Children’s Wellbeing and Schools Bill

(Limited Text - Ministerial Extracts only)

Committee stage
Tuesday 17th June 2025 Lords Chamber

Even if my very crude calculation is too high, it does give a sense that the return on investment of the Government buying additional homes—accepting the earlier amendment from my noble friend Lady Sanderson, and addressing the very real capacity problem—would be very high. So, I really urge the Government to consider that. We need a more fundamental reform of capacity to get to a place where we have public and non-profit models which would better serve the financial stability that we need, and most importantly, the welfare of children.

[The Minister of State, Department for Education (Baroness Smith of Malvern) (Lab)]

My Lords, I shall speak to amendments in group 4. As other noble Lords have identified, we have a market that is dysfunctional and not working appropriately. That results in the types of pressures and complexities for local authorities that we have heard about and has been described by several reports.

In 2022, the Competition and Markets Authority found that the children’s social care placement market was dysfunctional. It found that the largest private providers were making profit margins significantly above what would be expected in a well-functioning market. The LGA also found, in 2023, that the 20 largest independent providers made profits exceeding £300 million in a year. There is a considerable discrepancy between the levels of profits made in this market and those made, on average, across non-financial businesses in the rest of the economy. I do not believe that there should not be a market in this particular area, but it is completely clear that the excess profits being made are not the sign of a properly functioning market. They are the sign of a market that is distorted, dysfunctional and failing to serve children and young people and the local authorities which are paying the costs of funding the profits, as opposed to investing in their children.

We clearly need to make reforms, and that is what the Bill is partly about. I will come to some of the other reforms not included in the Bill that are also part of the overall programme. Additionally, local authorities currently have no way of knowing if a provider, or members of its wider corporate group, is at risk of failing financially. That is why amendments in this group cover Clauses 14 and 15 of the Bill and related issues.

I will start by addressing the point raised by the noble Baroness, Lady Barran, about Clause 14 standing part of the Bill. Clause 14 introduces a new financial oversight scheme for children’s social care, a key part of our wider reforms of the market. We are aware that a provider of children’s social care places suddenly closing its provision as a result of financial failure could have a significantly detrimental impact on the care and stability of where children and young people live. Currently, as I have said, local authorities have no way of knowing whether a private provider or its corporate owners are at risk of failing financially. If a large provider were to fail and suddenly exit the market without warning, it could be difficult for local authorities to find alternative placements for those children or places that appropriately met their needs. That is why we are developing this new financial oversight scheme in children’s social care. This will, for the first time, increase financial and corporate transparency of difficult-to-replace children’s social care providers, allow for an accurate, real-time assessment of financial risk and strengthen forward planning.

The noble Baroness, Lady Barran, rightly asked some detailed questions about how the system will work. We are not developing this completely from first principles. We have worked closely with the Care Quality Commission to learn from its existing market oversight scheme, which operates for a similar purpose in adult social care. That was set up in the wake of the collapse of Southern Cross in 2011. We are confident that we can operationalise this and make it effective.

The way in which the scheme is being designed means that those on the scheme will also be required to submit a recovery and resolution plan containing information on risks to a provider’s financial stability and plans to reduce those risks. The Secretary of State may also require providers or a corporate group member on the scheme of heightened financial risk to undergo an independent business review. The noble Baroness asked whether the independent business review would use the recovery and resolution plan. For reasons that I will explain, those are two important but slightly separate elements of the scheme.

Amendment 134A, tabled by the noble Baroness, Lady Sanderson, seeks to require all local authorities to publish the prices that they pay for private placements of children’s homes on an annual basis. Before I get into the detail of the amendment, the noble Baroness suggested that other parts of the overarching strategy that we must put right in this failing market were potentially not being taken forward. That is not right. The fact that something is not in this legislation does not mean that it is not part of the Government’s overall approach to improving the sufficiency of placements. Alongside the legislative provisions in this Bill, we are also developing a national data programme to address that gap in national and regional data around the underlying costs of children’s social care placements. We are also extending our national support programme to provide additional support to local authorities in forecasting, commissioning and market shaping. We are investing considerably in local authority capacity. There will be £560 million in capital investment between now and 2029-30 to refurbish and expand children’s homes and foster-care placements, alongside additional investment in foster-care sufficiency.

On the point about market diversification, raised by my noble friend Lady Thornton, we are exploring options to encourage new providers such as charities and ethical investors to enter the market. I will certainly talk to my honourable friend Minister Daby about how we can bring people to a round table to think about that market diversification.

We are improving both the workforce and the registration of new children’s homes and supported accommodation to support the reforms we are making to the market. This is a wide-ranging, strategic and important programme of work, and in the Bill we are looking at the legislative elements of that.

