Fears are being raised about the possibility of some services for vulnerable children being privatised.

A major overhaul of child services is underway, with a new agency being considered, an increase in the age limit for children in care to 18 and the contracting out of some services.

Under the proposals, a new entity will be created, that will be held responsible for running the system that looks after children in care.

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The new agency could be modelled on the Accident Compensation Corporation, so it would directly purchase services from other government departments or outside agencies.

Photo: RNZ

Green Party co-leader Metiria Turei said she was worried about the potential for privatisation of services.

"It could definitely make the system worse if the focus is on privatising services to companies who can make a profit out of vulnerable children and their families - that is the big risk with the proposals.

"If, however, they commit to child centred, and prevention first, then actually we could see an improvement in children's lives."

Photo: RNZ / Kim Baker Wilson

Social Development Minister Anne Tolley said the contracting out of some services was possible as children had complex needs and social workers would need extra support.

"We do need the child psychologists with our youth justice, we may need the help of criminologists, those may well be in the private sector that we've got to purchase the services from, some of our health services may be in the private sector."

Labour MP Jacinda Ardern was concerned about where the funding for the new entity would come from and said other government services shouldn't suffer.

"[Anne Tolley] has talked about reallocating resources out of existing government departments.

"We've seen that already happen for the children's teams that's meant that we've had front-line nurses, for instance, coming off programmes like immunisation to resource children's teams.

"We've got to be careful we're not robbing Peter to pay Paul."

The review panel estimated the cost of setting up a new agency in the hundreds of millions, which could be taken from existing agencies and put towards the new entity and direct purchasing.

Finance Minister Bill English said any investment was worth it.

"Some of these kids we're looking after could cost us a million dollars by the time they are 35 so it's worth spending quite a bit of money early on, but doing so effectively so that they have better lives.

So we're committing to a significant increase in resourcing over time - not immediately, but as the new model is built."

Photo: RNZ / Alexander Robertson

Mr English is firmly committed to his investment approach to delivering social services, and said the government was willing to spend quite a lot to get better results for kids.

The core of Child Youth and Family had not been restructured before, he said.

"It's had a lot of reviews, but part of the point of this report is that it's showing that not much ever changed, so this time round we've got a much stronger framework around investing in the children so that we can change the predictable negative lives.

"You know we can give these kids better lives if we are a lot smarter about how we apply our resource."

Mr English said extra money for the overhaul would start to be increased in next month's budget.