The UK government has announced a £53 million investment under its Plan for Change to create 200 new placements in high-quality, council-run children’s homes. This initiative aims to better protect vulnerable children from being placed in unsafe and illegal accommodations by expanding regulated, specialized care options across the country.
For the first time, government funding is being specifically directed toward children with highly complex needs—those who are at risk of, or have already been, deprived of their liberty. These children often require intensive support from care teams to manage behaviors that pose a risk to themselves or others, including frequent absconding and mental health crises.
The new homes will provide safe and stable environments tailored to these children’s behavioural and mental health needs. This development responds to a growing shortage of suitable placements, which has led many councils to use illegal, unregistered accommodations. These placements are not regulated by Ofsted, often placing children in dangerous or unsuitable living situations.
According to the Children’s Commissioner, local authorities are spending around £440 million annually on unregistered placements. In some extreme cases, over 30 placements have cost more than £1 million each. Some private providers are reportedly extracting over 20% of placement costs as profit. One example involved a child with special educational needs and mental health issues being housed in a caravan for two months at a cost of £75,000.
The funding builds on reforms proposed in the Children’s Wellbeing and Schools Bill, which includes provisions to give Ofsted stronger enforcement powers and allow the Secretary of State to cap profits of care providers if profiteering persists. The overall goal is to shift children’s social care from reactive crisis intervention to a model focused on early support and prevention.
Early evaluation of these reforms in pilot areas has shown promising results, including improved coordination among service providers and more consistent support for families. As part of this shift, funding for preventative family services has doubled from £250 million last year to £500 million this year, ensuring that every family in need has access to a dedicated family help worker.
The government has pledged to maintain this £500 million annual investment through 2028–29, alongside a further increase of at least £300 million over the next two years. Legislative measures will also increase transparency in the finances of private care providers, with the potential for a profit cap if voluntary reforms are not adopted.
To support the implementation of financial oversight, an expert market intervention advisory group has been formed. This group will help design the regulatory framework and identify strategies for involving more voluntary and non-profit providers in the children’s care sector.
Additionally, the government is exploring ways to incentivize charities and ethical investors to open children’s homes, including through alternative funding models such as social finance. These efforts aim to ensure the care system is both sustainable and centred on children’s safety and well-being, rather than profit.
