Recommendations & Conclusions
29 items
2
Recommendation
61st Report - Financial sustainability …
Rejected
It is unacceptable that children are placed in illegal settings that are not inspected, increasing safety risks and offering no assurance over the quality of care. Over the last five years, local authorities have reported placing more and more children into unregistered homes. It is illegal to run a children’s …
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It is unacceptable that children are placed in illegal settings that are not inspected, increasing safety risks and offering no assurance over the quality of care. Over the last five years, local authorities have reported placing more and more children into unregistered homes. It is illegal to run a children’s home or supported accommodation that is not registered with Ofsted, who cannot routinely inspect these unregistered settings. As such, there is a lack of checks to ensure that children receive high quality care and that they and the wider community are safe. Local authorities do not take the decision to use these homes lightly, only doing so when no registered settings are available, but in September 2024 nearly 800 children in England 3 were in illegal accommodation. However, rather than being used only in short-term emergency circumstances, children stayed an average of around six months in such accommodation. Placing children in unregistered homes is particularly undesirable where their liberty has been taken away through a court order. Delays to Ofsted registering new homes will contribute to some homes remaining unregistered, with Ofsted now introducing targets to register homes within 18 months or two to six months for priority cases. The Department expects it will take two years for improvements to the residential care system to take effect and address the shortages of places that contributes to local authorities using unregistered homes. recommendation In its Treasury Minute response, the Department should reaffirm its commitment to reducing the number of children in unregistered homes to zero by the end of 2027 and set out the specific actions it will take to do so.
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Government response AI summary
The government rejects the recommendation to reaffirm a commitment to zero children in unregistered homes by 2027, stating that a fixed deadline does not reflect the complexity. However, it outlines actions to tackle the issue, including £560 million capital funding, new secure placements opening between …
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HM Treasury
3
Recommendation
61st Report - Financial sustainability …
Accepted
Providers of children’s homes, including local authorities, are not offering the places needed locally, leading to children being placed in homes that do not meet their needs. There are disparities in the places available across the country, particularly for children with more complex needs. For example, there are currently no …
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Providers of children’s homes, including local authorities, are not offering the places needed locally, leading to children being placed in homes that do not meet their needs. There are disparities in the places available across the country, particularly for children with more complex needs. For example, there are currently no secure home places for children in London, and 49% of children in England are placed in homes more than 20 miles from their family homes. With long distances and travel involved, social workers find it harder to understand the support available locally and to then spend time with children, which negatively impacts outcomes for those children. Private providers are not incentivised to open homes where they are needed, with local authorities also facing challenges accessing capital support to open their own homes. There are no incentives to help prioritise homes where they are most needed and barriers to creating places remain. This includes difficulties getting reliable capital funding to build new homes, shortages of qualified staff to run and work in residential homes, and difficulties in gaining planning permission for children’s homes. recommendation The Department should detail how it will better understand and address barriers to creating the places needed and set out how it will: provide local authorities more consistent funding and support to create new places; work with Ofsted to resolve delays registering new homes; address challenges in providers receiving planning permission where homes are needed; and ensure providers are better able to secure the qualified staff needed. 4
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Government response AI summary
The government agrees and is providing £560 million capital funding to LAs for 2026-2030, has supported Ofsted to update registration prioritisation criteria for new homes, is working with the Ministry of Housing to reform planning processes, and will commission an expert review of professional development …
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HM Treasury
4
Recommendation
61st Report - Financial sustainability …
Accepted
To reduce the demand for children’s residential care, the Department is relying on there being more foster carers, but it has yet to address the significant challenges to increase numbers. The Department sees reducing demand for residential care as key to reducing costs. To do so, it plans to work …
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To reduce the demand for children’s residential care, the Department is relying on there being more foster carers, but it has yet to address the significant challenges to increase numbers. The Department sees reducing demand for residential care as key to reducing costs. To do so, it plans to work with children at an earlier stage so they do not need to be looked after by a local authority, and then also increase foster carer household numbers. However, between March 2020 and March 2024, the number fell by 9%, when excluding fostering with friends and family. The Department has initiatives to increase foster care numbers but lacks clear evidence that they are working, with its evaluations too early yet for clear results. It has also launched hubs to co-ordinate recruitment and improve the support foster carers receive. However, it is unclear how this will address the underlying barriers to increasing foster care, such as the cost of living, issues finding spaces in homes, and foster carer’s pay and fees. Some local authorities have used their discretion to adopt initiatives, such as council tax reductions for foster carers. However, the Department does not systematically encourage and direct these initiatives and is waiting for progress on wider initiatives. recommendation Drawing on what local authorities are doing, and its own analysis, the Department should set out how it will address the barriers to increasing the number of foster carers, with a clear timeframe and milestones.
