WIREDGOV

Children are being put at risk as a result of being placed in inappropriate homes through a residential care system in England that is not working.

• Read the report
• Read the report (PDF)
• Financial sustainability of children's care homes
• Public Accounts Committee

In a new report, the Public Accounts Committee (PAC) highlights an unacceptable finding: that in September 2024, nearly 800 vulnerable children had been placed in illegal homes through this system. This is around 1 in 10 of all children in residential care at that point in time.

It is illegal to run a children’s home or supported accommodation that is not registered with Ofsted. Such unregistered settings cannot be routinely inspected, meaning a lack of checks to ensure children receive high quality care and that they and the wider community are safe.

Local authorities only use these homes when no registered settings are available. However, the Children’s Commissioner’s evidence to the PAC’s inquiry reveals that the hundreds of children placed in such accommodation in ’24 stayed an average of around six months each, rather than on a short-term emergency basis.

Placing children in unregistered homes is particularly undesirable where their liberty has been taken away through a court order; 1,280 children in care were held against their consent under deprivation of liberty orders during 2024.

The Department for Education (DfE) expects it will take two years for improvements to the system to take effect and address a shortage of places.

DfE’s efforts to reduce demand in the system by increasing foster carer numbers lack clear evidence that they are working; the number of foster carer households fell by 9% between March ’20 and March ’24 (excluding fostering with friends and family). This is in the context of recent findings by the House magazine showing rising numbers of children placed in semi-independent placements.

The report depicts a system that is placing children in homes that do not meet their needs, with disparities in the places available across the country. Almost half of children in England are placed in homes more than 20 miles from their family homes, and there are currently no secure home places for children in London.

These long distances and consequent travel mean social workers struggle to understand support available locally and spend time with children. The PAC is calling on the DfE to set out how it will help prioritise homes and places where they are most needed.

As the need for homes in certain areas has exceeded places available, costs have risen in a dysfunctional market in which local authorities compete with each other for places.

This competition itself has helped drive up costs, which have almost doubled over five years in England to £3.1bn in 2023-24. The report finds the DfE has failed to address this problem, and it is unclear what it plans to do, and when, to help local authorities plan and smooth out volatile levels of demand. 

In 2022, the fifteen largest providers of children’s social care had average profit rates of 22.6% for children’s homes, and their prices increased by an average of 3.5% above inflation each year, according to the Competition and Markets Authority.

Seven of the ten largest children's homes providers are owned by private equity, which means less financial transparency, a focus on generating profits and potentially high debt levels. Despite private providers providing most care home places, the DfE does not fully understand their financial position.

The PAC’s inquiry raised concerns about the high levels of profits made by some private providers of children’s social care. When asked by the PAC whether suppliers were price gouging, the DfE acknowledged that in some places suppliers make a significant amount of profit.

The inquiry heard evidence from the sector that private-equity-owned providers were a particular concern because they were more likely to have excessive profits, and that most of the smaller practitioner-led homes do not make vast profits.

Chair comment

Sir Geoffrey Clifton-Brown, Chair of the Public Accounts Committee, said:

“The stated purpose of the children’s social care system is “to provide care for those who need it so that they grow up and thrive with safety, stability and love.” For the hundreds of children highlighted in our report living for months in illegally unregistered homes, a lack of oversight means we cannot know whether their circumstances are indeedsafe, stable, or loving.

"A dysfunctional system is forcing local authorities to routinely reach for solutions which will see our nation’s children regularly put at risk. This utterly unacceptable situation has become normalised, but there is nothing normal about this unsustainable state of affairs. 

“The oversight of the children’s social care system is similarly fraught, with the government not possessing clear line of sight into the financial circumstances of the majority of providers.

"Without a good understanding of the motivations, debt, and potentially excessive profits of private providers, government cannot effectively oversee a market with players within it who could very well be over-leveraged with debt.

"Our most vulnerable children are a sector of our society often without the ability to easily make their voices heard, but it is clear from our Committee’s scrutiny that they are currently being failed. We desperately hope, in those children’s interests, that this report sees the government urgently bring fundamental change to this broken system.”