Residential Child Care money matters in Parliament – Public Accounts Committee Inquiry
The Commons Public Accounts Committee (PAC) has held its first evidence session on its inquiry into the financial sustainability of children’s care homes. Members , MPs, questioned senior leaders from the Department for Education, children’s services and the residential child care private providers.
The PAC inquiry was prompted by research showing the coNational Audit Officestofk providing residential care placements has risen 96% since 2019/20, stretching many local authorities budgets by becoming a large expenditure area by children’s services.
CYP Now reported it as a ‘lengthy, wide ranging and sometimes fractious hearing’. Watch for yourself Parliamentlive.tv – Public Accounts Committee Or read transcript committees.parliament.uk/oralevidence/16730/html/
In brief
Responding to questions about profits, Mark Kerr, CEO of the Children’s Homes Association said labelling the entire sector as profiteering is unfair and does not take into account that small providers “are not making large margins”. He focussed the PAC attention on larger private equity providers.
He did not think that the financial oversight measures, such as monitoring and capping profits, being introduced through the Children’s Wellbeing and Schools Bill would reduce the number of private equity providers. He worried about unintended effects perhaps as providers left unexpectedly leaving shortages
The ADCS were pressed about the use of unregistered homes and responded that it happens in “very rare circumstances where you have both an absolute duty to place that young person in order to keep them safe and no regulated placement will take them”. This was challenged citing ’23-24 figures of an estimated nearly 1,000 children. It was explained that no registered setting could be found for those children and local authorities have an obligation to make children safe by placing them safely. The DfE supported the ADCS reiterating that councils only use unregistered settings when no other placements are available or an emergency arises. PAC members challenged this with figures showing that children spent extended time in these homes.
The DfE agreed they did not know how many children are in unregistered homes and have been there for six months or a year? However a 2024 Children’s Commissioner survey around 775 children were in unregistered accommodation, with an average placement length of 185 days.
The PAC are expected to make recommendations for government action on the issue.
The CHA highlighted delays in the Ofsted registration process and the effects on providers’ costs explaining that the registration target timeline has gone from 16 weeks to 18 months where a children’s home has to carry senior staff teams. This adds to the fees.
Then DfE advised that Ofsted is prioritising applications that are needed urgently, either because local authorities require an emergency placement or because local provision is needed to meet an identified urgent sufficiency need.
It is also prioritising applications that are linked to government capital funding for areas where supply is short, and anywhere where a child who is subject to a deprivation of liberty order from the court is being accommodated in unregistered provision. Priority applications have a two to six-month timescale. Of registrations so far in 2025/26, 78% have been approved.
The PAC heard that 84% of residential child care settings and 74% of places are provided by the private sector.
DfE have the view that there are benefits to having a mix of providers, and would worry about there being over-dominance of a particular kind of provider. They are working to rebalance the sector through funding LA homes and third sector and not-for-profit providers, and that is why we have got the work going on to try to bring more social finance into the system and to try to generate more support for not-for-profit providers because we think a balanced market is a good thing.
