New action to tackle illegal and exploitative children’s homes and profiteering

• Up to 200 places will be created for vulnerable children in council-run high-quality children's homes with £53m, breaking down barriers to opportunity for the most vulnerable children
• Homes to offer therapy and care, joining up health and social services to give troubled young people a fresh start in life, building on protections in Children's Wellbeing and Schools Bill and delivering on government's Plan for Change

• Comes as government commits to further increasing early intervention funding for councils – after already doubling it from £250 to £500 million

The most vulnerable children in society will be better protected from unsafe, illegal children's homes thanks to over £53 million investment from the government to create 200 new placements in high-quality council-run homes through its Plan for Change. 

For the first time, the government has specifically targeted funding at children who have such complex needs that they are at risk of, or have been, deprived of their liberty. 

Children in these situations need extra support from social workers and care teams to stop them running away from home and from harming themselves and others.

The new homes will break down barriers to opportunity by providing support for these young people's complex behaviour and mental health needs in safe and stable environments. A substantial shortage of placements to meet these young people's needs over recent years has seen them being placed into accommodation that is operating illegally by not registering with Ofsted.

Data from the Children's Commissioner shows this also comes at an eye-watering cost to councils, who spend an estimated £440 million a year on unregistered placements. Over 30 placements were costing over £1 million each - and this in a world where private providers sometimes siphon off over 20% of placement costs for private profit.

One teenager with both SEND and mental health needs told the commissioner they had been living in a caravan for two months, at a cost of £75,000, out of her council area.

Today's announcement builds on measures already announced in the Children's Wellbeing and Schools Bill to give Ofsted stronger powers to impose fines on illegal homes and new powers for the Secretary of State to cap provider profits if excessive profiteering is not brought under control.

Minister for Children and Families Janet Daby said: 

“The children's social care system has faced years of drift and neglect, leading to a vicious cycle of late intervention and children falling through the cracks.

“One of the worst symptoms of this is when some of the most vulnerable young people in society are shunted from pillar to post - traumatised by shameful illegal homes, while some private companies rack up ludicrous profits. 

“Through our Plan for Change and our Children's Wellbeing and Schools Bill, this government is enabling every child to achieve and thrive by investing in the places children need, cracking down on profiteering with new laws, and rebuilding family support services so parents and carers get the help they need to keep their children happy and safe in loving homes.” 

It comes as part of ambitious reform to rebalance the children's social care system away from crisis intervention and towards earlier help to keep children safe, with over £2 billion investment over the course of this parliament.

Green shoots are already being seen as an evaluation published today of areas that tested the government's early intervention reforms show evidence of improved collaboration between agencies leading to more consistent support for families.  

Funding for preventative services has already been doubled this year compared to last year from £250 million to £500 million, so that every family who needs support receives it to stop issues getting worse, with the guidance of a dedicated family help worker.

The government committed to continuing the £500m funding each year until 2028-29 at the Spending Review alongside a further increase of at least £300 million over the coming two years.

Children's Commissioner Dame Rachel de Souza said:

“My work as Children's Commissioner has shown there are too many children who need brilliant care who have instead ended up in illegal – and terrible – accommodation. Instead of receiving care and support, they are side-lined, ignored and left waiting while services fail to take responsibility for these children.

“This funding, and the social care provisions of the Children's Wellbeing and Schools Bill, is an opportunity to bring that to an end. It will increase the number of loving, safe homes for this group of children – whose needs are often urgent and complex – and must provide loving, therapeutic, joined-up care to help these children flourish.”

Chief Executive at Action for Children Paul Carberry said:

“It's vital that children and young people with complex needs receive specialist, therapeutic care in a stable environment. Over recent years, too many children have been placed in unregulated, unsuitable accommodation due to the critical shortage of placements in the system, with sometimes devastating consequences on their health, safety, and wellbeing. 

“Without the right support, their needs can escalate, and placements can break down.

“We wholeheartedly welcome this investment, which will ensure more children with complex needs get the care and support they deserve.”

Through the Children's Wellbeing and Schools Bill, new laws are being brought in to increase the transparency of private providers over their finances, with a backstop provision to introduce a profit cap if providers don't voluntarily bring an end to exploitative practices.

