The charity welcomed the cash injection from the Scottish Executive but said a 'properly-funded system of national minimum allowances' was needed to ensure that carers were no longer obliged to subsidise vulnerable children out of their own pockets.
The Fostering Network's recommended minimum allowances, published annually, state that they should start at 108.49 per week for a baby and vary according to the age of the child. But a Network survey found that actual allowances for the youngest children start at 60 a week.
According to the Executive, the average cost per child for foster care is approximately 209 per week, while residential care costs about Pounds 1,323 per week.
The 12m will be given to Scottish local authorities during 2005/06 and 2006/07 but details of how much each will receive will not be announced until next year.
Deputy minister for education and young people Euan Robson told the Scottish Parliament that allowances would be increased across the board.
'By investing in Scotland's foster carers we will reduce the need for so many children to be looked after in what is often very expensive residential care,' he added.
The Executive has commissioned the Fostering Network to undertake an audit of Scotland's fostering services and to examine the support and training available to foster carers. Its findings are due to be published in March.
Bryan Ritchie, manager of the Fostering Network in Scotland, said, 'This is a major investment by the Scottish Executive and as such is warmly welcomed. Local authorities throughout Scotland must now prioritise foster care and use this money to invest in this vital service.
'I would urge them to use this grant to update allowances paid to their carers, to bring them in line with the Fostering Network's minimum allowances, in order that we end the need for carers to subsidise the care of our most vulnerable children. I am confident this will begin to address the recruitment crisis facing foster care in Scotland.'
The survey by the Network published last month showed that foster carers in 91 per cent of Scottish local authorities were receiving less than the recommended minimum rates. It also found that 46 per cent of local authorities in England and 50 per cent in Wales were giving carers less than the recommended allowance.
In a statement, the Network said, 'This means they are not getting their fostering expenses fully covered, leaving fostered children shortchanged and carers effectively subsidising the state. This is despite the fact that the Executive's national care standards state that all carers should be reimbursed for the full costs of fostering.'
The Network received responses from 22 Scottish local authorities between April and August this year. Only two councils paid the recommended minimum allowance or more.
Mr Ritchie said, 'There is just no logic to a system which values children differently depending on where they live. With a shortage of 700 foster carers in Scotland, it's not a sustainable situation to expect carers to fund care from their own pockets.
'We urge the Executive to move swiftly towards a properly funded system of national minimum allowances for all foster carers.'
in order to relieve the very real crisis in foster care.'
The Scottish Executive said that of the 11,675 young people being looked after at the end of March 2004, 3461 were with foster carers an increase of five per cent since last year and 13 per cent since 2000.