Profit-making from children’s care in Wales is set to end by 2030, other than in exceptional circumstances, after a bill to implement the measure became law.

The passage of the Health and Social Care (Wales) Act 2025 makes Wales the first UK nation to institute an effective ban on profit in the provision of fostering, children’s home or secure accommodation placements for looked-after children. In Scotland, independent fostering agencies are not permitted to make a profit, but private children’s homes are.

After the legislation received Royal Assent today, minister for children and social care Dawn Bowden said: “By removing profit from the care of looked after children, we’re ensuring that funding goes towards improving outcomes for young people and I’m proud that we’re the first UK nation to take this bold step.”

Three stages of profit ban

Under the government’s plans, the policy to eliminate profit will proceed in three phases:

1. From 1 April 2026, no new for-profit providers of children’s home, fostering or secure accommodation services will be allowed to register in Wales.
2. From 1 April 2027, existing for-profit providers will not be able to add additional beds or foster carers to their services.
3. From 1 April 2030, councils will not be able to make new placements in existing for-profit providers of children’s home, fostering or secure accommodation services without ministerial approval, in the case of Welsh authorities, or in exceptional circumstances specified in regulations, in the case of English authorities.

Following stage three, placements will generally only be permitted in council-run homes, or with local authority foster carers, or with placements provided by four other types of organisation: charitable companies limited by guarantee without share capital; charitable incorporated organisations; charitable registered societies or community interest companies.

Under all four models, there are no dividends paid to shareholders or members and surpluses must be reinvested in services. These organisations would also have to have as their primary purpose the welfare of children or another public good determined by the Welsh Government.

Council and provider concerns about legislation 

The Welsh Government has said that the legislation is a response to young people’s concerns about having profit made from their care and would ensure that surpluses were reinvested in improving services.

However, both councils and providers have voiced concerns about the impact of the act.

The Welsh Local Government Association (WLGA) has warned that it risks putting pressure on an already-stretched care system, while the Children’s Home Association has said that ministers have “significantly underestimated” the cost of replacing for-profit services and that children would increasingly be placed in unregulated care as a result of the act.

Legislation to eliminate profit from the provision of care to looked-after children in Wales has been approved by the Senedd and so will become law.

Under the Health and Social Care (Wales) Bill, new placements in for-profit children’s homes, secure accommodation or foster placements, by Welsh or English councils, will be banned – other than in exceptional circumstances – in April 2030.

This is three years later than Welsh ministers’ original target for eliminating profit, but they have lengthened their planned timetable in response to significant concerns about the potential disruption to children’s care from their original plan.

Currently, the private sector provides 87% of children’s home and 35% of fostering placements in Wales.

Young people ‘don’t want profit made from care’

Introducing its final debate in the Senedd last week, the Labour government’s minister for children and social care, Dawn Bowden, said the legislation was a response to young people saying that “they did not want to be the means of someone making a profit out of the challenges that they and their families faced”.

She said in delaying implementation, the government was “mindful of minimising the risk of disruption to children”.

However, she added: “But I want to be very, very clear that the 2030 date for the ending of new placements by Welsh local authorities in existing for-profit services is not a target date, it is the absolute end date.

“And I expect substantial progress to be made before then in ending placements of existing for-profit children’s homes and fostering services prior to 2030 in areas that have sufficiency for that not-for-profit provision, and I will be making sure that we get to that place as quickly as we possibly can.”

Councils’ concerns over impact on care system

However, the Welsh Local Government Association, while voicing support for the bill’s ambitions, raised concerns about its impact on the care system.

“Councils continue to fully support the ambition of removing profit from the care of children that the Health and Social Care Bill aims to deliver,” said Charlie McCoubrey, the WLGA’s spokesperson for health and social services.

“It’s an important step towards making sure vulnerable children and young people get the right support, with their needs prioritised over financial gain.

“That said, we’re still concerned about the potential impact on a system that’s already under pressure, with a need for appropriate levels of funding to make this work. Councils are already stretched, and without proper, long-term investment, there’s a real risk of putting even more pressure on the services children rely on.

“We’re keen to keep working closely with the Welsh Government to help deliver these changes in a way that supports local authorities, doesn’t destabilise existing placements, and makes a real difference to children’s lives.”

Welsh Government ‘has significantly underestimated costs’

From a provider perspective, the Children’s Home Association said there was “no evidence” that many children’s homes providers would be able to transition to a not-for-profit model, meaning councils would have to replace them.

However, it warned that the Welsh Government had “significantly underestimated the cost of replacing the providers who have provided specialist care to society’s most vulnerable for decades”.

The CHA cited figures produced by the Welsh Government itself showing that the average weekly cost of looking after a child in a standard four-bed independent home was £3,811, 38% below the equivalent for a local authority home (£5,625).

The association also accused the Welsh Government of rejecting efforts from the sector to devise a “viable solution”, for example, by permitting models of care that restrict profit. It said that children would increasingly be placed in unregulated settings due to a lack of placements.

‘The right thing to do, but concerns must be addressed’

Giving the British Association of Social Workers (BASW) Cymru’s response to the bill, national director Sam Baron said: “This is a progressive and ambitious piece of legislation which, is simply the right thing to do.

“Whilst full implementation will take several years, this move will rightly return public money into the public care system, increasing available resources and, by implication, release public money to address the issues of quality variations and low salaries.

“However, frontline voices and concerns must be listened to and addressed, by ensuring an already stretched public system receives the desperate investment it already needs to avoid even greater pressures being felt further down the line.”

Profit ‘not inherently at odds with excellent care’

The bill, which will also introduce direct payments for people receiving NHS continuing healthcare, was passed comfortably, with only the Conservatives voting against.

The party’s shadow cabinet secretary for health and social care, James Evans, said private sector providers played “a critical role in ensuring that children have somewhere safe to live and receive the care and support they need” and that it was “wrong to assume that  making profit is inherently at odds with delivering excellent care”.

