Committee publication · Report · 16 January 2026 · HC 1233
61st Report - Financial sustainability of children’s care homes
From: Public Accounts Committee
Inquiry: Financial sustainability of children’s care homes
Government response deadline: 16 March 2026
Summary
The Public Accounts Committee's 61st Report examines the financial sustainability of children's residential care homes in England. It concludes the system is not working: 800 children are placed in illegal unregistered homes, costs have nearly doubled to £3.1 billion annually (2023–24), and outcomes remain poor. The committee finds the Department for Education lacks urgency, understanding of private providers' finances, and has failed to address local authority competition driving up costs. It demands fundamental changes, clearer departmental leadership, and a credible plan to eliminate illegal placements by end-2027.
Key findings
- In September 2024, nearly 800 children were placed in illegal unregistered homes (average stay six months), with no Ofsted inspection or safety assurance
- Local authority costs for residential care rose 96% to £3.1 billion (2023–24); average cost per child increased to £318,400 from £239,800 (2019–20), while child numbers rose only 10%
- 49% of children placed more than 20 miles from family homes; disparities in provision across regions, e.g. no secure homes in London, harm outcomes and increase social worker burden
- Department lacks understanding of private providers' financial positions; seven of ten largest providers owned by private equity; Competition and Markets Authority found 22.6% average profit rates with 3.5% annual price increases above inflation
- Downward trend in foster care (9% decline 2020–24, excluding friends/family) undermines Department's strategy to reduce residential care demand; fostering recruitment hubs show no early evidence of impact
- Regional commissioning pilots launched late (2025 vs 2024), do not test full model, and rollout timeline unclear (potentially 10 years); Department has not clarified principles or national implementation date
Recommendations
- Department should demonstrate ownership by setting out a clear definition of its role, desired outcomes with actions and timeline, and how it will develop a joined-up system with local authorities and wider government; write to committee within six months
- Department should reaffirm commitment to reducing children in unregistered homes to zero by end-2027 and set out specific actions to achieve this in its Treasury Minute response
- Department should detail how it will address barriers to creating needed places: provide local authorities consistent multi-year funding, work with Ofsted to resolve registration delays, address planning permission challenges, and help providers secure qualified staff
- Drawing on local authority initiatives and its own analysis, Department should set out how it will address barriers to increasing foster carers (cost of living, pay/fees, housing space) with clear timeframe and milestones
- Department should set out how it will better understand private providers' profits, motivations and debt positions, and how it will proactively address risks across the market
- Department should clarify (in Treasury Minute) the principles behind its collaborative regional approach, when it expects to implement nationally, and how it will support local authorities in the meantime
Tone
CriticalTopics
Key actors
Department for Education, Sir Geoffrey Clifton-Brown, Susan Acland-Hood, Isabelle Trowler, Association of Directors of Children's Services, Children's Commissioner, Ofsted, Competition and Markets Authority
Notable line
“It is unacceptable that last year this included 800 vulnerable children placed in illegal homes for an average of six months each.”
Key Quotes
“The children's residential care system in England is not working, with too many children being put at risk as a result of being placed in inappropriate homes.”
“It is unacceptable that last year this included 800 vulnerable children placed in illegal homes for an average of six months each.”
“Fundamental changes and strong leadership are needed to address what is an unacceptable situation.”
“This leads to unregistered placements being the "slightly less unacceptable" of two unacceptable alternatives, the other being a child not having a placement at all.”
“… there needs to be a much tighter grip on the amount and type of provision needed and where.”
“… regional arrangements need to be much more ambitious rather than merely asking local authorities to "play nicely together, contribute a bit of money and share intelligence".”
Source · parliament.uk record ↗