The UK’s £1.7billion foster industry has seen a growth of firms backed by huge private equity funds raking in taxpayers’ cash. They are cashing in on the anguish felt by parents who lose their children into care.
ANGUISHED parents of children taken away by social services have slammed fat-cat businessmen whose firms earn tens of millions from selling foster care.
The UK’s £1.7billion foster industry has seen a growth of firms backed by huge private equity funds raking in taxpayers’ cash.
They charge huge fees to councils for fostering which last year was at a record high of 53,420 children – three-quarters of all those in care – with 78,000 placements.
Thousands of parents across the country are being dragged into secretive courts each year where social services are removing children in record numbers.
High-profile cases have sparked public outrage such as one in June when a judge blasted social workers after they removed a boy, aged eight, from his mother’s care because she did not take him for an ice cream.
Last month we revealed how the latest figures showed children taken into care jumped by 34 per cent to more than 10,000 in a single year for the first time.
And hairdresser Jill Goss told The Sun how her ten-week-old baby daughter Alyssa was placed into permanent care after a doctor’s visit to check a swelling on her arm revealed a tiny fracture.
The 31-year-old, who now lives in Spain with her six-year-old son Loiq, said of the businessmen making millions from children being taken into care: “It’s completely wrong and doesn’t put the child first.
“They shouldn’t be making all this money from placing children in foster care – it’s just an industry and in my case it was not for the benefit of Alyssa at all. I still think about her every day.”
The rise in child care removals by councils – which last year overspent by £800million on child social care – means they are increasingly forced to pay higher fees to place children taken from families by social services.
In some areas reports show these private placements can be as much as 92 per cent higher than council rates or £19,000 extra for the taxpayer for each child.
Charities and parents have branded the profiteering private equity funds who make millions in profit off the back of families’ trauma as “disgusting”.
Mum-of-four Sam Brown, 33, had two of her sons taken into care after saying she had a low IQ and dad Bupesh had been aggressive towards their staff..
She said: “It’s totally outrageous. This is a billion-pound industry that these businessmen are making millions from. It’s disgusting. How can this be allowed to happen?
“I lost my two boys and social services can say parents don’t have enough money to look after their children but then pay out thousands and thousands to look after children.”
And Andy Elvin, CEO of charity TACT which provides lower-cost foster care for 760 children in the UK, said: “It’s obscene. These companies are set up for one reason only and that’s to make profit.
“Should we really be taking money out of the foster care system and putting it into the pockets of these businessmen?”
One founder of a £1billion private equity fund which owns a number of fostering agencies through huge amounts of debt is a super-rich socialite understood to be worth hundreds of millions of pounds.
Stefano Bonfiglio, 54 – ex-partner of TV presenter Trinny Woodall – lives in a five-storey £15million mansion in west London owned by a holding company based in a shady tax haven.
His wedding to ex-Goldman Sachs banker Carolina Gonzalez-Bunster featured in Vogue magazine and was attended by Hillary and Bill Clinton.
The Italian’s firm Stirling Square Capital Partners (SSCP) – said to have £1billion invested across the globe and run by investment bankers – boasts on its website of ploughing cash into military hardware manufacturers.
The equity fund’s portfolio includes the National Fostering Agency, Acorn Care and Education’s fostering firms and at least two military hardware companies AD Industrie and Mettis Aerospace – which makes missile and torpedo parts.
The agencies earned £15million in profit last year from fostering and care – money which campaigners say should be going back into the system.
Turnover for the National Fostering Agency grew by an extraordinary 46 per cent last year to more than £100million.
The equity fund – which paid £435million for the two care businesses – also uses a holding company called SSCP Spring Holdings SCA based in Luxembourg to route cash out of the UK.
Last year accounts show the holding firm SSCP Spring Topco tripled its turnover to £299.1million but managed to use financial instruments to double losses to £60million.
The losses include interest payments on loans from the parent company which can be used to reduce a company’s taxable profit.
