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“Children’s homes: transparency of costAll local authorities must annually publish the prices they pay for private placements in children’s homes.”Member's explanatory statement
This intends to enhance transparency and enable local authorities to negotiate effectively with providers to secure the best placement for children at the lowest possible cost. It implements a commitment in the Government’s Keeping Children Safe, Helping Families Thrive policy paper.
Baroness Sanderson of Welton (Con)
My Lords, I rise to speak to Amendment 134A, in my name, which is in one sense a fairly limited amendment compared to some of the other proposals in this group. I understand all that, because what we are trying to deal with in this group is one of the most controversial realities in children’s social care—the reliance on private provision, and in particular the role of private equity firms.
More than 80% of children’s homes are run by for-profit companies—a rise of more than 20% since 2010. A large proportion are owned by private equity groups carrying large debts and creating instability in a sector meant to protect the most vulnerable. It was the concerns about the market that the Minister has mentioned that led to the CMA launching its market study, completed in 2022. It identified a shortage of suitable children’s homes in the right places, as well as high costs. It says that, with local authorities paying excessive fees to private providers,
“the largest private providers of placements are making materially higher profits, and charging materially higher prices, than we would expect if this market were functioning effectively”.
As we have discussed in the previous group, we have seen a rise in the number of children placed in unregulated homes as the pressure to find placements has intensified.
As noble Lords might expect, in the Explanatory Notes for this Bill, and as the Minister has stated, one of the aims is to improve local authorities’ ability to shape the children’s social care placement market and to tackle profiteering. There are a number of measures to address this in the Bill: there are new powers for Ofsted to find unregulated homes across multiple settings in the parent undertaking—although, as we have heard, this may not go far enough; and the Secretary of State will have the power to cap the profit that providers can make. However, as is made clear in the Explanatory Notes, this is a power that would be used only if the other market interventions outlined in Keeping Children Safe, Helping Families Thrive do not sufficiently improve the functioning of the market. Yet, as with the previous amendment that I mentioned, some of the measures mentioned in this Green Paper have not been brought forward in this Bill.
One notable exception is the proposal to improve the data that individual local authorities hold on the prices paid for private placements, and to improve the sharing of that data—hence this amendment, which would require local authorities to publish annually the prices that they pay for private placements in children’s homes. This would
“ensure that local authorities are supported to better understand, shape and commission placements that suit the needs of children in their area and bring transparency to the cost of placements”.
That last bit is a direct quote from the Government’s own policy statement, so I am rather hoping that the Minister might agree with me.
If I may, I would like to give an example of why this data is important and how the current system works in the interests of the larger providers while threatening the viability of the smaller operations. I have a friend who runs a children’s home. He has one property; he runs it well and, as a result, has children who often stay with him for a number of years. Every year, he has to fill out a spreadsheet to justify any price uplift to the local authority for existing placements. He is told that this information is supposed to ensure that uplifts are transparent and fair across the board—but it is not transparent, as it is not shared with him, nor is it fair. Typically, his uplifts have run at about 2%, although one year it was only 0.2% However, if you are in a home with regularly changing children, it is possible to set the price for placements each time. As a result, and only through a chance conversation, he discovered that he was being paid £1,500 per week less than one of the large private providers in his area offering the same one-to-one support for a child with very similar needs.
The net result of all of this is that my friend continually struggles to keep his head above water, despite being a responsible provider running the type of home which we are all agreed we need more of. If he was able to see the data on payments made to other providers in the area, it would help him negotiate more equitably with the local authority, which in turn would shore up his perennially fragile position. There are benefits on the other side, too, for the local authority. As in the words of one practitioner, “If we were all more transparent then there would be less chance that private providers can pick us off one by one, re prices”.
The Government have said that they will engage with the sector to bring about greater cost and price transparency, but, as we know, local authorities are not great at sharing data. Would the Minister consider mandating the publishing of this data as part of this Bill? I understand—it has been mentioned previously—that Governments are rightly cautious about the number of requirements that they place on local authorities, but given the level of distortion in the market and the urgent need for more suitable homes, there is a solid case to be made in this instance.