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Government response AI summary
The government accepted the recommendation, noting it published an action plan, 'Renewing fostering: homes for 10,000 more children,' in February 2026. This plan details a comprehensive approach to increase foster care places, including national recruitment, digital tools, capital investment, and support for existing and prospective …
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HM Treasury
5
Recommendation
61st Report - Financial sustainability …
Accepted
Despite private providers providing most care home places, the Department does not fully understand their financial position. Private sector providers are responsible for 84% of children’s homes and 74% of places for children in England. Seven of the ten largest children’s homes providers are owned by private equity, which means …
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Despite private providers providing most care home places, the Department does not fully understand their financial position. Private sector providers are responsible for 84% of children’s homes and 74% of places for children in England. Seven of the ten largest children’s homes providers are owned by private equity, which means less financial transparency, a focus on generating profits and potentially high debt levels. The Department recognises private providers play an important role and that it needs to understand more about their financial standing to effectively oversee the market. This includes companies’ debt levels and financial risks and, should it introduce a profit cap, profit levels. In 2022, the Competition and Markets Authority found that the fifteen largest children’s social care providers had average profit rates of 22.6% for children’s homes, with their prices increasing by an average of 3.5% above inflation each year. However, there are many small and medium sized providers who do not make the same scale of profit. The Children’s Wellbeing and Schools Bill will introduce a financial oversight scheme, but the Department has not set out how it will use this beyond watching for warning signs of provider failure. This contrasts with other sectors. For example, the Care Quality Commission oversees adult social care providers and has a dedicated financial sustainability team overseeing around 30% of its market. 5 recommendation The Department should set out how it will better understand the profits, motivations and debt positions of private providers and how it will then proactively address risks across the market.
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Government response AI summary
The government accepted the recommendation, explaining that the Financial Oversight Scheme, established through the Children’s Wellbeing and Schools Bill, will increase financial transparency and allow real-time assessment of financial risk and debt positions for "difficult to replace" providers. The scheme will also require contingency plans …
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HM Treasury
6
Recommendation
61st Report - Financial sustainability …
Accepted
The Department has failed to address the problem of local authorities competing for places and the effect that has on driving up costs. A mismatch between the availability and demand for residential home places means local authorities compete for places, particularly when homes need to be found at the last …
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The Department has failed to address the problem of local authorities competing for places and the effect that has on driving up costs. A mismatch between the availability and demand for residential home places means local authorities compete for places, particularly when homes need to be found at the last minute. This has contributed to the exponential increase in costs, with residential care costs in England almost doubling over five years to £3.1 billion in 2023–24. Local authorities’ average spend per child had increased to £318,400, from £239,800 in 2019–20 (both figures in 2023–24 prices). Previous independent reviews in 2022 had recommended setting up regional bodies working together to collectively identify and plan for the places needed, as well as to create and commission places. This would help local authorities plan and smooth out volatile levels of demand. The Department accepted these recommendations. However, it has introduced regional cooperation pilots slower than planned, and these pilots do not test the full range of commissioning powers recommended. Stakeholders have identified concerns with regional commissioning, including how this would impact local authorities’ statutory responsibilities to support looked-after children, and the current model does not test the regional creation of places. It remains unclear what model the Department will introduce nationally or when, with its own documentation suggesting it could take ten years. It has offered some other commercial support to local authorities but has yet to determine how this will be rolled out more widely. recommendation The Department should clarify, as part of the Treasury Minute, the principles behind the collaborative regional approach it is working towards, by when it expects to implement its model nationally, and how it will support local authorities in the meantime. 6 1 Caring for looked-after children Introduction
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Government response AI summary
The government agrees, outlining that Regional Care Cooperatives (RCCs) will transform children's social care through collective buying power and pooled resources. Following positive evaluations of 2025 pathfinders, the department intends to accelerate the national rollout, aiming for every local authority to be part of an …
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HM Treasury
1
Conclusion
61st Report - Financial sustainability …
Acknowledged
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Education (the Department) on the sustainability of children’s residential care.2 We also took evidence from the Children’s Commissioner, the Association of Directors of Children’s Services (a local government membership organisation), and …
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On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Education (the Department) on the sustainability of children’s residential care.2 We also took evidence from the Children’s Commissioner, the Association of Directors of Children’s Services (a local government membership organisation), and the Children’s Homes Association (a membership organisation for providers of children’s homes).