Under the government’s plans, the policy to eliminate profit will proceed in three phases:

1. From 1 April 2026, no new for-profit providers of children’s home, fostering or secure accommodation services will be allowed to register in Wales.
2. From 1 April 2027, existing for-profit providers will not be able to add additional beds or foster carers to their services.
3. From 1 April 2030, councils will not be able to make new placements in existing for-profit providers of children’s home, fostering or secure accommodation services without ministerial approval, in the case of Welsh authorities, or in exceptional circumstances specified in regulations, in the case of English authorities.

Who can provide care to children?

The bill permits local authorities and four types of organisation to provide care to children: charitable companies limited by guarantee without share capital; charitable incorporated organisations; charitable registered societies or community interest companies.

Under all four models, there are no dividends paid to shareholders or members and surpluses must be reinvested in services. These organisations would also have to have as their primary purpose the welfare of children or another public good determined by the Welsh Government.

By Tim Spencer-Lane

The Children’s Wellbeing and Schools Bill was introduced in Parliament on 17 December 2024.

Part 1 of the bill contains reforms to children’s social care. Part 2 makes provision relating to education in England. Most of the social care reforms were foreshadowed in the policy paper, ‘Keeping children safe, helping families thrive’, which was published in November 2024.

This article summarises the main provisions that will impact on social workers.

Family group decision making

The bill would add a new section to the Children Act 1989 to impose a duty on local authorities who are considering making a court application for a care or supervision order, to offer a family group decision making (FGDM) meeting to the child’s parents or any person with parental responsibility for the child.

The purpose of the FGDM meeting is to enable a child’s family network to meet to discuss the welfare needs of the child and to make a proposal in response to concerns about the child’s welfare.

The duty does not apply if the local authority determines that it would not be in the child’s best interests.

Child protection and safeguarding

Safeguarding partners

The bill seeks to amend the Children Act 2004 to make it a requirement for the three safeguarding partners (the local authority, NHS integrated care board and police) in each local area to include education and childcare “relevant agencies” as mandatory participants in their multi-agency safeguarding arrangements. Currently, safeguarding partners only need to make arrangements to work with a “relevant agency” if they consider it appropriate to do so.

Multi-agency child protection teams

The bill would insert new sections into the Children Act 2004 to require safeguarding partners to establish and run at least one multi-agency child protection team in their area. The main purpose of these new teams is to support the local authority in delivering its child protection duties under section 47 of the Children Act 1989.

ICBs will be required to nominate a health professional with experience in relation to children’s health, while the police will be required to nominate an officer to be part of each multi-agency child protection team. The local authority is required to nominate someone with experience in education in relation to children and a social worker with experience in relation to children, and may appoint other appropriate individuals after consultation with safeguarding partners.

Information sharing

The bill would also amend the Children Act 2004 to impose a duty on specified persons and bodies to disclose information that may be relevant to safeguarding or promoting the welfare of a child, to other relevant persons in certain circumstances. The duty applies where the person considers that the disclosure may facilitate the exercise by the recipient of any of its functions that relate to safeguarding or promoting the welfare of children, unless disclosure would be detrimental to the child.

The duty to share information will apply to persons listed in section 11(1) of the Children Act 2004, including local authorities, ICBs, NHS trusts/foundation trusts, police forces, probation services and youth offending teams, along with education and childcare “relevant agencies”.

Consistent child identifier

The bill also makes provision, under the Children Act 2004, for a consistent child identifier (also known as a single unique identifier or SUI). Designated persons must include the consistent identifier when processing information about a child for safeguarding and promotion of welfare purposes.

Support for children in care or kinship care, and those leaving care

Kinship local offer

The bill would amend the Children Act 1989 to require local authorities to publish information about their general approach to supporting children in kinship care and kinship carers in their area, as well as financial support which may be available to them in their area (the “kinship local offer”).

Local authorities must take such steps as are reasonably practicable to ensure that children in kinship care and kinship carers receive the information in the kinship local offer.

Supporting educational achievement

Under amendments to the Children Act 1989, local authorities would be required to take appropriate measures to support the educational outcomes of children in need and children in kinship care.

The steps that can be taken under this duty include enabling children to overcome barriers to their educational achievement and improving educational attendance. The duty is a strategic duty, which does not extend to the educational outcomes of individual children.

The local authority must appoint at least one person to discharge the duty (in practice this is usually the virtual school head).

Supporting care leavers

The bill would also introduce a new provision in the Children Act 1989 to require each local authority to consider whether each former relevant child (up to age 25) requires “staying close support” and where their welfare requires it, to offer that support.

“Staying close support” is support to assist the former relevant child: (1) to find and keep suitable accommodation and (2) to access services relating to health and wellbeing, relationships, education and training, employment and participating in society. Support means the provision of advice, information and representation.

There are also amendments to the Children and Social Work Act 2017 to require each local authority to also publish the arrangements it has in place to support and assist care leavers in their transition to adulthood and independent living.

Accommodation of children

Regional co-operation

The bill seeks to amend the Children Act 1989 to give the secretary of state powers to direct two or more local authorities to make regional co-operation arrangements to carry out their functions in relation to the accommodation of looked after children.

The arrangements could be: (1) to carry out their strategic accommodation functions jointly, (2) for those functions to be carried out by one of the local authorities on behalf of the others or (3) for a corporate body, of a kind that may be specified in the secretary of state’s direction, to support them in carrying out those functions.

Deprivation of liberty

The bill also includes a number of changes to section 25 of the Children Act 1989. It would change the references from “restricting” liberty to “depriving” children of their liberty, to better reflect the nature and purpose of this section.

The bill would also provide for the authorisation of the deprivation of liberty of children in alternative placement types beyond just a secure children’s home. It brings within the scope of section 25 accommodation provided for the purpose of care and treatment of children that is capable of being used to deprive a child of their liberty (“relevant accommodation”).

The secretary of state would have powers to set out in regulations: (1) the maximum period for which a child may be kept in relevant accommodation both with and without the authority of a court, (2) the cohort of children who may be placed in relevant accommodation, and (3) a description of the alternative accommodation.

Currently, many children are being deprived of their liberty outside of a statutory framework, via the inherent jurisdiction of the High Court.

