Council leaders have said they are “absolutely committed” to improving standards which dropped from “requires improvement” to the inspectorate’s lowest rating following a two-week inspection in January.
Inspectors found “widespread and serious weaknesses” meaning some children were left “in harmful situations for too long”, the report states.
Luton was criticised for its approach to safeguarding, the quality of its child protection plans and its ability to retain high-quality social workers, among other factors.
The inspectorate also notes the council’s “ineffective responses to the needs of 16- and 17-year-old homeless young people” and a lack of local placements to meet the needs of children in care.
“A shortage of local foster homes result in children living a distance from family and friends,” inspectors said.
In response to the damning report, which states “caseloads are still too high in some teams to support effective social work practice” and adds that “too many children experience frequent changes of social worker”, the council said it is in the process of employing seven new social workers.
Robin Porter, chief executive of Luton Council, told CYP Now: “We have made a significant investment to recruit seven high-quality, experienced social workers, some of whom are already in place. We are also improving the benefits offered to social workers to retain our excellent staff and avoid relying on the use of temporary workers.
“We must clarify that the high caseloads mentioned in the report are in relation to just some of our teams, including the multi-agency safeguarding hub (Mash). We have also made investments to boost the management support for this team to improve services for our most vulnerable young people.”
The council said it had already ensured the “few specific cases” of homelessness among 16- and 17-year-olds mentioned in the report had been “resolved quickly” after inspectors deemed Luton’s response to the issue “not good enough”.
“There is too much emphasis on diverting these children away from statutory intervention, without an assessment of their needs or of whether they would benefit from being looked after by the local authority. This leaves some children living in unsuitable and unsafe situations and their needs not being met,” the report states.
Porter added that the council, which currently has 378 children in care and is ranked the 70th most deprived local authority in England, had “been forced to achieve substantial savings due to government cuts against a backdrop of rising social services costs”.
He said: “This report clearly states that better support and systems need to be put in place and we’ve immediately taken action to address some of these.
"We still have much more to do to ensure all of our most vulnerable children and young people receive the highest standards of protection and care, and that all children are in a position to thrive and feel safe. We are absolutely committed and focused on ensuring this happens.”
Ofsted praised the council for its work to combat radicalisation of young people in Luton and efforts to tackle an increase in victims of female genital mutilation and forced marriage.
Councillor Mahmood Hussain, portfolio holder for children’s services, said he was “proud” of the council’s “innovative” work in these areas, which he vowed to continue but said he "apologised unreservedly for letting down children in the borough".
He added: “We are truly sorry that some children are not getting the right help at the right time and we will do whatever it takes to put this right.
“We had already put in place systems to respond better to children at risk of radicalisation, female genital mutilation and forced marriage which are having a positive impact and we have developed our early help service where children and their families are benefiting from early interventions. While the report did list these and other areas as strengths, we fully accept that our overall performance is far from where it should be, and we will fix this.”
The report comes as latest figures from the Local Government Association show council budgets for children’s social care have increased by £600m a year over the past five years, resulting in around a £3bn overspend.