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Government response AI summary
The government agrees with the committee's introductory statement and outlines its ongoing decisive actions to address issues in the children's social care market, including £2.4 billion for early intervention, investment in fostering, creating over 600 specialist placements, and rolling out Regional Care Co-operatives. Further information …
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HM Treasury
7
Conclusion
61st Report - Financial sustainability …
Accepted
The Department told us that local authorities have a lot of discretion to make decisions impacting children’s social care provision. It described how, for example, some local authorities provided foster carers with capital grants to convert and increase the space available in their homes, while some local authorities informally cooperated …
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The Department told us that local authorities have a lot of discretion to make decisions impacting children’s social care provision. It described how, for example, some local authorities provided foster carers with capital grants to convert and increase the space available in their homes, while some local authorities informally cooperated on a regional basis.10 The Department has started providing more support to local authorities on forecasting, commissioning and market shaping but has not yet rolled out this support nationally.11 We asked when it would provide local authorities with further encouragement and direction, given the systematic and fundamental nature of the challenges. It told us that it was awaiting Ministerial decisions.12
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Government response AI summary
The government agrees with the committee's implicit recommendation, rolling out Regional Care Co-operatives (RCCs) with over £10 million funding to support their setup by 2026. They are also removing barriers for providers and supported updated Ofsted registration criteria in September 2025.
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HM Treasury
8
Conclusion
61st Report - Financial sustainability …
Accepted
The Children’s Commissioner told us that there needs to be a much tighter grip on the amount and type of provision needed and where.13 The Department lacks up-to-date information on the support children need, the demand for places and places available, to help local authorities make decisions.14 It recognises that …
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The Children’s Commissioner told us that there needs to be a much tighter grip on the amount and type of provision needed and where.13 The Department lacks up-to-date information on the support children need, the demand for places and places available, to help local authorities make decisions.14 It recognises that many children are not in appropriate settings based on their needs with, for example, a proportion of children in residential care who should be in foster care. We asked the Department what it is doing to make sure that homes are appropriate for the needs of children. It told us that its policy agenda is geared to prevention and that it is having some success in keeping children within family settings.15
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Government response AI summary
The government accepts the committee's observation as an implicit recommendation, detailing concrete steps to improve the sufficiency and appropriateness of children's social care placements. These include rolling out Regional Care Co-operatives to analyze accommodation needs and commission places, supporting Ofsted in prioritizing specialist care applications …
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HM Treasury
9
Conclusion
61st Report - Financial sustainability …
We asked the Department and other witnesses about the circumstances surrounding a young person recently taking their own life after turning 18 and facing the uncertainty of moving out of the children’s social care system. A situation which the Chief Social worker for children and families agreed was shocking.16 Sky …
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We asked the Department and other witnesses about the circumstances surrounding a young person recently taking their own life after turning 18 and facing the uncertainty of moving out of the children’s social care system. A situation which the Chief Social worker for children and families agreed was shocking.16 Sky News analysis found that 91 care leavers aged 16 to 25 have died in the past year.17 The Children’s Commissioner, Association of Directors of Children’s Services and Children’s Homes Association described specific challenges around the transition from children’s social care to adult services and personal advisors, with local authorities having 9 Qq 36-37 10 Qq 61, 68 11 Q 62 12 Qq 63-73 13 Q 11 14 C&AG’s Report, para 3.6 15 Q 32; C&AG’s Report, para 6 16 Q 24, 93-95 17 Sky News, Council facing urgent questions over deaths of two more teens, 19 November 2025 9 some duties for care leavers up to 25 years.18 The Department told us that it has extended the reporting of deaths to include care leavers up to the age of 24. When we stressed the need for better co-ordination between children’s and adult social care services, the Department told us this is an area that it needs to look at again. It described needing to look more carefully at common factors for those experiencing challenges, look at how it can share learning, and create environments better at preventing such incidents.19 Use of unregistered homes
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HM Treasury
10
Conclusion
61st Report - Financial sustainability …
Acknowledged
In recent years, the number of children reported to Ofsted as being placed in unregistered homes at some point each year rose significantly, from 147 during 2020–21 to 982 during 2023–24.20 More recently, the Children’s Commissioner found that as at September 2024, 775 children were in unregistered accommodation—around 10% of …
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In recent years, the number of children reported to Ofsted as being placed in unregistered homes at some point each year rose significantly, from 147 during 2020–21 to 982 during 2023–24.20 More recently, the Children’s Commissioner found that as at September 2024, 775 children were in unregistered accommodation—around 10% of all children in residential care at that point on time—with the mean length of their placements longer than six months (185 days).21
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Government response AI summary
Acknowledges that placing children in illegal settings that are not inspected is unacceptable.
