Cracking Down on Profiteering: New Financial Oversight in Children’s Social Care

Following the April 2025 SCCIF updates, the UK government has taken further steps to tackle growing concerns around profiteering in the children’s social care sector. These new financial oversight measures represent a major shift in the way the industry is monitored, focusing not only on the quality of care but also on the financial practices of the organisations delivering it. The aim is clear: public funds must be used to improve the lives of children in care — not to fuel unsustainable profits or prop up fragile corporate structures.

For some time, national attention has been drawn to the rise of private equity-backed care providers operating children’s homes. Investigations by the Competition and Markets Authority (CMA) and Ofsted have revealed that certain companies have been extracting high levels of profit, sometimes reaching margins of 20–30%, while local authorities struggle with stretched budgets and limited placement availability. These findings sparked a call for change, leading to new government measures introduced in late 2024 and taking effect through early 2025.

One of the most notable developments is the introduction of mandatory financial reporting for large children’s social care providers. Companies now need to submit detailed financial data to both Ofsted and the Department for Education. This includes profit and loss information, ownership and investment structures, debt levels, and plans for maintaining service continuity in the event of financial difficulties. This change allows the government to monitor financial risk within the sector and identify potential issues before they affect children or placements.

In parallel, the government has signalled its intention to introduce a “backstop” legislative mechanism that would allow profit caps to be imposed on providers if voluntary restraint is not achieved. Education Secretary Bridget Phillipson has been vocal in expressing concern over the level of profits being taken from public funds, noting that if companies do not act responsibly, the government is prepared to legislate to limit how much money can be made from taxpayer-funded placements. This move would bring the sector in line with other public services where similar financial controls are already in place to protect service quality and prevent market abuse.

Ofsted’s role has also evolved in response to these challenges. Beyond its existing inspection duties, the regulator has now been granted greater powers to investigate financial conduct and take enforcement action against providers where necessary. This includes issuing penalties to unregistered or non-compliant organisations and acting on early signs of financial instability, especially among groups operating multiple homes. This more proactive regulatory approach is designed to prevent disruption to children’s care by stepping in before financial mismanagement leads to crisis.

For care providers, these reforms mark a pivotal moment. Those who operate transparently, reinvest profits into staff and services, and maintain robust financial planning are likely to find themselves on more stable ground. However, organisations that have prioritised profit over care, or who are carrying unsustainable financial risk, will now come under greater scrutiny — and potentially face sanctions. Importantly, this is not just about compliance. It’s about fairness, sustainability, and ensuring that the entire sector is aligned around the same goal: delivering the best possible outcomes for children.

These changes also reflect a broader shift in the way the government views the children’s social care market. Financial health and care quality are no longer treated as separate issues. Instead, they are deeply interconnected. A financially unstable provider cannot offer continuity or quality, just as a care home that cuts corners to increase profit undermines the wellbeing of the children it supports. By embedding financial oversight into the regulatory framework, the government hopes to reduce volatility and create a more secure environment for young people in care.

At OVcare, we understand that this new level of oversight may feel like a significant adjustment, particularly for larger organisations. But it also represents a chance to build trust with commissioners, regulators, and — most importantly — the young people you support. Transparency, accountability, and reinvestment in care are no longer optional. They are becoming essential pillars of good practice in the sector.

As always, we will continue to monitor these developments and keep our community informed. If you’re unsure how these changes may affect your organisation, or would like to explore how technology can support your compliance efforts, don’t hesitate to get in touch.