I suspect that in her response the Minister will point me to the regional care co-operatives, which will of course lead to greater data transparency. However, what it does not do is to solve the problem for the smaller providers. As with other measures in this Bill, it is another late-stage intervention, so it is a step to be taken, such as imposing fines, when things have already gone wrong. What seems to have got lost along the way are some of those positive preventive measures that originated from the Government’s own policy paper; they have just fallen by the wayside. To be honest, I am slightly puzzled as to why that is the case, but perhaps the Minister can shed some light on the matter, or perhaps, dare I suggest, she might consider reinstating them into this Bill.
I turn to some of the other amendments in this group. My amendment does not go as far as Amendment 174, from the noble Baroness, Lady Bennett of Manor Castle, which seeks to remove private companies from the market as has happened in Wales. I think that our mutual agreement thing may have fallen down now, because I do not think that it is feasible or desirable to ban private provision; that would only increase the capacity shortfall, and we need responsible private investment. I do not think that we should disincentivise private providers from investing in new capacity or do anything to further destabilise the market. That is why I understand the concerns of my noble friend Lady Barran about the proposed profit cap, which the CMA thinks would be unworkable. It is also why I support her Amendment 142A, which would exclude individuals from financial penalties.
While I have purposely limited my amendment to children’s homes, the same principle of data sharing to create a fairer market certainly applies to fostering agencies, where there is a similar problem. While private investors operate less in the space of supported accommodation, it is not unheard of, so I understand the reasoning behind Amendments 140 and 142, which would include supported accommodation a little more in the Bill.
Finally, on Amendment 141, from the noble Lord, Lord Addington, I am afraid that this is not my area of expertise, but I look forward to hearing his reasoning behind it. I beg to move.
Baroness Tyler of Enfield (LD)
My Lords, I rise to speak to Amendment 140, in my name, and I thank my noble friend Lord Storey for adding his. It would extend the scope of Clause 14 to cover independent providers of supported accommodation. This is a really important group of amendments: the whole area of financial oversight and profit caps is incredibly important, and I suspect we are not all going to have exactly the same views on it.
To put things into context, I welcome the raft of measures in the Bill to strengthen regulation and oversight of the care system, particularly the new provider oversight measures, Ofsted’s new power to fine providers of unregistered children’s homes, the financial oversight mechanism, and the profit cap. I firmly believe that these measures are welcome steps in the right direction in addressing some of the structural problems facing the care system and the sort of issues we have talked about so often in this Chamber: excessively high profit levels and rising care costs, at a time when local authorities are under huge financial pressure; the power imbalance between local authority commissioners and the largest private providers; the risk of sudden market exits due to high debt burdens from private equity-backed providers; and the growth in unregistered children’s homes, which we have already rightly focused on. That is a pretty toxic mix, and we really have to take the opportunity the Bill provides to do something about it.
That is the big picture, but turning briefly to my amendment, as we have already heard, in the last six years there has been a very significant rise in the number of children in care aged 16 and 17 who are living in supported accommodation. It is important to be clear what we mean by supported accommodation. It is for young people, 16 and 17 year-olds, who may have already started to make some sort of transition to more independent living but who still require a fair degree of support. Many supported accommodation settings, such as children’s homes and foster homes, are run by private companies, many of which are very large. Local authorities currently have no way of knowing the debt level being carried by these large private companies and whether there is any risk of the company or provider failing financially—which, of course, could have drastic implications for the children living in these settings. So, given the significant and growing number of children living in supported accommodation, it is important that the new financial oversight measures in Clause 14 are extended to independent providers of supported accommodation as well as providers of children’s homes and fostering agencies. My amendment would achieve this, and in so doing would provide a consistent approach across the different care settings and a safeguard for local authorities, so they can identify and mitigate the risk of providers suddenly closing multiple supported accommodation settings.
