With this, it will be convenient to consider clause 12 stand part.

As I said in the last sitting, I am grateful to the Opposition spokesperson, the hon. Member for Harborough, Oadby and Wigston, for his thoughtful contributions and specific questions. I will take those points away and I will try to address as many of them as I can in this debate.

As required, we have produced impact assessments for all measures in the Bill, and have followed the better regulation framework for measures that are in its scope. As outlined on gov.uk, the Regulatory Policy Committee, or RPC, is currently reviewing the Bill’s impact assessments and will produce an opinion when its scrutiny has been completed. We will publish those impact assessments shortly. We have also conducted child’s rights impact assessments, where children are directly impacted by the policies and/or there are particular groups of children and young people who are more likely to be affected than others, as I mentioned this morning. There is no requirement to publish these documents in relation to England, but the documents are currently under review, and we will also publish those shortly.

The shadow Minister made a number of points about the shortage of foster carers. Local authorities have a duty to place looked-after children in their care in registered children’s homes. We understand that sometimes authorities need to place a child quickly, including when there are no suitable registered places immediately available, but the Government are clear that all providers of accommodation for children should register with Ofsted. We are also helping local authorities to meet their sufficiency duty by investing more than £130 million in fostering hubs and kinship care and providing additional funding for children’s homes, including more than £36 million specifically on foster carer recruitment and retention.

In the light of the questions that the shadow Minister raised, I also wanted to respond on how we are working with Ofsted to embed the reforms in the Bill. As Sir Martyn set out in his evidence, Ofsted is a key partner in delivering reform of children’s social care, and we are working closely with Ofsted to ensure that each of the measures presented to the House can be implemented carefully, alongside the non-legislative asks that Ofsted also needs to respond to in parallel. The Department has provided funding for a children’s social care transformation team in previous years, which has built the capacity for Ofsted to respond effectively to all the changes we have asked of it to date and ensure that it can meet the demands placed on it by the Bill.

The shadow Minister asked about the term “reasonably suspects”. Ofsted will have the grounds to suspend registration, which could be based on minor or major non-compliance, and may consider that that is a problem in other settings owned by the same provider group. That would be a reasonable suspicion, and it will be a matter for Ofsted to apply those judgments.

On the question of whether the bar is too high for provider group-level intervention, Ofsted’s power to cancel registrations is broad and allows it to intervene when the regulatory requirements are not being met. If Ofsted reasonably suspects that two or more settings owned by a provider group are not meeting those requirements, it has the power to ensure that the provider group acts to make improvements in the settings. If an issue arises in a single setting, it is unlikely to be indicative of wider issues in the provider group, and Ofsted would use its existing powers in relation to registered providers at the individual setting level. It is right that the bar at which Ofsted should be able to require actions of a provider group is the same bar that would enable Ofsted to take action against individual settings, where that is already set out in legislation and guidance. That ensures that this further power is proportionate and that it can only be used where there are real issues of concern arising in settings.

These powers supplement the existing inspection regime. If Ofsted has serious safeguarding concerns, it has the power to close individual settings.

The shadow Minister also spoke of the need to speed up action by Ofsted. The Hesley Group case showed what can happen when a culture and environment in a provider group allows a culture of silence and allows abhorrent abuse to take place. These new powers will allow Ofsted to act quickly and go directly to the provider group to seek improvement if it reasonably suspects that requirements are not being met, which it could not do with any legal backing in the Hesley case. If the provider group does not improve its settings, Ofsted can take action. Where there are serious safeguarding risks, ultimately Ofsted has existing robust powers to cancel a registration and close the setting.

On why we are not introducing inspection of provider groups, Ofsted inspects settings at a minimum of once per year, using the social care common inspection framework. Inspection is not warranted at provider group level—the organisation that owns the providers who run the settings—given the existing robust regime for inspection of individual settings. Provider oversight will supplement inspections to ensure that Ofsted can take the quickest and most effective action for the benefit of children. In many situations, the provider oversight measures will not be necessary, as most provision is rated good or outstanding. Inspection of provider groups would, in many cases, simply duplicate what Ofsted is already doing. Ofsted is already able to cancel registrations in respect of settings if necessary. Provider oversight ensures that multiple cancellations of registrations are not necessary.

