Source · Select Committees · Public Accounts Committee
61st Report - Financial sustainability of children’s care homes
Public Accounts Committee
HC 1233
Published 16 January 2026
Recommendations
2
Rejected
Reaffirm commitment to reducing children in unregistered homes to zero by 2027 and detail specific actions.
Recommendation
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 …
Read more
Government Response Summary
The government rejects the recommendation to reaffirm a commitment to zero children in unregistered homes by 2027, stating that a fixed deadline does not reflect the complexity. However, it outlines actions to tackle the issue, including £560 million capital funding, new secure placements opening between 2026-2031, new enforcement powers for Ofsted (from Summer 2026), and Ofsted reforms to increase focus on sufficiency.
HM Treasury
View Details →
3
Accepted
Detail plans to address barriers creating children's home places, including funding and staffing.
Recommendation
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 …
Read more
Government Response 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 for the residential workforce by Summer 2026.
HM Treasury
View Details →
4
Accepted
Set out how to address barriers to increasing foster carer numbers with clear timeframe and milestones.
Recommendation
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 …
Read more
Government Response 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 carers.
HM Treasury
View Details →
5
Accepted
Set out how to understand private provider finances and proactively address market risks.
Recommendation
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 …
Read more
Government Response 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 and use data to monitor profit levels across the market.
HM Treasury
View Details →
6
Accepted
Clarify principles of collaborative regional approach, national implementation timeline, and interim local authority support.
Recommendation
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, …
Read more
Government Response 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 RCC.
HM Treasury
View Details →
28
Accepted
Regional commissioning pilots delayed and limited, with national rollout potentially taking ten years.
Recommendation
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, …
Read more
Government Response 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 six new RCCs in 2026.
HM Treasury
View Details →
Conclusions (23)
1
Conclusion
Acknowledged
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Education (the Department) on the sustainability of children’s residential care.2 We also took evidence from the Children’s Commissioner, the Association of Directors of Children’s Services (a local government membership organisation), and …
Government Response Summary
The government agrees with the committee's introductory statement and outlines its ongoing decisive actions to address issues in the children's social care market, including £2.4 billion for early intervention, investment in fostering, creating over 600 specialist placements, and rolling out Regional Care Co-operatives. Further information will be provided to the Committee in six months.
7
Conclusion
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 …
8
Conclusion
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 …
9
Conclusion
We asked the Department and other witnesses about the circumstances surrounding a young person recently taking their own life after turning 18 and facing the uncertainty of moving out of the children’s social care system. A situation which the Chief Social worker for children and families agreed was shocking.16 Sky …
10
Conclusion
Acknowledged
In recent years, the number of children reported to Ofsted as being placed in unregistered homes at some point each year rose significantly, from 147 during 2020–21 to 982 during 2023–24.20 More recently, the Children’s Commissioner found that as at September 2024, 775 children were in unregistered accommodation—around 10% of …
Government Response Summary
Acknowledges that placing children in illegal settings that are not inspected is unacceptable.
11
Conclusion
Acknowledged
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 …
Government Response Summary
Acknowledges that placing children in illegal settings that are not inspected is unacceptable.
12
Conclusion
Acknowledged
We asked the Association of Directors of Children’s Services how it could possibly be right for any local authority to place children in homes that are not inspected. It described this as a consequence of local authorities having an absolute duty to place young people who needed a home but …
Government Response Summary
Acknowledges that placing children in illegal settings that are not inspected is unacceptable.
13
Conclusion
Acknowledged
The Department described the delays in Ofsted registering providers, and how this impacted the use of illegal provision. Changes to the law requiring the registration of those providing supported accommodation for 16 and 17-year-olds, strengthening oversight, led to a significant growth in home registrations and to delays. Ofsted has set …
Government Response Summary
Acknowledges that delays in Ofsted registering providers impacts the use of illegal provision.
14
Conclusion
Acknowledged
There are disparities in the number and types of children’s home available in different areas across the country, particularly for children with more complex needs.29 For example, there are no secure homes across all of London, while South West England has disproportionately few homes with specialist provision for children with …
Government Response Summary
Acknowledges that providers of children’s homes are not offering the places needed locally, leading to children being placed in homes that do not meet their needs.
15
Conclusion
Not Addressed
Local authorities and private providers face barriers and lack incentives to open homes and create places matching children’s needs at the scale required.35 The Association of Directors of Children’s Services told us that the distribution of residential provision is based on where it is easy to open a home, often …
Government Response Summary
The response simply restates the committee's conclusion from a different section.
16
Conclusion
Not Addressed
Homes require qualified staff to operate, including a registered manager, with staffing a significant issue for residential care providers.39 The Children’s Homes Association told us that staffing costs make up 60-80% of operating costs.40 The Children’s Commissioner told us that some providers react to taking children with complex needs by …
Government Response Summary
The response simply restates the committee's conclusion from a different section.