The government’s intention is to “provide an alternative statutory route to authorise the deprivation of liberty of a child in a more flexible form of accommodation, bringing more deprivation of liberty cases under a statutory framework via section 25, including its criteria for access, mandatory review points and parity with [secure children’s homes] in terms of access to legal aid”.

Regulating provider groups

The bill would give new powers to Ofsted in relation to parent undertakings (ie where more than one setting is owned or controlled by the same private or voluntary provider group).

The bill seeks to place a duty on parent undertakings to develop and implement an improvement plan where Ofsted have identified quality issues in multiple settings and reasonably suspects there are grounds for cancellation of registration in relation to those settings.

Should parent undertakings not comply with these requirements, Ofsted will have the power to issue an unlimited monetary penalty.

Tackling unregistered children’s homes

The bill also includes new powers for Ofsted to impose monetary penalties for breaches of the Care Standards Act 2000, including for operating unregistered children’s homes. This is designed to give Ofsted a quicker alternative to prosecution in these cases.

Financial oversight regime

The bill would also introduce a financial oversight regime for relevant children’s social care providers who meet conditions that will be set out in regulations. These are likely to relate to the size of the provider and whether it would be difficult to replace were it to fail.

The bill would give the secretary of state the power to require providers made subject to the regime to submit a “recovery and resolution plan”, setting out risks to their financial sustainability and actions they propose to take in response to these.

The secretary of state would also have the power to arrange an independent business review of a provider where there is significant financial risk to its sustainability. The secretary of state would also be under a duty to warn local authorities if there was a real possibility of relevant services failing, with potential adverse effects for the councils or any children looked after by them.

Limiting profits

The bill also provides for regulations to be made enabling the secretary of state to cap any profit made by a non-local authority registered children’s social care provider. The secretary of state may only make such regulations if satisfied that it is necessary to do so.

The government has said that it only intends to use the provision if other policies do not sufficiently reduce profiteering in the children’s social care placements market.

Agency workers

The bill seeks to provide a power for the secretary of state to make regulations applying to all English local authorities on the use of “agency workers” in children’s social care. The regulations may require that the agency workers meet certain requirements and make provision about how they should be managed and the terms on which they are supplied to local authorities.

When in force, this regime would replace the rules, introduced in 2024 under statutory guidance, regarding local authorities’ use of agency social workers in children’s services.

Ill-treatment or wilful neglect

This bill also intends to close a gap in existing legislation by extending the offences of ill-treatment or wilful neglect by a care worker or care provider to someone in their care, under the Criminal Justice and Courts Act 2015, to children aged 16 or 17 in regulated establishments in England.

Currently, the 2015 act protects against ill-treatment or wilful neglect by care workers providing health care for an adult or child or social care for an adult, while the Children and Young Persons Act protects those under 16 from cruelty by those who have responsibility for them.

Children not in school

The bill proposes a number of reforms aimed at protecting children who are being educated at home. Most of these involve amendments to the Education Act 1996 and include:

• Compulsory registers of children not in school in each local authority area in England, and a duty on local authorities to support the children on their registers (should a parent request this).
• Changes to the school attendance order (SAO) legal framework, for example, by introducing statutory timeframes for issuing and processing SAOs and making it an offence for parents to withdraw a child subject to an SAO from school without following the proper procedure.
• A requirement for a parent to obtain local authority consent to home educate if a child is: (1) subject to an enquiry under section 47 of the Children Act 1989, (2) on a child protection plan, or (3) at a special school or academy.
• A power for the local authority, in cases where a child is subject to a section 47 Children Act 1989 enquiry or on a child protection plan and is already being home educated, to review whether it is in the best interests of the child to be in school and require that the child be registered at a school.
• A duty for local authorities to consider the home environment and other learning environments when determining whether or not such children should be required to attend school.

What happens next?

The bill will be subject to debate in Parliament and will no doubt be amended during its passage. It is likely to become law sometime in spring 2025.

Some provisions will come into force the day the act is passed (such as the powers to make regulations and orders), others will come into force two months later (such as the duty to publish information for kinship carers and children in kinship arrangements, and the extension of the ill-treatment or wilful neglect offences.

Some provisions will be implemented over a longer period of time. For example, the new multi-agency child protection teams will not be implemented until 2027.

Tim Spencer-Lane is a lawyer specialising in social care, mental capacity and mental health and is legal editor of Community Care Inform.

Most social workers believe Labour’s plans to tackle profiteering in children’s care will succeed, but not without consequences, a poll has found.

The Department for Education’s (DfE) proposed reforms include regional commissioning of care placements, greater transparency around provider pricing and new powers for Ofsted to investigate providers of multiple children’s homes and fine providers of unregistered services.

Should these measures not succeed in bringing down excessive profit-making from care placements, the government has said it would introduce a cap on providers’ profits.

But do social workers think these measures will work?

Reducing profiteering to affect care placements

A Community Care poll of nearly 800 social workers revealed that most (73%) were confident that the DfE’s plans would curb profiteering.

However, most of this group – and 60% of all respondents – said they would also result in a reduction in the already scarce supply of care placements. 

Just over a quarter (27%) believed the reforms would make little or no difference.

Reforms require ‘commitment by all services’ to work

Social worker Tom J questioned how the government would address the issue of providers “making excessive profits” on the grounds that they would be unlikely to be transparent and co-operate voluntarily.

“Many care homes in the UK are owned by private equity companies, including those based in Qatar and the emirate of Abu Dhabi. They have to make a profit. The company will never open up its books, but the care provider they own may be able to open up about their data.”

Mark Corrigan argued that the way forward was not reform, but increased funding for local authorities to create specialist provision, while Steve advocated fostering competition in the sector by encouraging local care providers to open children’s homes.

“Councils could do this by engaging with the already existing good quality provision and inviting them to branch out into new areas, such as children’s homes,” he said. “Many elderly or young adult providers would jump at the chance to make a better profit […], but moving into another market is risky.”

However, another practitioner, Annie, doubted the government’s capabilities to tackle profit levels, citing its track record in other sectors.

“Based on the government’s success in tackling profiteering of private companies in other sectors (railway, fossil fuel, and water companies spring to mind), I wouldn’t hold out hope for either reducing costs or better provision in the care sector any time soon.”