I agree with those noble Lords who talked about the importance of data transparency. That will be part of our wider package of measures and will cover not only placements in children’s homes but fostering and supported accommodation placements. I am glad that the noble Baroness, Lady Sanderson, is supportive of the need for that change. I assure her of our ongoing commitment to it. We want to ensure that local authorities have the necessary information, capability and tools to shape the market, negotiate more effectively, secure better-suited placements and achieve greater value for money. It is, of course, also a function of an appropriately working market that there is better and clearer information than has been the case up until now.

On the point about whether and how we do that with local authorities, we are clear that these changes should be supportive in nature rather than seeking to add additional burdens to local authorities. For that reason, we are considering the best way to help local authorities to make informed decisions when commissioning placements—utilising the data we expect them to collect on costs—and how they can provide better data and cost transparency. We will outline more plans on that in due course. I agree with the principle about the need for much better information.

Amendment 140 tabled by the noble Baroness, Lady Tyler, seeks to apply the financial oversight scheme to providers of supported accommodation. I assure noble Lords that supported accommodation providers will be in scope for the financial oversight scheme. They are not in the Bill, which reflects how this type of provision is dealt with in the Care Standards Act. That Act was extended to cover supported accommodation by regulations. To ensure consistency, we will similarly apply financial oversight to supported accommodation through regulations, and that will occur once the financial oversight scheme comes into force. As I have said, the scheme will increase financial and corporate transparency of the most difficult to replace providers of supported accommodation, alongside the other forms of provision that have already been identified.

Amendment 140A tabled by the noble Baroness, Lady Barran, is where we get into some of the detail about the independent business review and the recovery and resolution plan. I want to reassure the noble Baroness that the independent qualified person undertaking the IBR will of course be able to request the provider’s recovery and resolution plan if that is necessary to inform their assessment. The RRP is a proactive contingency plan that requires providers to mitigate risks and prepare for the worst-case scenario of financial failure in a way that minimises negative impacts on children. On submission, a provider’s RRP will be reviewed by experts in my department. I can assure the noble Baroness that we will of course ensure we have the appropriate expertise to be able to do that. As we are basing this on a similar model for adult social care, there is good learning and understanding about what will be required.

Separately, if we judge that there is a significant risk to a provider’s financial sustainability, the department may instruct a qualified person to conduct an independent review of its business. The IBR will examine the nature and extent of risks to a provider’s financial sustainability and provide additional assurances to the department in its assessment of financial risk. As I have said, that may well include a consideration of the RRP and, of course, the independent review of the business will be carried out by people with specific expertise in this area. We may well need to look for particular expertise for that.

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[Lord Addington (LD)]

My Lords, listening to the noble Baroness introduce these amendments, I am remembering how many times, as a Minister, she batted me back with a question. As I interpret these amendments—if I have got it wrong, I am sure I will be told—they basically ask how this will work. Where are the levels of intervention when something does not work? How do we get through? It was a long and complicated series of questions, but that is what Committee is for. If we could get an idea of the answers, if the Minister has them or can tell us where we can find them, I think we would all feel a little more comfortable before the next stage.

[Baroness in Waiting/Government Whip (Baroness Blake of Leeds) (Lab)]

My Lords, the amendments in this group are all in the name of the noble Baroness, Lady Barran. Just taking the amendments as they are, the majority of residential settings are owned by provider groups—organisations that own the providers that run settings. The legislation refers to provider groups as “parent undertakings”. Provider groups have influence over how a setting is run, yet they are not accountable in legislation for the quality of the settings they own.

Clause 12 is intended to complement Ofsted’s existing powers. It will allow Ofsted to take action at scale and pace to improve the quality of care when it reasonably suspects that two or more of the provider group settings are not meeting regulatory requirements. In answer to the noble Baroness’s question, together with Clause 13, which provides additional enforcement powers for Ofsted, it is part of this Government’s strategy to ensure the safety and well-being of vulnerable children in care.

Amendments 135 and 136 seek to give Ofsted the power to inspect provider groups. Inspection is not necessary at provider group level. Given the existing robust regime for the inspection of settings, the inspection of provider groups would not give Ofsted any additional information that it does not already have to ensure quality of care and the safeguarding of children’s settings, which is obviously the purpose of what we intend to do here.

The inspection of provider groups would add substantial burden to the public purse and would not result in improvements to the quality of care for children, as inspections would focus on provider group policies rather than on the lived experience of children. Additionally, they would not be effective in holding provider groups to account without establishing a burdensome inspection system. Given that there are over 400 provider groups, I think we understand the scale of the additional work that we are talking about.

