Committee stage in the Lords
Lords Committee scrutinises private-sector profit, financial oversight, and Ofsted enforcement powers in children's social care — debating Clauses 12 to 15 and related amendments on data transparency, profit caps, and monetary penalties.
B(More than 80% of children's homes are run by for-profit companies — many owned by private equity groups carrying large debts — and the CMA found in 2022 that the largest providers are making materially higher profits than a functioning market would allow. Clause 14 gives the Secretary of State power to cap profits, but only as a last resort; what seems to have fallen away are the preventive measures from the Government's own policy paper, including better data on what local authorities actually pay. Require local authorities to publish annually the prices they pay for private placements in children's homes — without mandating that publication, the data won't appear, smaller providers will keep being undercut, and the capacity problems we all want to fix will persist.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…
The new financial oversight measures in Clause 14 must be extended to independent providers of supported accommodation. In the last six years there has been a very significant rise in the number of 16- and 17-year-olds living in supported accommodation run by large private companies, yet local authorities currently have no way of knowing the debt level those companies are carrying or whether they risk failing financially. Extend the scheme to supported accommodation to give a consistent approach across care settings and protect against sudden mass closures.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 ho…
There has been broad agreement across the Chamber — and the Minister herself said on an earlier group that the market has prevented local authorities from meeting their duties. That is the core point: the market is simply not the right model for ensuring vulnerable children get the right care in the right places. Wales has already banned for-profit providers and shown the way. My amendment would prohibit delivery of children's social care services by for-profit companies, requiring any new institutions under the Bill to be not-for-profit and phasing out existing for-profit provision within five years.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.
Cracking the tough nut of children's social care will be the real test of whether this Government can reform public services. Care packages are dictated by the market, not children's needs — the MacAlister review was unambiguous about that. But throwing money at the system won't fix it unless we change who delivers it. We need commissioners to actively lever the well-evidenced voluntary sector, social enterprises and co-operative models: organisations like Juno CIC in Liverpool, Social AdVentures in Manchester and the Lighthouse Pedagogy Trust in London, which are efficient, entrepreneurial, transparent and sustainable. The recent Procurement Act and the social value notice give commissioners new tools — use them. Would the Minister organise a round table on the new role of procurement in diversifying this marketplace before Report?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 Live…
Local authorities are being gouged. A semi-detached house for five care leavers with minimal supervision costs £500 per week per young person — nearly what a landlord would charge for the whole property for a month. A placement for a child in 24/7 secure accommodation can cost so much that one council placed a child in our borough without us even knowing — we only found out from a police missing-person report. Some transparency in pricing might actually help us grapple with these daily realities.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…
All these amendments are about financial control and transparency, which is long overdue. The noble Baroness, Lady O'Neill, has just illustrated exactly why — this is being managed on a crisis, last-minute basis. We need to extract from the Government the actual limits of what they are proposing. On Amendment 141: special educational needs provision is consistently accused of costing too much, and it usually involves the private sector, but the staffing ratios are genuinely high — I visited a school with one full-time staff member for every two pupils. Transparency here should at least act as a defensive tool against unjustified pricing.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.
I support Amendment 134A and agree price transparency must extend to the SEND sector. But the profit cap and monetary penalties are going to drive capacity out of a sector that private equity is already desperate to exit — these assets are out of favour and funds can't sell them. Who replaces the inevitable capacity shortfall? In an ideal world, charities and the public sector would fill the gap, but the public sector has no money and charities are struggling. I predict these provisions will cause a massive shortage of care places.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.
- How does the noble Lord square the need for transition with his concern about reduced capacity? What do you do about the profit gouging that has been happening? And what happens when suppliers walk away?
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?
- Transparency is the right starting point — prices vary enormously across the country and the market needs to see that. Trying to interfere in markets is generally dangerous and generates unintended consequences, and the Government need to be very careful here. If people running these homes face unlimited fines, who will want to do it? This needs much more thought.
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.
- You've just agreed that some of these private equity entities are financially unstable. Isn't it better to bring these facilities back into non-profit hands in an orderly, planned way — rather than waiting for one of them to collapse and having an immediate crisis on our hands?
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?
- Are we going to nationalise it for nothing — become a communist country? And if we pay for it, where does the money come from? Even setting aside the ownership question, threatening operators with fines just isn't reasonable. That is why I support the amendments that limit fines and exclude natural persons from the monetary penalty provisions.
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.
