Select committee: Public Accounts Committee
Conclusion 23
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)
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
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.