Updated October 2026
Removing profit from children’s care: Frequently asked questions
Purpose
This page brings together recurring questions raised about the removal of profit agenda. It provides background on the Welsh Government approach, the practical issues being worked through by local authorities and some of the emerging learning from implementation.
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▼ 1. What exactly does not-for-profit mean?
For the purposes of the Health and Social Care (Wales) Act 2025, a provider of a restricted children’s service must, unless it is a local authority, have appropriate objects or purposes and operate through one of four permitted legal forms:
- A charitable company limited by guarantee without share capital
- A charitable incorporated organisation
- A charitable registered society
- A community interest company limited by guarantee without share capital
In this context, not-for-profit therefore refers to the legal and financial structure required by the Act, rather than simply to whether an organisation makes a surplus.
▼ 2. Can a not-for-profit provider still charge high fees?
Yes. Not-for-profit describes the legal and financial structure of the provider; it does not impose a cap on the fee it can charge.
A not-for-profit provider may still have high costs, particularly where it is providing specialist care, supporting children with complex needs, or operating smaller services with higher staffing requirements.
The reforms therefore do not guarantee lower fees, particularly while suitable provision remains scarce.
▼ 3. If providers cannot extract a profit, could they simply increase management charges, property costs or other payments instead?
The legislation includes provisions intended to prevent profit simply being extracted in another form.
A not-for-profit provider can legitimately incur management costs, rent or own property, pay salaries, purchase services and build appropriate reserves. The change in legislation does not mean that these costs disappear, nor does it set prescribed levels for them.
However, the legislation specifically anticipates the risk that excessive management charges, property costs or other financial arrangements could be used as an alternative means of extracting value from a service. It therefore brings unreasonable or disproportionate financial arrangements within the fit and proper person test.
Care Inspectorate Wales (CIW) will monitor and enforce these requirements. Where CIW identifies arrangements that it considers unreasonable or disproportionate, this could ultimately affect whether the provider continues to satisfy the fit and proper person requirements, with CIW able to use its existing enforcement powers where necessary.
For commissioners, this reinforces the importance of transparency over the full cost of provision, particularly where there are significant management charges, property costs or transactions with connected organisations.
▼ 4. Is the removal of profit expected to deliver cash savings for local authorities?
The primary policy objective is to ensure that public money spent on the care of children who are looked after is retained within and reinvested in services, rather than extracted as private profit. The legislation does not require placement costs to reduce.
A not-for-profit service can still be expensive to operate. Staffing, property, regulatory requirements, therapeutic support and the increasing complexity of children’s needs all contribute significantly to costs. New provision can also carry higher costs during mobilisation or while operating below full occupancy.
There may be longer term opportunities to achieve better value through increased local provision, reduced reliance on spot purchasing and expensive external placements, and more effective management of capacity.
▼ 5. How will the reforms interact with the need to establish a fair cost of care?
The legislation changes who can extract profit from providing specified children’s services. It does not establish a national fee or cost of care methodology.
A sustainable not-for-profit market will still require fees that properly reflect the cost of delivering good quality care, including staffing, property, specialist support and the needs of individual children.
▼ 6. What level of risk remains as the reforms begin to take effect? Are we confident that sufficient alternative provision will transfer or be created?
Sufficiency remains the principal implementation risk. The key question is whether enough suitable provision will be available in the right places and for the right children as reliance on for-profit provision reduces.
The transition is deliberately phased. Since 1 April 2026, new for-profit children’s homes, fostering services and secure accommodation services cannot register in Wales and existing for-profit providers cannot add new services or places. Further restrictions will follow through the transition period, with the most significant change being the restriction on new placements with for-profit providers from 2030, subject to specified exceptions.
Local authorities are developing their own provision, new not-for-profit capacity is being created, and existing providers are considering re-establishment as permitted not-for-profit organisations. Welsh Government is also supporting the transition through capital and revenue funding and direct support to providers.
For that reason, sufficiency is being actively monitored through the strengthened sufficiency planning arrangements now required of local authorities. These plans are intended to provide a clearer picture of current and future demand, existing capacity, planned developments and areas of risk.
The key issue is not simply replacing a particular number of beds or foster placements. It is creating the right provision, in the right places, for the needs of children who require it.
▼ 7. What are the key enablers for increasing not-for-profit provision?
A key enabler is giving existing and potential providers the confidence and practical support they need to operate successfully within the new framework.
