New rules are being announced to stop profiteering in children’s social care as part of reforms aimed at ending years of what the Government described as neglect of the system.

The watchdog Ofsted is to be empowered to crack down on exploitative providers, while companies will be made to set out their finances in a bid to increase transparency across the sector in England.

Spending by local authorities on looked-after children has more than doubled in just over a decade, from £3.1 billion in 2009/10 to £7 billion in 2022/23, the Department for Education said.

The biggest 15 private providers make an average of 23% profit, according to analysis by the Local Government Association, which said there are more than 1,500 children in placements each costing the equivalent of half a million pounds every year.

The new measures, to be set out in Parliament, are aimed at empowering social workers and others who work with children to take action against providers delivering “subpar standards of care at sky-high costs to councils”, the department said.

It added that a longstanding challenge in the system is some private providers “siphoning off money that should be going towards vulnerable children, making excessive profits or running unregistered homes that don’t meet the right standards of care”.

The Government has pledged a “backstop” law, which will limit the profit providers can make – to be brought in if providers do not voluntarily put an end to profiteering, it said.

Ofsted will be given powers to investigate multiple homes being run by the same company, in response to recommendations made following abuse uncovered at the Hesley group of children’s homes.

The Child Safeguarding Practice Review Panel last year called for a more joined-up approach to the care of disabled children in care homes following their report into homes run by the Hesley Group.

Its review had focused on three residential settings – Fullerton House, Wilsic Hall and Wheatley House – registered as children’s homes and operated by the Hesley Group in Doncaster, between January 2018 and March 2021.

Looking at the experiences of 108 children and young adults, it found that some of society’s most vulnerable people had experienced “systematic and sustained” abuse and neglect over a period of more than three years, with the safety net that should have protected them proving ineffective.

The Government said it wanted to start the process of rebalancing the system in favour of early intervention and to help social workers keep families together wherever possible.

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

The department said a new duty will be placed on parents to be required to get local authority consent to homeschool their child, if there is a child protection inquiry or plan in place.

It added further plans would be laid out in the coming weeks to expand early family help, to reduce the number of children entering the care system in the first place.

Children’s Commissioner Dame Rachel de Souza said children were “paying the price of a broken social care system” and “enduring things no child should ever have to”.

She said: “Every child deserves to grow up safe, happy, healthy and engaged in their communities and in their education. With this Bill we have an opportunity to repair how we treat childhood in this country.

“Children in the social care system today are living week to week in limbo.

“They need action without delay, not plans or strategies, so I welcome the urgency with which this Government is setting out plans to tackle some of the most entrenched challenges.”

Education Secretary Bridget Phillipson said: “Our care system has suffered from years of drift and neglect.

“It’s bankrupting councils, letting families down, and above all, leaving too many children feeling forgotten, powerless and invisible.

“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.”

The Children’s Charities Coalition, which includes Action for Children, Barnardo’s and the NSPCC, said the Government’s “commitment to reforming and rebalancing children’s social care towards early intervention and family support services, is a huge step forward in fixing a struggling system under immense strain”.