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HM Treasury
11
Conclusion
61st Report - Financial sustainability …
Acknowledged
Ofsted cannot routinely inspect unregistered homes and local authorities are not obliged to inform Ofsted when they place children in unregistered care, even though it is illegal for providers to operate such homes.22 In such cases there are no formal checks to ensure that children receive high quality care and …
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Ofsted cannot routinely inspect unregistered homes and local authorities are not obliged to inform Ofsted when they place children in unregistered care, even though it is illegal for providers to operate such homes.22 In such cases there are no formal checks to ensure that children receive high quality care and that they and the wider community are safe. We expressed concerns over the safety of children in unregistered places, including vulnerability to criminal gangs and to sexual exploitation and abuse, and highlighted that those in illegal homes include some children with court orders taking away their liberty. We emphasised that the current situation is completely unacceptable.23 We asked the Department to confirm its position on the number that should be placed in unregistered illegal care. It agreed that no child should be living in such a setting.24 We asked the Department how long it expects it to take to stop the use of unregistered placements. In response, it described the wider reforms to residential care, which it previously told us would take two years to take effect.25 18 Q 24 19 Qq 93-95 20 C&AG’s Report, para 1.18 21 Qq 2, 49 22 C&AG’s Report, para 1.18 23 Qq 46-49 24 Q 43 25 Qq 37, 48 10
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Government response AI summary
Acknowledges that placing children in illegal settings that are not inspected is unacceptable.
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HM Treasury
12
Conclusion
61st Report - Financial sustainability …
Acknowledged
We asked the Association of Directors of Children’s Services how it could possibly be right for any local authority to place children in homes that are not inspected. It described this as a consequence of local authorities having an absolute duty to place young people who needed a home but …
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We asked the Association of Directors of Children’s Services how it could possibly be right for any local authority to place children in homes that are not inspected. It described this as a consequence of local authorities having an absolute duty to place young people who needed a home but in some cases no regulated placement being willing to take them. This leads to unregistered placements being the “slightly less unacceptable” of two unacceptable alternatives, the other being a child not having a placement at all.26 It told us that no local authority takes the decision of using an illegal home lightly and that they engage in additional quality assurance for these placements.27
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Government response AI summary
Acknowledges that placing children in illegal settings that are not inspected is unacceptable.
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HM Treasury
13
Conclusion
61st Report - Financial sustainability …
Acknowledged
The Department described the delays in Ofsted registering providers, and how this impacted the use of illegal provision. Changes to the law requiring the registration of those providing supported accommodation for 16 and 17-year-olds, strengthening oversight, led to a significant growth in home registrations and to delays. Ofsted has set …
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The Department described the delays in Ofsted registering providers, and how this impacted the use of illegal provision. Changes to the law requiring the registration of those providing supported accommodation for 16 and 17-year-olds, strengthening oversight, led to a significant growth in home registrations and to delays. Ofsted has set a two-to-six-month target to register priority applications, including those providing emergency placements and where an urgent need has been identified, and an 18-month target for other applications.28 Meeting children’s needs
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Government response AI summary
Acknowledges that delays in Ofsted registering providers impacts the use of illegal provision.
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HM Treasury
14
Conclusion
61st Report - Financial sustainability …
Acknowledged
There are disparities in the number and types of children’s home available in different areas across the country, particularly for children with more complex needs.29 For example, there are no secure homes across all of London, while South West England has disproportionately few homes with specialist provision for children with …
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There are disparities in the number and types of children’s home available in different areas across the country, particularly for children with more complex needs.29 For example, there are no secure homes across all of London, while South West England has disproportionately few homes with specialist provision for children with mental health problems.30 These disparities can lead to children being placed in unsuitable placements with, for example, 49% of children placed in homes more than 20 miles away from their original family home.31 The Children’s Commissioner told us that inappropriate placements may lead to criminalisation, exploitation or a lack of care.32 In addition, the Association of Directors of Children’s Services told us that when children are placed far from their local authority, it makes it difficult for social workers to know and understand the support available. This negatively impacts both outcomes and costs by making it more difficult for social workers to spend time with children and build, establish and maintain relationships. When children are moved multiple times it 26 Q 5 27 Qq 6-10 28 Qq 43-44 29 Qq 39, 42 30 Q 40; C&AG’s Report, figure 9 31 C&AG’s Report, para 1.17 32 Q 3 11 is also more difficult to access support from different local authorities.33 We received written evidence highlighting that when children are placed hundreds of miles from home it can cause trauma and loss of identity, as well as significant cost.34
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Government response AI summary
Acknowledges that providers of children’s homes are not offering the places needed locally, leading to children being placed in homes that do not meet their needs.