17
Conclusion
Not Addressed
The Association of Directors of Children’s Services described inconsistencies in capital funding, and competition between local authorities for funding, as barriers to creating homes where they are needed. Where one local authority might be delighted to win several million pounds to develop in-house provision, another will have lost out. It …
Government Response Summary
The Committee noted that the Association of Directors of Children’s Services described inconsistencies in capital funding as barriers to creating homes where they are needed. The government's response discusses providers of children’s homes not offering the places needed locally, but doesn't specifically address the funding inconsistencies.
18
Conclusion
Acknowledged
The Department told us that it sees reducing the need for residential care as key to addressing some of the drivers behind the increased cost. It plans to reduce the need by preventing children becoming looked after by a local authority, and then by increasing the availability of foster care, …
Government Response Summary
Acknowledges the Department is relying on there being more foster carers, but it has yet to address the significant challenges to increase numbers.
19
Conclusion
Acknowledged
The Department has initiatives to increase foster carer numbers. It described, for example, launching 10 fostering recruitment hubs by 2024, covering around two thirds of local authorities.50 It explained that these hubs are boosting co-ordinated recruitment of foster carers between local authorities, and offering greater support for those becoming foster …
Government Response Summary
Acknowledges the Department is relying on there being more foster carers, but it has yet to address the significant challenges to increase numbers.
20
Conclusion
Not Addressed
The Association for Directors of Children’s Services explained that there are barriers to increasing foster care numbers. This includes insufficient fees and allowances for foster carers, the need for foster carers to adapt their 47 Qq 26, 59 48 C&AG’s Report, para 2.7 49 National Association of Fostering Providers (CCH0003) …
Government Response Summary
The response simply restates the committee's conclusion.
21
Conclusion
Not Addressed
We asked the Department how it intended to overcome these barriers, and those of the cost of living, given these would not be addressed through the fostering hub. It told us that local authorities have a lot of discretion over the support they offer foster carers. It has seen, for …
Government Response Summary
The response simply restates the committee's conclusion.
22
Conclusion
Acknowledged
In 2024–25, 84% of residential care settings registered with Ofsted, including supported accommodation and children’s homes, were owned by private providers.57 The Department told us this accounts for 74% of residential care places, because privately-owned homes tend to offer fewer places than those run by local authorities and the voluntary …
Government Response Summary
Acknowledges that the Department does not fully understand the financial position of private providers.
23
Conclusion
Acknowledged
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 …
Government Response Summary
Acknowledges that the Department does not fully understand the financial position of private providers.
24
Conclusion
Not Addressed
We raised concerns about the high levels of profits of some private providers.64 The Competition and Markets Authority found in 2022 that the fifteen largest providers of children’s social care had average profit rates of 22.6% for children’s homes, and that their prices increased by an average of 3.5% above …
Government Response Summary
The Committee raised concerns about the high levels of profits of some private providers. The government's response notes that despite private providers providing most care home places, the Department does not fully understand their financial position.
25
Conclusion
Acknowledged
The Department described the significant levels of profit for some suppliers as the reason it introduced provisions in the Children’s Wellbeing and Schools Bill for a profit cap.69 The Bill will also introduce a financial oversight scheme covering those providers deemed hardest to replace. The Department acknowledged that how it …
Government Response Summary
The Committee noted that the Department introduced provisions in the Children’s Wellbeing and Schools Bill for a profit cap and a financial oversight scheme. The government explains that the Financial Oversight Scheme will be established and will increase financial and corporate transparency among the most "difficult to replace" providers.
26
Conclusion
Acknowledged
When finding children’s homes places, local authorities must often look outside of their own area, putting them in competition with each other. Local authorities also often rely on finding places just at the time children need to be housed, rather than buying in advance. which can further increase competition and …
Government Response Summary
The Committee noted that local authorities often compete for available beds which increases prices. The government states it agrees with the Committee's recommendation and aims to implement the model nationally by Spring 2029, backed by over £10 million of funding to support the setup of up to six new RCCs in 2026.
27
Conclusion
Acknowledged
The Department accepted recommendations to introduce regional commissioning made by the Competition and Markets Authority and Josh MacAlister in 2022. The MacAlister review recommended that local authorities should group together in regional organisations, taking collective responsibility for running public-sector residential care and fostering and for all commissioning.77 The Children’s Commissioner …
Government Response Summary
The Committee noted the Department accepted recommendations to introduce regional commissioning. The government states it agrees with the Committee's recommendation and aims to implement the model nationally by Spring 2029, backed by over £10 million of funding to support the setup of up to six new RCCs in 2026.
29
Conclusion
Acknowledged
The Department has not confirmed how it will test the full commissioning model, and stakeholders have highlighted the scale of change and the need for a strong evidence base.80 The Children’s Homes Association told us that it was unclear how regional care co-operatives would address barriers relating to property prices, …
Government Response Summary
The Committee noted concerns about testing the commissioning model and highlighted barriers related to property prices, planning permission and the workforce. The government states it agrees with the Committee's recommendation and aims to implement the model nationally by Spring 2029, backed by over £10 million of funding to support the setup of up to six new RCCs in 2026.