How did it happen that orphanages became centers of profit-making and abuse?

When we look back on the 2010s, the decade of Grenfell and Windrush, there will be plenty of contenders for what we as a society got most wrong. But among the most shaming is how long it took to expose the epidemic of child sexual exploitation by grooming gangs across a swath of British towns and cities. Thousands of children have had their lives blighted as a result of being passed around groups of men to be raped and sexually abused, while the adults supposed to be protecting them – police, social workers, councillors – turned a blind eye. Even as authorities were pledging to learn the lessons in towns such as Rochdale and Rotherham, still it went on in places such as Telford and Newcastle.

One of the shocking aspects of this story is that many of the child victims were in the care of the state. Gangs of abusers preyed on young girls living in children’s homes. The children’s home at the centre of the Rochdale grooming ring was owned by private equity, prompting a review of privately run children’s homes that found that one in three homes operated by the two largest private providers were classed by Ofsted as inadequate or requiring improvement.

It should not have taken a scandal of this scale to review how we keep our most vulnerable children safe. Yet new research suggests that not even this has rung sufficient alarm bells. A children’s commissioner report has revealed that one in six children in care lives more than 20 miles from home. While there may be good reasons for moving a child away, it can cut them off from family and friends, and make them more prone to exploitation by sex offenders and drug gangs. New Guardian investigations have revealed that growing numbers of teenagers are being placed in semi-independent accommodation that is entirely unregulated, including in caravans or on boats, and councils are spending millions a year placing children in homes rated as not good enough by Ofsted.

These are signs of a system under unprecedented strain. The number of children in care has grown by a quarter over the past decade and the number of teenagers has grown even more steeply. Most children are placed with foster families, but a significant minority live in residential children’s homes. Children’s care has become increasingly privatised: three-quarters of children’s homes are privately run, up from just 40% 20 years ago, and around a third of children are placed with foster families using private agencies.

We don’t allow companies to make a profit out of children by running schools, so why do we allow it in the 24-hour care of vulnerable children? One justification would be if allowing modest profit-making resulted in better quality and more reasonably priced care than the state could provide. Yet there is evidence that privately run care is of poorer quality and more expensive.

While the large majority of children’s homes are rated good or outstanding, that still leaves one in five privately run homes that are not good enough. Harrowing stories have emerged from whistleblowers about the quality of care children experience in some of those homes. The overall system works in the interest of profit, not children: private companies are opening homes at a much faster rate in cheaper areas of the country blighted by higher levels of crime and greater risk of exploitation, such as in Kent and the north west, which has nearly one in five of the county’s homes, compared with just one in 20 in London. No social worker wants to move a child away from home without good reason, but if that’s the only space available, what to do? Some of these children end up attending special needs schools run by the same companies as their home, leaving them without a distinction between home and school life. “I feel like a parcel getting moved around all the time, getting opened up and sent back,” one teenage girl told the Children’s Commissioner.

A 2016 review found private foster care placements were 92% more expensive, although some of that gap will be accounted for through local authorities underestimating their own administrative costs and private placements being more specialised. And Manchester city council says it can pay up to £6,700 per week per child for a place in a private home, compared with just under £4,000 in its own homes.

Consolidation in the market as a result of mergers means councils worry that a toxic mix of monopoly power and a shortage of places will result in providers demanding ever steeper fees, while care workers have described how undersupply means that children are being treated “like cattle”, with companies invited to compete for contracts to care for individual children through an online bidding process.

Companies can continue to make significant profits out of vulnerable children, even in this age of austerity, because this is a statutory service councils are legally obliged to provide, even if it means bigger cuts elsewhere. Private equity has sniffed out this risk-free stream of revenue and decided that, as in older care and water, there is cash to be made. Private equity typically expects returns of 12% in exchange for higher-risk investment; lately, it has been extracting such returns in exchange for supplying low-risk utilities and services for the vulnerable, a mismatch of monumental proportions. Private equity investors have been using parent companies to load up foster care agencies and children’s homes with unsustainable levels of debt at eyewatering interest rates, and extract big dividends, feathering their own nests at the expense of vulnerable children.

If this were the NHS or schools, it would never be allowed to happen. But too often these children have no one to speak for them and, while many will have excellent experiences of care, there are too many who will not. We may cast back to some of the horrors of the past century – the deportation of unaccompanied children to Australia, the institutional abuse suffered in children’s homes – and feel safe in the knowledge child abuse such as this could never happen again. Think again. If the 2010s were the decade where we learned the extent of child rape by grooming gangs, the 2020s may be the decade where we uncover the full scale of child exploitation by county lines drug gangs – children terrorised and abused, treated by police as criminals, not victims, their families threatened – and the complicity of the state in that by failing to protect the children in its care. How can this not shame us all?