Select committee: Public Accounts Committee
Recommendation 6
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)
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
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.