Finally, nine times out of 10, the noble Baroness, Lady Bennett, and I agree on pretty much everything. We often support each other’s amendments and speak in the same debates, but I do not quite share her position on removing the profit motive altogether from children’s social care. Far more needs to be done to regulate it, but there is a place for the private sector in the children’s social care market; it just has to be properly regulated.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Baroness, Lady Tyler—whether I agree with her or not. I note the phrase that she used, “toxic mix”.
I think there has been broad agreement around the Chamber, including on the Government Benches, that we have a huge problem. The Minister said on one of the earlier groups that the market has prevent local authorities meeting their duties. Here, I would stress the phrase “the market”. What I am postulating is that “the market” is not the appropriate way to ensure that we have the right care in the right places with the right services—and that is a statement of a Green Party philosophical position. We do not believe that profit should be made from any form of care.
In this case, that is also very clear from what people have been saying. The Minister also said on one of the earlier groups that the current market has driven us to this, and the noble Lord, Lord Russell, said that the market is clearly not working. So, yes, it is my ideological position, but I have an overwhelming argument here for saying that the market is just the wrong model for providing this sort of care for vulnerable young people and children.
My Amendment 174 proposes a new clause that would prohibit the delivery of children’s social care services by for-profit companies. It has two very simple provisions, the first being that any new institutions created under the Bill should be not for profit. It says that within five years of the Bill being passed, what is now for profit would be converted. As the noble Baroness, Lady Sanderson, rightly said, this follows the model of what has already happened in Wales. I acknowledge that Wales is smaller than England, but none the less Wales has shown the way. It is worth looking at why Wales went that way.
Baroness Thornton (Lab)
My Lords, in many ways the test of the Government’s success in reforming public services will be whether we can crack the tough nut of children’s social care. It has been quite clear from the debates on the last three groups that this is a major challenge. I declare my interests as the founding chair of Social Enterprise UK, and I am on the social economy APPG. I am an associate of Social Business International and, for the past 10 years or so, I have been working with leaders of social enterprises that provide public services.
I might have preferred to have made this speech in the earlier debate, at the beginning of the afternoon, but I am afraid I could not make it here in time for its opening. However, this is an appropriate group because we are talking essentially about procurement and finance.
As the noble Lord said earlier, I think it was in the previous debate, the Independent Review of Children’s Social Care, led by Josh MacAlister, described how the current system leads to unacceptable, poor outcomes for children and rising costs—private equity was referred to by the noble Baroness. It found that care packages are dictated by the market, not by children’s needs. Excessive profiteering has minimised resources and created public disgust. His central recommendation was for government to launch a reform programme, a radical reset to fix the broken care market, which has failed our most vulnerable children.
While I absolutely welcome the Government’s spending review commitments to fund family help, capital for residential care and fostering and other reforms linked to the MacAlister review, I feel that you cannot throw money at children’s social care and expect things to get better unless we actually also change. I want to see commissioners lever the well-evidenced voluntary sector, social enterprise and other forms of care to have a diverse marketplace in children’s social care.
At Second Reading I mentioned the wonderful Juno community interest company in Liverpool, Social AdVentures in Manchester and the Lighthouse Pedagogy Trust in London. All are boosting the life chances of our most vulnerable young people, and all exist for public service and benefit. They are efficient, entrepreneurial, transparent and accountable. They are sustainable and plough their profits into their social mission, often providing preventive and complementary services.
These organisations win tenders in open procurement processes yet are exceptions in a system that incentivises what you might call “social washing”—let me explain. Commissioners plan and design services to meet local needs and must consider social value when choosing providers, a concept brought into law by the social value Act, which I was very pleased indeed to help get on to the statute book, along with other noble Lords.
Scoring bids for social value means that public bodies consider and try to measure public and community benefits alongside value for money when they procure services we depend on, but in practice the system can be gamed or the process inadvertently rigged. Bidders promise outputs that they will never attain and do not achieve, and are barely held accountable.
