Care placement costs are continuing to drive up spending on children's services, data on council budgets for 2025-26 have shown.
Councils are planning to spend £15.5bn on children's social care in 2025-26, up by £1bn (7.1%) in real terms on budgeted spend for 2024-25, proportionately higher than the 6.3% increase for planned local government expenditure as a whole, according to Ministry of Housing, Communities and Local Government (MHCLG) figures.
Spending on looked-after children accounts for almost three-quarters of this increase (£732m), with the amount of budget allocated to these services rising by 9.5% in real terms, significantly above the rise for budgeted spend overall in children's services.
This will be largely accounted for by expenditure on care placements, whether in children's homes, foster care, supported accommodation or secure homes.
Care costs fuelling children's services budget rises
This is the third consecutive year in which actual or planned spend on children's social care has increased by at least 7% in real terms, above the overall rise in council spending, with expenditure on looked-after children chiefly responsible for the rise in each case:- In 2023-24, councils spent £971m (7.1%) more in real-terms on children's social care than the year before, with £731m (79%) of the increase accounted for by expenditure on looked-after children's services, which rose by 10.5% between the two years. Overall, real-terms council expenditure rose by 2.7% from 2022-23 to 2023-24.
- In 2024-25, councils budgeted to spend £14.1bn on children's social care, £1.4bn (10.7%) more in real-terms than planned expenditure in 2023-24, with £925m (68%) of the increase taken up by looked-after children's services. Overall, budgeted real-terms spend by councils was due to have risen by 7.2% in 2024-25.
Increasing complexity of need
Councils and providers have reported seeing a growing complexity of need among young people in care in recent years, including vulnerability to sexual or criminal exploitation, trauma from adverse childhood experiences and mental health conditions, said a recent Local Government Association-commissioned (LGA) report on high-cost placements.This had been driven by factors including missed opportunities to intervene in families' lives due to Covid-19 and austerity policies, and was linked to high-cost placements, said the report, carried out by the National Children's Bureau (NCB).
At the most acute end, this has been manifest in the rising use of High Court deprivation of liberty orders to place children in highly restrictive arrangements for their own safety, but it also likely to be part of the explanation for a general shift away from fostering towards residential care.
Rising numbers of children's homes amid drop in fostering capacity
The number of registered mainstream children’s homes in England grew by 44% from 2020-24, while the number of mainstream (non-kinship) fostering households in the country fell by 10% from 2021-24.Barely half (51.2%) of children were in mainstream fostering placements as of March 2024, down from 58% in 2019, with their number falling from 45,310 to 42,730 from 2019-24, despite the overall growth in the care population during this time.
As of March 2024, 8,640 young people were in children’s homes – the vast majority in open settings – up from 7,990 in 2023 and 7,100 in 2020, and accounting for 10% of the care population.
As of 2020-21, a place in a private children's home cost £4,153 per week, while a fostering placement cost £647 per week (source: Personal Social Services Research Unit).
Shortage of suitable placements and profit levels
However, the falling number of mainstream foster carers is also widely seen as contributing to a longstanding shortage of suitable placements for looked-after children, which has been raised by a string of reports, most notably, the Competition and Markets Authority's (CMA) 2022 study on children's social care.
The proportion of children placed out of area has grown steadily in recent years, from 41% in 2020 to 45% (37,520) in 2024, while there was a sevenfold increase in the number of children placed in unregistered homes from 2021-24.
At the same time, Ofsted has repeatedly warned of a mismatch between the location of registered children's homes and demand for looked-after children's services.
The CMA found that the scarcity of placements, combined with councils' weak bargaining position relative to providers, meant they were having to pay high prices for care, while the largest providers were reaping higher profits than would be expected in a functioning market.
Council leaders and government have accused some providers of "profiteering" from this situation.
Impact of supported accommodation
A further factor has been the introduction, in 2023, of supported accommodation as a new category of registered provision for 16- and 17-year-olds in care, to replace formerly unregulated semi-independent accommodation.The NCB ran a programme for the Department for Education from 2023-24 to help raise awareness of the new type of accommodation and assist providers in preparing to meet Ofsted's standards for its provision.
In its report for the LGA on high-cost placements, the NCB said that this programme had found intelligence suggesting that the costs of supported accommodation were rising more quickly than those for children's homes or foster care, "with providers citing the demands of the new regulation and quality standards".
Children's social care reforms
Significant parts of the government's children's social care reforms are designed to tackle the costs of care placements to councils, by reducing the numbers of children in care, boosting placement supply and strengthening local authority commissioning. Specific measures include:- Introducing multidisciplinary family help teams: these are designed to support families with multiple or complex needs across targeted early help, child in need and child protection levels, to enable children to stay safely at home. Councils have been given £270m in additional annual funding from 2025-29, plus an extra £555m from 2025-28, to help roll out these services.
- Providing a right to family group decision making teams: under the Children's Wellbeing and School Bill, councils considering issuing care proceedings would be required to offer families a family group decision making meeting to help them and their wider networks come up with a plan for the child's welfare as an alternative to care. The government sees this as enabling more children to enter kinship placements.
- Increasing support for kinship carers: the bill would also require councils to publish local information on services and support for kinship families, while the government is also testing the provision of allowances to kinship carers to help meet the needs of children they are caring for, in up to 10 areas.
- Boosting recruitment of foster carers: the government is spending £15m this year to complete the roll out of regional fostering recruitment hubs, designed to make the process of becoming a foster carer easier, with £25m committed from 2026-28 to recruit an additional 400 fostering households.
- Investing in more children's home and fostering capacity: the government's spending review provided £560m from 2026-29 in capital funding to refurbish and expand the children’s home estate and boost foster care provision, for example, by enabling carers to extend their homes to accommodate more children. This follows a £90m investment in the children's home estate in 2025-26.
- Setting up regional commissioning co-operatives: the bill empowers the government to direct councils to make regional co-operation arrangements to carry out their functions in relation to accommodating looked-after children. Such regional care co-operatives, which are being tested in the South East and Greater Manchester, are designed to have greater clout than individual councils currently do to shape services across their areas and ensure sufficient high-quality placements for children in care.
- Increasing the transparency of placement costs: the Children's Wellbeing and Schools Bill would also enable the DfE to oversee the finances of placement providers who would be difficult to replace in the market. This is designed to increase the transparency of the costs providers charge councils for care, among other purposes.
- Placing a cap on profits, if deemed necessary: the bill allows the government to introduce a cap on the profits of registered children's social care providers, a power it only intends to use if it judges that other measures have not sufficiently curbed profiteering from children's care.
Government 'may have to invest more, and faster' in social care
In response to the MHCLG's funding figures, Association of Directors of Children's Services president Rachael Wardell said: “The additional funding announced at the end of last year on top of commitments in the recent spending review are welcome and some recognition of the significant pressures faced by too many children and families as well as children’s services. Much of this funding is earmarked for early help and prevention, which in time, may lead to fewer children entering care, but it will take years to realise the benefits of this investment.“For now, we continue to see children and young people with very complex and multifaceted needs requiring very intensive support packages entering care quickly and in crisis. Again, there is a lot of focus on better meeting the needs of this cohort, plus new investment, but it will take time before we see impact. Government may well have to invest more, and faster, if it is to make a lasting difference to young lives in this generation.”
