Financial transparency and profit limitation in children's residential care: consultation analysis

9 Findings from the engagement sessions

9.1 In September and October 2025, the Scottish Government organised a series of engagement sessions to explore stakeholder views on the proposals to increase financial transparency in children’s residential care services as part of the Children (Care, Care Experience and Services Planning) (Scotland) Bill.

9.2 There were six engagement sessions in total, which attracted more than 100 participants. Some organisational participants attended more than one session, and some sessions may have been attended by more than one individual from a single organisation. The session reports provided for purposes of the analysis included details of the organisations and groups represented but not of individual attendees. It is therefore not possible to say exactly how many participants there were at each of the sessions.

9.3 In general, the main focus of the engagement sessions was on whether or not the Scottish Government should legislate to remove profit from care – and if so, what the implications for services would be. The discussions at the sessions did not cover the same set of questions included in the public consultation. In addition, participants were given assurances that nothing they said would be attributed to them individually. As a result, when analysing the reports of the sessions, it was not always possible to attribute views to specific stakeholder groups.

9.4 One session (held on 18 September) was organised in such a way that separate break-out sessions were provided for local authorities, care providers, and other stakeholders – and one session (held on 25 September) was attended by children’s residential services only. These stakeholder group-specific sessions made it clear that the views expressed in the engagement sessions largely echoed those presented elsewhere in this report. At the same time, they also showed that there were distinctive views expressed by different stakeholder groups.

9.5 This section provides a high-level summary of the main messages from these events. To allow the distinctiveness of the views to be seen clearly, this chapter sets out the main messages by stakeholder group.

Summary of key messages

• Most local authorities supported the principle of removing profiteering from children’s residential care services – mainly due to what they saw as the excessive cost of some services, and the increasing demands on local authority budgets.
• Care providers, by contrast, were uncertain about the rationale for the proposals, seeing them as a disproportionate response to circumstances in England and Wales that do not generally exist in Scotland. This group noted that good quality residential services for children and young people are expensive. They also pointed out that all children have different needs, and these can change over time. They did not agree with the concept of a ‘unit cost’ for providing care to this vulnerable group.
• While some participants argued that it was morally wrong for services to profit from the care of vulnerable children, all stakeholder groups were widely concerned about the possible unintended impacts of the proposed legislation. All agreed that there was the potential for negative consequences – not only for the services, but for the children and young people in their care. Stakeholders urged caution and care in taking forward the proposals and called for further consultation with stakeholder groups.
• All stakeholder groups also called on the Scottish Government to undertake further research and analysis to inform the legislation. The need to define key terms, such as ‘profit’ and ‘excessive profit’, was seen as crucial.

Summary of views of care providers

9.6 In general, care providers, regardless of their legal structure (private or not-for-profit) or their purpose (i.e. residential children’s home, secure care, residential school, etc.), were unclear about the ‘problem’ that this legislation was intended to address. These services noted that they are already subject to high standards of scrutiny (by the Care Commission, by Scotland Excel (SXL) and by the Office of the Scottish Charity Regulator), and the mechanisms for monitoring profiteering were already available (through annual financial reporting processes).

9.7 Participants from not-for-profit services pointed out that they are required by law not to be profit-making. This group questioned why this legislation would include them, and they suggested that, if there is a perceived problem with ‘profiteering’ among some private services, efforts should be focused on addressing this among those services.

9.8 Participants from private services felt that they were being ‘maligned’ and ‘got at’ for no good reason. They pointed to the quality of their services and noted that the children they supported had high levels of complex care needs, and that providing such care was inevitably high cost.

9.9 Care provider organisations, in general, queried what evidence there was of ‘profiteering’ by children’s residential services in Scotland. They suggested that the proposed legislation was a response to the marketisation of care in England in Wales and argued that the Scottish residential care context was different to that in England and Wales. This group thought that, if there is a problem with ‘profiteering’, it likely only applied to a handful of services operating in Scotland, and they thought the proposed legislative response to this was unnecessary and disproportionate.

9.10 Recurring points made by this group included the following

• What exactly is the definition of ‘profit’, ‘profiteering’ and ‘excessive profit’? Who will decide whether a care service is making an ‘excessive’ profit? How will this be determined? It was noted that the Promise referred to ‘profit’.
• Care providers did not support either a limit on profits or a price cap. They noted that surpluses are not ‘profits’. Surpluses / reserves are reinvested into services. They allow services to cover staff salaries and other costs when the service is not fully occupied, thus providing sustainability. They also allow service development (e.g. opening new services, buying in specialist skills / expertise).
• Residential care homes for children are a response to the needs of local authorities. These services support very vulnerable children. If they are limited in their ability to manage their reserves some will inevitably close. Some may also close due to the increased administrative demands that the proposed legislation would introduce. What will happen to the children in their care?
• Providing good quality care is expensive. Participants did not agree with the concept of unit pricing in relation to care. Children have different needs, and needs change over time. Good outcomes and experiences for children will be lost when discussions start focusing on costs only.

Summary of views of local authorities

9.11 Local authorities generally thought there was a need for greater financial transparency in residential care services. They were concerned about high – and variable – costs in relation to residential care, and the pressure this put on local authority budgets in an already challenging fiscal environment. They also wished to see greater focus on achieving quality care and good outcomes for children and young people.

9.12 However, local authorities saw the discussion of residential care – and the costs associated with it – as a challenging and complex issue. They noted that the crisis in recruitment and retention of foster carers had been further exacerbated by (i) the introduction of continuing care for older care-experienced young people and (ii) the requirement that foster carers must be registered with the Care Inspectorate. This meant that local authorities were increasingly having to rely on residential care services to support children who could not live at home. Moreover, the complexity of children’s needs was increasing.

9.13 At the same time, local authorities were concerned that ‘some companies move the goal posts’ – i.e. with local authorities being billed (excessively, in their view) for amounts that exceeded the fees / rates agreed with residential services as part of the SXL framework agreement. They felt they had no choice but to pay such charges as the alternative would be to move the child to another service.

9.14 Local authorities wanted a better understanding of high-quality residential care services, the associated costs, and the variation in rates charged by providers. They said they needed a better understanding of what a weekly, monthly, annual cost should be for a child with complex needs. Some also questioned whether the care young people were receiving was of sufficient quality for the price being paid.

9.15 Local authorities had the same questions about terminology as care providers in relation to what constituted ‘excessive profits’. Some local authorities thought the problem of excessive profits did not apply only to private care providers, but also to not-for-profit providers – some of whom had large reserves.

9.16 Local authorities also expressed the same concerns as care providers regarding implementation. While they agreed in principle with the aspirations of The Promise, they were concerned that the legislation could lead to the closure of good services that are currently supporting Scotland’s most vulnerable children and may end up breaking a system that is already extremely fragile. Local authorities said they were already struggling with the ‘skyrocketing’ costs of care and with securing placements in residential services. If this legislation leads to the closures of some services, costs will only increase, and it will become even harder to obtain suitable placements for children and young people. It would be very difficult for local authorities to develop their own services to fill any gaps.