Beyond the Bottom Line: Reflections on the First Few Weeks
Key contacts: Beverley Jones (corporate advice) and Jenny Wilde (regulatory advice)
The Health and Social Care (Wales) Act 2025, which received Royal Assent on March 24, 2025, reflects a comprehensive effort on the part of Welsh Government to reform health and social care services in Wales. The Act introduced a framework for non-profit provision in children’s social care services and signposted a more general move towards enhancing autonomy for individuals requiring care.
How does the Act change the provision of children’s social care services?
A key provision of the Act is the phased elimination of private profit from the care of looked-after children. By 2030, only public sector, charitable, or not-for-profit organisations will be permitted to provide fostering, children’s home, or secure accommodation services for children in Wales. This transition aims to ensure that funds generated through the provision of children’s care services are reinvested into children’s welfare rather than distributed as profits to shareholders.
When will the Act be implemented?
The key milestone dates for the implementation of this new legislation are:
1 April 2026: new providers registering with Care Inspectorate Wales (CIW) to provide children’s care home (either wholly or mainly to children), fostering and secure accommodation services (collectively “restricted children’s services”), must be a not-for-profit entity.
1 April 2027: existing for-profit providers will face transitional restrictions unless they re-establish their business as a not-for-profit model.
Restrictions will apply to:
- registering new homes and adding additional beds to existing services; and
- the ability of local authorities in Wales to place children with a for-profit provider without approval from Welsh Ministers.
1 April 2030: no new placements of children from Welsh placing authorities with for-profit providers unless approved by a supplementary placement process. English placing authorities are only able to place children in existing for-profit children’s services in exceptional circumstances.
What is a not-for-profit entity?
For the purposes of the Act, a not-for-profit entity is one of the following:
- a charitable company limited by guarantee, without a share capital;
- a charitable incorporated organisation;
- a charitable registered society; or
- a community interest company limited by guarantee without a share capital.
How does a for-profit provider continue to provide restricted children’s services?
The Act does not provide any particulars, or even certainty, on a process for private providers to apply to be considered as a continuing provider. The legislation is likely to be bolstered by related regulations and guidance that should clarify a pathway. Until then, there are no assurances that this will be straightforward.
What will be the regulatory impact of changes to the provision of children’s social care services?
From 1 April 2027, CIW will have significant work to do (in addition to its existing registration and compliance work) to monitor how existing providers are transitioning into not-for–profit models. There will be increased scrutiny of corporate structures and financials, as well as more detailed reviews of the individuals behind the structure.
The regulator will be forced to divert from its typical work and this is bound to have a significant impact on all registered providers. We would expect a project of this magnitude to require a major shift in focus towards children’s services generally, which could have a knock-on effect for the adult social care arm of CIW.
What organisational and commercial impact will result?
Providers themselves are going to have to think carefully about how they are structured if they wish to continue to deliver children’s services in Wales. Most will wish to seek advice from solicitors and accountants, likely at significant cost, which could have been invested in the service itself.
The reasons behind these changes are clearly well meaning. However, it’s important not to lose sight of the fact that there are some clear risks in closing the door to for-profit service providers, not least because there remains a big question-mark (particularly in an environment where costs are ever increasing) over the ability of local authorities, charities and the not-for-profit sector to deliver the services that are so desperately needed.
Even in the current environment, which allows both for-profit and not-for-profit service providers to co-exist in the sector, there is already insufficient service provision, not just in Wales but in the UK as a whole. The existence of for-profit providers operating in the sector is not the cause of that, and it is difficult to see how excluding them from future service provision is going to fix it.
Some commercial drivers are necessary to encourage new providers into the sector and to incentivise existing providers to expand their existing service provision beyond what is currently available. Investment requires capital, and that capital inevitably comes at a cost. If future investment can only be sourced by service providers in the form of lending, we risk exacerbating the problem of uneven distribution of wealth in our society. Those who can afford to deploy capital by advancing loans to service providers will be able to make a return (profit) on their investment, while owner-managers who pour their heart and soul into service delivery won’t reap the same rewards for their (often very considerable) efforts.
With so much uncertainty in the sector already, there is a real risk that this policy shift will cause providers to put any plans for growth on hold, which will only serve to exacerbate and compound the lack of sufficient service provision.
Are there other changes introduced by the Act?
So much attention has been drawn to changes made to the provision of children’s care services that some of the other changes introduced by the Act have been somewhat overshadowed.
Notably, the Act also facilitates the introduction of direct payments within continuing NHS healthcare. These payments grant individuals with disabilities and those with long-term health conditions greater control over their care arrangements and affords them the same rights to the payments as their peers who access social care.
Rhian Davies, CEO of Disability Wales, said:
“This new law will enable continuing healthcare recipients to make their own decisions regarding how and by whom their personal support is provided. It marks a significant milestone in progressing the right to independent living for all disabled people in Wales”.
Additionally, the Act:
- extends mandatory reporting requirements for children and adults at risk (to ensure that all relevant professionals are aware of their duty to report and to facilitate timely interventions to protect vulnerable individuals);
- amends the regulation of service providers (to strengthen the existing framework),
- attempts to strengthen the social care workforce by broadening the definition of a social care worker to encompass childcare and play workers (thus ensuring they have the necessary skills and knowledge to protect vulnerable individuals).
Final thoughts
The Health and Social Care (Wales) Act 2025 marks a significant policy shift, particularly in its ambition to remove private profit from children’s social care. While the intent to reinvest resources directly into children’s welfare is commendable, the path forward is far from simple. Without clear, practical guidance and adequate support for providers and regulators alike, there is a real risk that the sector could face reduced capacity at a time when demand continues to grow. This would ultimately be to the detriment of the vulnerable children that this legislation was designed to protect.
The transition away from for-profit provision may inadvertently limit investment and innovation, especially if not-for-profit providers struggle to absorb the increased demand or secure necessary funding. The lack of clarity around the supplementary placement process and the additional regulatory burdens could compound these challenges.
If the ambition of the Act is to succeed, it must be accompanied by thoughtful implementation, meaningful consultation with all stakeholders, and a realistic understanding of the financial and operational pressures and economic headwinds that providers already face. Without this, we risk undermining the very outcomes the legislation seeks to improve.
For advice on preparing for the implementation of the Health and Social Care (Wales) Act 2025, including on restructuring your business model, contact our Health & Social Care team.