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HM Treasury
15
Conclusion
61st Report - Financial sustainability …
Not Addressed
Local authorities and private providers face barriers and lack incentives to open homes and create places matching children’s needs at the scale required.35 The Association of Directors of Children’s Services told us that the distribution of residential provision is based on where it is easy to open a home, often …
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Local authorities and private providers face barriers and lack incentives to open homes and create places matching children’s needs at the scale required.35 The Association of Directors of Children’s Services told us that the distribution of residential provision is based on where it is easy to open a home, often where prices are lower, rather than where the need is greatest.36 The Children’s Homes Association told us that the barriers included property prices, salaries and workforce issues, alongside difficulties getting planning permission.37 The Department told us that it is working with the Ministry of Housing Communities and Local Government to address barriers in the planning system so the system works in a way that reflects where new homes are needed.38
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Government response AI summary
The response simply restates the committee's conclusion from a different section.
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HM Treasury
16
Conclusion
61st Report - Financial sustainability …
Not Addressed
Homes require qualified staff to operate, including a registered manager, with staffing a significant issue for residential care providers.39 The Children’s Homes Association told us that staffing costs make up 60-80% of operating costs.40 The Children’s Commissioner told us that some providers react to taking children with complex needs by …
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Homes require qualified staff to operate, including a registered manager, with staffing a significant issue for residential care providers.39 The Children’s Homes Association told us that staffing costs make up 60-80% of operating costs.40 The Children’s Commissioner told us that some providers react to taking children with complex needs by increasing staff numbers without evidence that it leads to better outcomes.41 In 2024, 13% of homes with unoccupied beds felt issues recruiting and retaining staff led to places being unfilled. At March 2025, 19% of children’s homes in England that were active or suspended did not have a registered manager in post.42 The Department acknowledged the challenge and the need for better training and skills, despite the residential care workforce growing from 39,000 in May 2023 to 46,000 in September 2024.43
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Government response AI summary
The response simply restates the committee's conclusion from a different section.
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HM Treasury
17
Conclusion
61st Report - Financial sustainability …
Not Addressed
The Association of Directors of Children’s Services described inconsistencies in capital funding, and competition between local authorities for funding, as barriers to creating homes where they are needed. Where one local authority might be delighted to win several million pounds to develop in-house provision, another will have lost out. It …
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The Association of Directors of Children’s Services described inconsistencies in capital funding, and competition between local authorities for funding, as barriers to creating homes where they are needed. Where one local authority might be delighted to win several million pounds to develop in-house provision, another will have lost out. It told us that it would be in the shared interests of local authorities to have consistency of funding, 33 Q 4 34 Cambian (CCH0006) 35 C&AG’s Report, para 2.13 36 Qq 2-4 37 Qq 4, 20 38 Qq 81-83 39 C&AG’s Report, para 2.14 40 Q 18 41 Q 19 42 C&AG’s Report, para 2.14 43 Qq 85-91 12 assured over multiple years.44 The Department told us that its capital programme has focused on areas with significantly fewer residential places or with specialist needs, and that it is engaging with local authorities and potential social investors to develop its approach.45 It lacks a national picture of capacity to tell whether the places created are where they are most needed.46 44 Qq 15-16 45 Qq 84, 92 46 C&AG’s Report, paras 9, 13 13 2 Addressing pressures on the residential care system Barriers to increasing foster care
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Government response AI summary
The Committee noted that the Association of Directors of Children’s Services described inconsistencies in capital funding as barriers to creating homes where they are needed. The government's response discusses providers of children’s homes not offering the places needed locally, but doesn't specifically address the funding …
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HM Treasury
18
Conclusion
61st Report - Financial sustainability …
Acknowledged
The Department told us that it sees reducing the need for residential care as key to addressing some of the drivers behind the increased cost. It plans to reduce the need by preventing children becoming looked after by a local authority, and then by increasing the availability of foster care, …
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The Department told us that it sees reducing the need for residential care as key to addressing some of the drivers behind the increased cost. It plans to reduce the need by preventing children becoming looked after by a local authority, and then by increasing the availability of foster care, which is eight times cheaper than residential care.47 However, over the period from March 2020 to March 2024, the number of foster care households fell by 9% when excluding fostering with friends and family, and the proportion of looked-after children in foster care decreased from 71% to 67%.48 We received written evidence from the National Association of Fostering Providers arguing that government must improve commissioning services for fostering, to introduce more variety and competition, and reduce bureaucracy.49
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Government response AI summary
Acknowledges the Department is relying on there being more foster carers, but it has yet to address the significant challenges to increase numbers.
