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Hundreds of children in care in England are being placed at risk in unregistered homes for months at a time by councils, MPs have warned.
A report by the cross-party government spending watchdog said the “dysfunctional” care system was “not working”, with 800 vulnerable children placed in illegal settings for an average of six months each last year.
The report said the lack of oversight for unregistered homes meant there was “no assurance over the quality of care or that children are safe”.
Last month, an Ofsted report found councils could often not find places in registered homes to cater for children’s needs, with many turning to alternatives which can charge up to £30,000 a week per child.
Such homes are not registered with or inspected by Ofsted – which is a criminal offence – but it can only issue warning letters to operators.
This practice is expected to change under new legislation as part of the Children’s Wellbeing and Schools Bill, with the inspectorate given stronger powers to impose fines on the unregistered homes.
The Public Accounts Committee (PAC) report, published on Friday, said councils were facing rising costs as a result of a “dysfunctional market where the need for homes in certain areas, particularly for children with complex needs, has exceeded the number of places available”.
Conservative Sir Geoffrey Clifton-Brown, the PAC chairman, said the current system was “forcing” councils to routinely “reach for solutions which will see our nation’s children regularly put at risk”.
The report said councils did not take the decision to use unregistered provision “lightly” and only did so “when no registered settings are available”.
It also said Ofsted had introduced targets to shorten the time it takes to register new homes
But it added that the Department for Education (DfE) expected it would take two years for the improvements to “take effect and address the shortages of places that contributes to local authorities using unregistered homes”.
The number of registered care homes in England reached a record high in 2024/25, at 4,010.
But in its annual report, published in December, Ofsted pointed out that many were not in the areas where the needs were highest, while there were also ongoing issues with the affordability and suitability of places.
It said the lack of available places in legitimate settings had led to a shadow market of illegal care homes which charge “exorbitant fees”.
A recent report from independent public spending watching, the National Audit Office, found the cost of children’s residential care in England had nearly doubled in five years, to £3.1bn in the year to March 2024.
The PAC report also noted that almost half (49%) of children in care in England were being placed in homes more than 20 miles away from their original family home.
It said the government was relying on more foster carers to reduce demand for children’s residential care, but had “yet to address the significant challenges” to boost numbers.
A DfE spokesperson said the government had inherited a children’s social care system “unable to meet the needs” of vulnerable children, but it was “taking action” to reform the sector.
“Running an unregistered children’s home is illegal and those who seek to profit from children’s social care illegally will face serious consequences,” they added.
