Councils are spending millions on private children’s homes. So why aren’t kids getting better care? 

There are nearly 10,000 young people living in children’s homes in England. Most of them are living in institutions run for profit. Private providers own 84% of children’s homes in England, charging councils an average £318,400 per child per year. Shareholders have made hundreds of millions of pounds from this arrangement – but a new survey suggests a high degree of public dissatisfaction with it.

We Own It polled 1,000 people on the children’s social care system, and three-quarters expressed a view. Half of those with an opinion wanted the government to “end profit-making provision in children’s social care altogether”, while 30% wanted the government to cap profits.

Just 21% said no further action needs to be taken.

The research comes as a House of Lords committee continues its inquiry into children’s social care.

The government pledged to “crack down on profiteering” in the sector last year, with capping profits as a last resort. Cat Hobbs, director of We Own It, called for an outright ban on profits – something that the Welsh government has already begun implementing through legislation to remove profit from children’s care.

“It’s truly immoral that private equity has been allowed to sink its claws deep into the sector,” Hobbs said. 

“It means that councils are struggling to make ends meet as they spend jaw-dropping amounts on care. 

“Meanwhile children get placed further away from their support systems because these companies really don’t give a damn about anything except their financial returns.”

Despite its huge cost – currently at around £3.1 billion per year to the state – the current system is failing too many children in care.

According to the most recent data, 49% of children in care in 2024 were placed more than 20 miles from their original home and 1,280 children in care were held against their consent under deprivation of liberty orders.

Ofsted has found 680 instances in which children had been placed in unregistered homes in 2024-25, a figure that the children’s commissioner Dame Rachel de Souza described as “a national scandal.” Her report into the issue earlier this year revealed numerous failures.

“One girl, Summer, was moved between four different homes in six months before being placed in an illegal children’s home, surrounded by staff who spoke limited English, without facilities to wash and left to support herself with meals and finances as though she were an adult,” de Souza said.

Read more:

• ‘Children in care shouldn’t be a route to profit’: Baroness Lola Young on privatisation of children’s homes
• Shocking number of children in care live without consistent love and support of an adult
• Reform councillor describing some children in care as ‘evil’ proves how broken the system really is

Why are so many homes outsourced?

Councils are legally required to provide care for children who cannot live with their families, either through fostering or residential homes. Around 84,000 children were in care in England in March 2024. Most are placed with foster carers, but a shortage of suitable placements means thousands need residential care, often because of complex needs.

Councils usually outsource residential care to private providers, who then charge handsomely. 

In 2022, the Competition and Markets Authority found that the 15 largest providers of children’s social care had average profit rates of 22.6% for children’s homes, and that their prices increased by an average of 3.5% above inflation each year.

Earlier this year, the Financial Times warned of a “gold rush” as private firms seek to capitalise on the desperation of councils who long ago outsourced their care homes but need to house children. 

Last year, the National Audit Office (NAO) reported that the cost of residential care for vulnerable children in
England had nearly doubled in five years, reaching £3.1 billion in 2023-24. The number of children in residential care had increased by just 10% over the same period. The watchdog said that a shortage of places, particularly for children with complex needs, had left councils competing for limited spaces and providers charging higher fees.

“Many children are placed in settings that don’t meet their needs,” Gareth Davies, head of the NAO, said at the time. 

“Local authorities are forced to compete for limited places in an under-supplied market, driving high costs.”

The government has begun taking steps to improve oversight of private providers and increase the supply of available places. 

At the first evidence session of the Lords Committee inquiry, Helen Waite from the Department of Education said that a timeframe had not been set for tackling sector profits but that it would be done “as quickly as possible”.

The Lords inquiry will look for ways to make the system “benefit the children and young people it is meant to serve,” said Lord Bradley, chair of the Public Services Committee.

“This support should ultimately allow these children and young people to thrive and reach their full potential in life so they can in turn create stable environments of their own.”

The committee is expected to publish its findings in the coming months.

Do you have a story to tell or opinions to share about this? Get in touch and tell us more. 

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