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HM Treasury
19
Conclusion
61st Report - Financial sustainability …
Acknowledged
The Department has initiatives to increase foster carer numbers. It described, for example, launching 10 fostering recruitment hubs by 2024, covering around two thirds of local authorities.50 It explained that these hubs are boosting co-ordinated recruitment of foster carers between local authorities, and offering greater support for those becoming foster …
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The Department has initiatives to increase foster carer numbers. It described, for example, launching 10 fostering recruitment hubs by 2024, covering around two thirds of local authorities.50 It explained that these hubs are boosting co-ordinated recruitment of foster carers between local authorities, and offering greater support for those becoming foster carers.51 The Department’s early impact evaluation of the first hub did not find any significant difference between the number of foster households approved in areas supported by the hub and those not. It noted, however, that more time might be needed to see results.52 The Department told us that it is seeing numbers of new foster carers increase each month.53
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Government response AI summary
Acknowledges the Department is relying on there being more foster carers, but it has yet to address the significant challenges to increase numbers.
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HM Treasury
20
Conclusion
61st Report - Financial sustainability …
Not Addressed
The Association for Directors of Children’s Services explained that there are barriers to increasing foster care numbers. This includes insufficient fees and allowances for foster carers, the need for foster carers to adapt their 47 Qq 26, 59 48 C&AG’s Report, para 2.7 49 National Association of Fostering Providers (CCH0003) …
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The Association for Directors of Children’s Services explained that there are barriers to increasing foster care numbers. This includes insufficient fees and allowances for foster carers, the need for foster carers to adapt their 47 Qq 26, 59 48 C&AG’s Report, para 2.7 49 National Association of Fostering Providers (CCH0003) 50 Qq 36, 59 51 Q 59 52 C&AG’s Report, para 2.9 53 Q 61 14 homes, and societal changes making it more unusual to have a non-working parent at home to provide care and more common for adult children to return to live with their parents.54
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Government response AI summary
The response simply restates the committee's conclusion.
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HM Treasury
21
Conclusion
61st Report - Financial sustainability …
Not Addressed
We asked the Department how it intended to overcome these barriers, and those of the cost of living, given these would not be addressed through the fostering hub. It told us that local authorities have a lot of discretion over the support they offer foster carers. It has seen, for …
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We asked the Department how it intended to overcome these barriers, and those of the cost of living, given these would not be addressed through the fostering hub. It told us that local authorities have a lot of discretion over the support they offer foster carers. It has seen, for example, local authorities provide small capital grants to allow for conversions and extensions of homes, or offer deductions on council tax. It is also expecting its pilot regional organisations to go further with the model of providing incentives.55 However, it told us it does not yet systematically encourage and direct local authorities in their approaches.56 Monitoring private providers
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Government response AI summary
The response simply restates the committee's conclusion.
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HM Treasury
22
Conclusion
61st Report - Financial sustainability …
Acknowledged
In 2024–25, 84% of residential care settings registered with Ofsted, including supported accommodation and children’s homes, were owned by private providers.57 The Department told us this accounts for 74% of residential care places, because privately-owned homes tend to offer fewer places than those run by local authorities and the voluntary …
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In 2024–25, 84% of residential care settings registered with Ofsted, including supported accommodation and children’s homes, were owned by private providers.57 The Department told us this accounts for 74% of residential care places, because privately-owned homes tend to offer fewer places than those run by local authorities and the voluntary sector. It told us there are benefits to having a mix of different types of providers and that private providers have a place in the market but that it would worry about an over-dominance of a particular kind of provider.58
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Government response AI summary
Acknowledges that the Department does not fully understand the financial position of private providers.
