Select committee: Public Accounts Committee
Recommendation 2
61st Report - Financial sustainability of children’s care homes
Published 16 Jan 2026
Addressed to HM Treasury
Public Accounts Committee Financial sustainability of children’s care homes All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗
Recommendation (the committee's words)
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.
From: Public Accounts Committee, 61st Report - Financial sustainability of children’s care homes (HC 1233), 16 January 2026
Government response
The government responded to the whole report on 1 April 2026 (deadline 16 March 2026).
Summary written by Accountability Index from the government's response. It is not the government's own words.The government agrees with the Committee's recommendations on five of the six areas it addresses (it states agreement for recommendations 1, 3, 4, 5 and 6), but disagrees with the recommendation to commit to reducing unregistered placements to zero by the end of 2027.
- On unregistered homes, the government disagrees with the recommendation and says it "has, however, not made a commitment" to reduce the number to zero by the end of 2027, because "Setting a fixed deadline does not sufficiently reflect the complexity of the issue."
- From summer 2026 "(subject to Royal Assent)", Ofsted will be able to issue uncapped fines to providers operating unregistered settings, and Ofsted will also consult on reforms to the inspection of local authority children's services.
- On regional collaboration, the government agrees with the recommendation, with a target implementation date of Spring 2029. Its "vision is for every LA to be part of an RCC" (Regional Care Co-operative), with an Expression of Interest in Spring backed by over £10 million to support up to six new RCCs in 2026.
- On private providers' finances, the government agrees and will establish a Financial Oversight Scheme through the Children's Wellbeing and Schools Bill, with timings "subject to Royal Assent", expected to cover about 40 providers.