What are your thoughts on the DfE’s plans to tackle profiteering in children’s social care?

The government has pledged to “crack down on care providers making excessive profit” from care placements, in children’s social care reforms unveiled today.

Labour’s proposed reforms to tackle “profiteering” are similar to those put forward by its Conservative predecessor, including through the regional commissioning of care placements and increasing the transparency of providers’ pricing.

But the government also warned that, should these not work as anticipated, it would cap providers’ profit levels from children’s social care placements.

The reforms, set out in a policy paper today, also include empowering Ofsted to investigate companies running multiple children’s homes and more speedily take enforcement action against unregistered services.

The Department for Education (DfE) will also tighten recently introduced rules limiting councils’ use of agency social workers by placing these into legislation and extending them to cover other children’s social care staff.

New safeguarding requirements on councils

In addition, it will require councils to set up multi-agency child safeguarding teams, and to also offer family group decision making meetings when cases reach the pre-proceedings stage, to give family networks the chance to find alternatives to children going into care.

In response to the huge rise in children being deprived of their liberty under the powers of the High Court due to a lack of suitable placements, it will create a statutory framework for these cases.

The DfE added that its reforms, generally, would also seek to rebalance the system towards early intervention in order to keep families together, in the context of the care population standing at near-record levels.  

This continues the emphasis of the agenda set out by the Conservatives in their Stable Homes, Built on Love strategy published last year, which was itself based on the recommendations of the 2021-22 Independent Review of Children’s Social Care.

The policy paper said the legislation the DfE was proposing would be brought forward when parliamentary time allows. This is likely to be through the Children’s Wellbeing Bill, which was promised in the King’s Speech.

‘We will crack down on providers making excessive profit’

Education secretary Bridget Phillipson said the care system was “bankrupting councils, letting families down, and above all, leaving too many children feeling forgotten, powerless and invisible”.

“We will crack down on care providers making excessive profit, tackle unregistered and unsafe provision and ensure earlier intervention to keep families together and help children to thrive,” she added.

A key focus of the reforms is the rising cost of care for looked-after children, which the government said had “ballooned” from £3.1bn in 2009-10 to £7bn in 2022-23.

Photo: pla2na/Adobe Stock

This has been driven by a shortage of suitable placements located in the right areas, which some providers have been accused of exploiting to increase fees and extract undue levels of profit from children’s care.

In its 2022 report on the placements market, the Competition and Markets Authority (CMA) found that, among the largest 15 providers, profit margins averaged 22.6% in residential care and 19.4% in fostering.

It said this was higher than would be expected in a well-functioning market, though it rejected the case for banning or capping profits on the grounds that this would reduce incentives for providers to invest in services and further shrink supply.

Backing for regional care co-operatives

Concerns about profit have led the Labour government in Wales to issue legislation to restrict the making of profit from children’s care, with a long-term aim of eliminating it altogether.

Its counterpart in Westminster will largely follow the blueprint to tackle profit set out by the Conservatives in Stable Homes, including by creating regional care co-operatives (RCCs) to commission placements on behalf of member authorities.

Photo: momius/Adobe Stock

RCCs are currently being developed in two areas, Greater Manchester and the South East, where they will go live next year.

In its policy paper, Keeping Children Safe, Helping Families Thrive, the DfE said RCCs would “harness the collective buying power of individual local authorities”, improving value for money from commissioning, while also developing provision to fill gaps.

It said it would legislate to enable groups of councils to set up RCCs, with ministers also taking powers to direct them to do so or intervene if a co-operative was not performing at a required standard.

Boosting pricing transparency

In another echo of Stable Homes, the government said it would seek to fill gaps in councils’ data around care costs, to “enable them to negotiate effectively with providers to secure the best placement for children at the lowest possible cost”.

“We will engage with the sector to bring about greater cost and price transparency which will aid local authorities in challenging profiteering providers, as well as enabling greater central government oversight of the placements market,” it said.

However, to guard against these measures not engineering a reduction in profiteering, the government said it would legislate to obtain powers to cap profit levels from children’s care placements, which would be enacted if required.

The idea sparked concerns from provider representative body the Children’s Homes Association, which said it risked “serious unintended consequences”.

“The CHA supports efforts to eliminate profiteering, but this law will incentivise more providers to adopt offshore interest and debt-driven business models,” it warned.

Greater oversight of hardest to-replace providers

Another Stable Homes policy being taken forward by the Labour government is setting up a financial oversight regime for the hardest to replace providers, to avoid children’s care being disrupted by businesses failing.

These providers, up to parent company level, would have to supply the DfE with financial information to enable it to assess the viability of their whole organisations.

Credit: lovelyday12 / Adobe Stock

They would also have to develop contingency plans to ensure that they did not exit the market in a disorderly way, while the DfE would have enforcement powers to ensure compliance with the regime.

Regulating children’s home groups

The DfE also pledged to give Ofsted the power to investigate multiple children’s homes run by the same company. The regulator has longed called for this to enable it to scrutinise companies’ decision making in relation to issues such as admissions, ending placements, budgeting and staffing levels.

The DfE said that, despite some companies ran over 100 children’s homes, Ofsted could not hold them to account for organisational failings that affected children’s care.

Under its plans, the regulator would be able to request, and monitor the implementation of, provider-wider improvement plans and be given powers, such as fining or preventing further registrations by the group, to enforce compliance.

Ofsted welcomed the proposal, with national director for social care, Yvette Stanley, saying: The proposed powers will strengthen our ability to hold providers to account at group level. This will mean that we can secure widespread improvements for children if there are patterns of failure.”

Tackling unregistered provision

The DfE said it would also give Ofsted powers to tackle a “worrying” rise in the use of unregistered provision, particularly of children’s homes and supported accommodation.

In 2023-24, Ofsted opened cases on 1,109 potentially unregistered settings and found that 887 (87%) should have been registered (compared to 370 in 2022-23).

Under the plans, the regulator would be given powers to fine providers of unregistered provision, as an alternative to criminal prosecutions, enabling it to act more quickly against organisations.