Many commissioners know that social enterprises, co-operatives, mutuals, leisure trusts, employee-owned businesses, charities and trading charities deliver high-quality public services that meet community needs, and many have long wanted them to take a bigger role in public services. This chimes with the public’s view too.
The recent Procurement Act gave commissioners new tools and flexibilities and came into force in February this year after Cabinet Office Minister Georgia Gould introduced the national procurement policy and the social value procurement notice, which referenced the role of these kinds of organisations and the idea of codesigning with communities. There is no point in having the best regulation—which I am very proud of—if we do not use it and the opportunities it gives us. Commissioners can collaborate with social enterprise providers, charities and other businesses. Procurement regulations should be an enabler, not a barrier.
What in the Bill will allow this real change to take place? Do we need to strengthen the Bill in some ways to allow these redesigns to happen? In the earlier debate, I was very struck by the question of planning and so on—because of course it is the whole system that needs to be thought of. Might my noble friend the Minister organise a round table where we could address the new role of procurement to bring about the change we need in this particular marketplace before we reach Report?
Baroness O’Neill of Bexley (Con)
My Lords, I would like to support my noble friend Lady Sanderson of Welton on Amendment 134A. Noble Lords will not be surprised to know I shall be championing local authorities around the cost of children’s homes.
I want to give noble Lords a bit of a reality check, and to do so I am going to reference two examples. The first is about supported living for care leavers aged 21 to 25. They are nearly adults, need very little support and are very nearly independent. A semi-detached house is created that can take up to five young people with very little supervision. The cost for one young person in that provision is actually £500 per week. That is nearly as much as any landlord would get to rent out that property for a month: £2,000 a month. If you have got five young people in there, that is one hell of a profit margin. You can see why people go down that route and why we are having to grapple with the costs.
The second case is about a property that had been sought and used as secure accommodation with 24/7 support. It was another council that placed it in our borough. It was worth it getting the property and having 24/7 support for secure accommodation. Obviously, it had made the decision that either it could not afford to get that accommodation through normal routes or that this was good value. We first knew about it when we read police reports saying this young person, who is in 24/7 secure accommodation with two people, had gone missing. I was jumping up and down saying, “We’ve got a young child gone missing”. But it was not our child—we did not even know this young person was in our borough. That is expensive accommodation.
Earlier on, the noble and learned Baroness, Lady Butler-Sloss, said that you would know if people were placed in your borough—but you do not. I am sure the Minister will have something to say about that. In addition to the knowledge that this young person is placed in your borough, the cost of 24/7 care and accommodation for one person in your borough is phenomenal. Local authorities are not perfect, but we are grappling with some of these things on a daily basis, which push the costs up, and some of this transparency might deal with it. I look forward to the Minister’s response.
Lord Addington (LD)
My Lords, I must apologise to the noble Baroness, Lady Sanderson, for missing her first few seconds. When someone said, “I want a quick word with you”, I should have jumped around them as opposed to trying to politely brush them off.
All these amendments are looking at financial control. It is probably overdue, but it is extremely difficult. It is a case of transparency. We need something in here, and, as the noble Baroness, Lady O’Neill, has just pointed out, the Government are actually dealing with it on a last-minute, we-must-do-something basis. Having some control over that is an extremely sensible idea, but they will not get rid of the fact that it will have to be done through emergency contingencies or whatever. It is still going to happen that way. We are trying to extract from the Government the limitations of what they are proposing and to get it more on the record.
On my own amendment—I probably should have slightly reworded it—of all the things accused of costing too much, special educational needs spending is probably right up there, and often it is the private sector. It depends on what you are dealing with, because there is not a right sum of money for that.
I am on a committee looking at the Autism Act at the moment. I just went to see a school that had one full-time member of staff for every two pupils and TAs on top of that, because it is needed. Usually, the private support comes in to support somebody who has struggled in the education system—it may not be autism and it may not be that severe, but they are usually playing catch up and repair, to put it bluntly. So, they are going to have high staffing needs and it is going to vary from person to person. I would hope that this transparency may be a defensive thing from people who are providing a service that is needed.
