Children’s Wellbeing and Schools Bill

Baroness Scott of Needham Market Excerpts

Thursday 19th June 2025 Lords Chamber

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

My Lords, as I said in Committee on Tuesday, in 2022 the Competition and Markets Authority found the children’s social care placement market to be dysfunctional. It found that the largest private providers were making profit margins significantly above what would be expected in a well-functioning market. Most significantly, notwithstanding the profit levels that are being made, we know that there are still insufficient high-quality placements for children who desperately need them. To that extent, the profit levels being made are not, as the noble Baroness, Lady Barran, suggested, driving the sort of supply that we want to see.

The amendments in this group cover Clauses 15, 16 and 17, which implement important legislative elements of our children’s social care placement market reforms: the new profit-capping powers and their associated financial penalties. Introducing profit-capping powers will ensure that we have further powers to curb profiteering if the wider package of measures that I outlined on Tuesday, which we expect to rein in excessive profit-making, do not have their intended effect. This is a power to have in place if other elements of the programme do not work.

I turn to the points raised by the noble Baroness, Lady Barran, on whether Clause 15 should stand part of the Bill. Having outlined the broad intention of the profit cap, I want to be clear that, although some private providers are clearly doing brilliant work, we want to ensure that all providers deliver high-quality placements at sustainable cost. As I say, we know that this is not always happening.

The Competition and Markets Authority found the market to be dysfunctional and estimated that the largest private children’s social care placement providers were making profit margins of between 19% and 36%—well above what would be expected in a well-functioning market. As I have said previously, excess profits have not led to sufficient supply in this market. Furthermore, making these levels of profit from providing placements for some of our most vulnerable children is unacceptable and must end.

This clause provides important backstop powers to ensure that the Government can take action, if needed, to end profiteering. It also sends a clear signal to providers that the Government will not hesitate to take regulatory action to restrict this unacceptable behaviour if profit-making is not reined in. It is not the Government’s intention to extend these powers to any other sectors at this point, although I can confirm that the provisions would cover supported accommodation, along with the other elements noble Lords have already outlined.

To be frank, I hope that it does not become necessary to use these powers. I hope that people see the writing on the wall that there is an impact from the other elements of the Government’s plans, and that we see profits delivered at a more reasonable level and, more importantly, placement sufficiency improving. However, if it became necessary to use these powers, the clause already includes important safeguards through restrictions on the powers to ensure that they are used appropriately. Of course, if they were to be used, the point at which that was determined would be dependent on market conditions and profit levels at that particular point.

Regulations may be made only if the Secretary of State is satisfied that they are necessary on value-for-money grounds. The Secretary of State must also have regard to the welfare of looked-after children and the interests of local authorities and providers, including the opportunity to make a profit. Crucially, this clause also requires the Secretary of State to consult before making regulations. This will be particularly important to ensure that all interests are considered in determining issues, such as how a cap would be calculated and the level at which it would be set. That would be the point at which the particular nature of profit levels—which the noble Baroness, Lady Barran, asked about—would be considered in detail. In addition, Clause 15 also provides for regulations to be made that set out important details about the administration of any future profit cap by providing for annual returns from registered providers and the ability to request supplementary information. I hope that noble Lords can see from the discussions we have had on this Bill—notwithstanding other areas—just how important these powers are to ensuring that the Government can take proportionate action, if needed, to restrict profit-making in the market.

Amendments 504A and 505A in the name of the noble Baroness, Lady Barran, seek to require the Secretary of State to publish a report that would clarify the supply and capacity of independent children’s homes and independent fostering agencies, and the expected impact of the profit cap on the number of available placements, before Clause 15 is commenced. To reiterate, if the profit cap was to be commenced, this would be at a later stage, at which there may well be a different set of market conditions. We intend to use the powers in Clause 15 only if profiteering is not brought under control through the wider package of measures that we have set out.

The consultation requirement in this clause is particularly important because it will outline the details of the proposed cap itself and require the Government to respond and publish that response. This will set out our rationale, including on the matters in the noble Baroness’s amendment, if we judge that a cap is needed. In addition, the Explanatory Memorandum to the regulations will set out the policy rationale. In effect, that already fulfils the aim of these amendments to require a report to be published. In response to the noble Baroness’s question, the regulations will, of course, be made by virtue of the affirmative resolution procedure, so there will be the opportunity to cover these matters in debate and address their potential impact. I hope that reassures the noble Baroness that a report on the impact and design of the profit cap would be necessary before it could be implemented.

I turn to Amendment 142A in the name of the noble Baroness, Lady Barran, which seeks to limit the ability of the Secretary of State to impose financial penalties. I understand her specific questions. We expect the vast majority of any penalties issued to fall on corporate structures of one form or another. First, however, as we said on Tuesday, an individual might run a provider within scope—for example, a children’s home—as a sole trader. It would seem strange and surprising if that sole trader were making profits that would be likely to breach a cap, but it would be a bit bizarre if that were way to avoid a profit cap, were it to be necessary to introduce one.

Secondly, even within a corporate structure, there might be an individual who is personally culpable for a breach under the requirements of Clauses 14 and 15. The ability to issue a financial penalty in those circumstances might act as a strong deterrent—the finance director, for example. Of course, the Government do not intend to issue financial penalties that would be disproportionate or unfair on an individual. Indeed, Clause 17 sets out a number of factors that must be considered in determining the amount of a penalty. These include the impact of that penalty on the person in question, the nature and seriousness of the offence, and any past breaches and mitigating or aggravating factors.

