Submitting evidence to the national stocktake of foster care provision, the National Association of Fostering Providers (NAFP), a membership organisation for independent fostering providers, said the widespread policy of councils opting for in-house fostering placements over those offered by the independent sector is resulting in children being moved from successful independent placements when in-house provision becomes available.
"We have huge concern at the practice of "in-house first", where local authorities place with their own foster carers regardless of potentially better matches in the independent sector," the NAFP response states.
"Every local authority has this policy. This undermines the principle of needs-based foster care. It is centred not on the needs of the child, but on the needs of the authority.
"There is no doubt that some children do not go to the best placement for them as a result of this policy."
The practice is creating unnecessary disruption for children who are forced to move and can impact on their mental health by generating feelings of rejection, the NAFP response states.
The fostering stocktake, which is being overseen by former government adviser Sir Martin Narey, was first announced in the Putting Children First white paper in July 2016 and started gathering evidence in April this year.
Its aim is to build a comprehensive picture of fostering in England and explore ways it can be improved, with its findings due to be published in December.
Ahead of last week's deadline for submissions, Narey said he was particularly pleased a large number of social workers had submitted their views.
I'm very pleased at the rush of submissions to my fostering review from Social Workers. Keep them coming please.— Martin Narey (@martinnarey) 16 June 2017
The NAFP response also raises concerns over a lack of planning and adequate funding around Staying Put, which allows looked-after children to stay with a foster carer until they are 21.
Such planning should start before a young person is 16 but this rarely happens, the response states. It also calls for a national minimum allowance for Staying Put carers, who the NAFP say are struggling to pay household bills under current funding arrangements.
The Department for Education has been contacted for comment.