Some children are not getting the right care from their placement due to a shortage of appropriate places in children’s homes and with foster carers, a report by the Competition and Markets Authority has found.

The CMA launched a market study into children’s social care in March 2021 and the final report finds that the system by which services are commissioned is fragmented, meaning local authorities are not able to leverage their role as the purchasers of placements or to plan properly for the future.

Andrea Coscelli, Chief Executive of the CMA, said: “The UK has sleepwalked into a dysfunctional children’s social care market. This has left local authorities hamstrung in their efforts to find suitable and affordable placements in children’s homes or foster care.”

There are more than 100,000 looked-after children in England, Scotland and Wales, across. The current annual cost for children’s social care services is around £5.7 billion in England, £680 million in Scotland and £350 million in Wales.

The CMA’s market study found that large private sector providers of fostering services and children homes appear to be making higher profits in England and Wales than the CMA would expect in a well-functioning market. This suggests that local authorities could be paying more for these services than they need to, particularly with fostering services, which are cheaper when run by local authorities.

The report found that as well as a shortage of appropriate places in children’s homes and with foster carers, some children are also being placed too far away from where they previously lived or in placements that require them to be separated from their siblings.

This shortage also means that high prices are often being paid by local authorities, who are responsible for placing children in appropriate settings.

To address the ‘fragmented’ commissioning system, the CMA is recommending that the UK Government, Scottish and Welsh Governments create national and regional organisations that could support local authorities with their responsibilities in this sector. These would improve commissioning by carrying out and publishing national and regional analysis and providing local authorities and collective bodies with guidance and by supporting them to meet more placement needs in their local area.

The CMA also raises concerns over the financial resilience of some private providers of children’s homes in England and Wales, particularly those financed through private equity. High levels of debt among these providers could lead to them into financial difficulties, which could impact the care provided to children.

The CMA recommends:

• A system for assessing the financial health of the most difficult to replace providers of children’s homes and providing warnings to relevant authorities if a failure is likely.
• Options are actively explored for bringing foster care in-house.
• A review should be carried out of the barriers to provision of children’s homes, as well as the recruitment and the retention of care staff and foster carers.

Andrea Coscelli, Chief Executive of the CMA, said: “We have also identified issues with the financial stability of children’s home providers. It is important to manage the risk of children’s homes providers going bust and local authorities having to pick up the pieces.

“Local authorities cannot be left to face these challenges alone. There are several areas where national governments should make changes to address issues in the sector, including new financial oversight of providers and the development of new bodies to support local authorities with commissioning. With children’s social care currently being reviewed across the UK we want to see our recommendations reflected in any changes to policy,” she concluded.