Finally, I turn to Amendments 142B and 142C, which seek to restrict the financial penalty that may be imposed for breaches. While the Bill does not limit the financial penalty that can be issued for a breach of the requirements, I hope I have reassured noble Lords that, importantly, we will set the maximum amount in regulations, after we have engaged in full consultation with interested parties to determine the most appropriate maximum for any financial penalties. That will allow us to adjust the maximum amount over time, as necessary, and regulations made will be subject to the affirmative procedure. That will afford Parliament the opportunity to debate and scrutinise the Government’s proposals, and the Government to provide timely answers at that point to issues such as profit levels and operating arrangements, which the noble Baroness identified. Of course, even if a maximum amount is set, that does not necessarily mean that a provider would automatically be fined the maximum amount. As set out in Clause 17, there will be discretion when determining an appropriate amount for any financial penalty.

I hope that that provides more clarification of some of the meanings in this clause, that it responds appropriately to the amendments the noble Baroness has tabled, and that she feels able to withdraw her amendment.

[The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)]

The noble Baroness, Lady Longfield, has the right to reply.

[Baroness Longfield (Lab)]

I have already indicated my intention to withdraw my amendment.

The Ties that Bind: Citizenship and Civic Engagement in the 21st Century Follow-Up Report

Baroness Scott of Needham Market Excerpts

Monday 17th April 2023 Grand Committee

[Baroness Scott of Needham Market (LD)]

My Lords, following a speech such as we heard from the noble Baroness, Lady Morris, is the nightmare slot, so I am just very pleased that we had the Division.

This is the fifth follow-up that has been carried out by the Liaison Committee since the new system was introduced in 2019. As a new member of the Liaison Committee when this follow-up inquiry was agreed and held, I was really pleased to be involved, partly because it is a topic that interests me but also because I was keen to get a sense of how well this process works. It feels to me that, given the resource, in all senses, that goes into producing a committee report, it is absolutely right that we do not just leave behind what we have done. To take an updated look at the committee’s excellent initial report and how the Government have responded, the second would not have taken us very long; it is bitterly disappointing. I absolutely agree with the noble Baroness, Lady Morris: I found the evidence session with Ofsted one of the most unsatisfying witness sessions I have undertaken in more than 20 years in the House.

I was just having a look at the evidence we took in February last year for the follow-up inquiry, and it was striking how many witnesses referred to the levelling-up White Paper—

--- Later in debate ---

[Baroness Scott of Needham Market (LD)]

As I was saying, when we were taking evidence for the follow-up inquiry, the levelling up White Paper had fairly recently been published. It was clear from the evidence that we took that a lot of people saw this policy intent, this drive for levelling up, as a vehicle for citizenship and, the other way around, that citizenship would be driven by notions of levelling up. There was a lot of good will and aspiration for levelling up, and most of us had a lot of sympathy with the policy intentions in the White Paper. It well described social capital as,

“the strength of communities, relationships and trust”.

It described institutional capital as,

“local leadership, capacity and capability”.

I think that we would agree that all these are intrinsically linked with notions of citizenship, as it is set out in the original report of the committee to this House. These themes were picked up by witnesses to the follow-up report.

Yet as the levelling up Bill is grinding through your Lordships’ House, there is no sense of any of these ideas and policy intents in the Bill. Somehow, it has become a morass of technicalities and legal argument, in which the essence of levelling up seems to have disappeared. I understand that between policy intent and legislation there is quite often a gulf, but it ought to be there somewhere. We ought to have in the Bill a sense of what levelling up means to citizens. I think that the revolving door of Ministers last year has something to do with the lack of coherence in the Bill, which points up the recommendation of the original committee report that the Government need to appoint a Minister with responsibility for citizenship and civic engagement. It really feels as though this coherence is missing from the levelling up Bill.

I also feel that the lack of a Minister with that sort of clout, that sort of responsibility, is also playing a part in the very real problems that are being felt by the charity, volunteering and community sector. Volunteering is something that the NCVO described as a “powerful expression of citizenship”, and I think that we all would agree with that. Here, I declare an interest as a member of the advisory board for the Institute for Volunteering Research and as a trustee of Community Action Suffolk, which supports the charity and voluntary sector in Suffolk.

Charities and volunteering have never in my mind found a natural home in government, and they very rarely have a real champion at the centre of government. This is not a debate about charities, but we all know that this is a sector which is facing some very real challenges at the moment. Most charitable organisations are reporting a significant fall-off in volunteers. Many older volunteers left during the pandemic, and they are not going to come back. Younger retirees are helping adult children with the costs of childcare. Others have gone back to work. People are working longer hours to make ends meet, and others are reporting that they can no longer afford bus fares or petrol to get to their volunteering opportunities. I am sure that there are things which government could do. However, and this is not a party-political point, successive Administrations have not understood the charity and voluntary sector. We have these big national campaigns, which can be effective at generating interest in volunteering, but they consistently fall flat because the skills needed for the next stages—matching volunteers with the right role, managing them when they get there—are often non-existent. Volunteers can be permanently deterred by a bad experience of their first time in volunteering. We saw this a decade ago with the Do IT campaign, and again during the pandemic. I fear that we are making the same mistake with the Big Help Out.

In Suffolk, we have decided that we want to do it better. We know that a lot of good will is being generated by the Coronation and that we have many leaders in communities, and many causes in the county, which collectively come together enthusiastically to pledge something not just for one day but for the longer term, really to promote the concept of volunteering. Therefore, we are running a campaign which will last several weeks. Organisations right across the county, including the county council, the high sheriff, the lord-lieutenant, voluntary organisations and the business sector, are coming together to create something which will add to the civic life of the county.

The key here is the existence of an effective infrastructure body in Community Action Suffolk, which uses its unique position to act as a catalyst, co-ordinator and champion. If aspirations of levelling up are ever to be met, this sort of organisation needs to exist throughout the country. Returning to the theme of the report, if we had a government champion for the sector in the form of a Minister, this sort of thing could perhaps become a reality.