Even still the company’s highest-paid director doubled their salary from the previous year from £319,000 to £650,000 with £455million of debt due to be paid back after more than one year.
SSCP founder Mr Bonfiglio’s rents a £15million London pad which is owned by a holding firm called Wastom Holdings based in the British Virgin Islands tax haven, according to Land Registry documents.
Speaking at their home this week, his wife Carolina said: “We rent this house.”
A representative of Mr Bonfiglio said he rented the house from high net-worth advisers Gryphon Asset Management and had no dealings with Wastom Holdings.
Another large fostering agency Partnership in Children’s Service (PICS) is owned by a London-based private equity fund called Sovereign Capital.
The agency, which is reportedly on the market again for more than £100million, is made up of several care companies fosters more than 1,000 children around the UK.
On a turnover of £37.7million the company offset £2.6million in loan interest payments and finance costs to make a loss of £60,000.
The foster group’s ultimate owner Sovereign Capital, which claims to manage almost £1billion of funds, was founded by investment banker Andrew Hayden who lives in a mansion in Tonbridge, Kent, which he paid just under £2.5million for in 2005.
Tax specialist Robert Leach said of these firms’ structures: “These companies seem to have a complex arrangement of loans and subsidiaries.
“They are difficult to track and therefore it’s not easy to say why they have been set up like this. It could be for commercial reasons or it could be to save tax.”
Jill, originally from Reading and who lost her baby daughter Alyssa at 10-weeks-old to foster carers, said: “I used to have visits with the foster carer and Alyssa but she was sometimes dirty and not in the best condition.
“The carer had three foster children and two of her own so they were struggling to cope – the older children ended up looking after the kids too.
“It’s completely wrong – people wouldn’t believe this is how the system works until they have dealt with social services.
“It’s been horrendous for me and nobody can imagine the pain you go through as a mother.”
A 2016 report found eight of the largest private foster agencies had made £41million in profits.
Another claimed that increasing in-house council foster carers from 67 per cent to 85 per cent would save £150million for local authorities.
Fostering agencies advertise the amount of cash to be made from taking children with some offering £3,000 “golden hellos” to carers if they leave their councils and join them.
On the website for Compass Fostering, owned by private equity group Graphite Capital, it says a carer would receive £18,980-a-year for a 14-year-old boy but £36,216 if he was “exhibiting problematic sexual behaviour”.
The average fee for an in-house council foster carer is £475 while agencies known as IFAs charge almost double at £798, according to an independent government review earlier this year.
But the report found much of these costs are often due to more difficult placements and increased payments to carers.
Even so the growth of larger IFAs has been an average of 7.7 per cent over the last five years – despite the numbers of foster placements growing by just one per cent.
Sir Martin Narey and Mark Owers’ report said it found large debt burdens from regular sales of IFAs by equity funds had meant prices for the services “appear to be inflated”.
It found 152 local authorities were using the agencies known as IFAs which found there was a “startling failure to obtain best value”.
One third of foster placements are arranged through IFAs with £727million spent on these services in 2016/17.
Cllr Anntoinette Bramble, chair of the Local Government Association’s Children and Young People Board, said: “A recent government review highlighted that eight commercial fostering agencies were able to make more than £40 million in profits in just one year.
“These profits were too often made at the expense of local councils, who can be charged twice the usual cost of an in-house placement due to a lack of available options elsewhere.
“Profits of that level simply cannot be justified at a time when the public sector is facing enormous financial strain.
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“Many local authorities are attempting to recruit more of their own foster carers, but the reality is that struggling councils are often simply unable to compete with highly profitable private agencies.”
A spokesman for Mr Bonfiglio’s SSCP firm said: “The private sector plays a small but essential role in fostering provision in the UK.”
A spokesman for fostering agency PICS, owned by Sovereign Capital, said: “As a result of our partnership working, we have been able recruit new foster carers and provide them with the support they need to look after young people with complex needs.”