Lord Nash (Con)
My Lords, I rise to support Amendment 134A, tabled by the noble Baroness, Lady Sanderson. I also believe that the transparency of prices should extend to the SEND sector. I agree we need responsible, not highly leveraged, private investment. I understand why the Government are bringing forward these provisions of a profits cap and monetary penalties, because, of course, none of us wants cowboys looking after our children. What worries me, however, is that these kinds of assets are already very out of favour in the private equity sector, which is struggling to sell the assets it has. The provision of the profit cap and monetary penalties or fines is just going to drive capacity out of the sector, and I really am worried about this. Who is going to replace the inevitable lack of capacity that I am sure will result as a consequence of these provisions?
In an ideal world, of course, many of us would like all provision for these kinds of children to be run by charities or the public sector, although some public sector operators have had their own problems. We do not, however, live in an ideal world; the public sector has no money, and charities are struggling to raise money. Most of the private equity operators are highly professional operators, very concerned about their reputation and safety and the quality of their provision, and we need to encourage them. Otherwise, we will have—and I predict this will lead to—a massive shortage of capacity as a result of fines and caps. I am, however, all for full transparency.
Baroness Thornton (Lab)
How does the noble Lord feel that we need to make the transition to the kind of system that we want, if he is so worried about the reduction in capacity? How do you deal with the profit gouging that has gone on? If you sort of say you do not have profit gouging, what happens when the suppliers walk away?
Lord Nash (Con)
Transparency is a good start. I think it is the case, and I know there are vastly different prices charged around the country, perhaps for different reasons, property prices or whatever; but I think transparency is key. I agree with the noble Lord, Lord Addington: I think that trying to interfere in markets is generally dangerous and you generally have unintended consequences. Everybody knows that I am a career venture-capital private-equity guy, but I do know that these assets are completely out of favour.
There are a number of groups that have these assets and cannot sell them, and we are just going to run out of money, so I think the Government need to be very careful. I say that as somebody who is very concerned about this sector, and that is why I am here. I do not have any magic solutions, but I think that, if people are threatened with fines, who is going to want to run these homes? Individuals. It is something that needs to be thought about very carefully.
Baroness Bennett of Manor Castle (GP)
The noble Lord has just essentially agreed with what I said, that some of these entities are financially unstable and uncertain. Would the noble Lord understand, at least, the argument that it is better to bring these back? These facilities are going to have to stay open: we need them. It is better to bring them back into non-profit hands in an orderly manner rather than, if one of these private equity companies goes down, having an immediate crisis. What do the Government do then?
Lord Nash (Con)
The care sector is slightly different, for the reasons people have mentioned. But what are we going to do—nationalise it for nothing? Are we going to become a communist country? Are we going to pay for it, and if so, where will that money come from? Anyway, even if you deal with the ownership issue—obviously, I do not agree with the idea of nationalisation—threatening people who operate them with fines just does not seem reasonable. That is why I support the amendments on limiting fines and not applying them to natural persons, as opposed to corporations.
Baroness Barran (Con)
My Lords, I will speak to Amendment 140A, in my name, and propose that Clause 14 do not stand part of the Bill.
Before I turn to my own amendments, I add my support to my noble friend Lady Sanderson’s Amendment 134A. As we have heard, it would bring much needed transparency to the children’s homes market and help to level the playing field for smaller and larger providers. Of course, this transparency would help the negotiating position of local authorities and regional care co-operatives in future. I thank my noble friend Lady O’Neill of Bexley for making it real and giving us very practical examples.
Equally, the noble Baroness, Lady Tyler of Enfield, made important points about the level of profit in the area of supported accommodation. As I understand it from the CMA report, it has some of the highest margins in the sector and today provides about two-thirds or three-quarters as many places as children’s homes do, at just over 6,000, or 7% of the market for looked-after children.