The Department has also brought together an expert ‘Market Intervention Advisory Group', which is working on the details of how the financial oversight and transparency schemes will work in practice to make as quick as possible progress to tackle profiteering, as well as how to bring in more voluntary providers.

Schemes are being considered to encourage charities and ethical investors to open children's homes, including through innovative funding mechanisms like social financing.

Notes to editors 

• Through the landmark Children's and Wellbeing Bill, the government announced:  

• At the Spending Review, we committed £555m to deliver children's social care reforms and £560 million to refurbish and expand children's homes.
• The Autumn Budget 2024 announced £44m investment to support children in kinship care and foster care.   
• £40m has also been announced to trial a new kinship allowance in up to 10 local authorities to test whether paying an allowance to cover certain costs – like supporting a child to settle into a new home with relatives – can help increase the number of children taken in by family members and friends.

• Through the Families First for Children Pathfinder programme and Family Networks Pilot, the government tested reforms across the children's social care system, helping children to stay with their families in safe and loving homes and protecting vulnerable children where needed in 10 local authority areas. The Families First for Children Pathfinder evaluation's full early findings will be available Thursday 10^th July.

• The Families First Partnership Programme launched in April 2025 and rolls out the family help, child protection and family group decision making reforms to every council in England and key measures in the Children's Wellbeing and Schools Bill including multi-agency child protection teams and family group decision making. Families First Partnership programme - GOV.UK 

Case studies:

Last year, commissioned by the Department for Education, the Children's Commissioner gathered the experiences of young people who has been deprived of their liberty, some of who were in unregistered placements:

• Ethan is 16 years old and autistic. At the age of ten he was taken into care under Section 20 as his parents were unable to manage his challenging behaviour in the family home. Ethan had outbursts when he became emotionally dysregulated, which could be violent, including destruction of property, self-injurious behaviour and aggression towards others. Ethan experienced seven specialist residential settings; however, none of them could manage his needs, and he was subjected to repeated episodes of restraint and isolation, which caused trauma and negatively affected his mental health. This increased his risk of harm to himself and others, and the absence of a suitable setting, led to Ethan becoming subject to a deprivation of liberty order in a solo unregistered placement with authorisation for 4:1 supervision and the use of physical restraint when required.
• Another child said of their unregistered placement: “It was just a horrible scruffy little council house. It was an emergency placement […] My bedroom light didn't turn on, my door didn't shut” – Child subject to deprivation of liberty order, 15.
• One social worker expressed their frustration at trying to find a placement for a child currently awaiting discharge into the community under a deprivation of liberty order: "[The setting] want him out, and we want him out, but there is nowhere for him. I've talked to providers across the UK but there is nowhere for him. Providers come back to us saying they are worried he is a danger to others; they are worried about staffing; worried about the medication he is on; about the DOL – they don't want to make the adaptations needed to keep him safe.”

Further quotes:

• Phil Anderson, Strategic Director of External Affairs at the National Children's Bureau, said: “We welcome the Government's recognition of the value of measures trialled by the Families First for Children Pathfinders—approaches that the social care workforce sees long-term benefit in adopting. These innovative models can intervene early to place children and families at the centre of joined-up networks of support, underpinned by new professional roles that promote integrated working. The programme must continue to be informed by the important learning from Pathfinder areas, and we're delighted to be working with Verian and Alma Economics on the next phases of the evaluation. To truly deliver whole-system reform, this momentum must be backed up by wider work to help families facing adversity —so that every vulnerable child can grow up safe, supported, and with the opportunity to thrive. 
• Rita Homer, Director of Children's Services for Pathfinder area Walsall Council, said:“Walsall is proud to be part of the Families First for Children Pathfinder programme, which is helping us deliver earlier and more effective joined-up support to children and families. We welcome the findings of the evaluation and the commitment of future funding. The programme has fostered stronger partnerships across education, health, social care, and policing, supported by innovative roles like the Lead Child Protection Practitioner and Family Help Lead Practitioner. Positive feedback from families and staff, alongside the findings from the evaluation, reinforces Walsall's dedication to continuous improvement, and ongoing investment enables us to integrate and expand prevention services, meeting the needs of our children and their families at the earliest opportunity.”