On the point about compliance with action and plans relating to litigation, it will be a straightforward question of whether a provider has implemented the improvement plan, which will have been agreed between the provider group and Ofsted. We do not foresee that it will lead to any lengthy litigation.

The shadow Minister spoke about local authorities who place in unregistered settings. Local authorities have a duty, of course, to place looked-after children in their care in registered children’s homes. We understand that sometimes authorities need to place a child quickly, including when there are no suitable registered places immediately available, but Government are really clear that all providers of accommodation for children should register with Ofsted. We are helping local authorities to meet their sufficiency duty by investing more than £130 million in fostering hubs and kinship care, and providing additional funding for children’s homes.

Finally, Ofsted will ask local authorities for information on their use of unregistered provision ahead of any inspections. If there are any concerns, Ofsted may focus on unregistered provision in the local authority’s next inspection. That could include the decision-making processes leading to use of this provision and the statutory duties to plan for sufficient places to meet the area’s needs.

I simply want to lodge a very specific question about proposed new section 30ZC(3)(a) of the Care Standards Act 2000 and the category of people who may not be given a regulatory fine but instead must be prosecuted. I raised the issue in this morning’s session about whether those people would not be able to get a regulatory fine because of the individual case being dealt with, or whether it was the case that anybody who had a previous history of being found guilty of any of these things could not have a regulatory fine applied to them. I would be grateful if the Minister can clear that up now, or if he will undertake to write to me about it. It is just to understand what the law is proposing in that respect.

I thank the shadow Minister for those comments. We will certainly take that away and get him a response.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clause 12 ordered to stand part of the Bill.

Clause 13

Financial oversight

Question proposed, That the clause stand part of the Bill.

It is actually quite difficult to talk to clause 13, as it looks as though pretty much all the important detail here is to be worked out in regulations. Of course, the Government should support local authorities to minimise the risk of disruption to children in homes or independent fostering placements from providers getting into financial difficulty, and financial oversight should indeed be part of their registration conditions. So far, so good.

However, proposed new section 30ZE(2) of the Care Standards Act 2000 states that a financial oversight condition

“is a condition specified in regulations made by the Secretary of State for the purposes of this section.”

Subsection (4) lists examples such as size, the number of children looked after, geographical concentration and so on. Though this area is being left to regulations, could the Minister say more about the sort of thresholds the Government are considering for these metrics—particularly as the Secretary of State will have so much power, including to alter all the criteria in regulations? Although this is broadly a sensible measure, it is quite an open-ended and new power.

The clause is already quite long, but the Opposition wondered about an improvement, perhaps as it goes through the other place, to fundamentally change the registration approach for any new market entrants, so that it is a condition of delivery that they provide financial transparency up to the parent company level, give a quarterly going concern update to the regulator and provide financial information as reasonably requested by the regulator. Has the Department considered similar requirements, so that all providers would have to give full financial transparency as a matter of course and further investigation would follow if concerns were raised?

We are completely sympathetic to proportionality in regulation, but in this case we could reasonably put the onus on providers to share the information systematically, rather than having to wait for a tip-off from a whistleblower or for a concern to become apparent. Sometimes it is the analysis of consistently reported data that provides the tip-off that there is a problem.

To use an example from a slightly different field, in my constituency I have been involved in cases where the integrated care board is regulating GP practices, and I have always thought there is a strong case for ICBs to get more data up front. Twice, when there has been a problem in my constituency and I have talked to the ICB afterwards, it seemed to me that if it had been getting financial data, the issue would have been obvious and there would have been signs long before whistleblowers ever went to the Care Quality Commission. I wonder whether consistent reporting analysis of data would allow us to see problems coming before we get to whistleblowers and other problems down the line. One issue is therefore whether we should have reporting on a more regular basis.