Amendment 141, in the name of the noble Lord, Lord Addington, seeks, as we heard, to extend the profit cap to independent special schools. As the noble Lord understands extremely well, this is a very complex area, and one has to be careful, given the range of provision. Some of these homes offer short-term respite to foster carers, for example, so any changes would need to be thought through carefully to avoid unintended consequences.
Along with others, and not just on my Benches, including the noble Baroness, Lady Tyler, I cannot support Amendment 174, in the name of the noble Baroness, Lady Bennett of Manor Castle. Our starting point is that there needs to be greater capacity to limit price increases and ensure a choice of suitable care. We were very clear when we were in government that we do not condone profiteering in this market, but we have concerns about how the transition in Wales will work to a market where there are no for-profit providers. Obviously, the problem of very high pricing will only be exacerbated, as my noble friend Lord Nash just explained, if sufficient new capacity is not created quickly or even if capacity is withdrawn. Such an approach cannot be considered in England until the Government have invested in new, not-for-profit or social enterprise capacity, whether that be in the local authority or in the voluntary sector, as the noble Baroness, Lady Thornton, very ably outlined.
I confess that it is slightly curious to be in a position of challenging the Government’s attempts to regulate and limit the profits of some actors in this industry, which have rightly drawn criticism from the CMA, local authority leaders and indeed many in your Lordships’ House. My amendments to this clause and the others in this area are definitely not about defending a group of companies that can well defend themselves; I am simply trying to test the viability and impact of the Government’s proposals. It is important, because there is such a level of frustration with the behaviour of some of the actors in this sector that we risk having a confirmation bias that anything we change it to will be better. We need to test these proposals and be confident that the solution the Government propose will work.
As we have discussed at numerous points in Committee, there is a fundamental problem with the lack of residential care capacity, whether that be in relation to fostering, children’s homes or supported accommodation. The Competition and Markets Authority described the current shortfall as a “fundamental failure” in market functioning, imposing, in its words,
“severe limitations on the ability of the 206 local authorities in England, Scotland and Wales, who purchase placements, to engage effectively with the market”.
We need a clear plan to address this shortage. My fundamental concern is that the measures in Clauses 12 to 18 will not have the desired impact that the Government seek—and that, across your Lordships’ House, we all seek. Amendment 140A is simply an example of why I do not think the plan for a financial oversight regime as presented in the Bill has been properly road-tested and that we can have confidence in its impact.
New Section 30ZI, to be inserted by the Bill, gives the Secretary of State the power to arrange for an independent business review by an external qualified person. You would assume that, in such cases, almost the first thing that they would look at, if it existed, would be the recovery and resolution plan set out at new Section 30ZG, but it is not even mentioned. There is a list of things that they should look at, but the recovery and resolution plan is not mentioned. It would be fundamental for them to look at that plan, given that it covers, according to the Government, the
“nature and extent of any risk to the financial sustainability of the person … the action the person proposes to take”
to address this, as well as
“impacts on local authorities, and children”.
That makes me lose confidence that this has been properly thought through. I hope that the Minister can either add it to the list of things that independent business reviewers will look at, or, more importantly, reassure me and the Committee that this area has been properly considered.
My opposition to Clause 14 standing part of the Bill is probing. The proposed financial oversight scheme for children’s social care represents part of the regulatory response to the market failures identified by the CMA. As with many parts of the Bill, much of this scheme will be set out in regulation. The scheme requires information from parent undertakings, but, as the Minister knows, private equity structures are notoriously complex and opaque. I wonder whether she is concerned whether providers might restructure to minimise oversight burden—how will the Government mitigate this? I am not clear how the scheme will address jurisdictional limitations on enforcement for offshore-based organisations. I would be grateful if the Minister could explain that, or write to me if the answer is particularly technical or it is not at her fingertips. It is reasonable to question whether the DfE has or will acquire the specialised financial and private equity expertise needed to analyse complex corporate structures and financing arrangements effectively—I think this fly in the Chamber has been sent in by a private equity firm.
