Children’s residential care: government response

To: Professor Russel Griggs, Chair Regulatory Review Group 

From: Natalie Don-Innes, Minister for Children, Young People and the Promise

Dear Professor Griggs,

Thank you for your letter of 20 November 2025 regarding proposed measures in the Children (Care, Care Experience and Services Planning) Bill.

I welcome the Regulatory Review Group’s scrutiny of the Scottish Government’s proposals for enabling powers for Financial Transparency Regulations to assess profit levels in the children’s residential care sector, and for regulations to limit levels of profit within the sector, if necessary

In your letter, you make a series of recommendations. I have given an initial response to these below. We will continue to reflect on them while we also take account of the analysis of the consultation responses on the Bill provisions, which will be published later in December.

Recommendation 1: There is currently no standardised definition of ‘profit’ shared across stakeholders. I recognise the importance of definitions of key terms, such as ‘profit’ and ‘surplus’. We will work closely with stakeholders to agree clear definitions of these terms to support development of the proposed Regulations.

Recommendation 2: Consideration should be given to the role that contracts can play in delivering the aims of the bill. My officials will continue to work with Scotland Excel and procurement advisors to explore whether the financial transparency measures could be built into contracts going forward.

Recommendation 3: We would encourage officials to look broadly across a range of sectors for any comparable regulations to find out if there are any lessons to be learned. I am keen to learn from other sectors, and from elsewhere in the UK, in relation to how they are using regulation or contractual mechanisms to facilitate profit limitation. We have been consulting our financial and procurement experts within the Scottish Government on this. We will also engage further with the Competitions and Markets Authority (CMA) and are grateful for their offer of continued support.

Recommendation 4: The Welsh and UK Governments are progressing measures in parallel to limit profit within the Children’s Residential Care sector. I agree that it is crucial to work closely with our counterparts in other UK administrations, including the Department for Education (DfE) and Welsh Government, to share learning and seek out new possibilities in this area. Officials have regular meetings with their DfE and Welsh Government counterparts and will continue these as we progress measures.

Recommendation 5: Great care should be taken to mitigate the risk that price-capping measures may drive supply out of an already constrained sector. We are working to better understand the current landscape of residential childcare, including capacity, commissioning and workforce challenges, with a view to informing policy development for residential childcare. The risks around market exit of private providers have been of utmost importance throughout our development of proposals in relation to profit, and we will continue to consider those risks very seriously. By introducing greater financial transparency and only then looking to see what further interventions are needed, we are taking an incremental approach that allows us to continue to assess what action is required and place children’s needs at the centre of any changes.

The wellbeing of children is my primary concern and, as you note, sustainability of the sector and continuity of care are key factors in that.

The measures within the Children (Care, Care Experience and Services Planning) Bill are an early step in fulfilling The Promise commitment to tackle profit in children’s residential care. The Scottish Government will continue to engage with stakeholders, including care providers, the CMA, and the Welsh and UK Governments to inform future measures.

All regulations will be considered and consulted on while taking account of wider issues for residential care, including commissioning strategies and workforce development. Officials would like to thank the Regulatory Review Group for their time and consideration and will engage further in due course.

I hope that this response is helpful and would, of course, be happy to meet with you to discuss this further. Please contact my private office if you wish to discuss this further at MinisterCYPTP@gov.scot

Yours sincerely,

Natalie Don-Innes