Jim Cockburn and Janet Rees from Foster Care Associates (www.thefca.co.uk)
Almost 86,000 children were in foster care in the UK last year. The support they receive from their foster carers can make a huge difference to their lives.
Foster care placements are still paid for publicly but they are increasingly organised by private companies, for a profit.* The number of children who need foster care is going up, and it has become a “growth market”, according to the Financial Times. Even with council spending hit by austerity cuts, it is attracting an ever-wider range of companies and investors.
In response to requests from foster carers concerned by the privatisation of their service, Corporate Watch has combed through company records and accounts to investigate who is behind the UK’s biggest foster care businesses, how much money they are making and where that money is going.
We have found millions of pounds that could be reinvested in the care of children are instead leaving the system as bumper payouts to shareholders. Directors enjoy very generous pay packets, while some companies are siphoning profits out through tax havens in the Channel Islands and the Caribbean.
Foster care has become a lucrative business. Whether it should be a business at all is another question.
Click on the relevant link below to go straight to a particular company:
Foster Care Associates; National Fostering Agency, The Foster Care Agency; Acorn Care and Education, Fostering Solutions, Pathway Care Fostering and Heath Farm Fostering; Partnerships in Children’s Services, Orange Grove, ISP, Fosterplus and Clifford House; Swiis Foster Care; Capstone Foster Care; Compass Fostering, The Fostering Partnership, Eden Foster Care and Seafields Fostering; Caretech
Foster Care Associates
Owned by: Jim Cockburn and Janet Rees through Ideapark Ltd
Income from foster care in 2014**: £127.2m
Payouts to owner in 2014: £7m
Highest paid director salary and other benefits: £406,000
Founded by carers Jim Cockburn and Janet Rees in 1994, Foster Care Associates (FCA) has become the biggest foster care company in the UK, and even has branches in Finland, Australia and Canada. The FCA website assures potential foster carers that it does not have any “shareholders or private equity interests to serve”, but this is only half right. Unlike many of its rivals it is not owned by a private equity firm. But it certainly does have shareholders – principally Jim Cockburn and Janet Rees, through a holding company called Ideapark Ltd.
The latest accounts of Core Assets Group Ltd (Foster Care Associates is a trading name) show the company paid out £7m in dividends to Ideapark Ltd in 2014, and £11.6m the year before. Ideapark Ltd’s accounts show it only paid out £50,000 to Cockburn and Rees in 2014, but a whopping £9.2m the year before.
Corporate Watch put the figures in this investigation to each company. Foster Care Associates told us:
“The aim of the Core Assets Group is to make a positive and lasting difference for children and families not only through foster care but via the delivery of a diverse range of statutory and non-statutory services for children, young people and families across the full spectrum need, from early intervention and education support through to specialist, intensive interventions for children and families with multiple/complex needs, and services for children who are at risk.”
National Fostering Agency (includes the Foster Care Agency)
Owned by: Stirling Square Capital Partners (previously Graphite Capital until April 2015)
Income from foster care in 2014*: £94.5m
Payouts to owners in 2014: £14.4m to Graphite Capital
Highest paid director’s salary and other benefits: £318,112
Private equity investment firm Graphite Capital sold the National Fostering Agency (NFA) in April 2015 to Stirling Square Capital Partners, another private equity firm. Graphite, run by an array of bankers and accountants, also owns businesses including a steak restaurant chain, a tyre wholesaler and, until recently, the Groucho Club.
The firm appears to have made a tidy sum from its involvement with the NFA. According to accounts filed at Companies House, when Graphite bought the NFA in 2012, instead of putting all its money into shares, it made most of its investment in the form of ‘shareholder loans’. Over the years, £14.4m in interest has been racked up on these loans, which was all paid out in 2014.
As well as enriching its owners, this would have reduced the NFA’s UK tax bill, as the interest is taken off the NFA’s profits before they are taxed. As the loans were listed on the Channel Islands Stock Exchange, they benefited from a legal loophole called the Quoted Eurobond Exemption – which means the owners can receive the interest without any tax being ‘withheld’ (for more on how this scheme works click here).
