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In a shift that could redefine the economics of care across the UK, Wales is preparing to limit profit in children’s residential and fostering services through the phased implementation of the Health and Social Care (Wales) Act 2025.
From next spring, any new provider seeking registration with Care Inspectorate Wales (CIW) will need to demonstrate that they are a not-for-profit organisation. This requirement applies initially to fostering, residential, and secure accommodation services, collectively referred to in the Act as “restricted children’s services.” It’s a policy change that has largely flown under the radar, yet its implications are enormous.
Supporters see it as a moral correction: ending a system where some private providers have been accused of making millions from the care of vulnerable children. Critics warn it could dismantle a fragile ecosystem, forcing long-established operators to restructure or shut down entirely. But either way, the Welsh Government’s Health and Social Care (Wales) Act 2025 is set to transform the landscape, and perhaps spark a ripple effect across the UK.
The idea that anyone could profit from a child’s suffering makes for uncomfortable reading, and it has dominated headlines whenever exposed. A handful of cases, where private owners have drawn substantial profits while local authorities struggled to fund placements, have stoked public anger. The reality, however, is far more complex.
“I have clients who charge local authorities what seem like enormous sums, £8,000, £9,000, even £10,000 a week for a single placement,” Jenny Wilde, Partner at Acuity Law, who is advising care providers.
“But when you look at the staffing ratios, specialist training required and the complexity of those children’s needs, those costs are often completely legitimate. The problem is that there are some providers who do not provide a high enough quality service for those high fees, and they can distort the whole picture.”
That picture has become politically untenable. Wales has decided to act first, moving from rhetoric to reform. From 1 April 2026, new entrants to the market will need to prove they are not-for-profit to be registered with CIW. By April 2027, existing for-profit providers will face restrictions unless they restructure. And by April 2030, Welsh local authorities will no longer be able to make new placements with for-profit providers, except under limited exceptions defined in regulations. Importantly, children already placed with such providers before 2030 will not be moved solely because of the new rules.
The stakes are high. Across Wales, private companies run the majority of residential homes and fostering agencies. For them, the change means more than a policy headache, it’s a wholesale shift in how their businesses are financed, managed and even defined.
“Providers are already under immense financial pressure,” says Jenny Wilde.
“They’re dealing with staff shortages, rising energy costs, and greater regulatory scrutiny. To then ask them to redesign their entire corporate structure within two years is daunting. But this is happening, it’s not a conversation anymore, it’s a countdown.”
This is not the first time Wales has led the way in social policy. It was first to introduce free prescriptions, and its social value procurement rules have influenced public sector reform across the UK. Now, it is positioning itself as the testing ground for a care model that puts reinvestment above return.
Officials in England are watching closely. Ofsted and the Department for Education have both hinted at exploring similar frameworks and the former has been given enhanced powers to consider financial transparency in its regulation of children’s services. But for now, Wales stands alone in moving from proposal to law.
