Cost of children’s homes in England nearly doubles in five years, NAO finds; care often inadequate

The cost of residential care for vulnerable children in England has almost doubled in five years while many children still do not receive appropriate care, the independent public spending watchdog has found.

The National Audit Office (NAO) report says councils on average spent £318,400 on each child placed in a children's home in the year ending March 2024, and total spending on residential placements was £3.1 billion in 2023-24. The report concludes the system is not delivering value for money and describes the market as "dysfunctional." Emma Wilson, the NAO report author, said a combination of rising numbers of children in care, increasing complexity of need and a largely profit-driven market had driven costs higher and undermined quality.

The report highlights placement patterns that separate children from local areas: in March 2024 two-thirds of children in residential care were in homes outside their placing local authority and almost half (49%) were more than 20 miles from home. NAO analysis found councils are struggling to secure enough appropriate placements, allowing some private providers to "cherry pick" the children they accept based on the level of support required and how profitable placements will be. The report cites previous research showing the 15 largest providers of children's homes making average profits of more than 22%.

Personal accounts in the report underline concerns about standards of care. Ezra Quinton, now 20, who first entered residential care at nine, described repeated moves and poor conditions. He said he was moved to different homes every few months, often far from his Greater Manchester home, and estimated he had as many as 60 different placements. Quinton recalled smashed windows and broken glass in showers at one home and said education was considerably disrupted though he achieved C grades in his GCSEs. He now works for Become, a charity for care leavers.

The NAO said rising costs were also driven by a record number of children in care and increasing complexity of their needs. Because the overwhelming majority — 84% — of children's homes are run to make a profit, the watchdog urged greater oversight to ensure the balance of supply and demand does not disadvantage vulnerable children.

Claire Bracey, interim chief executive of Become, said the report exposed "extortionate profits" being made from providing homes for vulnerable children and called the situation a market failure that threatens children's futures. The Department for Education said the report "lays bare" the consequences of years of neglect in children's social care and pointed to plans for what it described as the largest ever reform of children's social care. The department said it was recruiting more family help workers and preparing legislation it says will curb profiteering in children's homes.

Not all providers accept the watchdog's criticism of the independent sector. Sara Milner, who established a small children's home in Surrey after more than 30 years in local authority social care, said staffing accounted for about 80% of running costs and that her fees reflected direct costs with only moderate margins. She said rising costs and recruitment difficulties had delayed plans to open a second home. Mark Kerr, chief executive of the Children's Homes Association, said official data show local authority costs can be higher and argued the independent sector can demonstrate better value for money.

The NAO report recommends stronger market oversight and clearer action from government to improve placement matching, restrict profit-taking that undermines quality, and ensure sufficient supply of appropriate, locally based care. It warns that without change the current mix of rising costs and poor matching of children to suitable placements will continue to fail many of the most vulnerable children in the care system.