Financial sustainability of children’s care homes

Status / emerging findings

• Average cost per child in residential care jumped from £239,800 (2019-20) to £318,400 (2023-24); wage inflation and utility costs explain 60-80% of rises, but private equity involvement is creating unsustainable profit expectations
• Nearly 1,000 children annually placed in unregistered homes (illegal, uninspected by Ofsted) due to absence of regulated provision in their areas; some remain there for six months or longer
• 49% of children placed more than 20 miles from original home, severing family ties and access to local CAMHS, schools, and police, increasing exploitation and criminalisation risk
• Outcomes for residential care children significantly worse than foster care: higher criminal justice involvement, higher NEET rates, more placement instability, more children going missing
• Department for Education lacks clear vision for reform; Regional Care Co-operatives proposed as solution but witnesses disagreed on effectiveness; government response issued April 2026 but specifics on recommendation acceptance unclear from available documents

Why it matters

800 vulnerable children are sleeping in illegal, unregistered homes right now, and local authorities are spending £318,000 per child per year on a system that produces worse outcomes than foster care—this is a public money and child safeguarding crisis that demands urgent restructuring.

Tone arc

Opened procedural; November 2025 evidence session turned sharply adversarial as committee confronted representatives (Children's Homes Association, local authority directors, Children's Commissioner) over system dysfunction, cost escalation, and children's safety. Subsequent correspondence (December 2025–April 2026) shows unresolved tensions between sector and Department.

Key witnesses

Susan Acland-Hood (Department for Education), Isabelle Trowler CBE (Office of the Children's Commissioner), Gila Sacks (likely Children's Homes Association representative), Association of Directors of Children's Services, Children's Homes Association