The government has announced a major £53 million investment to create 200 new placements in council-run children’s homes as part of its Plan for Change. This initiative aims to better

protect the most vulnerable children from unsafe and unregistered accommodation.

Supporting children with complex needs

For the first time, funding will be targeted specifically at children with highly complex needs—those at risk of, or who have already experienced, being deprived of their liberty. These children often require intensive support to prevent them from running away, self-harming, or endangering others.

The new high-quality homes will offer stable, secure environments tailored to their behavioural and mental health needs. For years, a shortage of appropriate placements has forced councils to use unregistered—and often illegal—facilities, placing children at risk and driving up costs.

A costly and dangerous problem

According to data from the Children’s Commissioner, councils currently spend around £440 million annually on unregistered placements. Shockingly, over 30 placements have cost more than £1 million each. In some cases, private providers have been found to divert over 20% of placement costs into profits. One teenager with special educational needs and mental health issues revealed she was placed in a caravan for two months—at a cost of £75,000 to the council.

Reform and accountability

This funding boost complements new powers introduced in the Children’s Wellbeing and Schools Bill, which include stronger enforcement for Ofsted to fine illegal homes, and provisions for the Secretary of State to cap excessive profits by private providers if needed.

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’. 

Wider reform in children’s social care

The funding is part of a broader transformation of children’s social care, shifting focus from crisis response to early intervention. Over £2 billion is being invested this Parliament to support this change.

Early evidence from pilot areas of the government’s reforms shows improved collaboration between services and more consistent support for families. Funding for preventative services has doubled from £250 million to £500 million this year and will be maintained through 2028–29, with an additional £300 million coming over the next 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’.

Cracking down on exploitation

The government is also introducing measures to improve transparency and accountability in the children’s care market. New laws will force private providers to disclose financial information, with the option to impose a profit cap if voluntary compliance fails.

An expert advisory group has been formed to design financial oversight mechanisms and encourage ethical investment in children’s care. This includes exploring social financing models to help charities and non-profits open new homes.

Through this comprehensive package of reforms, the government aims to build a children’s care system that prioritizes safety, dignity, and long-term support over profit.