The PAC found that in September 2024 almost 800 children – around one in 10 of all those in residential care – were living in settings that were not registered with Ofsted and therefore not subject to routine inspection.

Although councils only use such homes when no regulated alternatives are available, evidence to the inquiry showed children stayed in them for an average of six months, far longer than intended for emergency use.

The report highlights significant regional shortages, with almost half of children in England placed more than 20 miles from their family homes and no secure children's home places in London. These gaps, combined with a lack of coordinated planning, have forced councils to compete for places.

Spending on residential care has almost doubled over five years to £3.1bn in 2023–24, according to the PAC's findings.

The committee also raises concerns about high profits among some private providers, many owned by private equity, adding that the Department for Education lacks a clear view of their finances.

The committee is calling on Government to set out a clearer strategy, improve oversight and work more closely with local authorities to ensure children are placed in safe, suitable homes.

PAC chair Sir Geoffrey Clifton-Brown said: ‘A dysfunctional system is forcing local authorities to routinely reach for solutions which will see our nation's children regularly put at risk. This utterly unacceptable situation has become normalised, but there is nothing normal about this unsustainable state of affairs.'

Responding to the report, Cllr Amanda Hopgood, chair of the Local Government Association's Children, Young People and Families Committee, said: ‘No council wants to place a child in an unregistered setting, and it is extremely concerning that in many cases, a lack of choice means provision is not fully meeting children's needs.

‘The astronomical cost of care placements also means there is less money available for councils to spend on earlier support for children and families.'

She added: ‘It is absolutely vital that the entire sector works together to ensure that we have enough homes that can meet children's needs.'

Cllr David Hitchiner, Children's Services spokesperson for the County Councils Network, said: 'Councils are determined to address these challenges but with record numbers of children presently in the care system too many are currently locked in a vicious cycle of spending more on crisis care rather than prevention. If nothing changes, local authorities across the country could be spending as much as £12bn a year on children in care by 2030 which is why the government's proposed reforms will be vital in creating change.'