Foster Carers: Allowances and Tax Arrangements

Although Emma’s decision is understandable, it is a huge loss to fostering services in my community. Her example shows the importance of putting the right support in place for foster carers. Naturally, there is a financial element to that. The altruistic nature of fostering means that conversations about money are often shied away from, and our admiration for foster carers does not pay the bills, so it is right to discuss these allowances, tax arrangements and fees. That is not least because, as the Member for Linlithgow and East Falkirk mentioned, the fostering allowance does not cover the full cost of providing foster care to a child.

I will give credit where it is due: in December, the Government announced a 6.88% uplift to the foster care national minimum allowance. I also welcome the changes made last year that mean that most foster carers will no longer pay tax on that income. But I wish to focus the majority of my comments on those fostering allowances, because I note that the increases to the minimum allowance still fall short of the recommendations made by the Fostering Network.

I would be grateful if the Minister could set out what assessment his Department has made of the affordability of the national allowances called for by the Fostering Network. Moreover, I would be grateful if he would clarify where the funding for the 6.88% uplift will come from. I am unclear whether local authorities will have to find that money from existing budgets. Given the perilous state of local government finance, that may prove unmanageable for councils across the country. I am sure the Minister intends to fund the uplift from an alternative source, but I would be grateful for his reassurance on that point.

Another crucial point is that the fostering allowances are a postcode lottery for many people. In England, only 26% of local authorities pay the national minimum allowance at all the age bands. That results in discrepancies: for example, the maximum difference in allowance rates payable for 11 to 15-year-olds in England is as great as more than £8,000 per year. When we all agree that all children’s lives are of equal importance, that cannot be acceptable. Will the Department consider monitoring compliance with the national minimum allowance and look into reviewing fee payments so that there is more consistent compensation for the time, skills and experience of foster carers?

If we needed a reminder of the importance of getting this right, it came with Ofsted’s data on foster care for 2023, which showed a 6% fall to 35,000 over the past two years in the number of mainstream households in England who are fostering. The data also showed that the number of applications to become foster carers fell by over 3,000 between 2021 and 2023. This recruitment and retention crisis comes at a time when the care population continues to grow; it now stands at over 83,000.

The value of foster carers is in allowing children to be placed in environments that feel more like a real home, rather than in the less natural environment of a care home. It is also in the financial savings to local authorities, because many placements in care homes and other settings can be incredibly expensive. These trends are simply unsustainable; for the good of vulnerable children and the foster carers who are so dedicated to them, we must address them. I look forward to hearing more about how the Government intend to do that when the Minister responds.

The Government set the national minimum allowance for foster carers annually in April. The increases in April 2023 and the planned above-inflation increases from April 2024 are very welcome, but it is essential that the funding actually reaches foster families. Across the country there is a postcode lottery, with some fostering services paying families significantly below the national minimum allowance. The Fostering Network has found that some services significantly underfund the allowance for an 11 to 15-year-old, for example, by as much as £2,333 per year. I hope that the Minister can update us on what he is doing to ensure that all services offer at least the national minimum allowance, and to ensure proper monitoring of that allowance across the country.

It is important that support for foster families reflects the impact of the last two years on family finances. Although the headline rate of inflation may have fallen, let us remember that food inflation remains high, at more than 9%, while the Government’s mismanagement of the economy has hammered households with rising mortgage and rent costs. The Labour party will always put children and families first. We have already set out plans to help address the cost of living for families. Just some of the costed measures we have announced include acting now to ensure that every family caring for a primary-aged pupil has access to a free breakfast club, and limiting the number of costly branded school uniform items to save families hundreds of pounds through a child’s time at school. What assessment has the Department made of the specific impacts of rising costs on foster families?

The hon. Member for Linlithgow and East Falkirk talked powerfully about the urgent crisis in recruitment and retention of foster families. Worryingly, more than four in 10 foster carers are thinking of leaving fostering. At the same time, fewer and fewer households are registering to become foster carers, and the conversion rate of people who express interest in fostering to actual foster carers is vanishingly small.

