Some 800 vulnerable children placed in illegal homes for average of six months each this year, MPs find

Its new report, published today (15 Jan), revealed that last year, 800 vulnerable children were placed in illegal homes for an average of six months each.

Illegal children’s homes are those not registered with or inspected by Ofsted - giving the Department for Education no assurance over the quality of care or that children are safe.

In 2023–24, the average cost to local authorities for each child in residential care was £318,400, compared to £239,800 in 2019–20.

According to the report, the total financial costs of residential care almost doubled over five years to £3.1 billion in 2023–24.

The PAC noted: “Rising costs have resulted from a dysfunctional market where the need for homes in certain areas, particularly for children with complex needs, has exceeded the number of places available.

“This has led to competition between local authorities and given private providers the opportunity to choose not to home certain children or charge higher rates, making excessive profits.”

The report made the following key conclusions and recommendations:

1. The Department for Education (DfE) has not demonstrated the urgency and leadership needed to provide a children’s residential care system that works.

Recommendation: The DfE should demonstrate how it will take more ownership of the system by setting out: a clear definition of its role; what it wants to achieve, the associated actions and timeline; and how it will develop a joined-up system and approach with local authorities and wider government.

2. It is unacceptable that children are placed in illegal settings that are not inspected, increasing safety risks and offering no assurance over the quality of care.

Recommendation: In its Treasury Minute response, the DfE should reaffirm its commitment to reducing the number of children in unregistered homes to zero by the end of 2027 and set out the specific actions it will take to do so.

3. Providers of children’s homes, including local authorities, are not offering the places needed locally, leading to children being placed in homes that do not meet their needs.

Recommendation: The DfE should detail how it will better understand and address barriers to creating the places needed and set out how it will: provide local authorities more consistent funding and support to create new places; work with Ofsted to resolve delays registering new homes; address challenges in providers receiving planning permission where homes are needed; and ensure providers are better able to secure the qualified staff needed.

4. To reduce the demand for children’s residential care, the DfE is relying on there being more foster carers, but it has yet to address the significant challenges to increase numbers.

Recommendation: The DfE should set out how it will address the barriers to increasing the number of foster carers, with a clear timeframe and milestones.

5. Despite private providers providing most care home places, the DfE does not fully understand their financial position.

Recommendation: The DfE should set out how it will better understand the profits, motivations and debt positions of private providers and how it will then proactively address risks across the market.

6. The Department has failed to address the problem of local authorities competing for places and the effect that has on driving up costs.

Recommendation: The Department should clarify, as part of the Treasury Minute, the principles behind the collaborative regional approach it is working towards, by when it expects to implement its model nationally, and how it will support local authorities in the meantime.

Last week, the Children’s Commissioner warned that the costs of unregistered placements remain “staggeringly high”, and many are putting children at an “increased risk of harm”.

In her report, published on 11 January, Dame Rachel de Souza found that the use of holiday camps and activity centres to accommodate children illegally has risen from the previous year, putting children in placements with minimal facilities.

Responding to the report by the Public Accounts Committee, Cllr Amanda Hopgood, Chair of the Local Government Association’s Children, Young People and Families Committee, said: “With more children needing help with increasingly complex and challenging needs, what is most important is ensuring they get the best care and support. No council wants to place a child in an unregistered setting, and it is extremely concerning that in many cases, a lack of choice means provision is not fully meeting children’s needs.

“The astronomical cost of care placements also means there is less money available for councils to spend on earlier support for children and families.

“It is absolutely vital that the entire sector works together to ensure that we have enough homes that can meet children’s needs. This includes central and local government, Ofsted, the NHS and providers in all sectors.”

A spokesperson for the Department for Education said: “This government inherited a children’s social care system unable to meet the needs of the country’s most vulnerable children as this report highlights, but we are taking action to reform the sector. Running an unregistered children’s home is illegal and those who seek to profit from children’s social care illegally will face serious consequences.

“Our Children’s Wellbeing and Schools Bill is the most ambitious piece of child protection legislation in a generation and will bring important additional safeguards for children in care, as well as giving Ofsted the power to issue fines and take decisive action against illegal providers.

“We want all children in care to be in loving homes where they get the support they need, which is why we’re investing £2.4 billion in the Families First Partnership programme to stop children entering care by keeping families together, and will be laying out ambitious plans soon to boost the number of foster homes available in England.”

Lottie Winson