A National Care Service must start with reforming the care market

At Labour Party conference, Andy Burnham promised a National Care Service built around “people not profit”.  His pledge formed part of a wider vision to bring the essentials of everyday life, from housing to water and energy, back under public control. The underlying argument is clear: who owns and controls essential services shapes the outcomes they deliver. Care should be no exception.

Too often, debate about social care begins and ends with funding gaps, rising demand and pressure on councils.  Focusing on how much we spend, without asking where the money goes, risks overlooking a fundamental part of the problem. The political economy of care cannot be separated from the delivery of care itself.

At the Centre for Local Economies (CLES), our forthcoming report, Understanding and addressing extraction in the North West care system, explores this. Commissioned by the North West Regional Leaders Board, it examines care-related spending by the region’s 24 care-commissioning councils, covering adult social care and children’s services.

A significant share of public money spent on care ultimately ends up as private profit. Over three years to 2023/24, we estimate that companies delivering publicly funded care generated £356m in profits from the £5.9bn of care-related spending that went to third-party providers. Of this, £139m went to companies owned by private equity firms or with parent companies based in tax havens.

Profit itself is not inherently problematic. Providers need to be viable, and reasonable returns can coexist with good care. Our concern is with business models in which debt servicing, shareholder distributions and opaque transactions between related companies take priority over reinvestment in services, staff and facilities.

These financial arrangements have consequences for the people delivering and receiving care. Our research found that, in all but two North West local authority areas, average pay for direct adult social care workers employed by independent providers fell below the Real Living Wage. Raising all full-time workers in that group to this level would cost around £146m a year – comparable in scale, though not directly equivalent, to the £119m in annual profits generated across publicly funded adult and children’s care. In short, when public funding is extracted rather than reinvested, opportunities to improve pay, services and local prosperity are lost.

Reforming the care market therefore cannot wait for the National Care Service. It must form part of its foundations.

First, government should introduce stronger national regulation of excessive profit and financial extraction. Wales is already restricting profit-making in children’s care, while new legislation in England gives ministers powers to cap profits in children’s homes and fostering services. These powers should be used effectively, with equivalent protections developed for adult social care and SEND. Regulation must also address disguised profits through inflated rents, related-party charges and excessive interest payments, alongside requirements for transparency and reinvestment. The aim is not to prohibit every reasonable return, but to ensure public funding serves the public interest.

Second, councils need greater freedom to commission for public value rather than price alone. Ethical commissioning can prioritise fair work, continuity and reinvestment, as Wigan Council’s approach demonstrates. But councils can only commission from the providers available to them. In many areas, there are too few viable, non-extractive alternatives to established operators. Commissioning differently, therefore, cannot by itself create the alternative care market councils need.

Third, government must actively support the growth of non-extractive care providers. Initiatives such as JUNO, a not-for-profit provider of children’s residential care in Liverpool City Region, demonstrate what is possible. But developing these alternatives at scale requires access to finance, business support and stable commissioning arrangements. Building a more diverse care market would reduce dependence on extractive providers, strengthen local provision and retain more public investment within services and communities.

Fourth, government should extend Fair Pay Agreements across the wider care economy. The forthcoming agreement for adult social care provides an important foundation for improving pay and conditions. But equivalent standards are needed across children’s services and other publicly funded care provision. This would help tackle low pay and workforce instability while ensuring improvements are not dependent on individual commissioning decisions.

These reforms must also sit at the heart of Baroness Louise Casey’s commission, expected to report in summer 2027. Alongside questions of access, funding and integration, the review must examine how ownership structures and financial incentives shape what care can deliver. Every major reform should face a simple test: will it retain more public money in care, improve conditions for workers and strengthen quality and stability? The principle should extend to reforms of children’s services and SEND.

None of this removes the need for significant new investment. But changing who pays for care without changing how the market works risks allowing new funding to follow the same extractive pathways as the old.

Burnham has set out the ambition. The evidence from the North West shows what must change to realise it. A National Care Service cannot be built on funding reform alone. It must also change how care is owned, regulated and delivered, ensuring that more public money reaches the workers, services and communities it is intended to support.

This article was originally published in Public Sector Focus.