This was also welcomed by Ofsted, with Stanley adding: “It is only right that we are given additional powers and resources to better tackle persistent offenders and put a stop to unscrupulous and profiteering providers, once and for all.”

Housing support for care leavers

The reform package also includes legislating to require all councils to provide any care leaver (up to the age of 25) whose welfare requires it with support to access and maintain accommodation, along with practical and emotional support from someone they trust.

Photo: AdobeStock/Monkey Business

This would be based on the current Staying Close programme, which the DfE is funding 47 councils to deliver in 2024-25, at a cost of £22m, and would be designed to tackle the lack of support experienced by care leavers on moving into independent living.

The plan to extend Staying Close nationwide was also proposed by the care review and set out in Stable Homes, Built on Love.

The DfE said the duty on councils would not come into force until three years after the legislation is passed, to give them sufficient time to develop the service.

Charity Become, which supports young care experienced people, said it was “a very welcome and important first step” but must not become “another postcode lottery”.

Multi-agency safeguarding teams

Outside of the care system, the government has pledged to introduce a requirement on councils to set up multi-agency child safeguarding teams, involving professionals from social care, police, health and education, and other services, where required.

They would be responsible for investigating child protection concerns and managing cases, and would be staffed by specialists from the various constituent agencies.

This adopts a recommendation from the Child Safeguarding Practice Review Panel’s 2022 report into the murders of Arthur Labinjo-Hughes and Star Hobson.

That review found a “systemic flaw in the quality of multi-agency working”, with “an overreliance on single agency processes with superficial joint working and joint decision making”.

The panel’s proposed model of multi-agency safeguarding teams, along with the care review’s proposal for child protection cases to be held by specialist social workers, are being tested in the 10 families first for children pathfinder sites.

The DfE said the details of how the proposed teams would work would be based on the evaluation of the pathfinder, and councils and their partners would have time to prepare.

Annie Hudson, chair, Child Safeguarding Practice Review Panel

In response to the plan, panel chair Annie Hudson said: “We believe that this will provide a crucial new lever for tackling some deep-seated perennial problems in safeguarding children.”

Other child protection measures

Other child protection measures include placing a duty on parents to seek local authority consent to home educate their child where the child is subject to a child protection enquiry or on a child protection plan.

The DfE also plans to introduce a unique identifier for every child, to promote better information sharing between professionals. This will be piloted before the relevant legislation is implemented.

Alongside this, it will introduce a duty that would provide “absolute clarity on the legal basis to share information for the purposes of safeguarding children”.

This is designed to tackle findings that practitioners lack confidence to share information without families’ consent when there is not clear evidence of harm, despite there being other lawful bases to do so.

Rollout of family group decision-making

Councils will also have to offer families in pre-proceedings a family group decision making (FGDM) meeting, enabling them to be involved in decisions about their children’s future, where this is in the child’s best interests.

This is based on the findings of a randomised controlled trial (RCT), commissioned by what works body Foundations, into the use of family group conferences – a particular form of FGDM – at pre-proceedings, which reported last year.

This found that children whose families were referred for a family group conference (FGC) were less likely to have had care proceedings issued (59%) compared to those not referred (72%) and were less likely to be in care one year later (36%) compared to those not referred (45%).

Photo: zinkevych/Fotolia

The DfE acknowledged that “there may be barriers for local authorities in implementing FGDM at scale, including financial constraints and challenges around the recruitment or training of staff”. But it said it hoped its ambition could be realised through investment and the sharing of best practice.

Families should be offered ‘tried and tested’ FGCs – charity

Foundations’ chief executive, Jo Casebourne, welcomed the move, adding: “This type of family-led approach helps to avoid costly, late-stage interventions, and ensures that children and families get effective support at the right time.”

The Family Rights Group (FRG), which runs an accreditation programme for family group conferences services, was also supportive, but said it was vital that families were offered FGCs.

“For this radical ambition to be achieved, the offer to families must be of a family-led, robustly evaluated approach that has been tried and tested in the UK and abroad, namely family group conferences,” said FRG chief executive Cathy Ashley.

“They operate to clear standards and reduce the likelihood of a child entering or remaining in care. For children who cannot remain at home, they enable prospective carers to be identified from within the family.”

Virtual school head role extended

The government also pledged to legislate to require councils to appoint an officer responsible for promoting the educational achievement of children on child in need plans, on child protection plans and in kinship arrangements.

This role is currently carried out on a non-statutory basis by virtual school heads, who have a statutory role to promote the educational achievement of looked-after children and provide educational advice and information in relation to former children in care.

The DfE said its proposal would “bring consistency to the deployment of the role” and “ensure that children with a social worker and those in kinship care are in school, safe and are learning”.

Payment by results scrapped for Supporting Families

In her statement to Parliament announcing the policy paper, Phillipson said the government would consolidate more than £400m of children’s social care funding within the local government finance settlement in 2025-26, to simply resourcing arrangements for councils.

As a first step, it has suspended the payment by results mechanism of the Supporting Families programme, under which families with multiple needs are provided with multi-agency support, co-ordinated by a lead practitioner, to resolve issues.

Under payment by results, most councils receive some money for the programme up front with the rest delivered based on the outcomes achieved for families.

The Association of Directors of Children’s Services welcomed the decision to scrap the approach.

ADCS president for 2024-25, Andy Smith (photo supplied by the ADCS)

“[It] is a hugely positive step in the right direction towards ensuring that the limited funds in the system are used in the best interest of children and families, rather than on the mechanisms of tracking and reporting on this vital work,” said ADCS president Andy Smith.

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The government will legislate to tackle “profiteering” from children’s care placements in England, a minister has vowed.

Children’s minister Janet Daby said that the forthcoming Children’s Wellbeing Bill would strengthen regulation of the sector to “return children’s social care to delivering high quality outcomes for looked after children at a sustainable cost to the taxpayer”.

Her pledge came as Ofsted, in a bid to influence the legislation, called for new powers to regulate providers of children’s care placements, including in relation to profit-making.

‘Profiteering from vulnerable children unacceptable’

Daby, a former fostering social worker, was responding to a written question from fellow Labour MP Helen Hayes about what the government would do to tackle “excessive profits in the residential children’s social care sector”.

