Get a cuppa ☕ (15 mins read)

This piece draws on conversations with two extremely experienced professionals, both are known and respected in the sector. K has spent thirty years in residential practice. M has spent twenty-five years in local authority commissioning. I paraphrase their contributions rather than quote them directly.

One of the most important sentences ever spoken about children's residential care was delivered quietly, in an office, around 1993. As M tells it, the instruction local authority directors were giving their commissioning teams in those years was simple. Go and find some short-term private children's homes. They will not be needed for long. Once we fix our fostering service, we won't need them at all.

Thirty-three years later, we spend £3.1bn a year on children's residential care. Ninety per cent of it is independent sector. Nearly eight hundred children were placed in illegal settings in the last twelve months alone.

The temporary market never left.

Because nobody expected it to stay, nobody built the commissioning infrastructure required to manage it. The sector has since watched a generation of reforms chase the wrong story. Josh MacAlister's 2022 Independent Review of Children's Social Care, the biggest attempted reset in a decade, did not substantively address residential care. It did not address workforce. It did characterise our sector as "institutional." K, thirty years in residential practice, is unequivocal: the review looked for the answers that told the story it wanted to tell.

Now the Public Accounts Committee has called out the Department for Education for completely absolving themselves of all responsibility. The DfE response is imminent. Wales has banned new for-profit providers without a funded alternative, and the number of Welsh children in unregistered settings, run by local authorities themselves, is spiking. England's Regional Care Cooperatives are three years into pathfinder. Ofsted has rewired its entire framework in a single month.

And the conversation, still, is about profit.

The real story is permanence. And the commissioning failure nobody named.

A declaration. My career has been spent inside large, complex markets: big data, tech, finance. My family runs children's services. I have skin in this sector.

I can say what the Providers, Commissioners, Academics, and Local authority staff can’t. Journalists won't say what I say, because "£6,000 a week to lock up a child" writes itself and "commissioning failure" does not.

And I am not just writing about this. I am doing something about it, aiming to put the right information in the hands of the right professionals at the right time. Everything else, the analysis, the legislation explainers, the (regular) yelling in the digital town square, that is LinkedIn, is in service of that.

The foundational year is 1989. The Children Act passes. Children belong with families. Fostering is the good option. Residential is what happens when everything else has failed. The ideological direction of travel for the next thirty-seven years is set.

Two scandals break at the same time. Pindown in Staffordshire: at least 132 children subjected to prolonged solitary confinement in local authority residential care over six years, uncovered in 1989.

Bryn Estyn in North Wales: a slow-burn catastrophe investigated through the early 1990s, the Waterhouse Report not published until 2000.

The combination is irreversible. Publicly operated residential care becomes politically radioactive. Local authorities read the Children Act as a mandate. Between 1987 and 1995, the number of children in LA-operated residential care falls from approximately 14,000 to approximately 6,000. A 57% drop in eight years.

There is one problem. A proportion of children cannot live in foster care. They return from failed placements. They present with complexity family-based provision cannot hold. And local authority fostering services cannot expand fast enough to absorb them.

So local authorities turn to the private sector. Not to build a permanent partnership. To fill a gap. Temporarily.

This is the moment M describes from her position as a commissioning manager of the era. Her sector was being told the private homes were a short-term holding pattern. Not because anyone was stupid or cynical, but because the ideological weight of the moment said residential care was being phased out. The private sector would carry the load for a few years while fostering scaled. Nobody expected any of it to last.

Independent fostering agencies emerged in that window, mostly set up by former local authority social workers who had left to do the job they knew their employer could not. Independent residential providers followed. The market that appeared in the 1990s was not designed. It was a spillway for a system that had committed to a different future and discovered, slowly, that the different future was not arriving.

By the late 1990s, the sequential placement logic (in-house fostering first, independent fostering next, residential as last resort) was embedded in practice. It would not be written into statute until 2008, with Section 22C. The practice was already universal.

