The Government will set out plans on Monday aimed at preventing companies running children’s homes in England from making excessive profits.

It says it will introduce new measures that will require larger providers to disclose their finances. If they do not voluntarily limit their profits, they will face legal limits on how much they can earn.

The government also intends to strengthen the powers regulator Ofsted has to investigate and fine “exploitative” children’s home providers who fall victim to the extended care system.

Education Secretary Bridget Phillipson said “thousands of children have been failed” in the care system.

“Clearly some of the accommodation and placements are absolutely shocking,” she told BBC Breakfast, adding that this was due to both the conditions and the “horrific consequences” for some of the most vulnerable children in the country.

The changes are part of a wider overhaul of the children’s social care system, which supports and protects vulnerable young people.

The measures come as council-run children’s services struggle with rising demand, complex cases and rising costs.

Local authorities say there were more than 1,500 children in 2023 for whom councils were paying more than £500,000 a year to place in residential homes, with lack of other options the most common reason.

Meanwhile, a 2022 report from the Competition and Markets Authority found that the 15 largest children’s home providers make an average of 23% profit per year.

The government will introduce legislation in Parliament on Monday that will require major care home providers to share their finances with the government, so it can challenge what it describes as profiteering.

It would also include a “backstop” law that would impose a limit on profits, which the government could enforce if companies do not do so voluntarily.

The government says the measure will also allow it to ensure that the largest providers do not suddenly dominate the administration and children do not become homeless.

But Andrew Rome, an accountant and leading analyst in the sector, said the 10 largest providers account for only 26% of all children’s homes in England, with many providers being much smaller.

He told the BBC that the measure would miss out on “small opportunists who are charging extraordinary prices for unregulated (or) unregistered services”.

Mr Rome also said it would be difficult to monitor the finances of larger providers because they often operate through networks of companies, while smaller companies may only have to disclose limited financial information.

He said that a “backstop” law to limit profits was “near impossible to police by design”.

The government also intends to give Ofsted the power to issue civil fines to private providers, including unregistered homes, to “prevent dishonest behaviour”.

It accused some providers of “sucking money that should go towards vulnerable children” from homes that “do not meet the correct standards of care”.

on September, A Liverpool court heard unregistered children’s homes were demanding up to £20,000 per child One week from local authority. The council said it was forced to agree to such fees because it could not find anywhere else to keep the children – despite it being illegal to send them there.

Ofsted will also have the power to investigate multiple homes run by the same company.

The government says it is acting on the recommendation of a child protection panel, which reviewed allegations of abuse at three children’s homes in Doncaster run by the Heasley Group.

In 2023, BBC revealed More than 100 reports related to abuse and neglect were filed at the sites between 2018 and 2021. The children were reportedly beaten, locked outside naked in the cold and had vinegar poured on their cuts.

At that time, Heasley Earned 16% profit from sites that were run,

Ofsted received 108 reports about sites which housed children with disabilities and complex health needs, but were still rated “good”. Both the regulator and Hessle Group have apologized for the failings, and three homes have been closed.

An expert panel was tasked with reviewing the incidents Said that “major changes” are needed in the security system,

Anne Hudson, chair of the panel, said the new law would “go some way towards tackling some of the systemic weaknesses that can lead to situations where very vulnerable children are abused and neglected”.

Phillipson said England’s care system was “bankrupting councils, disappointing families, and, above all, leaving too many children feeling forgotten, powerless and invisible”.

Other planned measures by the government include:

• Strengthening the rights of families to be involved in decisions about a child going into care
• There is a need for multi-agency child protection teams for every council
• Local authorities are expected to provide support to care leavers, including help to find accommodation, until they turn 21
• Forcing families with children who have a safeguarding check or safeguarding plan to seek council permission for home schooling

The BBC understands the government will also outline action to tackle the increase in deprivation of liberty orders. Which has increased 12 times in the last seven years,

These court orders allow children to be detained in registered or unregistered homes – and are often granted for children who are a danger to themselves or others. Dame Rachel de Souza, Children’s Commissioner, say that very few grants should be given,