In her response, the Department for Education (DfE) minister said that “profiteering from vulnerable children in care [was] unacceptable” before saying that the Children’s Wellbeing Bill would tackle the issue.

Her comments follow longstanding concerns about profit levels among providers, particularly the largest, enabled by their leverage over councils needing to place children, often at short notice, amid an insufficiency of placements.

Profit levels of largest providers

In its 2022 report on the placements market, the Competition and Markets Authority found that, among the largest 15 providers, profit margins averaged 22.6% in residential care and 19.4% in fostering.

Since 2020, English council spending on children’s homes has risen sharply, with the cost of these placements increasing by 13% in 2021-22 and 15% in 2022-23, according to a recent report commissioned by the major children’s charities (source: Pro Bono Economics, 2024).

The number of registered places in mainstream children’s homes has grown by 28% over the past four years, compared with a 7% decline in the number of approved mainstream fostering households from 2019-23.

Promised children’s social care regulation

The Children’s Wellbeing Bill was announced in the 2024 King’s Speech, meaning it will be debated during the 2024-25 parliamentary session and should become law next year.

Initial information on the bill did not include any pledges to tighten the regulation of children’s social care services – a pledge in Labour’s manifesto – but Daby has now confirmed that the legislation will enable the government to deliver on its election commitment.

It is not clear as yet what the bill will contain on regulation and how far it will draw upon work commenced under the previous government to address service costs, profit levels and placement sufficiency through the so-called market interventions advisory group (source: Children and Young People Now).

However, last week, Ofsted set out a wish-list of measures for ministers to include in legislation, to bolster its regulatory powers over children’s social care services.

Ofsted’s call for new powers

This included being able regulate profit-making by large groups that provide multiple social care and education services, “to make sure their decisions are made in children’s best interests and not solely for profit”.

Ofsted also called for powers to:

• Regulate groups providing children’s homes or other social care services, including being able to restrict growth where there are systemic issues across multiple settings, requiring group leaders to tackle quality issues revealed by inspections and being able to enforce actions at a group-wide level.
• Fine unregistered settings, to deter providers from operating them. Its current powers are limited to prosecution, which Ofsted said was “costly and time-consuming”.
• Refuse registration applications based on need, for example, in areas, such as in the North West, that are oversaturated with children’s homes.

Other measures proposed by the regulator included setting quality standards for all places where children live away from home, including residential special schools, to ensure consistency across all settings, and enabling registered managers to be able to move from one setting to another without having to re-register, reducing burdens on providers.

Regulator ‘optimistic’ about reform

The proposals were made in response to the Big Listen, Ofsted’s biggest ever consultation, which also resulted in its plan to scrap single-word judgments for inspections of local authority children’s services and of children’s social care providers.

Its national director for social care, Yvette Stanley, said the regulator could not “pre-empt future ministerial decisions” but it was “working very closely with DfE officials” and was optimistic about the prospects for reform.

Daby indicated that the DfE was looking at at least one aspect of Ofsted’s proposals, on the location of children’s homes.

In answer to a parliamentary question, from Labour MP Mohammad Yasin, on the issue, Daby said: “The department is developing options in regard to planning of children’s homes,
including considering the location of new homes and registration requirements.”

Ofsted’s proposals were welcomed by the Association of Directors of Children’s Services (ADCS), which has long sought action to tackle profit levels among children’s home providers.

Children’s directors seek ‘bold action’ on ‘huge profits’

ADCS vice president Rachael Wardell said it supported the regulator being able “to look at the contribution groups of providers make to children’s outcomes and experiences, and their use of scarce public funds”.

“In recent years there has been a trend towards business mergers and acquisitions giving rise to some very large providers and an expansion of private equity investment in children’s homes, which is increasingly being seen in the childcare sector too,” she added.

“We await the government’s response to these asks and hope to see bold action from ministers to prevent huge profits being generated and extracted from the system on the backs of vulnerable children and young people, in particular.”

Daby’s commitment to ‘cracking down on excessive profits’ 

For the government, Daby added: “We know that all too often care placements for vulnerable children come at a massive financial cost to councils and a human cost to young people who aren’t getting the support they need.

“We are committed to cracking down on providers making excessive profits, and our Children’s Wellbeing Bill will strengthen regulation to make sure every child has a safe, loving home.”

Meanwhile, the DfE has selected two areas – Greater Manchester and the South East – to test the commissioning of care placements by region-wide bodies, rather than individual local authorities.

Regional care co-operatives – proposed by the previous Conservative government are designed to give councils – collectively – greater clout over providers to shape services across their regions and ensure sufficient high-quality placements for children in care.

The number of mainstream children’s homes in England has grown by 44% over the past four years, amid a contraction in the fostering sector.

Children’s home numbers grew by 12% in the year to 31 March 2024, continuing significant increases seen in preceding years, showed Ofsted’s annual statistics on the social care sector, released last week.

The number of places in mainstream homes – a category which excludes secure units and homes also registered as residential special schools – has grown more slowly but still significantly, with a 28% rise, from 10,033 to 12,870, from 2020-24.

Reduction in foster carer numbers

The growth in the residential sector has accompanied a decline in the number of mainstream fostering households, a group which excludes family and friends carers.

Their number fell by 7% from 2019-23, from 37,520 to 35,005, with the number of approved fostering places dropping by 12%, from 78,995 to 72,770 over the same period (source: Ofsted).

The shift in provision is evident in statistics on where looked-after children are placed.

The number of placements in secure units, children’s homes and semi-independent living grew by 4,530 (to 14,580) from 2019-23, compared with an overall growth in the care population of 5,700 (to 83,840).

Over the same period, the numbers in foster care grew much more slowly, by 1,260, to 57,020 (source: Department for Education).

Children’s homes ‘in wrong places’

As in previous years, Ofsted’s data showed there were significant disparities in the distribution of homes and places between regions. The proportion of places ranged from 6% in the South West and 8% in London to 22% in the North West, significantly above that region’s share of looked-after children (18%).

Ofsted has long raised concerns about a mismatch between the location of homes and local levels of need and demand.

