Senior councillors in Warwickshire have expressed frustration that plans to reduce spend on "profiteering" private children's homes are being stymied by OFSTED.

Questions were raised over the £6.1 million overspend that the council anticipates having to fund this financial year for placements for children in care.

A breakdown presented to the county's cabinet – the panel of Conservative councillors in charge of major service areas – shows that spending on residential care placements is to be £7.2 million over budget, while there is a £1.1 million underspend on other placements, due in part to a falling number of foster carers. 

There is also an overspend of £1.677 million expected in Warwickshire's own children homes which the report says "is mostly due to staffing".

The council is embarking on a process of opening its own homes to mitigate the costs associated with private providers but "places created to date are still not fully utilised" with the council's provision needing two out of every three places to be filled for these smaller homes, often former residential properties, to break even.

There is also a forecast overspend of £2.336 million for establishment staff coupled with £1.186 million for agency staff.

Cllr Sarah Feeney, leader of the Labour group at Warwickshire County Council, said: "The current overspend is £6 million yet we have underspends on foster care and we still haven't filled all our places.

"I know some of that is due to waiting for OFSTED but I am keen that we press and support the county's treasurer's position that there needs to be regulation of the children's care market. It is almost like a free for all, which is a real concern.

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"I know we have done some excellent joint work with trying to recruit foster carers and this clearly demonstrates that we still need more. We would keep children in Warwickshire, which I am really passionate about.

"Keeping children as close to home as possible is absolutely the best thing for them and it is better for our staff, they are not having to journey for a day to go to see a child and assess their needs, support them and come back. 

"It is not about money but it would also be cheaper to keep a child in a placement in Warwickshire rather than a profiteering placement which could be as far away as Scotland in some cases." 

Leader Cllr Izzi Seccombe OBE noted the efforts to establish the council's own places in more residential settings. 

"The staff are brilliant and do a wonderful job," she said.

"In some cases, where it is appropriate, it does get children back into their family setting. It normalises what is a very difficult situation, keeps children in Warwickshire and puts choice in the market.

"Let's face it, the demand across the sector is far greater than the number of placements and that in itself drives the cogs of inflation and opportunism which I don't care for, don't like and don't want. We have to try to fight against that."

Deputy leader and portfolio holder for finance and property Councillor Peter Butlin (Con, Admirals & Cawston) highlighted the hurdles the council has to navigate in setting up new provision.

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"They take time to get through," he said. 

"Once you have permission and have bought your property, you need planning permission for change of use, you need security, cameras and everything else before getting it certified by OFSTED.

"OFSTED is a particularly challenging organisation to deal with. Poor old John Coleman (the council's director of children and families services), every time we go to register a new home, he has to get a health certificate – the one he got the previous month for another room (isn't enough), he has to do it again. There is this disconnect in getting a speedy response.

"Where we have got the homes in place, it is already driving down the cost. We wish we could act quicker."