Wales is on the cusp of one of the most significant changes to children’s care regulation in a generation.
Under the forthcoming Health and Social Care (Wales) Act 2025, the Welsh Government is moving towards a system where new providers entering the children’s care market must operate on a not-for-profit basis. The change is designed to ensure that money intended for the care of vulnerable children is reinvested directly into services, rather than distributed as private profit – though the detailed rules on financial oversight and what counts as ‘not-for-profit’ will be set out in secondary regulations.
In practical terms, this means that from 1 April 2026, any new provider seeking registration with Care Inspectorate Wales (CIW) to deliver children’s care, whether that’s fostering, secure accommodation or residential placements, must demonstrate that they are structured as a not-for-profit organisation. From 1 April 2027, the focus will turn to existing for-profit providers, who will face transitional restrictions unless or until they reconstitute as not-for-profit entities. Then, by 1 April 2030, Welsh placing authorities will no longer be able to make new placements with for-profit providers, except under tightly defined exceptions set out in regulations. Children already placed with for-profit providers before that date will not be moved solely because of the new rules.
These are seismic shifts for the sector.
The Welsh Government’s policy aims are clear and, in many ways, commendable. The intention is to put children at the heart of decision-making, to prevent exploitation of complex needs for financial gain, and to ensure that profits are reinvested into improving care quality and outcomes.
It follows a series of high-profile stories that have sparked public concern, cases where private operators were seen to generate substantial profits while providing placements for some of the most vulnerable young people in society.
But while those headlines make for powerful reading, they don’t always reflect the nuance of the sector. The reality is that most providers are not exploitative; they’re dedicated professionals running highly regulated services in extraordinarily challenging circumstances.
I know of a client, for example, who was legitimately charging a local authority almost £10,000 a week to care for a single young person with extremely complex behavioural needs. That fee wasn’t excessive, it reflected the sheer intensity of support required, with multiple skilled staff providing round-the-clock supervision. These are real-world costs, not profiteering.
The problem, as ever, lies in balance. In seeking to close loopholes and eliminate bad actors, the government risks creating a blanket system that could place enormous pressure on responsible providers who are simply trying to do the right thing.
The transition will require significant restructuring, legal advice, and financial planning.
Existing providers will need to consider how to change their company structures, how surpluses are managed, and how funds can be reinvested in compliance with not-for-profit requirements, all within a tight timeframe.
From a legal and corporate perspective, this is not a small undertaking. The first key date of April 2026 is approaching rapidly.
For those considering entering the market, this is the time to act, to seek advice, assess viability, and understand what the new landscape will demand. For those already established, 2027 will arrive quickly, and transforming an existing business model is not something that can be done overnight.
There’s no question that the underlying principle is sound, but as with any sweeping reform, the execution will be critical. A rigid framework risks destabilising the very services that vulnerable children depend upon, particularly if capable, experienced providers are deterred from continuing because the process of transition feels insurmountable.
It’s worth noting that Wales is, once again, leading the way. England’s regulators, including Ofsted, are already considering similar proposals, but Wales is out in front, and arguably implementing the policy with greater clarity and intent. That’s something to be proud of, provided the implementation is managed sensitively and proportionately.
The reality is that a change of this scale will always bring uncertainty. But it also brings opportunity: to reset priorities, refocus on outcomes, and ensure that the care system truly serves those who need it most.
Ultimately, this is about more than compliance; it’s about values. It’s about recognising that while profit and purpose have long coexisted in care, the future in Wales will ask us to think differently about where that balance should lie, and how we ensure that every pound spent truly serves the children at the centre of the system.