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HM Treasury
23
Conclusion
61st Report - Financial sustainability …
Acknowledged
As local authorities manage all provider contracts, the Department does not have direct visibility of contract and financial information. It does not fully understand what constitutes a reasonable price for residential care.59 The Department acknowledged that there is room to improve transparency and price sharing to strengthen the hand of …
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As local authorities manage all provider contracts, the Department does not have direct visibility of contract and financial information. It does not fully understand what constitutes a reasonable price for residential care.59 The Department acknowledged that there is room to improve transparency and price sharing to strengthen the hand of local authorities.60 We received written evidence from Revolution Consulting Limited that there are particular issues with transparency where providers have ownership and funding structures offshore.61 Seven of the ten largest providers of children’s homes are owned by private equity. The Competition and Markets Authority has reported these types of providers as having much higher debt levels than others, which we highlighted as raising concerns about their financial 54 Q 12 55 Q 61 56 Q 73 57 C&AG’s Report, para 2.2 58 Q 80 59 C&AG’s Report, para 19 60 Q 50 61 Revolution Consulting Limited (CCH0007) 15 sustainability. 62 We asked what information the Department is collecting on the financial situation of providers and it told us that it needs legislation to enable it and local authorities to collect more data.63
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Government response AI summary
Acknowledges that the Department does not fully understand the financial position of private providers.
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HM Treasury
24
Conclusion
61st Report - Financial sustainability …
Not Addressed
We raised concerns about the high levels of profits of some private providers.64 The Competition and Markets Authority found in 2022 that the fifteen largest providers of children’s social care had average profit rates of 22.6% for children’s homes, and that their prices increased by an average of 3.5% above …
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We raised concerns about the high levels of profits of some private providers.64 The Competition and Markets Authority found in 2022 that the fifteen largest providers of children’s social care had average profit rates of 22.6% for children’s homes, and that their prices increased by an average of 3.5% above inflation each year.65 The Association for Directors of Children’s Services and Children’s Homes Association told us private-equity- owned providers were a particular concern because they were more likely to have excessive profits.66 The Children’s Homes Association told us that most of the small, micro or SME practitioner-led homes do not make vast profits.67 We asked the Department whether suppliers were price gouging. It acknowledged that in some places suppliers make a significant amount of profit.68
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Government response AI summary
The Committee raised concerns about the high levels of profits of some private providers. The government's response notes that despite private providers providing most care home places, the Department does not fully understand their financial position.
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HM Treasury
25
Conclusion
61st Report - Financial sustainability …
Acknowledged
The Department described the significant levels of profit for some suppliers as the reason it introduced provisions in the Children’s Wellbeing and Schools Bill for a profit cap.69 The Bill will also introduce a financial oversight scheme covering those providers deemed hardest to replace. The Department acknowledged that how it …
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The Department described the significant levels of profit for some suppliers as the reason it introduced provisions in the Children’s Wellbeing and Schools Bill for a profit cap.69 The Bill will also introduce a financial oversight scheme covering those providers deemed hardest to replace. The Department acknowledged that how it will use the scheme will be covered in further regulation.70 The Children’s Homes Association told us that the scheme would provide an early warning system that providers might fail, but that it did not consider the scheme robust enough to reduce the numbers of private-equity-owned providers.71 One existing model for such an oversight scheme is that operated in the adult social care market by the Care Quality Commission, which has a dedicated financial sustainability function which oversees around 65 of the largest and most significant care providers across England, representing around 30% of its overall care market.72 62 Qq 18, 50, 74 63 Qq 75-76 64 Qq 50, 74 65 C&AG’s Report, para 2.3 66 Qq 2, 22; C&AG’s Report, para 2.4. 67 Q 18 68 Q 50 69 Q 50 70 Q 74 71 Q 22 72 C&AG’s Report, The adult social care market in England, 25 March 2021, para 2.22 16 Co-operation between local authorities
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Government response AI summary
The Committee noted that the Department introduced provisions in the Children’s Wellbeing and Schools Bill for a profit cap and a financial oversight scheme. The government explains that the Financial Oversight Scheme will be established and will increase financial and corporate transparency among the most …
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HM Treasury
26
Conclusion
61st Report - Financial sustainability …
Acknowledged
When finding children’s homes places, local authorities must often look outside of their own area, putting them in competition with each other. Local authorities also often rely on finding places just at the time children need to be housed, rather than buying in advance. which can further increase competition and …
