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Plans to prevent companies running children's homes in England from making excessive profits will be presented by the Government on Monday.
He says he will propose new measures that will force large suppliers to disclose their finances. If they don't voluntarily limit their profits, they will face a legal limit on how much they can earn.
The government also intends to strengthen the powers of regulator Ofsted to investigate and fine “exploitative” childcare providers who profit from an overburdened care system.
Education Secretary Bridget Phillipson said “thousands of children have been abandoned” within the care system.
“Frankly, some of the accommodation and placements are deeply, deeply shocking,” she told BBC Breakfast, adding that this was due to both the conditions and the “terrible consequences” for some of the country's most vulnerable children.
These changes are part of a major overhaul of the child welfare system, which supports and protects vulnerable young people.
The moves come as council children's services face growing demand, complex cases and soaring 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 be placed in residential homes, with a 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 a bill to Parliament on Monday which will force major care home providers to share their finances with the Government, so they can challenge what it describes as profiteering.
It will also include a “safety net” law that would impose a limit on these profits, which the government could implement if companies did not do so voluntarily.
The government says the move will also help it ensure larger providers do not suddenly collapse into administration, leaving children homeless.
But Andrew Rome, a leading accountant and analyst in the field, said the 10 largest providers account for just 26% of all children's homes in England, with many providers being much smaller.
He told the BBC the move would not be missed by “small opportunists who charge extraordinary prices for unregulated (or) unregistered services”.
Mr Rome also said it would be difficult to exercise control over the finances of large providers because they often operate through a network of companies, while smaller companies may only need to disclose limited financial information.
He added that a “safety net” law aimed at limiting profits was “nearly impossible to design and control.”
The government also intends to give Ofsted the power to impose civil fines on private providers, including unregistered homes, to “deter unscrupulous behavior”.
It accuses some providers of “siphoning off money that should be going to vulnerable children” into homes that “do not meet good standards of care”.
In September, a Liverpool court heard that unregistered children's homes were demanding up to £20,000 per child per week from a local authority. The council said it was forced to accept such fees because it could find nowhere else to place the children – despite it being illegal to send them there.
Ofsted will also be able to investigate multiple homes run by the same company.
The government says it is acting on the recommendation of a child protection committee, which examined allegations of abuse at three children's homes in Doncaster run by the Hesley Group.
In 2023, the BBC revealed that more than 100 reports of abuse and neglect were recorded at the sites between 2018 and 2021. Children were allegedly beaten, locked naked outside in the cold and vinegar was poured on their cuts .
At the time, Hesley was making a 16% profit on the sites it operated.
Ofsted received 108 reports on the sites, which housed children with disabilities and complex health needs, but nevertheless rated them as 'good'. The regulator and the Hesley Group have since apologized for these failings, and all three houses have been closed.
An expert panel reviewing the incidents said a “major overhaul” of the protection system was needed.
Annie Hudson, chair of the committee, said the new legislation would “go some way to addressing some of the systemic weaknesses that can create the conditions in which very vulnerable children are abused and neglected.”
Phillipson added that the English care system was “bankrupting councils, failing families and, above all, leaving too many children feeling forgotten, helpless and invisible”.
Other measures planned by the government include:
Strengthen the right of families to be involved in decisions regarding the placement of a child. Require every city council to have multi-agency child protection teams. Require local authorities to provide support to people leaving care, including helping them find accommodation, until the age of 21. Oblige families with a child. who have been the subject of a safeguarding investigation or safeguarding plan to obtain permission from the council to homeschool them
The BBC understands the government is also planning measures to deal with the increase in deprivation of liberty orders, which have increased 12-fold over the past seven years.
These court orders authorize the confinement of children – in registered or unregistered homes – and are often granted for children who pose a risk to themselves or others. Dame Rachel de Souza, the children's commissioner, believes much less support should be given.
In response to the government's plans, the Children's Home Association (CHA), which represents providers in England and Wales, said Ofsted's new powers, which “will tackle unregistered and unregistered illegal housing regulated, are long overdue.
However, he argued that the “safety net” law that threatens to cap providers' profits “risks serious unintended consequences” as it would “incentivize more providers to adopt interest-based business models and indebtedness abroad.
The CHA also criticized Phillipson's comment that the sector was failing families, saying it was “not involved in families or their decisions” and that it took in children “because social work and preventive measures fail, probably due to the lack of financial resources of local authorities.” .
Paul Carberry, chief executive of the charity Action for Children, welcomed the government's plan but said “urgent investment in not-for-profit services and the public sector is needed to create stability and ensuring every child gets the placement they need.”
