Childcare costs soar under Welsh Government agenda, council chief warns

Elgan Hearn – Local democracy reporter

Sky-rocketing costs for childcare placements is an “unintended consequence” of the Welsh Government’s not-for-profit childcare agenda, a council chief has said.

The Welsh Government’s not-for-profit care agenda has driven up short-term costs for childcare placements as firms look to make as much money as possible before the legal changes to remove profit from children’s care come into phases up to April 2030.

At a meeting of Blaenau Gwent County Borough Council’s Corporate Governance and Resources scrutiny committee on Thursday, September 24, councillors received the provisional position of last year’s budget as it stood at the end of March.

The council spent £203.23 million against a budget of £201.55 million for 2025/2026.

This means the council ended up with an overspend position of £1.4 million, which will be plugged by the use of council reserves.

The report explains that the council’s financial issues are centred in two areas, schools and Children’s Social Services.

The Children, Young People & Families department, which included children’s services, reported an overspend of £3.14 million – which has been put down to the escalating costs for children’s placements, external residential placements and legal fees.

Keith Chaplin (Labour – Abertillery and Six Bells) pointed out that the “market” for childcare placements was still “volatile at the moment.”

Cllr Chaplin said: “Is this an unintended consequence of the government moving to not-for-profit children’s homes?”

He asked whether other councils were also seeing their children’s services costs ballooning in the same way and whether the Welsh Government understood this and could “re-consider” the timeline for phasing the changes.

Deputy chief executive Dr Luisa Munro Morris said: “I think it is an unintended consequence, however, if this hadn’t come into effect, we would have seen continued price rises anyway.”

“Interestingly, we are starting to see a shift of more not-for-profit organisations coming into the market.”

Dr Munro-Morris explained that she and the joint chief executive, Steve Vickers, had met with a new not-for-profit organisation earlier this week which could be able to provide provision for both Blaenau Gwent and Torfaen.

Dr Munro-Morris said: “They are in the early stages of setting up and it was really interesting to hear of their model.

“I think we will begin to see more and more organisations rethinking their model and coming with a new offer.”

Dr Munro-Morris told the committee that the council could not “sit on our laurels” and wait for the children’s care sector to rebalance itself while the not-for-profit system is established.

Dr Munro-Morris said: “We need to be proactive and that’s why we are considering what is the right, most sustainable and best model for our young people moving forward.”

She added that councillors would be provided with the findings of a review into the council’s childcare provision at the earliest possible opportunity once it is completed.

Cllr Chaplin said: “It seems we’re in a transitional position.

“We’re going to have to endure for a couple of years and hopefully the market will smooth itself out and things will get better.”

The committee accepted the report, and it will go on to be discussed at a cabinet meeting next month.

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