The most vulnerable people in Wales
Why simply making laws isn't enough...
There has been a hell of a lot of politics chat over the last few weeks in this newsletter. Of course you might argue that this is a Welsh politics newsletter, what else would we talk about?
But when I started this 18 months ago I stressed that I don’t believe that politics stories should be just focussed on politicians and polling. The most important thing is how the actions of politicians impact upon the people they serve. I also said that the principal aim of this newsletter was to help you better understand Wales.
Given that in the coming weeks there is going to be so much election focus, this weekend I wanted to deep dive into something different.
Ask any Welsh Labour politician what they have achieved over the last five years and the chances are they will point to the fact they have legislated to take private profit out of children’s care. While in principle this is an unequivocally good thing, passing the legislation isn’t job done and there are very real reasons to be concerned that this could create an even worse situation.
To explore this, Marcus has been investigating the issue in-depth and has produced a fascinating piece. I learned so much that I wasn’t aware of. Who would have known that some of Wales’ children’s services are run by private equity funds? One also needs to question why, if we are taking the profit out of care, have the majority of recent children’s care homes registering in Wales been for profit?
This stuff matters. It shows how even the best intentioned policies carry risk. I hope you enjoy reading it.
Before we start, I want to talk to you about Hello Starling:
Those of you who have been with me since the start will know all about Hello Starling. They are media planning and buying specialists. But what does that actually mean?
Well let me give you an example of what they do. They previously ran a digital campaign for Visit Warwickshire designed to drive reach amongst specific audiences. This campaign reached over 1.9m people!
Who will pay the price for Wales’ ban on profit in children’s care?
Reporting by Marcus Hughes
Of all the hardships a person could face, your initial years of life being marked by abuse, neglect, family crisis, poverty, parental addiction, or mental ill-health has to be among the most profound.
All children deserve a loving and supportive home, enough food on the table, proper access to healthcare, education, and friends – ultimately to feel like they properly matter.
When these basic standards are not reached, it is sometimes incumbent on us as a society to step in and provide care that meets their needs and helps them grow into happy, healthy individuals. It is an investment in all our futures, not just theirs.
You’d also struggle to find a room of socially conscious adults who wouldn’t agree that, ideally, any and all public money spent on that care should benefit the child – and shouldn’t disappear across the profit margin of a private company.
Unfortunately, this has been happening more and more within the care sector over the past several decades as local authority-led services creaked, leading to an increase in the commissioning of private firms to provide services. Some of these companies are run by private equity funds.
The last Labour-led Welsh Government took note of this profit-making and legislated to end it. A law was passed signalling the end of private profit, fixing a hard deadline of 2030 after which point no Welsh child can be placed into the care of a for-profit organisation in Wales or England – apart from in “exceptional circumstances”.
Labour have been applauding themselves for the move. Their 2026 election manifesto notes in a “We Have” achievements section that they “passed a trailblazing new law to remove private profit from children’s services”.
Job done then?
Alas, the time for celebration is not now. Around 80% of children’s home places are currently provided by private companies in Wales, and more than a third of fostering places. That is a huge reliance that we have just four years to wean ourselves off. To do this we will need to do a combination of the following:
Replace it with local authority provision
Tempt current for-profit providers to convert to a not-for-profit model
And/or find new not-for-profit providers.
And we cannot get this wrong.
Wales currently has the second highest rate of children in care in the UK, behind Scotland where the rate is decreasing. In Wales, the number of children in care has increased by 28.4% in a decade, although has remained fairly stable in the last five or six years.
That’s approximately 7,200 children. The anxiety inducing question from those working in the sector is what happens if local authority and not-for-profit provision can’t replace that offered by the private sector in time? Finding places for some young people is already a challenge even with the current options available.
Figures in local government express broad support for the principle of taking profit out of care, but the fact of the matter is they don’t really know how this is going to impact them and where they need to spend money.
For children’s residential homes, the scale of the task ahead is almost completely unknown. We just don’t know how many of these residential homes will be here in four years time. This creates a huge challenge for local authorities to plan.
A recent Welsh Government report said there are 294 for-profit children’s home services in Wales as of September 2025, compared with just 74 local authority children’s services, and just seven services operating an independent not-for-profit model.
In short, this means Wales is currently very reliant on the private sector to deliver children’s home places. Of the 1,291 available places for children’s residential care in Wales, 80% are provided by for-profit private companies.
Local authority fostering does, in contrast, currently make up the majority. Around two-thirds of placements are provided by local authorities under the umbrella title of Foster Wales, with a third provided by the private sector. Making up that third of provision might sound like a gentler hurdle, but recruiting new foster carers is very hard.
Some argue it’s getting harder with the advent of working from home arrangements meaning that, for many households, their spare bedroom is now an office. Wales is still very reliant on private agencies to make up the shortfall even with efforts to push recruitment.
How many of those companies will transfer to a not for profit model?
This is a very important question. Current private providers are holding their cards close to their chest and, notably, more have been entering the market.
The Health and Social Care (Wales) Act 2025, the legislation that removes profit from care, put the first deadline for the transition on April 1, 2026. After that point, new for-profit providers will not be allowed to register in Wales and supposedly by 2030 local authorities wouldn’t be able to place a child with them anyway.
