£53m fund to tackle use of 'illegal and exploitative homes' for children deprived of liberty

The government will provide £53m to tackle the use of "illegal and exploitative homes" for children deprived of their liberty through the creation of 200 new council-run placements.

The money is a slice of the £560m in capital funding allocated in the government's spending review for the development and refurbishment of children's homes and the provision of foster placements, from 2026-29, and will be allocated among 49 local authorities.

The Department for Education funding is designed to prevent young people with highly complex needs that mean they have been, or are at risk of being, deprived of their liberty being placed in unregistered children's homes.

This follows a significant spike in recent years in the number of children placed on High Court deprivation of liberty (DoL) orders, including those at risk of sexual or criminal exploitation, or with severe mental health needs, often linked to trauma, learning or physical disabilities or neurodevelopmental conditions.

Unregistered placements driven by shortages

They are often placed in unregistered children's homes, due to a shortage of suitable placements, including in secure children's homes.

Though unregistered placements for looked-after children are illegal, the High Court permits their use for children on DoL orders, though providers are required to register provision with Ofsted urgently, something the regulator has found often does not happen.

The DfE said the funding would help provide "support for these young people’s complex behaviour and mental health needs in safe and stable environments".

Legislation to create new type of placement

The funding comes with the government legislating, through the Children's Wellbeing and Schools Bill, to create a new registered placement type for children who may need to be deprived of their liberty at times, but for whom restrictions will be able to be increased or decreased according to need.

It is not clear how far the 200 additional placements will address the lack of provision for this group of children, in relation to whom 287 deprivation of liberty orders were made between January and March 2025, according to Ministry of Justice figures.

However, on its own, the £53m is unlikely to significantly curb the use of unregistered homes for children in care, with those on DoL orders only making up a minority of such cases.

Sevenfold rise in use of unregistered placements

According to Ofsted, there was an almost sevenfold increase in the number of children placed in unregistered homes in England from 2020-21 (147) to 2023-24 (982), with those on DoL orders accounting for just 12% of cases in 2023-24 and 15% in each of 2021-22 and 2022-23.

This is likely to have been driven by the lack of available placements for looked-after children more generally, due to factors including the falling number of mainstream fostering households, the mismatch between the location of children’s homes and need, and the historically high numbers of children in care.

Ofsted has found that unregistered placements were typically of “poor quality”, as evidenced by the fact that just 6% of unregistered settings applied to register with Ofsted after receiving a warning letter about the provision, with a mere 8% of these applications being approved.

'Children being placed in holiday camps or rentals'

This finding was echoed by a report last year from the Children's Commissioner for England, Rachel de Souza, who said "many children were being looked after in holiday camps, activity centres or caravans while others were placed in holiday rental properties"

De Souza also found that councils were spending about £440m a year on unregistered placements - with an average cost per child per day of £1,567 - predominantly in for-profit provision.

The remainder of the £560m allocated in the spending review to develop children's home and foster placements is designed to tackle the shortage of suitable provision for children in care generally, while the Children's Wellbeing and Schools Bill also includes a measure designed to tackle the use of unregistered homes.

Under this, Ofsted would be able to impose monetary penalties for breaches of the Care Standards Act 2000, including for operating unregistered children’s homes, as a quicker alternative to prosecution.