Children’s Care System Under Strain As Councils Face Rising Costs

A new report from the Public Accounts Committee has warned that England’s children’s residential care system is failing vulnerable children and placing growing, unsustainable pressure on local authorities.

The Committee found that in September 2024 nearly 800 children - around one in ten of those in residential care - were living in illegal, unregistered homes, often for extended periods rather than short-term emergencies. These settings are not registered with Ofsted and cannot be routinely inspected, meaning there is no assurance that children are receiving safe or appropriate care.

The report highlights a severe shortage of suitable care places across the country, particularly for children with complex needs. Almost half of all children in residential care are placed more than 20 miles from their home area, making it harder for social workers to maintain contact and understand local support options. Such distance placements are a long-standing issue for many rural authorities, where limited provision and workforce shortages already restrict local options.

As demand has outstripped supply, local authorities have increasingly been forced to compete with one another for placements, driving up costs in what the Committee describes as a dysfunctional market. Spending on residential care has almost doubled in five years to £3.1 billion in 2023–24, with the average annual cost per child rising to more than £318,000. These pressures are compounding wider financial challenges facing councils.

The report also raises concerns about the role of private providers, which operate the majority of children’s homes. It highlights high profit margins among some large providers and notes that the Department for Education does not have a clear line of sight over the financial position of much of the sector, limiting effective oversight.

Chair of the Public Accounts Committee Sir Geoffrey Clifton-Brown described the situation as “utterly unacceptable”, warning that a lack of suitable provision is forcing councils into choices that routinely put children at risk.

The Committee calls on government to show greater leadership, improve planning of provision across regions, strengthen oversight of providers and ensure local authorities have the funding and support needed to create appropriate places where they are most needed.

The full report can be read here