Bill to end profit from children’s care placements in Wales published

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The Health and Social Care (Wales) Bill would permit only not-for-profit organisations and councils from providing fostering, children’s home or secure accommodation placements.

The reform would make Wales the first UK country to ban profit-making from both fostering and residential services.

However, following concerns during consultation that the reform would disrupt the supply of placements and children’s care, the Labour-run Welsh Government has dropped its original plan to require compliance from all providers by April 2027.

While new providers registering from April 2026 would have to be not for profit, existing services would be able to continue delivering for-profit care for an indefinite transitional period under conditions determined by regulations.

In the context of the private sector providing 87% of children’s home and 35% of fostering placements in Wales, the Welsh Government said this would “mitigate disruption” to the lives of children in existing placements.

However, despite this, both provider and local authority leaders raised concerns about the bill’s impact on the placements market.

Young people ‘have strong feelings’ about profit-based care

Introducing the bill in the Senedd this week, minister for social care Dawn Bowden said the reform was driven by what children and young people wanted as well as the Welsh Government’s belief in the inappropriateness of profiting from their care.

“In developing this bill, we have been guided by what young people have told us,” she said. “They have very strong feelings about being cared for by privately owned organisations that profit from their experience of being in care.”

Bowden added: “These are children who have been through the most traumatic of times who end up in the care system, and we have to offer them the best care that we can in whatever way we can. That means that any money coming into the system must be reinvested into the system.”

She told the Senedd that spending on residential care had tripled, from £65m to £200m, since 2017, which she said was “unsustainable”.

The reform is part of a wider plan to reduce the number of children in care – which has risen from 5,660 in 2017 to 7,210 in 2023 – deliver more care closer to children’s homes and reduce the number – and cost – of residential care placements.

This includes, potentially, rolling out family drug and alcohol courts across Wales, to keep more families together, and taking steps to boost foster carer recruitment and retention, including by making allowances more equitable between local authorities.

Chances of providers ditching profit model

Bowden said that, because of the transitional arrangements, there would be no “cliff edge” for profit-making providers, many of whom were in “active and encouraging conversations with us about how they can transfer their operation into a not-for-profit model”.

However, in a memorandum on the bill, the Welsh Government said that intelligence it had received indicated that, while high numbers of IFAs would convert, relatively few residential providers would, though it was not possible to be precise at this stage.

The memorandum sketched out three scenarios, under which 50% (scenario A), 25% (B) and no (C) private providers switched to not-for-profit provision.

Under scenario C, councils would have to secure an additional 653 residential care placements across 204 homes, whereas under scenario A, only 102 additional homes would need to be sourced.

Initial costs of reform falling on councils

According to a report by ADSS Cymru, a standard cost for developing a children’s home is £700,000, and the directors’ body assumed that councils would have to meet the start-up costs and bear the risks of homes running below capacity to encourage new not-for-profit providers to enter the market.

The Welsh Government is providing councils with £68m from 2023-26 to invest in new provision.

However, with all things being equal, councils would face additional costs of £88m in 2025-26, £67m in 2026-27 and £46.5m in 2027-28 under scenario C, compared with £45.5m (2025-26), £35m (2026-27) and £25m (2027-28) under scenario A, according to modelling by the Welsh Government.

In the long-term – from 2028-29 – the government projected that councils would save money under any of the three scenarios.

Also, it added that its intention was for the costs of reform to be lower than illustrated because of its plans to reduce the number of children in residential care.

Adequate funding ‘will be crucial’

In response to the bill, Welsh Local Government Association spokesperson for health and social care, Llinos Medi said removing profit from provision for children in care was “an important ambition in supporting us in achieving better outcomes for children and young people” that would lead to “a better and fairer system for all”.

“However, while we endorse the bill’s aims, we do have some concerns regarding the resources and capacity of local authorities to implement these changes effectively and within the timescales set out,” she added.

“Adequate funding and support will be crucial to ensure that local authorities can meet the increased demands and continue to provide essential services without disrupting the lives of children and young people in existing residential and foster care placements. We look forward to working collaboratively with the Welsh Government to address these challenges and ensure the successful implementation of this important legislation.”

‘Lack of detail on transitional arrangements’

On behalf of providers, Care Forum Wales chair Mario Kleft said there appeared to be “more questions than answers2 in the bill.

“There are some truly excellent providers of children’s care placements in the independent, third sector and charity sectors in Wales,” he added. “Nobody accepts that it is right to profiteer from any service and from our perspective the driver needs to centre on quality and choice.

“Whoever provides child care services, they need to be economically viable to ensure their sustainability into the future. There is not any great detail yet about how any transition might be achieved and I am aware that a number of local authorities who commission services have voiced concerns around practical issues and the affordability of what’s being proposed.”