Fixing the children’s social care market: Summary

The children’s social care market in England is broken. When a child needs to go into care, councils often face a limited set of options, with choices shaped too much by the provision that is available than by the child’s needs. Sometimes, the options are so limited that local authorities must pick the “slightly less unacceptable” of two unacceptable alternatives. ¹ House of Commons Committee of Public Accounts, Financial Sustainability of Children’s Care Homes: Sixty-first report of session 2024–26 (HC 1233), The Stationery Office, 2025, p. 11, retrieved 10 March 2026, https://committees.parliament.uk/publications/51065/documents/283185/default

At the root of this problem is a mismatch between the demand for care and its supply. There are simply not enough placements of the right type, in the right places, to meet children’s needs. In practical terms, this means that:

• Too many children are in unsuitable care. They are placed increasingly far from their support networks, and sometimes in residential care – the most acute form of provision and the one least resembling a family environment – when their needs would be better met in foster care. Some of the most vulnerable children live in settings with no formal oversight, leaving little assurance that minimum standards of care are met.
• The quality of care is subject to a postcode lottery. Too often, the suitability of a child’s care is arbitrarily determined by which local authority is responsible for them, and what provision they have access to. Disparities in care quality across England are widening as the market becomes increasingly dysfunctional.
• The system is financially unsustainable. Scarcity of provision means that spending on children’s care has rocketed, reaching a point where it is financially unsustainable. ² Comptroller and Auditor General, Managing Children’s Residential Care, Session 2024–26, HC 1290, National Audit Office, 2025, www.nao.org.uk/wpcontent/uploads/2025/09/Managing-childrens-residential-care.pdf  According to the Competition and Markets Authority, the largest private providers are making “materially higher profits” than would be expected were the market functioning effectively. ³ Competition and Markets Authority, Children’s Social Care Market Study: Final report, GOV.UK, 2022, p. 5, https://assets.publishing.service.gov.uk/media/6228726cd3bf7f158c844f65/Final_report.pdf  Children’s social care now exerts massive pressure on local authority finances, putting some local authorities at risk of insolvency.

There is more that local authorities could do to realign the supply of children’s social care with demand, for example:

• develop better forecasting capability
• provide foster carers with a more comprehensive support offer
• invest more in their own provision
• invest in preventative services to alleviate some acute pressure.

But these actions require upfront (and, in most cases, ongoing) investment, which is incredibly difficult for councils to scrape together given the deep cuts made to their funding since 2010. And even with additional funding, clear political direction is needed to signal that such investments are ones that elected officials expect local authorities to make.

Councils’ ability to shape the set of available placement options, and to forecast or stem demand for the most acute forms of care, is – critically – limited. Private providers increasingly dominate the residential care market, which, in some cases, allows them to set prices, or refuse to provide care for children with more complex needs when they are equipped to do so. High levels of debt among some of the largest private providers leave the social care system and the children in it exposed to sudden and widespread service closures. Private providers are offered few incentives to create capacity where it is needed so, instead, many build provision in the most commercially viable or cheap areas of the country. And certain regulatory and workforce barriers, over which councils have little power, may discourage providers of any type from seeking to create new capacity.

Councils also have limited influence over demand, and do not always have data available that they can use to forecast it. Gaps in other public services, particularly mental health services, drive some of the most acute demand for care. Where children’s primary needs sit outside social care, local authorities can become involved only at crisis point, leaving little scope to prevent, or forecast, escalation into the most intensive and expensive forms of care. Councils have even less control and foresight over demand from unaccompanied asylum-seeking children, which is instead determined by the UK’s immigration policy and the global refugee crisis.

Although these problems have now intensified into crisis, they are not new. The then government acknowledged many of them in 2007 in its Care Matters white paper, which set out proposals to strengthen councils’ ability to commission enough suitable local care placements. ⁴ Department for Education and Skills, Care Matters: Time for change, Cm 7137, The Stationery Office, 2007, https://assets.publishing.service.gov.uk/media/5a7ecc6ded915d74e33f27b8/Care_Matters_-_Time_for_Change.pdf  Nearly 20 years later in 2024, the Starmer administration announced a suite of reforms to children’s social care with very similar aims. ⁵ Department for Education, Keeping Children Safe, Helping Families Thrive, CP 1200, The Stationery Office, 2024, https://assets.publishing.service.gov.uk/media/67375fe5ed0fc07b53499a42/Keeping_Children_SafeHelping_Families_Thrive_.pdf

The new reforms set out a clear and ambitious vision, with a particularly welcome focus on early intervention, and backed by relatively generous funding. ⁶ Davies N and Haile D, Public Services Performance Tracker 2025, ‘Cross-service analysis’, Institute for Government, 2025, www.instituteforgovernment.org.uk/sites/default/files/2025-11/performance-tracker-2025-cross-service-analysis_0.pdf  Yet the proposals stop short of the integrated, cross-service approach needed to support children at the sharpest end of the care system, who often have multiple and overlapping needs. The government must also address system-wide barriers – including gaps in key data and insufficient workforce capacity – that risk undermining the delivery of its vision.

A 10-point plan to deliver children’s social care reform

To make sure its reforms deliver real change for children, the government should:

1.    Ensure that regional care co-operatives have the funding, analytical capacity and data they need to forecast demand for children’s social care well

2.    Ensure that regional analysis of demand retains granular insight

3.    Clearly define preventative spending, prioritise it at every level of government and ensure it is not siloed

4.    Improve the availability and quality of data on preventative children’s services

5.    Tackle the financial barriers to becoming a foster carer, and identify and address shortages in specific types of foster placement

6.    Make clear what baseline it will use for measuring progress towards its target for 10,000 additional foster places

7.    Clarify the structure of its desired care market, as the National Audit Office has recommended

8.    Develop a clear plan to ensure there is enough workforce capacity to deliver its reforms

9.    Provide incentives and funding structures that enable better co-ordination of support for vulnerable children

10.    Ensure that accountability for commissioning children’s social care sits with the appropriate bodies, supported by robust data.