Graphite owned the NFA through a web of companies, most of which do not publish accounts. It is therefore difficult to know exactly how much it made in total when it sold the NFA, which it had originally bought for £130m from Sovereign Capital (another private equity firm!). But the Graphite Enterprise Trust, one of the companies that does disclose financial information, announced that it had more than doubled its original investment when the sale went through. If that rate of return applies to the rest of the deal, the total return made by Graphite will be huge.
No financial reports have been published since Stirling Square took over so it remains to be seen if they will run similar financing schemes to Graphite, although it too is run by an array of former bankers and accountants. Other businesses it currently runs make plastic for food and drinks cartons, sell alarms and security systems to banks, own helicopters and French holiday parks, and design men’s trousers.
Corporate Watch contacted the National Fostering Agency about the above points but at the time of writing we have not had a reply.
Acorn Care and Education (includes Fostering Solutions, Pathway Care Fostering and Heath Farm Fostering)
Owned by: Ontario Teachers’ Pension Plan
Income from foster care in 2014*: £73.1m
Payouts to owners: £13m accrued in 2014
Highest paid director’s salary and other benefits: £266,420
Acorn Care and Education, which owns the Fostering Solutions, Pathway Care and Health Farm fostering businesses, was bought by the pension fund of Ontario teachers in 2010.
The Ontario Teachers’ Pension Plan also owns the National Lottery, among other UK companies. While the teachers themselves may be generous people, their pension plan’s main interest in maximising its returns. It has set up the same tax avoidance scheme that Graphite Capital was running at the National Fostering Agency.
The accounts of Acorn Care 1 Ltd, show the pension plan is set to benefit from £72.8m that Acorn has already accrued in interest since 2010, on loans issued through the Channel Islands Stock Exchange. £20.4m of this was from 2014, and this figure will rise each year as more interest is racked up. However, Acorn also makes money from education and residential care, so not all of this is profit from foster care, which accounts for around 65% or Acorn’s total turnover. As such, we estimate the total profit so far from foster care at around £47m (£13m in 2014 alone).
The Canadian teachers who will eventually benefit from this may not know they are profiting from the care of UK children. Maybe they should be told?
Corporate Watch contacted Acorn Care about the above points but at the time of writing we have not heard back.
Partnerships in Children’s Services (includes Orange Grove, ISP, Fosterplus and Clifford House)
Owned by: Sovereign Capital
Income from foster care in 2014*: £29.8m
Payouts to owners in 2014: £1.9m
Highest paid director’s salary and other benefits: not shown in accounts
Fresh from selling the National Fostering Agency in 2012 (see above), private equity firm Sovereign Capital bought Partnerships in Children’s Services in 2013. The Orange Grove, ISP, Fosterplus and Clifford House fostering businesses are all part of the Partnerships in Children’s Services group.
The accounts of Partnerships in Children’s Services Ltd show the company has already paid out a total of £2.4m in interest on loans from Sovereign since the purchase. The private equity firm also owns a range of healthcare, education and ‘business support services’ companies. Run by a team of experienced financiers, it may have bigger things in mind for PiCs if its past experience is anything to go by. Its website boasts it helped the NFA: “acquire a number of other high-quality providers” to become the second biggest foster care company.
Corporate Watch contacted Partnerships in Children’s Service about the above points but at the time of writing we have not heard back.
Swiis Foster Care
Owned by: Dev Dadral and family
Income from foster care in 2014: £29.4m
Payouts to owners in 2014: £1.5m (from the wider Swiis group, see below)
Highest paid director’s salary and other benefits: £169,000
Ex-local government social services manager Dev Dadral founded Swiis Foster Care in 1999, incorporating it into the wider Swiis group, which also includes healthcare and social work firms. Their foster care business has been hit by local government spending cuts, but the wider Swiis Group continues to perform well. Accounts filed at Companies House show Swiis International Ltd paid out £1.5m to Dadral and family in 2014, and £4.3m since 2011.
Corporate Watch contacted Swiis about the above points but we were told they would not be commenting.