We also need diversity in our foster carer network so that families have options for closer matches to their cultures, foods or faiths, which helps a child to feel settled at an anxious time. The Department’s own figures show a 26% decrease in newly registered households since 2019. The same figures show more households leaving fostering during the year than joining, at a time when the number of children in care continues to increase. Without the right placements, more children will end up being placed in homes that do not meet their needs. In 2021, all but six local fostering services reported a shortage in the number of carers they need for their local population.

There is an urgent need for more foster carers who can look after teenagers, large sibling groups, children with complex needs, and children with special educational needs and disabilities. Foster caring is more than simply opening a home to an additional child; it requires skill and dedication. Looked-after children are more likely than other children to have experienced a severe trauma in their lives, such as bereavement, abuse or neglect, and foster carers need to have a good understanding of a wide range of needs.

In response to the independent review of children’s social care led by Josh MacAlister, the Government committed to a nationwide recruitment and retention programme for foster carers. When does the Minister expect to be able to update the House on the progress of pathfinder areas and plans for any wider roll-out across the country?

The challenges facing foster carers and the children they look after must be placed in the context of the wider crisis in children’s social care. The number of children entering the care system continues to rise, but the Government have eroded the support that they need. More than 1,300 Sure Start centres have closed since 2010, while the funding offer to local councils for children’s services has fallen by an estimated 24% since 2010.

Perhaps the Minister will point towards his Department’s family hub programme, but he cannot escape the fact that that programme is funded in only half of all local authority areas. The high turnover in children’s social workers and the loss of experienced staff are creating uncertainty for foster families and those applying to foster. At the same time, the 10 biggest providers of children’s homes and private foster care placements are raking in huge profits from public money, more of which should be spent on the wellbeing of vulnerable children.

Foster carers are a vital part of our children’s social care system. They provide a loving and safe home to tens of thousands of children across the country, but they urgently need better support and recognition for their wider role. I hope that the Minister will set out how the Government will act quickly to ensure that all foster carers are better supported, so that more people who are able to offer a stable and loving home to vulnerable children can be urgently encouraged to take up the very important role of being a foster carer.

In March, we set out our response to the petition. We have increased the minimum fostering allowance by 12.43% and raised qualifying care relief for foster carers, with the latter change representing an average tax cut of £450 per year. Fostertalk, which launched the petition, described our announcement as “fantastic news” and said it was a

“positive development for the foster care community”.

As has been touched on, in order to support foster carers further, from April 2024 we will raise allowances by a further 6.88%, marking two consecutive years of above-inflation increases to foster carer allowances. That means a foster carer in the tax year 2024-25 will earn between £28 and £49 more per week, per child, than they did in the 2022-23 tax year. Over a full year, this will equate to between £1,456 and £2,548 more in allowances. We have also committed to ensuring that qualifying care relief will rise with inflation each year, so foster carers will have more left in their pocket to support the children in their care.

More broadly, there are three key categories of financial support for foster carers. First, there is the national minimum allowance to cover the additional cost of the child, which, as I have mentioned, we have increased at an above-inflation rate for two years running. Secondly, there are fee payments, set locally by councils and fostering agencies to recognise and compensate foster carers for their expertise, skills and development. Thirdly, there are any expenses that have been agreed by the foster service provider.

The national minimum allowance was introduced in 2007 to try and ensure that foster carers are not financially disadvantaged by looking after a child or young person. It is meant to cover the cost of raising an extra child in the home. It should pay for the child’s food, clothing, transport and additional costs, and support children to take up hobbies and have pocket money, as other children would. The rates are set centrally by Government, and we expect all fostering service providers to pay at least the national minimum. Indeed, many local authorities or agencies choose to pay more. As the hon. Member for Linlithgow and East Falkirk touched on, a similar allowance was introduced in Scotland earlier this year.

Every year, the Department for Education works with the Department for Levelling Up, Housing and Communities to review the allowance and consider any changes in inflation and affordability for local government. The allowance operates on a sliding scale, with levels rising as children become older, and with higher rates in parts of the country where costs are typically higher. On the discussion about variation, most of the variation cited by the Fostering Network is the result of councils choosing to pay significantly above the national minimum, as well as the flexibility we give to local authorities to set rates. I will return in a moment to the monitoring that we might do on whether they are paying that.