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When finding children’s homes places, local authorities must often look outside of their own area, putting them in competition with each other. Local authorities also often rely on finding places just at the time children need to be housed, rather than buying in advance. which can further increase competition and therefore the prices they have to pay.73 The Association of Directors of Children’s Services recognised that local authorities often compete for available beds which increases prices.74 That has contributed to the exponential increase in the cost of residential care, which almost doubled over five years to £3.1 billion in 2023–24. Over the same period the average local authority spend per child increased to £318,400, from £239,800 in 2019–20.75 We received written evidence from the County Councils Network which stated that to balance budgets and meet increased demand, councils had been forced to reduce non-statutory services including those which may help avoid children needing care.76
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Government response AI summary
The Committee noted that local authorities often compete for available beds which increases prices. The government states it agrees with the Committee's recommendation and aims to implement the model nationally by Spring 2029, backed by over £10 million of funding to support the setup of …
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HM Treasury
27
Conclusion
61st Report - Financial sustainability …
Acknowledged
The Department accepted recommendations to introduce regional commissioning made by the Competition and Markets Authority and Josh MacAlister in 2022. The MacAlister review recommended that local authorities should group together in regional organisations, taking collective responsibility for running public-sector residential care and fostering and for all commissioning.77 The Children’s Commissioner …
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The Department accepted recommendations to introduce regional commissioning made by the Competition and Markets Authority and Josh MacAlister in 2022. The MacAlister review recommended that local authorities should group together in regional organisations, taking collective responsibility for running public-sector residential care and fostering and for all commissioning.77 The Children’s Commissioner told us that regional bodies would help to reduce volatility in individual areas, with regions more able to predict the number and types of places they will need.78
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Government response AI summary
The Committee noted the Department accepted recommendations to introduce regional commissioning. The government states it agrees with the Committee's recommendation and aims to implement the model nationally by Spring 2029, backed by over £10 million of funding to support the setup of up to six …
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HM Treasury
28
Recommendation
61st Report - Financial sustainability …
Accepted
The MacAlister review envisaged regional organisations operating fully from early 2025, to address sufficiency challenges by 2027. The Department decided against immediately rolling out regional commissioning nationally given insufficient evidence on potential benefits, instead opting for pilots in two regions, Greater Manchester and South East England. Delays meant the Department …
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The MacAlister review envisaged regional organisations operating fully from early 2025, to address sufficiency challenges by 2027. The Department decided against immediately rolling out regional commissioning nationally given insufficient evidence on potential benefits, instead opting for pilots in two regions, Greater Manchester and South East England. Delays meant the Department and local authorities launched the pilot regional cooperatives in 2025 rather than 2024 as planned. The pilots are not testing the full commissioning model as the Department removed the expectation that they would discharge local authorities’ statutory responsibilities. The Department has not committed to a date for a national rollout, but in one 2023 evaluation document, it expected that it could take around ten years to do.79 73 C&AG’s Report, para 2.16 74 Q 17 75 C&AG’s Report, para 1.12 76 County Councils Network (CCH0005) 77 C&AG’s Report, paras 13, 3.11 78 Q 14 79 C&AG’s Report, paras 3.11-3.12 17
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Government response AI summary
The government agrees with the recommendation to clarify the principles behind the collaborative regional approach and expects to implement its model nationally by Spring 2029, including launching an expression of interest backed by over £10 million of funding to support the setup of up to …
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HM Treasury
29
Conclusion
61st Report - Financial sustainability …
Acknowledged
The Department has not confirmed how it will test the full commissioning model, and stakeholders have highlighted the scale of change and the need for a strong evidence base.80 The Children’s Homes Association told us that it was unclear how regional care co-operatives would address barriers relating to property prices, …
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The Department has not confirmed how it will test the full commissioning model, and stakeholders have highlighted the scale of change and the need for a strong evidence base.80 The Children’s Homes Association told us that it was unclear how regional care co-operatives would address barriers relating to property prices, planning permission and the workforce.81 We received written evidence from Ofsted that it is disappointed not to have been given the power to inspect regional care cooperatives and is concerned that current proposals will leave gaps in oversight.82 The Children’s Commissioner told us that regional arrangements need to be much more ambitious rather than merely asking local authorities to “play nicely together, contribute a bit of money and share intelligence”.83 The Children’s Commissioner suggested a need for joint funding pots and shared accountability among local authorities, health, justice and education.84 Local authorities have previously raised concerns about the impact of regional commissioning on their statutory responsibilities, particularly around the risk of a local authority not finding a suitable place for a child.85 80 C&AG’s Report, para 3.12 81 Q 14 82 Ofsted (CCH0004) 83 Q 14 84 Q 14 85 C&AG’s Report, para 3.12 18
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Government response AI summary
The Committee noted concerns about testing the commissioning model and highlighted barriers related to property prices, planning permission and the workforce. The government states it agrees with the Committee's recommendation and aims to implement the model nationally by Spring 2029, backed by over £10 million …
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HM Treasury