Similarly, is the Minister confident that local authorities have the capability to respond to advance warning notices? Is she concerned that the act of alerting local authorities about the financial fragility of a provider could lead to them withdrawing placements, leading to the financial collapse that the scheme seeks to avoid? I would be grateful if she could set out how the Government think that the contingency planning will work. I wonder whether the Government have had conversations with providers about how they expect to create realistic plans, given the prevailing market conditions. Surely existing supply shortages will make rapid replacement extremely difficult, and emergency placement costs are already unsustainable.
There are a lot of questions about the impact that this will have on the shape of the market. Will it actually result in more concentration in the market, because the 40 largest providers will have gained the confidence of local authorities? Could it result in financial pressures on smaller providers where there is less transparency?
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.
Baroness Sanderson of Welton (Con)
My Lords, I thank the Minister for her response, and I thank all noble Lords for a really interesting debate. We said it would be controversial, and so it proved. I will not speak for long as we are getting late again, as usual, but I say very quickly to the noble Baroness, Lady Bennett of Manor Castle, that I genuinely have real sympathy for the children she mentioned and how it makes them feel. I am a big believer in the voice of the child; it would be hypocritical to say otherwise.
I agree with the noble Lord, Lord Addington, that in some senses this is a reactive Bill, while we are dealing with problems that we have here and now. As my noble friends Lord Nash and Lady Barran said, a root cause of a lot of the problems that we have spoken about on all these days in Committee is capacity. We have to address the fact of capacity and its geographical spread.
I particularly thank my noble friend Lady O’Neill because she brings her experience and is able to tell us what it is really like and what actually happens. I was really pleased that she said she thought this could be helpful in grappling with some of the problems that local authorities face, because if my noble friend says it could be helpful then it probably will be helpful. I was very encouraged by that, and it might be helpful in other areas.
I apologise to the noble Baroness, Lady Tyler. I think I was slightly ill advised on the extent of the supported accommodation market and the levels there.
The noble Baroness, Lady Thornton, made some really interesting points. I was going to suggest that the Government take her up on the offer of the round table because I was very interested in social value procurement, but they are doing that already.
I kind of knew, having sat through last Thursday’s debate, that I was going to end up in the Minister’s “not everything’s for legislation” box, and so it proved. I take the point. Of course there is a wider body of work; on the last amendment that I spoke to, I mentioned the money that the Government had put in and the wider body of work, and I am very happy to acknowledge that. I just think the difference here—everyone says this—is that while it is great to have better data and to have that improvement with local authorities, I am not clear how it will help the smaller private providers and therefore the problems of capacity that we have mentioned. Unless we mandate that publishing, I do not think it will happen—and that feels a little one-sided, so I am afraid this is back out of the “not everything’s for legislation” box. On that note, and with that in mind for now, I beg leave to withdraw the amendment.
Baroness Barran
Baroness Barran (Con)
My Lords, I will speak to Amendments 135 to 138C in my name. Clause 12 introduces the provider oversight scheme, which, according to the department’s policy summary, creates the ability for Ofsted to act at scale and pace when there is poor quality in multiple settings and agencies owned by a single provider group. It will require providers of two or more homes or agencies to implement an improvement plan where there are reasonable grounds to suspect that the registration of two or more of their establishments or agencies should be cancelled.
We support in principle the approach of giving Ofsted the power to intervene at a group rather than an individual home level. However, I have three main concerns about the clause. My overarching concern is that this approach may not be effective in getting providers to meet the required standards. Rather, I fear that it risks turning into a letter-writing competition between Ofsted and the providers. I am thinking of a similar approach to independent schools that do not meet the independent school standards, frequently in relation to the teaching of RSHE. These schools face sanctions, and they are required to improve and present a plan for meeting the standards. But during my time in the department, despite the best efforts of officials, the names on the fairly long list barely changed. I appreciate that the context and the reasons for non-compliance are different, but I hope the Minister can convince me that this regime will be more effective.
