The children's care system in England is being distorted by providers prioritising profit over the needs of vulnerable young people, the national inspectorate has declared in a damning new report. Ofsted warns that a surge in new children's homes is concentrated in areas with cheap housing rather than where the greatest need exists, labelling the trend an 'ongoing national scandal'.
Profits Dictate Placements in a System 'Bent Out of Shape'
Sir Martyn Oliver, Ofsted's Chief Inspector, stated that the profit motive is increasingly determining where children's homes are located and who owns them. 'The most vulnerable children in our society deserve loving and stable homes,' he said. 'As a society, we are failing these children.' The watchdog's annual report reveals that while the number of registered children's homes hit a record high of 4,010 by March this year, a 15% annual increase, their distribution is deeply flawed.
This growth is heavily skewed towards the north-west of England, which now hosts over a quarter of all homes despite being home to only 18% of looked-after children. Ofsted believes providers are attracted by lower property prices, 'bending the system out of shape' and piling pressure on local services in regions already struggling. The report highlights 'stark regional differences', with 88% of London's local authorities rated good or outstanding for children's services, compared to just 46% in the north-west.
Spiralling Costs and a Shadow Market in Unregistered Care
The financial strain on the system is severe. Local authority spending on looked-after children has more than doubled from £3.9bn in 2015-16 to £8.1bn in 2023-24, pushing the average annual cost per child to £97,200. This crisis is exacerbated by a booming 'shadow market' of unregistered children's homes, where providers charge up to £30,000 a week in some cases.
Ofsted launched nearly 900 investigations into potential illegal homes in the last year. The inspectorate stated this market thrives due to a critical shortage of suitable places in legitimate homes. Alarmingly, almost nine in 10 local authorities admitted placing children in unregistered settings because they could not find an appropriate registered placement, creating a 'crisis both for children and for local councils'.
Private Sector Dominance and Calls for Government Action
The sector's fragility is underscored by its ownership structure. A significant 84% of children's homes are privately operated, with the ten largest owners controlling nearly a fifth of all homes. Ofsted warned that the failure of any major provider would have an 'enormous impact' across the country.
The report urges the government to work with councils to eliminate the use of unregistered homes entirely. Ministers have previously threatened a 'backstop' law to cap profits if providers do not voluntarily curb profiteering. The findings come alongside a worrying rise in child protection concerns for children's homes, which increased to 510 in the latest year from 364 the year before.
