The children’s residential care home sector is “broken” and dominated by private companies that rack up excessive profits despite delivering consistently poor outcomes for young people, a government adviser is to say. Josh MacAlister, the head of the government’s review of children’s social care, will warn children’s homes bosses they must cut “indefensible” profits and improve the experience of young people in care or run the risk of intervention. Rising levels of wealth are being made off the back of soaring children’s home fees and people are rightly concerned that private homes are making an estimated £250m a year in profits from the care of vulnerable children, MacAlister will say in a speech to the Independent Children’s Home Association on Thursday morning. “Given pressures in the system and economic realities, this is indefensible. It cannot continue … We need to ask, if we were creating care today that was good enough for all our children, what would it look like? I do not believe the current system is one we would choose to design,” MacAlister will say. “I would implore those of you who are owners of private children’s homes, particularly large groups, to act with responsibility to bring down costs and reduce profit-making and to be responsive to the needs of children. It is better that plans to make this happen are started now.” The children’s residential care home market in England – 75% of homes are run by private firms – has come under increasing criticism over rising costs and profits. Prices have risen by 40% since 2013, with the average placement costing £4,000 a week, or about £200,000 a year. At the same time, a shortage of places has forced some looked-after children to take up placements hundreds of miles from where they live, and there has been a scandal over thousands of vulnerable young people put up in unregulated accommodation. MacAlister, who has welcomed the Competition and Markets Authority’s investigation into the children’s care market announced in March, is concerned that some heavily debt-laden private children’s care companies are at risk of collapse, with dire consequences for children in care and the local authorities that fund them. The founder of the social work fast-track training social enterprise Frontline, MacAlister was appointed by the education secretary, Gavin Williamson, in January to head a comprehensive year-long review of the children’s care system, from early years support to child protection and looked-after children’s services. He is three months into the review and his criticisms of private children’s care homes are in part intended to signal his determination to ruffle feathers and challenge the system. In the next few weeks he is due to publish the initial findings of his review highlighting problems in the children’s care sector. MacAlister’s review is regarded with scepticism in some parts of the children’s social care sector. Some are concerned it will focus on introducing market-style changes to the system rather than addressing the underlying issues of child poverty and local authority underfunding.