Financial allowances

What’s happening now?

The government announced on 27 October 2024 and confirmed in the Autumn Budget that it will invest £40 million to support kinship carers in England by “trialling a new kinship allowance in up to 10 local authorities to test whether paying an allowance to cover certain costs – like supporting a child to settle into a new home with relatives – can help increase the number of children taken in by family members and friends”.

No further information is yet available on the trial, including which groups of kinship carers are eligible, which local authorities are involved, or how the allowance will be delivered, although the Minister has confirmed that the trial is due to begin in autumn 2025 that there will be a call to all local authorities for expressions of interest launched in the summer. Kinship is continuing to advise the Department for Education on the design and delivery of the trial.

Some local authorities already deliver a consistent, non means tested financial allowance for some groups of kinship carers (most commonly special guardians where the child was previously looked after) and several local authorities have recently announced plans to strengthen their offers of financial support to kinship carers, including Kirklees, Leeds and Sheffield. However, most local authorities continue to deliver only discretionary means tested financial support to kinship carers other than kinship foster carers.

What’s happened previously?

The previous government committed in the National Kinship Care Strategy to delivering a 4-year financial allowances pathfinder in up to 8 local authorities from 2024 to28, with £16 million funding committed to for year one (2024-5). Only special guardians where the child was previously in care were due to be eligible for an allowance which matched the minimum fostering allowance in that local authority. Although further details were expected in Spring 2024, the then government’s response to a parliamentary written question suggested a delay even prior to the general election.

Previously, Stable Homes, Built on Love committed to “explore the case for mandating” a mandatory financial allowance across all local authorities following the Independent Review of Children’s Social Care’s recommendation in 2022 that financial allowances be extended to all special guardians and kinship carers with child arrangements orders where the child would otherwise be in care. The government’s strategy agreed with Review’s assessment that the current system perversely incentivises kinship carers to become foster carers given this can be the only route to access financial support, and acknowledged this can be a barrier to permanence for children who would otherwise be cared for under a different legal order.

In Stable Homes, Built on Love, the government argued that improving financial support “often makes good financial sense for local authorities, kinship carers and, ultimately, for children and their outcomes”. It argued the provision of flexible funding for kinship arrangements makes economic sense, noting that some local authorities had seen a financial benefit – particularly where this has reduced the numbers of children in care – and encouraged others to follow suit: “we do not want local authorities and partners to feel the need to wait for permission to act now… [local authorities] should feel confident to pursue approaches and ways of working that we know are the right ones”. 

The Lords Public Services Committee has previously encouraged the government to go further and suggested that it “should ensure that sufficient financial support for those caring for their kin is provided regardless of whether the arrangement is formal or informal, and that it is consistent across England. Additional funding should be allocated to local authorities to provide this support in the immediate future.” In addition, the previous Education Committee acknowledged that “many kinship carers live in poverty, and many begin looking after a child in a time of crisis. The case for additional financial support for kinship carers, as well as ‘kinship leave’ on par with Adoption Leave must be reviewed”.

Our verdict

We are pleased the government is moving ahead with plans to trial improved financial support for kinship carers given our extensive evidence of the impact of poor financial support on kinship family poverty and stability. However, it is vital that the trial does not paralyse progress towards a wider rollout of allowances in the future. There is a strong economic argument for investing in well-supported kinship care arrangements: for every 100 children looked after in well-supported kinship care rather than local authority care, the state saves £4 million per year and increases the lifetime earnings of those children by £2 million.

It’s important that the government carefully considers eligibility for and duration of the trial in the context of the outcomes to be measured and evaluated, which should include reducing the risk of kinship family breakdown, improving wellbeing for kinship carers and their children, and enabling informed choices about the right type of kinship arrangement. The previous government’s pathfinder was due to be restricted to those who were special guardians caring for previously looked after children, signaling a clear intention to explore how improved financial support could encourage and support more kinship foster carers to move to special guardianship, where in the child’s best interests. Our evidence shows that poor financial support for kinship arrangements outside the care system is indeed preventing some kinship carers moving from kinship foster care arrangements, despite their desire for permanence and parental responsibility.

The government’s descriptions of the trial to date also suggest an ambition to evidence how improved financial support might increase the number of children living in kinship care by diverting children from the local authority care system, echoing the government’s wider children’s social care objectives articulated through other provisions included within the Children’s Wellbeing and Schools Bill and the Keeping Children Safe, Helping Families Thrive policy paper. This, however, will be a much more difficult challenge given how the mechanics of the system effectively dictate children’s initial entry to the care system when deemed at risk of significant harm by the local authority and the absence of any well-supported kinship care routes which are not predicated on the child having spent some time in local authority care. As such, this isolated trial of a financial allowance is unlikely to deliver the right testing ground to evidence initial diversion from care and could risk kinship families being pushed down routes which have long-term implications for eligibility for other practical and emotional support.

We welcome those local authorities who have followed the evidence and already deliver leading practice in financially supporting special guardians and other kinship carers. Elsewhere, guidance on the provision of financial support for kinship carers continues to be misunderstood and delivered poorly – and sometimes unlawfully – in practice, leading to highly variable experiences for kinship carers and leaving local authorities open to legal challenge, evident in a number of recent successful judicial challenges and Ombudsman complaint decisions.

What should happen next?

We urge the Department for Education to work at pace to confirm plans for the kinship allowance trial so that kinship carers across England can understand how it might impact them and how it might inform a wider rollout in the future. However, we ultimately want to see a commitment made by the government to legislate for and appropriately fund a consistent offer of financial allowances nationally for kinship carers.

The Department for Education and the Ministry of Housing, Communities and Local Government should jointly support a significant bid to HM Treasury as part of the multi-year Spending Review to implement this, moving further and faster and building on available interim evidence from the kinship allowance trial. We believe this would deliver positive outcomes for children and families, including improved family stability and movement to more appropriate kinship arrangements, resulting in significant cost savings for local authority budgets at a time of intense spending pressures.

In the interim, local authorities should emulate the leading practice of local authorities who already deliver a non-means tested allowance to kinship carers as soon as possible, and ensure financial issues do not prevent kinship carers from moving to a kinship arrangement best suited to their family situation. This aligns with Foundations’ Kinship Care Practice Guide which recommends that kinship carers should be offered a financial allowance “to increase placement permanency, reduce the likelihood of placement disruption and improve the likelihood of permanent guardianship”.

To support this, the government should also commit to updating special guardianship guidance to reduce current unacceptable variation and poor practice in the delivery of financial support, reiterating that “financial issues should not be the sole reason for a special guardianship arrangement failing to survive” and offering clarity to local authorities in the absence of an up-to-date and suitable means testing model. Guidance should also encourage equitable provision of suitable financial support to kinship carers with child arrangements orders, and local authorities should offer support to kinship carers with these arrangements who wish to move to special guardianship when in the best interests of the child.