61st Report - Financial sustainability of children’s care homes

Select Committee
Public Accounts Committee HC 1233 16 January 2026
Report Status Government responded
Conclusions & Recommendations 29 items (6 recs)
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Government Response (AI assessment · 28 of 29 classified)
Accepted 7
Acknowledged 14
Not Addressed 6
Rejected 1
Government response
Treasury minutes: Government response to the Committee of Public Accounts on the Sixty-first report from Session 2024-26 · published 1 Apr 2026
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Recommendations & Conclusions

14 results
1 Conclusion Acknowledged
Committee took evidence on sustainability of children's residential care.
Conclusion
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 … Read more
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.
HM Treasury
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10 Conclusion Acknowledged
Significant rise in children placed in unregistered homes with lengthy placement durations.
Conclusion
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 … Read more
Government Response Summary
Acknowledges that placing children in illegal settings that are not inspected is unacceptable.
HM Treasury
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11 Conclusion Acknowledged
Lack of oversight leaves children in illegal unregistered homes at significant risk.
Conclusion
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 … Read more
Government Response Summary
Acknowledges that placing children in illegal settings that are not inspected is unacceptable.
HM Treasury
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12 Conclusion Acknowledged
Local authorities resort to unregistered homes as last resort due to placement scarcity.
Conclusion
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 … Read more
Government Response Summary
Acknowledges that placing children in illegal settings that are not inspected is unacceptable.
HM Treasury
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13 Conclusion Acknowledged
Ofsted faces significant delays registering supported accommodation providers, impacting the use of illegal provision.
Conclusion
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 … Read more
Government Response Summary
Acknowledges that delays in Ofsted registering providers impacts the use of illegal provision.
HM Treasury
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14 Conclusion Acknowledged
Significant geographical disparities in children's home availability lead to unsuitable placements and poor outcomes.
Conclusion
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 … Read more
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.
HM Treasury
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18 Conclusion Acknowledged
Foster care households and placements have significantly decreased despite the Department's reduction goals.
Conclusion
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 … Read more
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.
HM Treasury
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19 Conclusion Acknowledged
Departmental fostering recruitment hubs show limited immediate impact on increasing foster carer numbers.
Conclusion
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 … Read more
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.
HM Treasury
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22 Conclusion Acknowledged
Private providers significantly dominate the residential care market, owning 84% of all settings.
Conclusion
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 … Read more
Government Response Summary
Acknowledges that the Department does not fully understand the financial position of private providers.
HM Treasury
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23 Conclusion Acknowledged
Lack of transparency hinders understanding of reasonable prices for children's residential care.
Conclusion
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 … Read more
Government Response Summary
Acknowledges that the Department does not fully understand the financial position of private providers.
HM Treasury
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25 Conclusion Acknowledged
Proposed profit cap and oversight scheme for children's care lacks robustness to address private equity.
Conclusion
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 … Read more
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.
HM Treasury
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26 Conclusion Acknowledged
Competition among local authorities for children's home places drives up costs significantly.
Conclusion
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 … Read more
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.
HM Treasury
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27 Conclusion Acknowledged
Department accepts recommendations for regional commissioning to improve children's residential care provision.
Conclusion
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 … Read more
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.
HM Treasury
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29 Conclusion Acknowledged
Full regional commissioning model remains untested, raising concerns over scope and accountability.
Conclusion
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 … Read more
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.
HM Treasury
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