Capstone Foster Care
Owned by: Different individuals and companies (see below)
Income from foster care in 2015: £21.1m
Payouts to owners in 2015: £406,000
Highest paid director’s salary and other benefits: £185,000
Records filed at Companies House show Capstone is owned by over 20 individuals and companies, including the Capstone management team, a company and trust registered in the tax haven of Jersey, and hedge fund tycoon Crispin Odey, famous for cashing in on the credit crunch (scroll down for the full list).
The accounts of Capstone Foster Care Ltd show its owners have shared out a steady payment of £406,000 a year, made out as interest on shareholder loans, for at least the past five years (£2.4m since 2010).
Corporate Watch contacted Capstone about the above points but at the time of writing we have not heard back.
Compass Fostering (includes The Fostering Partnership, Eden Foster Care and Seafields Fostering)
Owned by: August Equity
Income from foster care in 2015: £25.9m
Payouts to owners in 2015: £3.1m accrued
Highest paid director’s salary and other benefits: £131,000
Compass Foster Care consolidated the Fostering Partnership, Eden Foster Care and Seafields Fostering into one business prior to being bought by private equity investment firm August Equity in 2013.
Following the examples of the National Fostering Agency and Acorn Care, August is running the ‘quoted Eurobond’ tax avoidance scheme. Instead of making its investment in shares, August has lent Compass money through the Channel Islands Stock Exchange, at a tidy 12.5% interest rate. The interest comes off Compass’ profits before they are taxed in the UK, and will be paid out to August at a later date, with no tax withheld (see above). In 2015, £3.1m was racked up in 2015, with £7.7m already accrued since 2013.
According to August’s website, “the potential to build scale” excites the management team, again made up of former bankers and accountants, so further acquisitions may be on the horizon for Compass. Other companies August currently owns specialise in marine safety, private schools, funeral services and vets.
Corporate Watch contacted Compass about the above points but at the time of writing we have not heard back.
Owners: shares are publicly-listed – Farouq and Haroon Sheikh biggest shareholders with 20%
Income from foster care in 2014: £12m
Payouts to owners in 2014: £240,000 in 2014
Highest paid director’s salary and other benefits: £324,000
Faroon and Haroon Sheikh, Hertfordshire-based businessmen said to be worth £41m, set up Caretech in 1993. The company, which also runs care homes and other social care services, moved into foster care in 2010.
Caretech Plc is listed on the London Stock Exchange, and regulatory disclosures show investment funds including Henderson Global Investors and Octopus Investments Nominees Limited among the major shareholders.
However, the Sheikhs still own the most shares, mainly through a company called Westminster Holdings Ltd, which Corporate Watch has found to be registered in the Carribbean tax haven of Nevis. To make things more confusing, Westminster Holdings Ltd is itself owned by the Sheikhs’ Westminster Trust, registered in Guernsey, another tax haven.
Caretech Plc paid out £2.4m in dividends to its shareholders in 2014 and £3.3m in 2013, though it is difficult to say exactly how much of this came from foster care. As foster care accounts for approximately one tenth of Caretech’s revenue, we have estimated total pay-outs to owners as a tenth of the total dividends paid.
Caretech told Corporate Watch: “the requirement for fostering in the UK is growing and local authorities are not investing in foster care, instead choosing to outsource to the private sector. Contracts are awarded in competitive tenders so the fees are in line with the marketplace.”
* Last year one third of placements were organised by companies or charities, up 3% from the year before (click here for the latest figures).
** Latest accounts used for all companies (most have not yet published their 2015 accounts)
Full list of Capstone shareholders, from the Annual Return of Capstone Foster Care Ltd:
Jeremy Anderson, Alan Bell, Andrew Burton, Euan Clathorpe, Alliance Trust Full SIPP AB Curruthers, Sofos Investments Ltd (Jersey-registered), Richard Compton-Burnett, Simon Constantine, Tenon Group SIPP R Garnett, Placehill Ltd, Guy Morton, Crispin Odey, Simon Pilcher, David Segal, Gordon Scutt, Charles Simpson, Alexander Stewart-Clark, Grangeleigh Ltd, Michael Walford, Tom Tiechman, Anthony Bell, Michael Falmer, Sally Scutt, Alison Sargent, Anglo Saxon Trust Ltd (Jersey-registered), Juliet Simpson.
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