Speaking to the Association of Directors of Children’s Services (ADCS) conference last week, Ofsted’s national director for social care, Yvette Stanley, said this reflected the lack of control over where homes are established.

“The homes are still in the wrong places,” she said. “We can’t stop the homes where there’s saturation nor is anyone stimulating growth where they are needed.”

Skills concerns despite improved performance

Ofsted’s data showed that performance among mainstream children’s homes had improved, with the proportion rated good or outstanding as of March 2024 standing at 83%, up from 80% a year earlier.

Despite the improving performance, Stanley raised concerns about skills levels in the residential sector.

“We have some real challenges out there,” she told the ADCS conference. “The needs of the children out there are growing, and we also know that our providers…have difficulty recruiting staff with the training and skills to work with those children.”

She added: “We must acknowledge that there are places where children really aren’t having their needs met – not many, but it’s really awful when I see them.”

Qualification levels falling

In its annual report last year, Ofsted said 54% of children’s homes staff of children’s home staff held a level 3 qualification, down from 61% four years ago. Regulations require homes to ensure staff are level 3 qualified within two years of starting work.

Providers and councils reported that staff in roles that required few or no qualifications were moving to better-paid jobs in other industries, while more qualified workers were moving into higher-paid agency roles, the regulator said.

Stanley urged directors to work with Ofsted to “nudge” providers to invest more in having staff with the right skills, amid widespread council concerns about the rising costs of care placements, particularly in residential care.

Placement costs driving children’s budget pressures

Authorities are budgeting to increase children’s social care spending by £1.4bn in real-terms in 2024-25, with spending on looked-after children accounting for £933m of this, according to government figures.

This follows a planned £1.2bn real-terms rise in children’s social care spending in 2023-24, of which £700m was accounted for by looked-after children’s expenditure.

Annual council spending on private children’s home providers – who run the vast majority of children’s homes – grew by 105% from 2016-22, during which time the number of registered places grew by just 11% (source: Revolution Consulting).

Concerns over profits

These pressures have been linked to profit levels, particularly among private-equity owned organisations. In these cases, companies are bought out by investment firms using funds backed by high levels of debt, which must then be serviced through the providers’ profits.

Before they left power, the Conservatives set up a market advisory group tasked with looking at how to tackle “profiteering” in the children’s social care sector.

It remains to be seen what stance the incoming Labour government takes on this issue, though in its election manifesto it promised to strengthen regulation of the children’s social care sector.

However, Stanley told the ADCS conference that, even if councils saved money through restrictions in profit levels, they may have to spend more on helping children’s homes invest in their staff.

“We might make savings if we eradicate profit but we may need to invest more into therapeutic support for these children,” she added.

Management vacancies

Separate Ofsted data released last week revealed that 12% of all children’s homes – including secure units and dual-registered residential special schools – did not have a manager in post as of 31 March 2024.

This is unchanged on last year, when Ofsted reported, in its annual report, that in 40% of homes with a registered manager, they had been in post for less than a year.

The data showed there was a “significant gap in oversight of what is happening for children”, the regulator said at the time.

The previous government’s children’s social care strategy included plans to develop a leadership development programme for children’s  homes and explore professional registration of the sector’s staff.

The new government is yet to confirm how far it will take forward the Stable Homes, Built on Love strategy.

The majority of social workers support banning profit-making companies from providing children’s care, a Community Care poll has found.

This follows the publication of a bill in Wales to end profit-making from the provision of children’s care placements.

Under the Health and Social Care (Wales) Bill, only not-for-profit organisations and councils would be able to provide fostering, children’s home or secure accommodation placements, following a transitional period.

Wales would be the first UK country to enact such a ban, though the Scottish Government is committed to doing the same and for-profit provision is scarce – though legal – in Northern Ireland.

In England, as of 2023, independent fostering agencies (IFAs) accounted for 47% of filled mainstream fostering places and private children’s homes accounted for 81% of residential placements.

But what would be the ideal way forward?

In a recent Community Care poll, 55% of practitioners backed a ban on profit-making companies providing care placements. A further 35% said they supported a ban in principle, but feared it would worsen placement shortages.

The remaining 9% disagreed with children’s care placements only being provided by not-for-profit organisations or councils.

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Legislation to end profit-making from the provision of children’s care placements in Wales has been published.

The Health and Social Care (Wales) Bill would permit only not-for-profit organisations and councils from providing fostering, children’s home or secure accommodation placements.

The reform would make Wales the first UK country to ban profit-making from both fostering and residential services.

However, following concerns during consultation that the reform would disrupt the supply of placements and children’s care, the Labour-run Welsh Government has dropped its original plan to require compliance from all providers by April 2027.

While new providers registering from April 2026 would have to be not for profit, existing services would be able to continue delivering for-profit care for an indefinite transitional period under conditions determined by regulations.

In the context of the private sector providing 87% of children’s home and 35% of fostering placements in Wales, the Welsh Government said this would “mitigate disruption” to the lives of children in existing placements.

However, despite this, both provider and local authority leaders raised concerns about the bill’s impact on the placements market.

Young people ‘have strong feelings’ about profit-based care

Introducing the bill in the Senedd this week, minister for social care Dawn Bowden said the reform was driven by what children and young people wanted as well as the Welsh Government’s belief in the inappropriateness of profiting from their care.

“In developing this bill, we have been guided by what young people have told us,” she said. “They have very strong feelings about being cared for by privately owned organisations that profit from their experience of being in care.”

Bowden added: “These are children who have been through the most traumatic of times who end up in the care system, and we have to offer them the best care that we can in whatever way we can. That means that any money coming into the system must be reinvested into the system.”

She told the Senedd that spending on residential care had tripled, from £65m to £200m, since 2017, which she said was “unsustainable”.

The reform is part of a wider plan to reduce the number of children in care – which has risen from 5,660 in 2017 to 7,210 in 2023 – deliver more care closer to children’s homes and reduce the number – and cost – of residential care placements.

This includes, potentially, rolling out family drug and alcohol courts across Wales, to keep more families together, and taking steps to boost foster carer recruitment and retention, including by making allowances more equitable between local authorities.