With the writing on the wall, you might think they’d be losing interest.
But right up until that April deadline, the majority of new providers of children’s residential homes registering with Care Inspectorate Wales have been for-profit.
This begs the question of why for-profit providers are rushing to enter a market which is apparently on borrowed time?
There’s a few ways to interpret this. An optimist might see new providers coming into Wales who are broadly supportive of the ambition to eliminate profit and will look to alter their make-up to meet the definition of a not-for-profit model in the future.
A cynic may suggest that providers are seeing a potentially short window open to make money, and with demand currently outstripping supply, it’s worth their time to get into that market now.
Further still, it may be the case that in the long term, they just don’t believe that Wales will fully realise the goal as it currently stands.
You can see why they may think this. A provision was written into the legislation that children can’t be placed with a for-profit provider “unless in exceptional circumstances”. Even after 2030 children can still be placed with for-profit providers “in exceptional circumstances”, such as keeping siblings together and where “no suitable not-for-profit placement is available”.
And while the statute is already in place, Cymru is facing a pivotal Senedd election next month that will almost definitely see a new governing party, or parties, take power for the first time since devolution began.
Some of those parties currently polling well with the electorate may not be as opposed to private enterprise maintaining an interest in the provision of public services. Reform’s leader in Wales Dan Thomas led an aggressive outsourcing policy when he ran a London council.
There are many wondering if providers are simply biding their time.
What’s the problem with profit in care?
In 2022, a Competitions and Market Authority (CMA) investigation concluded that the UK has “sleepwalked into a dysfunctional children’s social care market”.
The study looked at services in Wales, Scotland, and England, finding there is currently a shortage of appropriate places in children’s homes and with foster carers. This shortage often resulted in high prices being paid by local authorities to commission services from private providers with these costs picked up by taxpayers.
The study found that private sector providers of fostering services and children homes “appear to be making higher profits” than the CMA would expect in a well-functioning market, suggesting local authorities may be paying more for these services than they should and which could be cheaper if delivered by local authorities.
The CMA also raised concerns about the “financial resilience” of some private providers of children’s homes in England and Wales, particularly those financed through private equity. The report authors said high levels of debt among these firms risked them getting into financial difficulties which could impact the care provided to children.
There’s a risk then that these companies can abruptly shutter a service, leaving the children in their care facing further disruption to their lives.
Will Wales really take the profit out of care?
The Welsh Government has argued that by April 2028 councils will have been provided with £144m to help implement these changes, but there have been calls from the sector saying this is insufficient.
The Children’s Homes Association (CHA), which represents providers, has issued stark warnings that the policy to eliminate profit from children’s care in Wales is being implemented without a funded or realistic delivery plan.
A report outlined a residential care sector already operating under sustained demand and sufficiency pressure, arguing that the Welsh Government hadn’t committed enough money to realistically deliver the transition. It warns that cash-strapped councils are being left to absorb extra costs.
CHA chief executive Dr Mark Kerr said the policy is creating the risk that local authorities, already struggling to meet complexity pressures and the demand to secure appropriate placements, will be further hamstrung as providers potentially leave the sector.
He told us:
“The policy destination may be clear, but the journey is not funded.”
Action for Children Cymru is one of the few charities still providing not-for-profit residential care in Wales. They have 16 residential services in Wales as well as running a fostering service.
Their director for Wales, Laurie Ryall, said the charity fully supports the ambition to take profit out of care, reiterating that “no one should profit from caring for children” but she’s realistic about the massive challenges ahead in a short time frame.
She added:
“There remains a lack of clarity about how many providers will transition to a not‑for‑profit model ahead of the 2030 deadline, resulting in uncertainty about future sufficiency level.
“At the same time, there are ongoing challenges around the sufficiency of foster carers across Wales. More needs to be considered at a national level to improve the recruitment and retention of foster carers, to help rebalance the system and ensure children are able to access the right home at the right time.”
The principle behind removing profit from children’s care is difficult to dispute. But principles alone don’t provide children with the stability they need.
There are thousands of people all over Wales working hard for those children every day, but some we’ve spoken to fear there is a very real risk that well-intentioned reform could create greater instability in a system already under strain.
Ultimately, it’s vulnerable children who will feel the benefit of these changes, or their consequences.
That’s all for today. Please do take advantage of our comments section. It is one of the few corners of the internet where you can have reasoned and polite discussions about Welsh politics, even if you disagree with people.
Diolch!
I could argue that this is Labour dog-whistle politics.
The important thing should be the quality, safety and cost of care, not whether the owners pay themselves a dividend or a salary. Historically the Church and local authorities have a very bad record; and you acknowledge above that the change to not-for-profit requires additional funding.
With the grooming gang scandal still not being properly addressed, it would be informative to see an analysis of the ownership models of the children's homes involved.
Add to these concerns the fact that local authorities are already having to place children in illegal childrens homes, some of which are just plain dangerous.
When Thatcher started the "privatisation" trend, people in social care could see that profiteers would take over.
In one county I worked near, the best adult residential care was provided by organised crime as a means of money laundering.
Labour did nothing about the problem either - and here we are.
https://www.thebureauinvestigates.com/stories/2026-01-16/new-report-reveals-shocking-prevalence-of-illegal-childrens-homes