I support Amendment 134A and add my backing for Amendment 140 on supported accommodation. But my deeper concern is whether the measures in Clauses 12 to 18 will actually work. Clause 14's financial oversight scheme requires an independent business review, yet the list of things the reviewer must examine doesn't even mention the recovery and resolution plan — the very document that sets out a provider's financial risks and mitigation steps. That gap alone makes me lose confidence this has been properly road-tested. How will the Government stop providers restructuring to minimise the oversight burden? How will it work for offshore-based organisations? Does DfE actually have the private-equity expertise needed to analyse complex corporate structures? And is the Minister concerned that alerting local authorities to a provider's financial fragility could trigger the very collapse she is trying to prevent?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…
The market is dysfunctional — the CMA said so in 2022, and the LGA found in 2023 that the 20 largest independent providers made profits exceeding £300 million in a single year. That discrepancy between profit levels in this market and those in the rest of the economy is not the sign of a functioning market; it is a sign of distortion and failure. Clause 14 introduces a new financial oversight scheme so local authorities — who currently have no warning when a provider is at risk of collapse — can get accurate, real-time assessments of financial risk. On the independent business review: the reviewer will of course be able to request the recovery and resolution plan; they are complementary tools at different stages. We have learned directly from the CQC's existing market oversight scheme for adult social care set up after the Southern Cross collapse in 2011, so we are not building from first principles. On the wider market: alongside this legislation we have £560 million in capital investment to 2029-30, a national data programme on placement costs, extended commissioning support for local authorities, and we will explore options to bring in new not-for-profit and social enterprise providers — including the round table my noble friend Lady Thornton proposed. Supported accommodation will be brought into the financial oversight scheme through regulations, consistent with how it was added to the Care Standards Act.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…
- I take the Minister's point that not everything needs to be in legislation — but the difference here is that without a statutory mandate to publish, the data simply won't appear. Local authorities are not great at sharing data, and the current system, as I explained with my friend's children's home, actively disadvantages the smaller, responsible providers we need more of. Until mandated publication actually happens, this stays in the 'not everything is for legislation' box — and I do not think that is good enough.
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…
- Clause 12 introduces the provider oversight scheme — requiring providers of two or more homes or agencies to produce an improvement plan where Ofsted reasonably suspects grounds for cancelling two or more registrations. We support the principle of group-level intervention, but my three concerns are: first, will this just become a letter-writing competition between Ofsted and providers, as happened with independent schools failing RSHE standards? Second, the clause is unclear on how different levels of standards breach — some warranting cancellation, some merely an improvement plan — mesh with the existing individual-home regulatory regime. Third, where there are serious safeguarding concerns, we need immediate eyes on the ground. My amendments would require an immediate inspection where safety concerns are evident, empower Regulation 44 visitors to make unannounced visits for lower-level breaches and flag them to Ofsted, and require Ofsted to notify commissioning local authorities when an improvement plan notice is served, cancelled or appealed.
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…
- As I read these amendments, they all come down to one question: how does this actually work? Where are the trigger points? What are the levels of intervention when improvement doesn't happen? That is exactly what Committee is for — if the Minister has the answers, or can tell us where to find them, the House would be grateful.
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.
Clause 12 will let Ofsted act at scale and pace when poor quality stems from a provider group's policies — if it reasonably suspects two or more settings are failing, it can serve an improvement plan notice on the parent undertaking. Inspecting at provider-group level, as Amendments 135 and 136 propose, would not give Ofsted any information beyond what individual setting inspections already provide, and given over 400 provider groups, the burden would be enormous. Regulation 44 independent visitors already make monthly unannounced visits and send reports to Ofsted — it is Ofsted alone, not local authorities, that must issue improvement plan notices; giving that power to local authorities would create duplication with no added protection. On local authority notifications (Amendments 138A to 138C): Clause 13 already requires Ofsted to notify local authorities when a monetary penalty is issued — adding earlier-stage notifications would consume significant resources and create unnecessary disruption to placements where issues are subsequently resolved. I will write to the noble Baroness on the detailed drafting questions and share that with all interested Members.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 not…
- Could we make sure all Members are copied in on that letter?
Could we make sure that we are all copied in?
- Amendments 135, 136 and 137 were not about inspecting the parent company — they were about getting experienced inspectors or Regulation 44 visitors into the subsidiary homes when there are serious safeguarding concerns. When Ofsted suspects grounds for cancelling registrations, there could be genuine child safety risks that an improvement plan process is too slow to address. On 138A to 138C: if the process works quickly, the Minister's proportionality argument is entirely reasonable — but if it bogs down in an endless exchange of draft plans, other local authorities could keep commissioning a provider that has grave concerns against it. The proof of the pudding will be in the eating.
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…
- Clause 15 gives Ofsted the power to impose monetary penalties on providers who breach Clause 12 requirements or run unregistered children's homes. My amendments would exclude natural persons from those penalties. If the financial penalty regime is set out in regulations and can be altered at any point — and the fines are currently unlimited — who is going to be willing to take on the individual management risk of running one of these homes?
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.
- It is difficult to see why a natural person running a children's home should be shielded from the same enforcement powers that apply to any company when they have broken the law — particularly when Ofsted could prosecute that same individual criminally for the same breach. Based on Companies House data, these amendments would only shield ten individuals who currently operate children's homes, compared with 2,738 companies. Ofsted has told me directly it strongly opposes any amendment excluding natural persons — individuals do gain financially from illegally operating unregistered homes and should face the consequences. Other legislation routinely applies financial penalties to natural persons: the Equality Act 2010 regime, landlord fines under the Tenant Fees Act, and ICO fines under the Data Protection Act all do so. Ofsted will also not be able to impose a penalty where criminal proceedings have already been brought for the same conduct.
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…
- It was helpful to have those examples — landlords, data protection — where natural persons are routinely fined. I think the Minister said there are only ten individuals who might otherwise escape, which is a small number in the totality, and criminal proceedings remain available in any case. I look forward to her letter.
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.