Residential care, as K notes, became the option you reached for when children had already been removed from birth families, already been through multiple failed foster placements, and arrived at the door carrying serious early-life trauma. The sector positioned as last resort was the sector the system had chosen not to develop. The young people who ended up there arrived more traumatised than they would have been had the sequence been different.

Through the late 1990s the "temporary" market began to discover it had a business model. Providers bought properties. The late-90s property boom cleared mortgages quickly. Revenue became reliable. Providers reinvested and expanded.

The regulatory state responded. The Care Standards Act 2000 created national-level regulation, which moved from NCSC to CSCI to Ofsted by 2007. For the first time, public and private providers were regulated on the same basis.

Framework agreements appeared in the early 2000s. Local authorities clustered to impose order on a market they had neither designed nor expected to manage. In 2008, the Children and Young Persons Act inserted Section 22C. Sequential placement was now statutory.

What was built, in other words, was the structure around the market. What was not built was the infrastructure to manage its purpose.

There was no national taxonomy of children's needs. No standardised way for a local authority to describe what it required, or for a provider to describe what it offered. No outcome measurement following a child across placements. No longitudinal data to tell the sector whether specific placements led to specific outcomes for specific children. No two-sided matching. No common language.

The market had a regulator. It did not have a commissioner.

In 2005, Phoenix Equity Partners made the first significant private equity investment in children's care, backing Acorn Care & Education. Cambian was formed around the same time. What the PE houses saw was captive demand (local authorities were statutorily obliged to place children regardless of cost), growing spend, fragmented ownership, and a poor commissioning environment where price signals were systematically distorted. A market that rewarded consolidation.

By 2015 consolidation was well underway. Graphite Capital sold National Fostering Agency to Stirling Square for £250m. Cambian had listed on the London Stock Exchange in 2014. CareTech was scaling aggressively.

The market sold to local authorities in the early 1990s as temporary was now large, complex, financialised, and growing faster than any commissioning infrastructure could catch up with, because that commissioning infrastructure had never been started.

Through the 2010s, the commissioning failure compounded in ways the sector understood and the public did not.

Framework assessments were, and remain, heavily price-weighted. Practitioner testimony is consistent: with assessments measured roughly 70% on price, providers were incentivised to be cheapest, not best. A two-hour online module on attachment theory scored identically to a day's face-to-face training from a clinical psychologist. Real therapeutic provision and marketed-as-therapeutic provision competed on equal footing. Buzzwords galore…

In 2015, the Nationwide Association of Fostering Providers took three local authorities (Leeds, Suffolk, Bristol) to judicial review, arguing that in-house-first policies breached Section 22C. Andrew Rome at Revolution Consulting demonstrated that local authority and independent fostering costs were essentially identical. The cost, location, and quality arguments for in-house first were all demolished.

The judge accepted all of this, then made one of the most consequential interpretive escapes in recent English children's law. He ruled that Section 22C's "most appropriate placement" does not mean the most appropriate placement for each individual child. It means the most appropriate type. NAFP could not afford to appeal. Ten years later, sequential sourcing continues legally unchallenged. One of the most important cases ever brought for children in care, and the residential sector did not pick it up.

Then the media narrative. In 2016, BuzzFeed News published Richard Holmes's investigation into Cambian Group: decrepit conditions, violent assaults, the direct line from post-IPO debt pressure to quality failure. Serious journalism about a specific company.

What followed on Twitter in 2017 and 2018 was something different. Profiteering became the frame. Nuance became impossible. Anyone pointing out misinformation was accused of being captured.

In 2022, Josh MacAlister's Independent Review was published. The largest attempted system reset in a decade. Eighty recommendations including Regional Care Cooperatives, Family Help, kinship carer allowances, and the abolition of Independent Reviewing Officers. It did not substantively address residential care. It did not address workforce. It did characterise our sector as "institutional." Practitioners who were paying attention made the same diagnosis: divisive, looked for answers to fit a predetermined story. The largest attempted reset of the system did not substantively engage with the part of the system at the heart of the crisis.

