pet owners) will need to use.

I am not sure that in and sector hiking prices and reducing quality to concentrate wealth is a good thing.

Tends not to be good for the company or it's employees either. Even less so when PE moves on and leaves a carcass.

PE is a fairly clear cut lose lose situation unless you owned the company in the first place or unless you are a total banker.

Not saying PE is a good thing or a bad thing. I was just discussing some of the aspects of its involvement. Though apparently the government wants our pensions invested more heavily in PE to generate higher returns, so PE does have its supporters outside the industry.

I'm no expert but for statutory services such as social care, there are two routes the government can go down. One is to provide all services themselves. (Not personally, but via government agencies etc.) Or it can outsource the provision of the services to the private sector, and regulate heavily to ensure quality and value for money. The current approach of relying on the private sector but not really doing any meaningful regulation is a recipe for angst in the Guardian etc.

The private sector route was chosen some time ago (same for water etc.) in the hope that the private sector would do things more efficiently. But the government (over several iterations) has proved woeful at promoting sensible regulatory regimes. So providing "in house" is likely the least bad option these days.