The Opposition have worries of the same kind about this clause as we did about clause 11, though in this case, instead of an improvement plan, it is called a recovery and resolution plan. Again, thinking about independent schools, there is a risk that time and resource get spent preparing the request for the plan, writing the plan, challenging the plan as needed, writing a better plan and going through iterations. In the case of these providers, do we have the financial expertise, either in Ofsted or the Department, to assess the plans? It looks as though there is a recognition that we do not, because proposed new section 30ZI includes the power to arrange for an independent business review. That makes sense, but for reasons best known to the Bill drafters that does not appear to include scrutinising the recovery and resolution plan. I am not sure why not. I do not know whether that is a slip of the draftsman’s pen, as they say, or whether it is deliberate.

My understanding is that Ofsted already has the power to inspect the financial position of schools, but there is a limit on what it does because of the need for a high level of expertise to pick through these cases. Looking at the accounts of a school or group of schools is simpler than analysing the complex debt and ownership structures that we see in some of the private equity-owned children’s homes.

In practice we know that the market is so tight for placements that the loss of even a smaller provider would be disruptive, and the timing of the issuing of the advanced warning notices set out in proposed new section 30ZJ will be terminal for the affected businesses. Page 47 of the policy summary states that the regulations may be extended in scope,

“so that they may provide that a person is not fit to carry on an establishment or agency if a parent undertaking has failed to comply with the financial oversight scheme.”

I am unclear where that provision is in the Bill. Perhaps the Minister could clarify that, because it is quite a complicated clause. Are there any other potential extensions of the Secretary of State’s power by regulations here? Could the Minister clarify the thinking behind allowing Ofsted to determine that someone applying for registration is not a fit and proper person to manage an organisation in this area?

We heard from the right hon. Member for East Hampshire about the involvement of larger and smaller-scale providers in children’s social care, and the Bill covers the other places that children and young people can make their home in. I think we all agree that there is a need for a wide range of options, so that we can determine what is best for individual children and young people when they are finding their home.

Clause 13, however, is particularly relevant to larger-scale providers because of the sheer number of children who would be affected should one of those providers experience unexpected or unreported financial difficulties. No young person should be faced with losing their house overnight, and this measure would help to secure provision for those children in a planned way, as opposed to a reactive situation where a number of places have to be found overnight.

The clause also follows the Competition and Markets Authority’s recommendation to emulate the equivalent schemes we find in adult social care. That is long overdue in child social care. It adds safeguards that allow for transparency and security, which we welcome when we are dealing with children’s social care and the homes that they will hopefully have for a long time.

We are aware that a provider of children’s social care places suddenly closing their provision as a result of financial failure could have a significant detrimental impact on the care and stability of children and young people where they live. Currently, 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 meet their needs. That is why we are developing a new financial oversight scheme in children’s social care, as recommended by the Competition and Markets Authority, which will for the first time increase the financial and corporate transparency of difficult-to-replace children’s social care providers and allow accurate real-time assessment of financial risk.

The scheme will give local authorities advance warning of failure, so that they can take swift action and minimise disruption to the most vulnerable children. Those in the scheme will be required to submit a recovery and resolution plan containing information on risks to providers’ financial sustainability and plans to reduce those risks. The Secretary of State may also require providers or a corporate group member in the scheme of heightened financial risk to undergo an independent business review. We will provide details of the RRP and the IBR through guidance.

I thank the shadow Minister for his comments and questions and my good and hon. Friend the Member for Portsmouth North for her insightful contribution. The shadow Minister asked a number of questions about how the scheme will work in practice ahead of the regulations, and made a number of points about which providers will be in scope of the financial oversight scheme.

It is worth saying that the scheme will be proportionate and target only difficult-to-replace providers and their owners according to their size, market share and geographical concentration. The scheme will apply to private, voluntary and charity providers of children’s homes, including dual registered special schools and independent fostering agencies operating in England. We will also extend the measure to supported accommodation, and we in the future may look to extend it by regulation to residential family centres. Local authorities routinely manage placements of individual children in the event of closures of smaller services, so we do not think those need to be covered by the scheme.

