The Cross-border Placement of Children (Requirements, Effect and Enforcement) (Scotland) Regulations 2026: Business and Regulatory Impact Assessment

Section 3: Costs, impacts and benefits

Quantified costs to businesses

The Scottish Government does not hold data on the cost associated with cross-border placements into Scotland. Where a child is placed into Scotland on a temporary basis, the placing authority should bear the costs of the placement and of providing all services required to support the child. Arrangements should be made between the placing and receiving authority to support this.

There is a recognised gap in relation to information about cross-border placement costs and associated profit in the residential care sector in Scotland, which is one reason why the Scottish Government is making proposals within the Children (Care, Care Experience and Services Planning) (Scotland) Bill in relation to profit and financial transparency.

Other impacts

N/A

Scottish firms’ international competitiveness

N/A

Benefits to business

N/A

Small business impacts

Residential care

There is currently limited data in relation to the businesses in the residential care sector in Scotland. While there may be some smaller private homes, many of these are often part of a larger parent company (sometimes based outside of Scotland).

The Regulations may lead to a reduction in the number of cross-border placements into Scotland. This may have a negative impact on the residential care services in Scotland that rely on such placements for income. However, we consider the new requirements to be necessary and proportionate to ensure children are only placed where this meets their needs and upholds their rights.

Foster care

All fostering services in Scotland are required by law to be not-for-profit. We are proposing legislation in the upcoming Children (Care, Care Experience and Services Planning) (Scotland) Bill 2025 to require all fostering services to be registered charities.

Investment

The Scottish Government does not hold information in relation to investment in residential homes in Scotland.

Workforce and Fair Work

We are not aware of any impact that the Regulations will have on pay or the workforce.

Climate change/ Circular Economy

N/A

Competition Assessment

The Competition and Markets Authority (CMA) launched a market study into children’s social care across England, Scotland, and Wales in March 2022, prompted by concerns over local authorities struggling to find suitable placements for children and the high costs of care. While Scotland’s issues were less severe than in England and Wales, the study still identified challenges in placement availability, particularly for children with complex needs, and concerns over high prices and profits among private providers. The CMA emphasised the importance of reforming the placements market to ensue better outcomes for children and more sustainable public spending.

In Scotland, local authorities generally manage to find appropriate placements, but difficulties persist for children with complex needs. Some children from England are also placed in Scotland due to difficulties sourcing an appropriate placement in their home region. The CMA found no consistent quality differences between public and private care providers but noted that high profits suggest competition is not functioning effectively. The Scottish Government’s commitment to move away from for-profit provision was acknowledged, though the CMA cautioned that this transition must be carefully managed to avoid negative impacts on children.

The report recommended reforms in three key areas: improving commissioning through collective procurement and forecasting, reducing barriers to new provision by supporting workforce recruitment and reviewing Regulations, and enhancing market resilience by monitoring financial risks and requiring contingency planning.

The CMA stressed the need for national oversight and coordination, particularly through bodies like Scotland Excel, and suggested that the Scottish Government consider integrating these recommendations into broader reforms. It also highlighted the importance of annual sector reviews to monitor workforce challenges and ensure sufficient placement capacity. Finally, the CMA called for proactive steps to manage financial risks among providers, especially those with high debt levels, to protect children from the consequences of sudden provider failures.

The CMA highlights a shortage of foster carers, particularly for children with complex needs. It notes that although all fostering services in Scotland operate on a not-for-profit basis, the cost to local authorities for placements through independent/voluntary sector remains high. These costs are comparable to those in England and Wales, where Independent Fostering Agencies are not required to be not-for-profit. This suggests that not-for-profit status alone does not guarantee lower costs.

As noted above, the Scottish Government is seeking to address issues raised through measures proposed in the Children (Care, Care Experience and Services Planning) (Scotland) Bill 2025. More broadly, Ministers consider that the implementation of the Regulations will be an important step in ensuring that cross-border placements are only made into Scotland where necessary and appropriate for a child; that oversight of these placements is improved; and that their impact on the residential and foster care sector can be monitored and assessed.

Consumer Duty

Through these Regulations, the Scottish Ministers aim to ensure the rights of children placed in Scotland (service users) are upheld and protected. The requirements to be fulfilled in relation to cross-border placements will ensure that risks of harm to children placed from elsewhere in the UK are mitigated, and that placements are only made where they are appropriate to the child’s specific needs. The intention is that this will, in turn, ensure the maximum availability of residential and foster placement places for children within Scotland, maintaining choice and flexibility.