The 12.43% increase was a record uplift, which represented an increase of between £17 and £30 in allowances per child, per week. The further allowance from April will be an additional £11 to £19 in allowance per child, per week. Beyond the allowance, councils and fostering agencies have the flexibility to provide fee payments for foster carers that reflect their experience, skills and development, as was touched on, or to provide extra support for children with more complex needs. Many fostering service providers supplement that with local offers, including council tax deductions, and discounts for local child-friendly attractions and services. Fostering service providers often provide extra money for taking children on holiday, or to celebrate a birthday or religious festival. Finally, fostering service providers also agree expenses with their foster carers. For example, foster carers may receive travel expenses or be reimbursed for the cost of a school trip.

Moving on to tax arrangements in the second part of the petition, we review tax arrangements for foster carers, ensuring that tax relief is appropriate over time, supporting carers now and in future. Foster carers benefit from qualifying care relief, which means that they do not pay tax on any income below an earnings threshold. In March, we raised that household earnings threshold, as well as the weekly threshold for each looked-after child. For each household, the first £18,140 of income is now tax-free, up from the previous level of £10,000. Additionally, foster carers pay no tax on £375 of income each week for each child under the age of 11, and no tax on £450 of income each week for each child over the age of 11. This means that the vast majority of fostering households will now pay no tax on their fostering income, and it simplifies the tax return process that foster carers have to complete. For a fostering household with one fostered child, the first £37,640 of fostering income is tax-free for a child under 11, with the tax-free amount rising to £41,540 for a child over 11. Our recent increase represents a tax cut of £450 a year for fostering households, and we have committed to raising qualifying care relief by the consumer price index measure of inflation every year.

Foster carers can access a range of benefits, and the money that carers receive from fostering is disregarded when calculating means-tested benefits. Fees and allowances are not taken into account as earnings or income, so do not affect the amount of universal credit to which a foster carer may be entitled. Child benefit, or the child element of universal credit, is included in the allowance paid to foster carers from the local authority, but foster carers can claim child benefit for their own birth children. Birth children of foster parents are entitled to the additional 15 hours of funded childcare, as well as being entitled to an extra bedroom for the purposes of housing benefit and universal credit, meaning that they do not lose out following the removal of the spare bedroom subsidy. Foster carers who combine fostering with other employment can get extra funded childcare hours for their foster children, as long as that childcare is consistent with the child’s care plan and agreed with their social worker.

I will briefly touch on the questions raised; if I miss any, I am happy to write to Members with the answers. The allowance is not ringfenced. In December, I wrote to local authorities to remind them of the duty and our expectation that they pay at least the minimum allowance. I share Members’ frustrations where local authorities are not doing that, since we are giving them the money to be able to do so. We will certainly consider collecting more data to ensure that the minimum is being paid. As I say, I wrote to all local authorities in December to reiterate our expectations in this matter.

The 6.88% increase is additional money through the local government finance settlement and the increase in core spending. We are investing £36 million—again, a record amount—to improve recruitment and retention, which a number of hon. Members touched on, and to improve approvals and help more people to undertake this vital role. We are working with more than 60% of local authorities in order to do that.

The shadow Minister, the hon. Member for Feltham and Heston (Seema Malhotra), asked for an update on fostering. It will shortly be the anniversary of the publication of “Stable Homes, Built on Love”, our strategy for transforming social care as a whole, and we will provide an update on what has been happening with our fostering work, the north-east pathfinder, Mockingbird and so on, alongside everything else.

In conclusion, I once again thank the hon. Member for Linlithgow and East Falkirk, and the Petitions Committee generally, for tabling this debate. I am committed to our programme of reform and proud of the Government’s record levels of investment and support for foster carers. I know that all Members present, as well as those not present—as the hon. Gentleman touched on, there is an important statement in the Chamber; otherwise, I feel sure more Members would be present—admire the work that foster carers do for their communities and, most importantly, for the children in their care. It is important we give them all the support we can.