In March 2023, Outcomes First Group closed 28 children's homes with sixty days notice. Stated rationale: sector recruitment challenges. Actual strategic rationale: pivot to residential schools, where margins are higher. Approximately sixty children displaced. Private equity financial logic applied to a service that cannot absorb short-notice closure without serious harm produced exactly what a market with no commissioning counterweight will produce.

The sector-wide narrative kept debating profit in the abstract instead of commissioning in the specific.

By the mid-2020s the evidence base had caught up with the practitioners.

The Competition and Markets Authority's 2022 Market Study described the market as dysfunctional: PE consolidation had limited choice and driven up prices; over-reliance on spot purchasing was structural; national commissioning infrastructure was inadequate; supply and demand for complex-needs placements were badly misaligned. It recommended regional commissioning infrastructure, the direct precursor to the RCC model. It explicitly warned that profit caps would reduce investment incentives and worsen sufficiency.

In 2022 the Welsh Government announced that it would remove profit from children's residential care. The Health and Social Care (Wales) Act 2025 followed. From 1 April 2026, no new for-profit providers can register for restricted children's services in Wales. From 2027, existing for-profit providers cannot expand. From 2030, local authorities cannot place children with for-profit providers without ministerial approval. The market reality the legislation must navigate: 87% of Welsh children in residential care are currently placed with for-profit providers.

There is no funded alternative model.

Practitioners watching Wales closely report the same thing, and the numbers back them up. The population of children in unregistered settings, almost entirely operated by local authorities themselves, has spiked. Wales has no registration requirement for supported accommodation. Complex children who should be in registered homes are being placed in unregistered SA with packages of agency staff. Nobody reports this, because the rhetorical control of the narrative is absolute.

Any criticism is dismissed as protecting private sector profits. The conversation shuts.

I’ll say what needs to be said here, on behalf of those who cannot…

It was dressed in moral certainty, launched without a funded replacement for 87% of the provision it is removing, and is now producing exactly the outcomes anyone with operational experience predicted. It is ideological political theatre that has cost children stability, and it will cost them even more before it is done.

The National Audit Office's September 2025 report found that residential care costs had almost doubled in five years, reaching £3.1bn in 2023-24. Average cost per place: £318,400 per year. The proportion of homes operated by local authorities had fallen from 33% in 2010 to under 10%. LA spending on private children's homes had more than doubled in real terms between 2016 and 2023, to £1.8bn per year.

In January 2026 the Public Accounts Committee reported that nearly 800 vulnerable children had been placed in illegal, unregistered homes for an average of six months each. Councils had spent £353m on unregistered settings in the last twelve months. The DfE was publicly criticised for completely absolving itself of responsibility.

In April 2026, Ofsted reset its inspection architecture. SCCIF for children's homes, SCCIF for supported accommodation, and ILACS for local authority children's services all updated simultaneously on 1 April. The single overall effectiveness grade was removed from ILACS entirely. Directors of Children's Services now face three practice judgements (help and protection, children in care, care leavers) alongside a judgement on the impact of leaders. No overall number to hide behind.

A market the state created by accident thirty years ago is now:

…and the conversation, for the most part, is still about profit.

There is another truth in this sector that nobody running for political cover will say out loud.

Specifically, there are far too many small generic EBD homes, heavily concentrated in the north of England where property is cheap, commissioned nowhere near the population of children who actually need them, staffed by people who were sold careers in "trauma-informed practice" that the training budget never funded…

(Some) providers keep opening generic EBD provision because the commissioning signal from local authorities is too blunt to tell them anything else.

The homes are not full.

Framework referrals keep missing the specialism they are actually designed for. Beds sit empty. Providers chase volume to cover costs. And children who need specialist provision are placed in the wrong setting, because the specialist provision that should exist does not exist.

