Ofsted warns children’s homes are putting profit first

Ofsted’s annual report has warned that children’s homes are prioritising profit over the needs of children, as more emerge in areas where housing is the cheapest.

In England, the number of children’s homes has reached a record high. By the end of March this year, 4,100 had registered. This is a 15% increase from the previous year and the highest number ever registered.

Ofsted, which is responsible for inspecting children’s homes, along with schools, has said there is a “strong profit motive”.

The report states:

Being motivated by profits, rather than the needs of children, bends the system out of shape. It leads to homes being created where they aren’t needed and it can tempt operators who are not properly prepared to run a children’s home to move into the sector. This can carry risks in a sector where management structures can change and ownership is often opaque.

According to Sky News, local authority spending on looked-after children hit £8.1bn in 2024. Notably, this represents a significant increase from £3.9 billion in 2016.

Unregistered homes

Ofsted also opened nearly 900 investigations into potential unregistered homes in the year up to March 2025. These often charge extortionate fees to local authorities that have run out of options. Often, this is for children who have more complex needs.

And it’s not just a couple of local authorities using unregistered homes:

This year, nearly nine in 10 local authorities told us that they had placed children in unregistered homes because they could not find places in registered homes to cater for the children’s needs. This represents a crisis both for children and for local councils, whose budgets cannot hope to keep pace with the spiralling costs. The government must work with local authorities to drive out all use of unregistered children’s homes. Ofsted stands ready to play its role in this – and we have recently received funding for a project to quantify the sufficiency of children’s social care provision across England.

Each time a local authority places a child in an unregistered home, it can cost up to £30,000 per week, per child.

However, the only reason unregistered homes are able to make a profit is because local authorities struggle to access legitimate support.

This shadow market only exists because there aren’t enough of the right kinds of places in legitimate registered homes to take the children who most need specialist support.

The report also highlights the lack of staff training, concerns about safeguarding, and the fact that children are lacking the stability they desperately need. It adds:

We are also concerned that there is a shortage of providers with staff and carers who have the specialist
skills to meet the needs of older children with single or multiple complex needs, or the ability to prepare
them for independence. As children near adulthood, it is vitally important that they get help with
accessing adult services, preparing to take care of themselves, and continuing in education and/or
employment

In the annual report, Sir Martyn Oliver, Chief Inspector of Education, Children’s Services and Skills, concludes:

Inclusion matters. It matters because addressing the needs of the most vulnerable and disadvantaged children demands a rigour and attention to detail that ultimately benefits all the children, pupils or learners in that setting – from those facing the greatest barriers, to those whose path to adulthood is more straightforward.

As a country, we should measure our successes in education, children’s services and skills, both by how well we support the most economically disadvantaged and vulnerable, and by how much further we can push forward the boundaries of knowledge through higher learning. We have a duty to improve the lives and life chances of every child and every learner.

Feature image via BBC Newsnight/YouTube