Response to PAC report: Government must fix supply, workforce and commissioning

The Children’s Homes Association (CHA) has responded to today’s Public Accounts Committee (PAC) report on the financial sustainability of children’s care homes, warning that England is now routinely relying on illegal, unregistered provision because there are not enough lawful, regulated placements in the right places for the children who need them most.

The PAC's final report, published 16th January, reveals that hundreds of children were placed in illegal homes for months, not days — and that the system is “not working”.

CHA agrees: illegal placements are not a niche problem at the margins; they are a predictable symptom of national sufficiency failure and, critically, a collective governance and regulatory failure that has allowed illegal children’s homes to prosper.

New analysis from the Children’s Commissioner published in January shows the crisis continuing into 2025: 669 children in care were living in illegal settings on 1 September 2025, with average costs around £10,500 per week and an estimated annual cost of £353 million to the taxpayer — including 36 “million-pound placements” already exceeding £1 million per child. Most of these children have significant additional needs.

Dr Mark Kerr, CEO of the Children’s Homes Association, said:

“Illegal children’s homes are local authorities purchasing danger at high costs because we have not developed the right regulated capacity for children with high risk profiles and complex lives.

"Over the last five years, CHA has developed evidence-based solutions to the sufficiency crisis affecting this cohort of children, with repeated requests to the government to take small but significant actions to remove the barriers for expert providers to develop the appropriate provision.

“The PAC is right to focus on value for money — but we cannot pretend this is a simple story of ‘public good, private bad’. When emotive and ideological debate is removed, the evidence is clear that independent children’s homes provide care at a lower cost than local authorities and can help remove the illegal market entirely by developing the right homes, in the right places, with the right practice.

“CHA supports the PAC’s focus on weak national grip, poor data about what provision is needed, delays and barriers to opening new homes, and insufficient oversight of market stability and financial risk. We are leading sector initiatives to address this including the roll out of the Child and Adolescent Needs and Strengths (CANS) assessment in partnership with local authorities.”

At the same time, CHA cautions against policy choices that could shrink capacity further.

In late December, the Observer reported the Children’s Minister’s plans to “phase out profit-making children’s homes as soon as possible”. 

This announcement has already caused highly experienced providers, who can safely care for children who present extreme risks, to retreat from plans to open more regulated provision. Whatever the moral instinct behind the announcement, a blunt “phase out” approach — without a fully funded national plan to replace capacity — risks making the illegal market bigger, not smaller.

Dr Mark Kerr, CEO of the Children’s Homes Association, said:

"Phasing out for-profit or independent children’s homes will be one of the most costly and complex system changes since the National Health Service and Community Care Act (1990), 35 years ago. We are disappointed that the first time the plans that threaten the future of thousands of children’s homes and their staff were seen in a newspaper article on Boxing Day. They deserve better.” 

The debate must also keep a clear distinction between profit and profiteering.

Ofsted’s annual report notes that most children’s homes are privately owned and that this is “not in itself a bad thing”, while warning about opaque ownership and a shadow market of unregistered homes charging exorbitant fees. The PAC report itself (in line with views from DfE and stakeholders at the hearing) recognised that the great expanse of quality and expertise in the private sector is part of the solution, not the problem.  CHA agrees that profiteering must be tackled — especially where financial structures are opaque and highly leveraged — but the response has to be precise and evidence-led, starting with the removal of tax haven-based providers.

CHA is calling for government to act on eight practical fixes:

1.  A national sufficiency plan for specialist and therapeutic provision — including for children at risk of deprivation of liberty — backed by capital and revenue funding, and clear expectations on where provision is needed.
2. Planning reform so councils grant planning consent for children’s homes by default, enabling the right provision to open in the right communities.
3.  Faster, clearer registration pathways for high-quality provision — while bearing down hard on those operating outside the law.
4. Support for the CHA workforce plan to stabilise staffing, reduce churn and agency dependence, and address the wage spiral created when public and independent sectors compete for the same limited staff.
5. Commissioning reform that ends crisis spot-purchasing and accelerates effective local authority commissioning to match children with the right homes.
6. Serious enforcement to end the use of illegal homes by 2027, including rapid action when an unregistered setting is identified.
7. Tougher financial transparency and market oversight, focused on the riskier end of the market (high leverage, opacity, offshore structures) without punishing small, practitioner-led homes that deliver high-quality care on modest margins.
8.  A ban on tax haven-based providers of children’s residential care so that those funded via general taxation pay a proportion of their profits back into society.

Dr Kerr added:

“If ministers want to stop ‘profiteering’, they need to stop creating the conditions in which profiteering thrives,” 

“Support the development of lawful capacity, stabilise the workforce, and fix commissioning — and the price pressure and the illegal market will fall.”

CHA stands ready to work with Parliament, government, local authorities and the regulator to turn the PAC’s findings into a practical national plan that delivers safe, stable, high-quality placements and better value for the public.

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Notes to editors

• The Children’s Homes Association (CHA) represents providers of registered children’s homes across England and Wales and across the public, private and charity sectors, alongside local authority and not-for-profit partners. 
• CHA has already tightened its own sector standards: since April 2024, CHA membership has required UK ownership, UK taxpayers as shareholders, and the exclusion of tax-haven loans or investment.

Media enquiries: 

Sophie Crewdson (Communications) 
07974081549 

Naomi Bowler (PA to Dr Mark Kerr) 
Naomi.bowler@the-cha.org.uk
07498 959 731