Excessive profiteering by unscrupulous private companies charging sky-high fees for substandard placements for vulnerable children will be clamped down on as part of a major overhaul of children’s social care in England. The government will on Monday outline a wide-ranging package of changes, which it promises will end years of “drift and neglect” in the children’s social care system, and introduce a new emphasis on early intervention. Billed as “the biggest overhaul in a generation”, the reforms include new powers for Ofsted to issue civil fines to providers, which the government hopes will be more effective in deterring unscrupulous behaviour than existing criminal powers. Amid growing concern about the vast profits being made by private companies at the expense of councils, many of which are now facing bankruptcy, there will also be a legal requirement for private providers to open up their finances to government to allow greater scrutiny. If they do not voluntarily put an end to profiteering, the government says it will introduce a “backstop” law to put a limit on the profit providers can make. “Our care system has suffered from years of drift and neglect,” said the education secretary, Bridget Phillipson. “It’s bankrupting councils, letting families down, and above all, leaving too many children feeling forgotten, powerless and invisible.” The changes, which are likely to form part of the forthcoming children’s wellbeing bill, were welcomed by the sector, though concerns remain about underfunding and a continuing workforce crisis. Local government spending on looked-after children has shot up from £3.1bn in 2009-10 to £7bn in 2022-23, as costs and demand have soared. Analysis by the Local Government Association (LGA) found that more than 1,500 children in placements each costing the equivalent of more than half a million pounds every year. In some cases the individual cost of a child in care can exceed £1m a year, while the largest 15 private providers make an average of 23% profit. Other measures will be set out in the coming weeks to expand early family help, reduce the number of children who need to enter care, and give every family the legal right to be involved in decisions made about children entering the care system. The government is also planning to introduce a duty on parents whereby if a child is subject to a child protection inquiry, or on a child protection plan, they will need local authority consent to home school that child. In addition, Ofsted will be given powers to investigate multiple homes being run by a single company, in line with recommendations after abuse revelations at the Hesley group of children’s homes. The government will also deliver its manifesto commitment to introduce a unique ID number for children to link records, and every council will be required to have multi-agency child safeguarding teams. “We want to break down the barriers to opportunity and end the cycle of crisis through ambitious reforms to give vulnerable children the best life chances – because none of us thrive until all of us do,” said Phillipson. “We will crack down on care providers making excessive profit, tackle unregistered and unsafe provision and ensure earlier intervention to keep families together and help children to thrive.” Arooj Shah, a councillor who is chair of the LGA’s children and young people board, said: “Moving forward, progress will be limited by the significant funding and workforce challenges within children’s social care, councils and among partners more widely. “It is vital that the government uses the forthcoming spending review to ensure that all those working to keep children safe and to help them thrive have the resources they need to do that well.” Action for Children’s chief executive, Paul Carberry, also injected a note of caution, saying: “Frontline services and councils are providing essential, life-changing support under ever-tightening pressures, with many at breaking point. “While we are pleased to see the focus on financial oversight and regulation of the care market, urgent investment in not-for-profit and public sector provision is required to create stability and make sure every child gets the placement they need.” The children’s commissioner for England, Rachel de Souza, has published her own report highlighting how children are being placed in illegal, unsafe accommodation, including caravans and Airbnbs, amid a sharp increase in the use of deprivation of liberty orders. She said: “Children in the social care system today are living week to week in limbo. They need action without delay, not plans or strategies … There must be no limits on our ambition for these children and I will look forward to working closely with ministers to push for radical reform.” Sir Martyn Oliver, Ofsted’s chief inspector, said: “These new powers will allow Ofsted to do more to make sure all children’s homes are safe and nurturing places, and to combat illegal and poor-quality homes quickly and effectively.” Anne Longfield, executive chair of the Centre for Young Lives and former children’s commissioner for England, said: “Today’s announcement must mark the beginning of a radical transformation of an underfunded and unreformed children’s social care system that has been allowed to crumble and fail many vulnerable young people for too long.