Chances of providers ditching profit model

Bowden said that, because of the transitional arrangements, there would be no “cliff edge” for profit-making providers, many of whom were in “active and encouraging conversations with us about how they can transfer their operation into a not-for-profit model”.

However, in a memorandum on the bill, the Welsh Government said that intelligence it had received indicated that, while high numbers of IFAs would convert, relatively few residential providers would, though it was not possible to be precise at this stage.

The memorandum sketched out three scenarios, under which 50% (scenario A), 25% (B) and no (C) private providers switched to not-for-profit provision.

Under scenario C, councils would have to secure an additional 653 residential care placements across 204 homes, whereas under scenario A, only 102 additional homes would need to be sourced.

Initial costs of reform falling on councils

According to a report by ADSS Cymru, a standard cost for developing a children’s home is £700,000, and the directors’ body assumed that councils would have to meet the start-up costs and bear the risks of homes running below capacity to encourage new not-for-profit providers to enter the market.

The Welsh Government is providing councils with £68m from 2023-26 to invest in new provision.

However, with all things being equal, councils would face additional costs of £88m in 2025-26, £67m in 2026-27 and £46.5m in 2027-28 under scenario C, compared with £45.5m (2025-26), £35m (2026-27) and £25m (2027-28) under scenario A, according to modelling by the Welsh Government.

In the long-term – from 2028-29 – the government projected that councils would save money under any of the three scenarios.

Also, it added that its intention was for the costs of reform to be lower than illustrated because of its plans to reduce the number of children in residential care.

Adequate funding ‘will be crucial’

In response to the bill, Welsh Local Government Association spokesperson for health and social care, Llinos Medi said removing profit from provision for children in care was “an important ambition in supporting us in achieving better outcomes for children and young people” that would lead to “a better and fairer system for all”.

“However, while we endorse the bill’s aims, we do have some concerns regarding the resources and capacity of local authorities to implement these changes effectively and within the timescales set out,” she added.

“Adequate funding and support will be crucial to ensure that local authorities can meet the increased demands and continue to provide essential services without disrupting the lives of children and young people in existing residential and foster care placements. We look forward to working collaboratively with the Welsh Government to address these challenges and ensure the successful implementation of this important legislation.”

‘Lack of detail on transitional arrangements’

On behalf of providers, Care Forum Wales chair Mario Kleft said there appeared to be “more questions than answers2 in the bill.

“There are some truly excellent providers of children’s care placements in the independent, third sector and charity sectors in Wales,” he added. “Nobody accepts that it is right to profiteer from any service and from our perspective the driver needs to centre on quality and choice.

“Whoever provides child care services, they need to be economically viable to ensure their sustainability into the future. There is not any great detail yet about how any transition might be achieved and I am aware that a number of local authorities who commission services have voiced concerns around practical issues and the affordability of what’s being proposed.”

The body representing children’s home providers has decided to exclude providers receiving finance from tax havens from membership.

The Children’s Homes Association’s (CHA) new membership rules also stipulate that members must be ultimately owned in the UK and have at least majority shareholders who are UK-registered taxpayers.

The CHA will base these judgments on checking providers against Companies House records and with reference to a list of countries deemed to be tax havens, which includes the British Virgin Islands, Bermuda, the Cayman Islands, Guernsey, the Isle of Man, Jersey, Luxembourg, Monaco and Switzerland.

The decision, which came into force on 6 April 2024, has excluded just 2% of CHA’s 300+ members.

Reduction in fee income

However, these organisations collectively represent 20% of placements under the association’s umbrella, meaning the decision will lead to a 10% reduction in income from membership fees.

The association said the move was designed to ensure that its private-sector members – who make up the large majority of the CHA’s membership and the children’s homes sector alike – contribute, through their taxes, to the state-funded care system that pays them.

Excluding providers financed through tax havens will also affect private equity-owned organisations, where companies are bought out by investment firms using funds backed by high levels of debt, which must then be serviced through the providers’ profits.

An analysis of the largest 20 children’s home and fostering providers by Revolution Consulting, published last year, stated that six had owners based outside the UK, and ten had private equity involvement.

Concerns about private equity ownership

In its 2022 report on the children’s social care, the Competition and Markets Authority warned that debt levels carried by private equity-backed companies increased the risks of providers failing, harming children whom councils would then have to find placements for at short-notice.

On the back of this, the CMA recommended that the Department for Education set up a market oversight regime to monitor the finances of the largest and most difficult to replace children’s home providers, which the DfE agreed to take forward in last year’s Stable Homes, Built on Love strategy.

In a statement on its membership changes, the CHA said it was “not appropriate” for fees paid to providers to be spent on “unreasonably high levels of interest”.

Its interim chief executive, Mark Kerr said the association supported “a mixed economy of children’s social care which relies on public, charity, and independent for-profit provision”.

Providers ‘should contribute to tax-funded care services’

He added: “An amazing range of specialist expertise exists in the sector and the continuation of investment from private organisations is vital to ensuring the right care is available for our society’s most vulnerable children.

“However, we are also committed to social value and believe that organisations delivering tax-funded care services should fairly contribute to the system that makes care possible in the first place.”

As well as concerns over provider debt, council leaders and campaigners have also raised repeated concerns about profit levels among largest providers, which the CMA concluded was higher than would be expected in a well-functioning market.

It did not recommend caps on prices or profits in its 2022 report, while the DfE also did not include any specific measures to tackle profits in the sector in Stable Homes, Built on Love.

Instead, the department said it believed its plans to for regional care co-operatives (RCCs) to take over responsibility for commissioning care placements from individual councils would reduce profit levels by ensuring care was better planned.

Call for national rules to tackle profit levels

However, the Association of Directors of Children’s Services has warned that there is no evidence that RCCs – whose full establishment is several years away – would have this impact and that national rules were needed to tackle what it has described as profiteering.

The ADCS welcomed the CHA announcement, with president Andy Smith saying: “This sends a positive signal about the need for a more stable care system that is committed to meeting the needs of our most vulnerable children and young people above all else. We now urgently need national government to create a set of national rules to ensure the system is reset in favour of children’s best interests.”