Select committee: Public Accounts Committee
Conclusion 11
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 ↗
Conclusion (the committee's words)
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
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.