Children’s Wellbeing and Schools Bill

Baroness Longfield Excerpts

Thursday 19th June 2025 Lords Chamber

Moved by

[Baroness Longfield]

142: Clause 15, page 29, line 34, at end insert—
“(c) a supported accommodation setting in England.”

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[Baroness Longfield (Lab)]

My Lords, Amendment 142 is in my name. It sets out to make the case for the inclusion of supported accommodation in the scope of the proposed profit cap. Following clarification from my noble friend the Minister, including in answers to questions in earlier groups in Committee, I am content that that is the case, and that the intention is to include supported accommodation within these measures, so I will not be moving this amendment.

[The Deputy Chairman of Committees (Lord Geddes) (Con)]

I am sorry but, having spoken to the amendment, the noble Baroness must move it so that others can comment.

[Baroness Longfield (Lab)]

I beg to move.

[Baroness Barran (Con)]

My Lords, Amendments 142A to 142C, 504A and 505A are in my name. I will not speak to Amendment 142 in the name of the noble Baroness, Lady Longfield, and I thank her for giving me advance notice of her intentions. I will also probe the merits of Clause 15 standing part of the Bill.

Amendment 142A mirrors my earlier Amendments 138D, 138E and 139A, which would have excluded natural persons with a role in the management of a business from receiving personal financial penalties. I have reread the Minister’s remarks in Hansard from our debate on Tuesday, and I confess I am still not entirely clear about the status of a natural person who is registered at Companies House. The Minister said earlier that the figure of 10 operators out of over 2,700 was based on Companies House data. Forgive my ignorance, but I do not know what legal status an organisation registered with Companies House has if it is not a company. If it is a company, I am not sure what the status of a natural person is.

The reason for these amendments is simple, as I set out before. It is based on a concern that, without these amendments, the Bill will limit the number of people who are prepared to take senior management responsibility in such providers and will lead to providers exiting the sector. I may have misunderstood what is meant by “an operator”—namely, that it is the owner of a business rather than the senior management—but perhaps the Minister could clarify both those points when she sums up.

Amendments 142B and 142C would limit the maximum fine for a provider to 10% of its turnover and, if imposed on a natural person, to £100,000. We have heard that margins in the children’s home sector average 22%, although in the LGA-commissioned report this figure is taken from, the range of margins is very wide. If we took 10% of a company’s turnover and accepted an average margin of 22%, that would be almost 50% of its profits, which surely is a very strong incentive to avoid being fined. Can the Minister set out what level of fine the Government expect to impose and what the criteria will be for different levels of financial penalty?

Amendments 504A and 505A would delay the commencement of Clause 15 until the Secretary of State has published a report that sets out the current levels of capacity in independent children’s homes, independent fostering agencies and, perhaps, based on the Minister’s remarks on Tuesday, supported accommodation. Again, I wonder whether she could confirm that last point.

The report would also need to have an impact assessment on the number of available placements in relevant homes or agencies. I am definitely not an expert on regulatory impact assessments, I confess, but the Government’s own regulatory impact assessment has, to my amateur eyes, clear gaps; hence the need for my Amendments 504A and 505A.

In the section of the document titled “Expected impacts on businesses”, it states:

“It is not possible for the department to monetise the impact of any future profit cap at this stage. This is because the impact will depend on both the level at which any future cap is set and the market conditions—including profit levels, supply and demand and diversity of provision—at the time that a cap were introduced. Attempting to include straw man figures at this stage—far in advance of any decision about whether or not to introduce a profit cap—would be unhelpful and would have the potential to adversely impact the market by driving providers to make incorrect assumptions about the future level of any future cap based on such figures”.


My amendments would bridge this gap by requiring the publication of an impact assessment when the Government are clear on what their approach to a profit cap will be and by capturing the baseline data on capacity so that the impact of a future cap can be analysed and understood.

My reason for questioning the approach to capping profits as set out in Clause 15 is based partly on the concerns expressed by the Competition and Markets Authority. It was very clear in its report that

“taking measures that directly limit prices and profits, would further reduce the incentives of private providers to invest in creating new capacity (or even to maintain some current capacity)”.

I wonder what assessment the Government made of this risk which led them to ignore the CMA’s advice. Can the Minister set out what impact the department believes this measure will have on investment in sector? What do the latest figures show?

More broadly, there is an important point of principle here. As David Rowland, the director of the Centre for Health and the Public Interest, wrote in a blog published by the London School of Economics in December 2024, if the Government decide that one sector has excessive profiteering and will cap the level of profit in that sector,

“there is no good reason for it not to be extended to other areas as well”.

I wonder what other areas the Government might be considering. David Rowland’s work has highlighted other areas where companies are profiting from—I quote the right honourable Secretary of State for Education—the trauma and abuse of

“some of the most vulnerable children in our country””.—[Official Report, Commons, 18/11/24; col. 27.]

This includes in the management of sexual assault referral centres which serve children, where he cites one business as generating 25% margins after tax—much higher than the 22% margin on earnings before interest, tax, depreciation and amortisation generated by the average children’s home. Might this be an area in which the Government are considering profit caps?

It would also be helpful if the Minister could confirm what operating margin, as opposed to EBITDA margin, the Government think is acceptable for operators of children’s homes, independent fostering agencies and supported accommodation. What is the figure for operating margins today? The figures in the LGA-commissioned report that the Government reference in their regulatory impact assessment are for earnings before interest, depreciation, amortisation and tax, and date from 2023. They are for around the 20 largest providers only. Why have the Government not done their own analysis of profitability across the sector, rather than relying on an external document that is two years old and looks at only part of the sector?

On Tuesday, after I gave my back-of-the-envelope figure of, from memory, £500 million or £600 million, the Minister quoted the sector as having a combined EBITDA of £310 million. But this figure from the Government’s own report, which is taken from the LGA’s analysis, covers just the 19 largest providers of children’s homes. The report goes on to say that the top 22 providers own 40% of children’s homes. That, of course, will not necessarily equate to 40% of profit, but it seems clear that £310 million is not the right number. The Minister should set the record straight at some point—if not now, then in a letter.

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[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.

[Baroness Barran (Con)]

My Lords, I thank the Minister for her reply.

On the point of principle—why you would put a profit cap on one area of the economy where you think there is profiteering on the back of vulnerable children, but not on another—the Minister said that there was no intention to extend this; indeed, she said that she hoped it would not be used. I certainly agree with that, but I do not really understand why, where children have been sexually assaulted or raped and companies are making far higher profit margins than the ones we are talking about here, the Government would choose to apply a profit cap on one and not the other. That does not feel very coherent to me.

I also felt that the Minister was slightly selective in the quotes she chose to identify from the Competition and Markets Authority report. The CMA was clear that it thought that a profit cap was not a good idea. I would also like to clarify something for the record. I think the Minister suggested that I said that current margins were driving supply. I said that current margins, according to the recent data, are uneven and actually falling, so I did not suggest that they were driving supply.