Here is the other shoe drop about profits and children’s homes
We did say that this is how politics is done these days:
Private providers of child social care in England will be pushed out of the system if they are found to be profiteering, the children’s minister has said.
Well, if by profiteering we mean excessive profits then why not, obviously? But:
Ministers are carrying out an urgent review of the financial security of private providers of child social care, and are homing in on profit-gouging in the sector – warning they will implement a profit cap if profiteering is identified at private providers.
The Guardian links to this piece. About which we said, at the time:
Truly lousy analysis of profits in children's homes
For:
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.
Another explanation here:
Turning to price, our evidence suggests that the cost to local authorities of providing their own children’s home placements is no lower than the cost of procuring placements from private providers, despite their profit levels.
This is that other shoe dropping - the work to enact the nonsense produced by these contortions over profits.
Just to make it clear here. For some years now an interest group - largely, we think at least, backed by the state bureaucracies in children’s care - have been touting tales of the vast profits being made by private sector children’s homes. These guesses at profits do not include capital costs - they measure by gross profit, not net profit. They also complain, at that same time, of financial instability due to debt burdens. The debt for the capital costs which are not included in the estimations of profits. This is, at best, a pollution of the information well, at worst deliberate lying - if any of us thought these people grasped the difference between capital and current costs, gross and net profits.
But, repeat this sort of nonsense for long enough and the law will be changed. The bureaucracy gets its budget back. And, yes, do note that comment from the Competition and Markets Authority. The bureaucracy is “no lower” in price despite the excision of those supposedly massive profits. If there were large profits then the council would be cheaper, no doubt, or if they’re not then what the heck are they spending the cash on? Or, if councils are not cheaper then there are not those large profits that can be excised. You know, basic numbers and logic there.
So, that’s how government works these days. Lie - OK, confuse everyone - for long enough and government will kill off your competition, award you a vast budget. Aren’t we just the lucky ones to be governed so well?
Tim Worstall