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The Competition and Markets Authority (CMA) launched a market study into childrens social care in March 2021 due to concerns over a lack of availability of placements and high prices.

Its final report, published in March 2022, found there is a shortage of appropriate places in childrens homes and with foster carers meaning some children are not getting the right care from their placement. It also found that some children are being placed far away from their hometown or separated from their siblings. This shortage of places has driven up prices, meaning local authorities who are responsible for placing children in an appropriate home are paying higher costs, which are then picked up by taxpayers.

The CMAs study also found that private sector investors appear to be making higher profits in England and Wales than the CMA would expect in a well-functioning and competitive market. This suggests authorities may be paying more for these services than they need to, particularly when it comes to fostering services which are often cheaper when run by local authorities.

To address the issues it found and help make sure children are properly protected, the CMA made a number of recommendations to government all of which have today been accepted by the Department for Education (DfE) in respect of England.

As part of its wider strategy to improve the sector, the DfE has committed to implement these recommendations to ensure long-term reform, including:

• Developing regional bodies to support local authorities in obtaining suitable placements for children: These bodies will be able to engage better with placement providers, such as care homes and foster agencies, to help make sure the right placements are available when and where children need them. They will also be trialled and evaluated to make sure they are fit for purpose.
• Introducing a financial oversight regime: Establish an oversight regime to assess the financial health of care home providers that are most difficult to replace, and alert authorities if a failure is likely.
• Reviewing regulation relating to the placement of children: Create an expert working group to review all existing legislation and regulation regarding childrens social care, and develop a common set of standards for fostering, childrens homes and supported accommodation.

Sarah Cardell, Chief Executive at the CMA, said:

This is a much-needed first step to improving the lives of vulnerable children and young people who rely on these services. Our recommendations, all of which have been accepted by the Department for Education, will help build a better and more supportive system.

Well continue to work with the government to make sure these proposals deliver longstanding improvements, providing every child in care with the right home.

The CMAs study looked at childrens social care in England, Scotland, and Wales, across which there are over 100,000 looked-after children. The current annual cost for childrens social care services is around 5.7 billion in England, 680 million in Scotland and 350 million in Wales.

The study highlighted and reflected the significant differences in the policy context for childrens social care between England, Scotland, and Wales. The Scottish Government and the Welsh Government each committed to move away from the model of for-profit provision in childrens social care, and national organisations exist in these nations to support local authorities. The CMA will continue to work with both governments as they move through their own policy reform processes.

For more information, see the Childrens social care study webpage.

Notes to editors

1. Analysis of prices and profits is from financial data obtained from the 15 largest private providers of childrens social care across all three nations, covering the period since the financial year 2016. Our analysis covers independent providers responsible for around a fifth of placements in childrens homes and slightly over half of fostering placements.
2. In England, 72% of children in care are placed in foster care, 13% in residential care such as childrens homes, and 15% in other settings including unregulated accommodation. In Scotland, 33% are in foster care, 10% in residential care and 57% in other settings (the higher percentage in other settings in Scotland reflects a broader definition of care, but excludes unregulated settings, which is not permitted in Scotland). In Wales, 70% of children are in foster care, 7% in residential care, and 23% in other settings.
3. The largest proportion of childrens homes places in England and Wales are provided by the for-profit sector around 78% in England and 77% in Wales. This compares to 35% in Scotland. Most fostering placements are provided by local authority foster carers 64% in England, 69% in Scotland and 73% in Wales. However, a significant minority are provided by private providers (except in Scotland where for-profit provision is not permitted) and voluntary providers.
4. Media queries should be directed to: press@cma.gov.
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