With care costs set to rise 82% by 2030, councils must rethink procurement and commissioning to secure better value, improve provision, and deliver stable homes for children in care, says Michelle Walker, Head of Procurement Services at YPO.

In 2024, there were approximately 84,000 children in care in England, 16,000 of whom were placed in some form of residential care setting. Residential care homes now account for 44% of the total spend on children in care, with total expenditure in England on placements for the financial year 2023-24 at around £3.1bn.

Based on forecasting and recent historic data, the number of children placed in residential homes is projected to increase over the next five years. Match this with a pattern of increasing unit costs of residential homes and a compounding picture becomes quickly apparent.

It is estimated that the cost of children in care is projected to rise by 82% from £6.6bn to £12bn by 2030. On this forecast, children’s services represent the biggest financial burden on future council budgets, accounting for a potential 45% of total overspending .

The tragic consequence of these factors combined is the impact on children. A recent report from the Education Committee found that 39% of young people currently leaving the care system are not in education, training or employment and a third of care leavers have become homeless within two years of leaving care.

Central Government has recognised that this current trajectory is unsustainable and with potentially catastrophic consequences. In the June 2025 Spending Review, it was announced that £555m would be allocated to reform the sector over the next three years, as well as a £560m capital expenditure boost provided to ‘refurbish and expand children’s homes and foster care placements’.

To capitalise on these reforms and funding, we need to collectively understand the role of procurement and an updated approach to commissioning can have in enacting change. This will ensure that the public sector secures the best value possible and invests in solutions that can make tangible differences.

The Challenges

Through engagement with local authorities, assessment of research papers, public data and policy statements, YPO has led a PBO ‘Futures Group’ report titled Securing good homes for children in care to identify the systemic challenges being faced and how we can strengthen the commissioning and procurement landscape within children’s social care to ultimately improve services. In this report the Futures Group report has identified six main challenges facing the sector:

1. A lack of systematic approaches to assessing and communicating children’s needs.

2. Difficulties in managing the care market and engaging smaller providers, with many councils struggling to encourage new entrants, SMEs, or VCSEs to meet specialist or complex needs.

3. Regulatory complexities, planning hurdles, and high capital entry costs limiting the establishment of new homes.

4. Rising placement costs presenting financial sustainability concerns, particularly for high-need placements.

5. Challenges in children’s homes workforce recruitment, training, and support.

6. Capital entry and set-up costs for new providers, especially those drawn from not for profit and SME sectors

In identifying these challenges, YPO and the PBOs involved in this report recognised value-adding recommendations.

Procurement Solutions

Building these points out further, in producing this report, five ways to support positive changes were identified:

Shared investment and risk: Current commissioning models place the majority of financial risk on local authorities, leading to short-term, high-cost placements. A shift towards collaborative financial models where both providers and local authorities share responsibility, can foster long term sustainability and reduce cost volatility.

Developing values-based providers: With 76% of residential care now being provided by the independent sector, ensuring that providers operate with strong ethical frameworks is critical and nurturing value-driven providers will help to ensure a realignment of care with the long-term needs of children and young people. The Procurement Act 2023 introduces a regulatory framework that can support this with improved transparency, competition, and social value considerations.

Balanced placement strategies: Developing approaches that consider scale, distance, and local needs will reduce out-of-area placements and keep children closer to their communities, leading to better overall outcomes. This has been recognised by the Education Committee’s recommendation for all local authorities to develop and publish strategies for reducing the number of out-of-area placements.

Homes, not just placements: The institutional nature of residential care can lead to instability and negatively impact children’s well-being. Shifting towards stable, nurturing home environments can provide greater stability and support their long-term well-being.

Integrated NHS participation: Many children in care have complex health and mental health needs, yet collaboration between social care and health services is often fragmented. Strengthening collaboration between social care and health services can improve access to support, children and young people's outcomes and experiences and reduce placement breakdown.

Better Futures

By no means does YPO or any other PBO believe a strategic approach to procurement will be a fix-all for the long-term issues facing children’s care provision. The scale of this challenge is daunting, but we must never lose sight of our collective need to support the most vulnerable people in our society. This is a moral duty, but with clear knock-on economic effects. Supporting children through social care will build stronger future communities and considering the role of procurement and commissioning can make a difference.

For more on procurement check out: How Local Authorities Can Lead Smarter, More Inclusive Procurement.