There will be vacancies. There will be closures. There must be.

This is supply and demand, in a market that has been undersupplied and insulated from it for thirty years by the absence of an accurate signal. It is a correction that has to happen whether or not we ever have a serious debate about profit. Capping profit at zero does not make the generic EBD home in the wrong location full of the right children.

Which is why I am here thinking about referrals and needs. The first question for this sector is not "should for-profit providers exist." It is whether the people commissioning children into residential care, and the providers trying to serve them, can see each other clearly enough to make a good decision. The answer right now is no. Everything downstream, the generic EBD glut, the specialist shortage, the illegal placements, the 700 emails a week filling specialist inboxes, is a consequence of that information gap.

Fix the signal and the market corrects itself.

Fail to fix the signal and you can ban ownership, cap profit, launch another portal, and the children in the wrong placements will still be in the wrong placements.

There is a way out of this. It has been found in other sectors with structurally similar failures.

US healthcare in the 1980s, when there was no common language for what patients needed. The NHS in 2009, when nobody could tell whether elective procedures were actually helping patients. The American used-car market after George Akerlof mathematically predicted in 1970 that information asymmetry would collapse it into a market for lemons (interesting paper), and a handful of private operators built the information layer the market had been missing.

The pattern is consistent across every structural fix. A specific piece of information infrastructure, adopted first by the parties with the most to gain, becomes the de facto standard before anyone makes it mandatory. Never a whole-system reform. Always a coordinating layer built by someone who understood that the market could not function until buyers and sellers were speaking the same language about the same underlying reality.

The structural failure shape of UK children's residential care is not new. Captive demand. Information asymmetry. No common language for what the buyer needs or what the seller offers. Consolidation by the players who could extract value from the confusion. Public outrage at the symptoms of the confusion. Reforms chasing the outrage rather than the confusion.

I know what the fix looks like in this sector (I am working on it). Hint: It is not a market ban. It is not a profit cap. It is not another government portal. It is the coordination layer that should have been built in 1993 and never was, the layer that lets commissioners see providers clearly, providers see demand clearly, and children end up in the provision that was actually designed for them.

I will write about it when it is the right time to. What matters for this piece is that the problem has a shape, the shape is recognisable, and the thirty-year lag is not an argument against starting. It is an argument for moving now.

It stayed, grew, consolidated, financialised, became the system. The people who said in 1993 that we would not need it for long were not lying. They were operating on an assumption the world refused to co-operate with. Thirty-three years later, the work they did not do still has not been done.

The PAC response from DfE is coming. By the logic of the moment, it will address profit. It will address ownership. It will address transparency of PE holdings. Those are reasonable things to address. They are not the thing.

The thing is the commissioning infrastructure never built, because nobody in the room in the early 1990s expected the market to last long enough to need it. The common language for needs that does not exist. The two-sided matching architecture every attempted portal has failed to deliver. The longitudinal child-level data that would let us, for the first time, say with evidence what works for whom.

We have the tools. We have the people. We have practitioners like K and M, who have been sitting with this for decades, who know what the work requires, and who would do it tomorrow if anyone with a cheque book commissioned it. We have, for the first time, the political oxygen of a sector being publicly forced to confront its own failure.

Everything I write in this newsletter is in service of that work being commissioned. And then built.

I think you’ll agree with me…the sector really Requires Improvement…

I’ve been taken back by the emails and Linkedin DMs and had some amazing conversations! I continue to have the pleasure of connecting so many professionals with practitioners and owners.

I want to talk to providers, practitioners, consultants, commissioners, local authority staff, regulators. Let me know who you are and what you do, so I can continue to join the dots for myself and others.

I want to know where you want more clarity, where this is resonating, where it is missing the mark, and what you need covered next. Everything gets read (bare with…i’m slow at times!)

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Marcus (LinkedIn)