The clause gives Ofsted the power to serve an improvement plan notice on a provider group to improve quality in two or more of its settings. This is vital, as it will ensure the quickest and most effective action to secure change at scale. Clause 13, which we will come to shortly, gives Ofsted powers to take action against the provider groups when they do not improve the quality of their settings. This amendment would not impose any requirements on the provider groups that Ofsted could enforce against.

Amendment 137 seeks to empower Ofsted to use the services of an independent person, as provided for by Regulation 44 of the Children’s Homes (England) Regulations, to carry out an unannounced visit to a children’s home for administrative breaches or minor concerns about the quality of care being provided. The amendment proposes that, after an independent person has inspected the children’s homes or home, the local authority may issue an improvement plan notice based on the findings.

Under current regulations, the registered person of a children’s home must ensure that an independent person visits the home at least once each month, and this visit may be unannounced. The independent person should have the skills and understanding necessary to form an impartial judgment about the quality of the home’s care. They must produce a report about their visit which sets out their opinion on whether children are effectively safeguarded and whether the home effectively promotes children’s well-being.

Ofsted, the placing authorities and the registered provider, registered manager and responsible individual must be given a copy of the report. The local authority where the home is located must also be given the report if it requests it. Ofsted uses these reports to inform whether further activity or inspection is necessary. They may be used to inform Ofsted decision-making around improvement plan notices to ensure its effective role as the regulator. Ofsted must be the only body responsible for issuing improvement plan notices. Giving local authorities the power to issue an improvement plan notice would mean duplication and would offer no protection additional to what is already in place.

Amendment 138 seeks to probe how an improvement plan might work in practice. Provider oversight has been designed to enable Ofsted to address poor-quality care at scale and at pace. For example, where Ofsted inspects two children’s homes and believes quality is being impacted by the provider group’s policies or management, it could reasonably suspect that those issues were in all homes owned by the provider group. It would be able to use the new powers to ensure that the provider group drove up standards in all its homes.

The provider group would be required to develop and implement an improvement plan to address the issues identified by Ofsted as being of concern. This plan will be approved by Ofsted, if it is satisfied that it will be effective in addressing the concerns. Ofsted can fine the provider group if it fails to submit or implement the improvement plan. When Ofsted is satisfied that improvements have been made, it will consider the plan completed. This will result in improvement in multiple settings simultaneously, which could not be achieved through inspection of provider groups, as would happen if Amendments 135 and 136 were adopted.

Finally, Amendments 138A, 138B and 138C seek to require Ofsted to notify the relevant local authority when an improvement plan notice has been served, cancelled or appealed. Ofsted is currently required to notify all local authorities where certain enforcement actions such as suspension or cancellation of registration are taken. Clause 13 amends these requirements to include a requirement for Ofsted to notify all local authorities where a provider group is issued with a monetary penalty for failing to prepare or implement an improvement plan. This is a more proportionate balance for ensuring local authorities are aware of problems arising and ensuring that children’s accommodation is not unnecessarily disrupted. Not only would additional notifications, as required by these amendments, require significant extra resources both from Ofsted and from local authorities, but the notifications would prove unnecessary where issues were resolved or successfully challenged.

It is important to stress that provider oversight will not be the only tool in Ofsted’s toolbox to tackle poor-quality care where it finds it; it will continue to have its existing powers to work with individual homes, including suspending or cancelling their registration, if it has serious concerns.

I recognise that the noble Baroness, Lady Barran, has asked some detailed questions, as it is her right to do. I am sure that she will understand that I do not have all the answers at my fingertips and that she will give me the space to look specifically at the issues that she has raised. I shall write to her and make sure the responses are shared with Members in the usual way.

[Lord Addington (LD)]

Could we make sure that we are all copied in?

[Baroness Blake of Leeds (Lab)]

As always. That was the point that I was making. For all the reasons given, I would kindly ask the noble Baroness to withdraw her amendment.

[Baroness Barran (Con)]

I thank the Minister for her very detailed reply and for her commitment to write; that is much appreciated.

To respond to the Minister’s remarks, the reason for tabling Amendments 135, 136 and 137 is that the improvement plan is for the parent company or parent undertaking, but it is for when there are concerns about two or more of their establishments or agencies, in the language of the Bill. I understood that to mean, given the severity—that Ofsted suspects that there are grounds for cancelling the undertakings registration—there could within that be concerns about the safety of children in those homes. So the spirit of Amendments 135, 136 and 137 was that we should have really experienced people, either inspectors or Regulation 44 visitors, going in, not to inspect the parent—I am sorry if my amendments were unclear in that regard—but to inspect the subsidiary undertakings. Maybe when the Minister comes to write, she could just reflect on that point.

