Over £120m was spent by local authorities across Merseyside in the last year on private children’s homes, and some of that money is being paid to house children in unregistered, illegal settings.
It comes after Ofsted announced in July that councils that place children in unregistered homes could see their children’s services performance ratings downgraded, and after the inspectorate carried out its first successful prosecution against this type of provider.
Spending breakdown
Collectively, Liverpool, Sefton, Knowsley and Wirral Councils spent £119.6m on funding private services in 2025/6, according to responses to Freedom of Information requests. St Helens Council did not respond, but as of 2024 had 34 private homes across the borough.
Costs have risen significantly over the past couple of years, with Sefton for example spending £35.6m in the past year, compared to £23.4 in 2023/4.
Rise in private homes
Private care homes make up over 80% of the mix in England, with the remainder being run by local authorities and charities. The number of this type of home has skyrocketed in recent years, nearly doubling from 2,209 to over 4,000 since 2018, according to Ofsted.
In that same period, the number of children in care only increased by 9%. It is thought that the rise in the number of homes is the result of new providers including private equity and property investors who do not require prior experience or qualifications to set up services, according to charity Become.
Ofsted warned last year that firms were increasingly putting profit over the needs of children, partly by setting up homes in areas of the country where housing is cheaper.
Unregistered homes on the rise
The sharp rise in the number of children’s homes has also resulted in an increase in the number of unregistered providers.
All services are legally obliged to register with Ofsted, which is required to inspect them twice a year. However, when councils with a shortage of homes in their area cannot find any other way to place children in care, they sometimes have to resort to using these settings, sometimes costing up to £2m per year per child, the BBC has reported.
Firms lodging applications with Merseyside councils’ planning departments often do not show up on Ofsted records. These settings may be waiting to register with the inspectorate, or they may not have submitted an application at all.
Prosecution and warnings
Ofsted’s successful prosecution of an unregistered provider related to Catalyst Care Limited, whose directors were fined £92,400 after pleading guilty to managing illegal homes in Kent. The directors had been sent repeated warnings by Ofsted that they were breaking the law, while receiving over £1.7m from local authorities.
Ofsted said that children placed in unregistered homes have no assurance of safe or suitable care, adding: “There are no guaranteed checks on staff or living conditions, or accountability when things go wrong. Worryingly, many children placed in illegal homes are often those with the most complex needs.”
Local impact
In Knowsley, there are currently four children from the borough living in unregistered homes.
A Knowsley Council spokesperson said “A key priority for the Council is for all our cared for children to live in registered provision, where they are subject to regular inspection regimes. It’s important that we have the right homes for our children, in the right places, which is of a consistently high standard.
“In exceptional circumstances, and where registered provision isn’t available, unregistered provision would be used, but these are subject to our own robust safeguards, monitoring and management.”
Liverpool City Council said that it was aware of unregistered homes operating in the borough and that two local children were living in one.
A spokesperson said: “The use of unregistered provision is only ever considered as a last resort when no suitable registered placement is immediately available and where the alternative may present a greater risk to a child’s welfare.
“Any child placed in such provision is subject to enhanced oversight and support, with our services working urgently to identify and secure a registered placement as quickly as possible. We have already reduced our use of unregistered care and are committed to eliminating it entirely.”
Sefton Council said that it knows of 65 unregistered homes within its boundaries, but none of its young people are housed in one. It added that it does interact with the providers for safeguarding processes and due diligence measures, as well as to clarify whether the home is pursuing Ofsted registration.
Sefton Cabinet member for children, schools, and families Diane Roscoe said: “It is a trend we are aware of but our position in Sefton is that children who need to come into our care are best placed within their home communities and our priority is to recruit foster carers so children live in stable, loving homes.”
Wirral Council said that it was aware of unregistered homes operating in the borough but has no direct interaction with them. It said that fewer than five Wirral children were living in one.
Children moved away
The majority of the young people in residential settings are looked after in homes placed outside of the borough they are from.
In 2024, Become found that there were almost 18,000 children in care living over 20 miles from their home area, out of a total of 84,000, and that this number had increased by 3,000 since 2018.
There are currently 85 Knowsley children in residential settings, but the vast majority – 67 – are being housed elsewhere. Similarly, of Liverpool’s 129 looked-after young people in children’s homes, 85 have been placed outside of the borough. Meanwhile, in Sefton, 65 of the 82 children in homes are living elsewhere.
There are reasons why a child might need to be moved away from home, such as safeguarding them from criminal behaviour or abuse, but often it is simply because of a lack of spaces in their area.
Become, which is the national charity for children in care and care leavers, has continually raised concerns that this means a child having to leave everything and everyone they know through its Gone Too Far campaign.
Council responses
Wirral Council said: “Wherever possible, we seek to place children close to their families, schools and support networks. However, there is a national shortage which can mean placements are not always available locally.
“The cost of residential care has also risen significantly in recent years because of increasing demand and limited availability. As a corporate parent, the council has a legal duty to ensure suitable accommodation and care are available for children who need them, and Wirral Council will always prioritise their safety and wellbeing.
“Children placed outside Wirral continue to receive support and oversight to ensure their needs are being met and that they remain safe and well cared for.”
The Liverpool City Council spokesperson also said: “Wherever possible, we seek to place children close to their families, schools and support networks, but there is a national shortage of suitable placements, which can mean some children are accommodated outside the city.
“Importantly, while some children may be placed outside Liverpool’s boundary, the majority remain living close to home within Merseyside.
“We also maintain strong oversight of children placed within Liverpool by other local authorities, challenging whether the benefits of the home outweigh the need to place them outside of their own home area and ensuring that Ofsted are aware.
“A recent Ofsted inspection found that the Council’s oversight and leadership of unregistered placements was strong, providing independent assurance of the rigorous approach we take to safeguarding children in our care.”
The Knowsley Council spokesperson added: “We also look forward to seeing the work of the Regional Care Cooperative across Cheshire and Merseyside progressing, which aims to plan, commission and deliver children’s care places in fostering, children’s homes and secure homes. This regional approach brings together partners and local authorities on a wider regional footprint to improve sufficiency of places and ensure children and young people have access to the right care, at the right time in the right place.
“Our priority is always to ensure that every child is safe, well supported, and living in a home that meets their individual needs.”
In a bid to tackle this problem, the inspectorate has recently been granted the power to hand out financial penalties, as well as greater resources for investigations into providers.