Secondly, the policy note talks about required standards not being met. Surely there is a spectrum of standards breaches: some that will require the cancellation of the registration, as the Bill is drafted, and some that will require an improvement plan. While I understand that Clause 12 is intended to sit alongside the existing regulatory regime for individual homes, it is unclear how they will mesh together. I would be grateful if the Minister could explain that.
My Amendments 135 and 136 would require an immediate inspection where the breaches of standards indicate concerns about the safety of children. My Amendment 137 would encourage Regulation 44 visitors to make an unannounced visit to establish whether there are lower-level breaches. If these are established, the visitor could make a recommendation to Ofsted about what they have seen—which, of course, it is not obliged to accept. The idea I am trying to get across is that having immediate eyes and boots on the ground, so to speak, is essential where there are serious safeguarding concerns.
I remember a case from when I was in the department where two homes of a particular children’s home group were judged to be inadequate. I requested that all the other homes in the group should be immediately inspected, and that happened. The Minister may say that these amendments are not needed, but it would help to have on record the Government’s explanation of how they expect this to work in practice.
Thirdly, my Amendments 138A to 138C would require the department to communicate with local authorities that might be commissioning a provider, where there are concerns, to make sure that these are shared. I appreciate that this might be difficult in reality. But as we just discussed, there is a similar provision in the financial oversight regime, so I assume this is something the department has considered.
Finally, I have a number of specific questions that sit behind my Amendment 138, which might form the basis of some tidying-up government amendments on Report. I do not expect the Minister to have the answer to every one of these; if she would like to write to me, that is absolutely fine.
On page 18, line 8, how is “reasonably suspects” defined? Is that from a recent inspection—and if so, how recent—or is it from wider intelligence? Secondly, how is an individual with
“a significant role in the management of the parent undertaking”
defined? Is that a director? Do they have to be registered at Companies House? What happens if it is an offshore holding company?
In new Section 23A(7) on page 19, line 3, can the Minister confirm that the Bill is correct where it says:
“The period mentioned in subsection (4)(d) must not be less than … 28 days”?
Should it not say that it must not be more than 28 days? I read this about eight times and am still not clear on what it means. The point is: do we not want to receive improvement plans as promptly as possible?
Should new subsection (8) not clarify that the CIECSS—or Ofsted to its friends—can withdraw an improvement notice only if it has strong evidence that it is no longer needed? What evidence does the Minister expect Ofsted to require before it withdraws an improvement notice? In new Section 23B(2), on line 22, should it not be clear that Ofsted must inform the parent undertaking and any subsidiaries within 28 days, and should this not be mirrored for all the stages of the process?
Can the Minister confirm whether the timeline for the communications listed in Clause 12 will be set out in regulations? At the moment, it is not clear what the maximum time periods are for each stage of the improvement notice process, including for Ofsted to inform and respond to the provider. It would be useful for this to be as clear as possible.
In new Section 23B(5), I wondered whether a step is missing from the processes set out in the Bill. Surely the parent undertaking needs to inform the chief inspector when the plan has been fully implemented within an agreed timescale, which is currently not stated, and then the chief inspector should arrange for an inspection or take whatever appropriate action to confirm that that is the case. I beg to move.
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.
Baroness Barran
Member’s explanatory statement
This amendment seeks to limit the financial penalties that can be imposed upon the operators of children’s homes to exclude natural persons.
Baroness Barran (Con)
My Lords, Clause 13, as we have heard, introduces monetary penalties for non-compliance with an improvement plan or for running an unregistered children’s home or fostering agency. My Amendments 138D, 138E and 139A seek to exclude natural persons from the power to impose financial penalties on individuals involved in the management of these organisations. As my noble friend Lord Nash said earlier, there is a reasonable concern that this will result in a dearth of people who are prepared to take such a risk, particularly as the financial penalty regime is being set out in regulations and could therefore be altered at any point. Having said that, given that the fines, as I understand it, are currently unlimited, perhaps that is not the greatest worry, but obviously if that concern were to materialise, it would have an impact on provision.
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.