Recommendations & Conclusions
7 items
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
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
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