In the reference to Regulation 44, the amendment should have stated that

“Ofsted may issue an improvement plan notice”,

not

“the local authority may issue an improvement plan notice”.

Of course, the Minister is absolutely right—the local authority cannot issue an improvement plan notice. But again, it was just trying to get at the idea that, if there was a variation in the levels of concern and the level of breach, for a lower-level breach, a Regulation 44 visitor could advise Ofsted. There is an urgency, if it is thought that an undertakings registration should be cancelled, which will not be met by the improvement plan approach on its own.

In relation to the Minister’s remarks about Amendments 138A, 138B and 138C, I think the answer is that, if the process works reasonably quickly, the proportionality that she set out is completely reasonable. If it gets bogged down, and it comes down to, “We sent you a plan, Ofsted doesn’t think the plan is fit for purpose”, and it goes back and forth and back and forth, we would not get the speed that might be needed to prevent other local authorities commissioning a provider when there are grave concerns, as set out in the Bill. The proof of the pudding will be in the eating. In the meantime, I beg leave to withdraw my amendment.

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[Baroness Blake of Leeds (Lab)]

There is a deafening silence. I turn to group six and the amendments, all in the name of the noble Baroness, Lady Barran, which concern Clause 13: Amendments 138D, 138E and 139A. They seek to exclude natural persons from the provisions relating to the issue of monetary penalties. Clause 13, as drafted, gives Ofsted an additional power to issue monetary penalties to providers that have breached requirements set out in, or under, the Care Standards Act, including operating a children’s home without registering with Ofsted, which they could also prosecute as a criminal offence.

Ofsted will also be able to issue a monetary penalty to provider groups for failure to comply with new requirements set out in Clause 12 of the Bill. This measure will ensure Ofsted has a full range of enforcement powers so that it can act proportionately and at pace, which will act as a deterrent. This includes individuals who operate children’s homes, other establishments or agencies. It is difficult to see why a natural person running a children’s home, other establishment or agency should not be subject to the same enforcement powers as a partnership or organisation when they have breached the law, and where Ofsted could prosecute that natural person for the relevant breach.

Furthermore, based on data from Companies House, these amendments would result in Ofsted being unable to fine 10 individuals who currently operate children’s homes if they breached the law, compared with the 2,738 companies that operate children’s homes. Ofsted have told me directly that it strongly opposes any amendment that would exclude natural persons and limit who financial penalties can be imposed on for illegally operating children’s homes without being registered. Individuals will—and do—gain financially from illegally operating children’s homes without being registered, and should not be excluded from the potential consequences of doing so. All the discussions in Committee have been about protecting children and making sure that they are safe. We have to make sure that, in this area, in spite of the comments made by the noble Baroness, children and their safety are at the forefront of our minds. It is also worth noting that it is common in legislation for natural persons to be subject to financial penalties in the same way as operations and companies.

For example, the Tenant Fees Act 2019 enables fines to be imposed on landlords, who may be natural persons, for breaching the ban on letting fees being charged, and the Data Protection Act 2018 enables the Information Commissioner to impose fines on persons, including natural persons, who have failed to comply with various notices issued by the ICO.

I have already stated the reasons for the need and intent of these additional powers. However, I add that the clause ensures that Ofsted has an alternative to prosecution where that is currently the only enforcement action. Ofsted will not be able to impose a monetary penalty on a person for the same conduct where criminal proceedings have been brought against them in relation to that same conduct. Further, and importantly, to act as a deterrent and to ensure transparency for the public, the clause gives the Secretary of State the power by regulations to require Ofsted to publish details about the monetary penalties it has issued. Ofsted must also notify local authorities when a monetary penalty has been issued, as it is currently required to do in relation to other enforcement action it takes. A monetary penalty may be used by Ofsted as grounds for cancellation of registration.

I assume it will come as no surprise to the noble Baroness that I will have to write to her on the financial assessment and the other questions she raised on the specific requirements in place. I am more than happy to do that, and to share it with any interested parties. Therefore, for the reasons I have outlined, I kindly ask the noble Baroness not to press her amendments and that the clause stand part of the Bill.

[Baroness Barran (Con)]

I thank the Minister, and I will keep my remarks brief. It was very helpful of her to set out the examples of where natural persons are fined, as in data protection and with landlord and tenant. I did not quite follow, but I think she said there were 10 people who might escape this, which seemed like a small number in the totality. I suppose I would still argue that criminal proceedings could be brought, even if they could not be fined, but it was helpful to get those examples and I look forward to her letter. I beg leave to withdraw my amendment.