Welsh Government is funding Cwmpas to provide tailored, confidential support to existing for-profit providers that are considering re-establishing as one of the permitted not-for-profit organisations. This includes specialist advice to help providers understand the options available and work through the practical, financial and organisational implications of transition.
Alongside this, close partnership with local authorities is particularly important. Providers need a clear understanding of local need, future demand and commissioning intentions if they are to make confident decisions about developing or adapting services. There is already some good work taking place between local authorities and providers to explore future requirements and opportunities for new or reconfigured provision.
Access to suitable property, capital investment, workforce and sustainable revenue will also remain important.
▼ 8. Have for-profit providers increased fees for existing placements since the restrictions came into force in April 2026?
There continues to be upward pressure on some placement costs, but this pattern predates implementation of the legislation.
There is currently no evidence that placement costs in Wales have increased more rapidly than comparable costs in England because of the reforms.
▼ 9. How many children and young people are currently using these services?
The legislation relates specifically to restricted children’s services: children’s home services, fostering services and secure accommodation services.
The latest published Welsh Government statistics show that 7,072 children were looked after by Welsh local authorities on 31 March 2025.
Of these, 4,793 (68%) were in foster placements and 970 were in secure units, children’s homes or hostels.
▼ 10. Does the legislation include residential special schools?
A service registered as a special school residential service is not one of the restricted children’s services covered by the legislation.
The removing profit provisions apply to services defined as restricted children’s services. These are children’s home services, fostering services and secure accommodation services.
▼ 11. Where do 28-day activity, outward-bound or similar placements sit under the new legislation?
The 2025 Act does not create a general prohibition on purchasing any service from a profit-making organisation for a child who is looked after. Its provisions relate specifically to children’s home services, fostering services and secure accommodation services.
A genuine short-term activity or outdoor education service would therefore not automatically fall within the removing profit regime simply because it provides accommodation to a child who is looked after.
The key issue is the nature and regulatory status of the service rather than simply the length or description of the placement.
▼ 12. Is there, or will there be, a register of not-for-profit providers in Wales?
Care Inspectorate Wales (CIW) already maintains the statutory register of regulated providers and publishes information about registered services through its Care Service Directory.
The CIW directory was updated from 1 April 2026 to reflect the new requirements associated with removing profit.
▼ 13. Can local authorities outside Wales use the financial and demand modelling tools developed through this work?
Tools have been developed to support Welsh local authorities with sufficiency planning and implementation of the reforms. However, much of the underlying methodology is transferable and ADSS Cymru would be very happy to share the learning.
ADSS Cymru would also welcome the opportunity to learn from the work taking place in England. Sharing approaches, assumptions and emerging evidence across both countries has significant value, particularly as authorities consider how best to develop sustainable local provision.
▼ 14. Has the policy resulted in foster carers transferring from independent agencies to local authorities?
The main focus has been on working with existing fostering agencies to support their transition from a for-profit model to one of the permitted not-for-profit structures, with the aim of maintaining continuity for foster carers and the children they support.
Local authorities are continuing to strengthen their own fostering capacity and many have a strong offer for foster carers, including local support, training, peer networks and a close connection to children’s services. Where carers choose to move between agencies or to a local authority, that will remain a matter of individual choice.
However, increasing local authority fostering capacity is a broader strategic objective and should not be confused with the implementation of the legislation, which is focused on the organisational model through which fostering services are provided.
▼ 15. Could existing for-profit fostering agencies simply move their operation to England and continue recruiting Welsh foster carers?
No. Moving an agency’s operation or registered office to England would not provide a route around the Welsh reforms.
The legislation is concerned with the provision of fostering services and the placement of children, rather than simply where an organisation is headquartered.
From 1 April 2027, existing for-profit fostering agencies will no longer be able to approve new foster carers as part of their Welsh fostering service. By 1 April 2030, new placements with for-profit fostering providers will also be restricted, subject to the limited exceptions provided for in the legislation and regulations.
The policy intention is therefore that agencies wishing to continue developing their fostering provision for children in Wales will need to operate through one of the permitted not-for-profit models, rather than simply relocating their corporate base across the border.
- ADSS Cymru website
- Welsh Government website
- Care Inspectorate Wales website
- Social Care Wales website
- Foster Wales website
- Cwmpas website
Questions? Email: removalofprofit@adss.cymru