To answer other questions raised by the shadow Minister, the Bill sets out the foundations of the financial oversight scheme, exercisable through the Secretary of State’s powers. We know that the children’s social care placement market is dynamic and we will use these measures and powers to set out the detail in regulations, which will enable my Department to review and update the details in line with future changes to the market. We will publish guidance alongside the regulations, setting out how the scheme will operate in practice and enabling providers to understand what the scheme requires of them.

The shadow Minister asked why Ofsted is not leading the financial oversight scheme. The forensic financial analysis required to fulfil the scheme’s aims extends beyond Ofsted’s remit as a largely quality-focused regulator. Given that Ofsted is not a financial regulator, we will build on my Department’s existing capabilities and market oversight functions to undertake the specialist work required to develop the scheme. A Department-led scheme means that we can play a stronger co-ordination role should a difficult-to-replace provider exit the market, enabling a quick multi-agency response.

Finally, how many providers will be covered and how many placements they represent, we want the financial oversight scheme to deliver an effective oversight function that is proportionate and not overly burdensome. We therefore want to introduce a scheme that covers difficult-to-replace providers only, as recommended by the Competition and Markets Authority. We will determine how many providers will be subject to the scheme as we develop the regulations. Providers who meet the conditions will include private, voluntary and charity providers; we may look to scale the number of providers in the scheme up or down in future ,according to market developments, to ensure that we continue to meet the aims of the scheme.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14

Power to limit profits of relevant providers

I beg to move amendment 42, in clause 14, page 28, line 37, at end insert—

“(c) independent schools with caring responsibilities and offering SEND provision.”

This amendment would include independent special schools within the profit cap provision.

With this it will be convenient to discuss the following:

Amendment 25, in clause 14, page 29, line 25, at end insert—

“(10) Before making regulations under this section the Secretary of State must lay before Parliament a report containing —

(a) details of the number of available placements in relevant establishments or agencies;

(b) an analysis of the expected impact of this section on the number of available placements in relevant establishments or agencies.”

Clause stand part.

It is a pleasure to serve under your chairmanship, Mr Betts. Clause 14 grants the Secretary of State the power to limit the profits of certain social care providers, so I will say at the outset that I, as a Liberal, support a mixed economy in the provision of public services, but I believe that there must be limits to that. It is clear that we have a market that is not functioning, and there are providers who are shamelessly profiteering. I spoke to my director of children’s services about this last week, and he told me at the moment the average price of a placement in a children’s care home per week is £5,500. That is very much the average price; a number charge multiple times that amount per week. That local authority finances are being utterly crippled by some providers, which are clearly behaving inappropriately in the market because of the lack of supply, leaves me incredulous.

A number of hon. Members have made reference to the Competition and Markets Authority’s 2022 report. It said that the UK had sleepwalked into a dysfunctional market, and that

“the largest private providers…are…charging materially higher prices, than we would expect if this market were functioning effectively”.

The power in clause 14 is an important backstop if other measures are not successful, but the devil will be in the detail of how the power is implemented if it is triggered. We all know that many of those big companies have deep pockets from which to pay the best accountants and lawyers, and comprise multiple companies in complex structures all over the world; they can put money into all sorts of different places to avoid the intended scrutiny.

Amendment 41 would include independent special schools in the provision. I will say at the outset that there are many independent special schools run by private providers and voluntary sector providers that do an excellent job and are certainly not profiteering; none the less, some do not fall into that category. We are all acutely aware of the crisis in state special educational needs and disabilities provision and the lack of specialist places, which has led to a growth in private provision that is crippling local authority finances. In 2021-22, councils spent £1.3 billion on independent and non-maintained special schools—twice what they spent just six years previously. The average cost of one of those places was £56,710—twice the average cost of a state-run special school place.

It is clear from analysis done by the House of Commons Library for the Liberal Democrats that some of the companies running those schools are the same private equity companies that are running the children’s homes and fostering agencies that the power in clause 14 is designed to address, so I am at a loss as to why the Government have not included independent special schools in the provision. LaingBuisson, which undertakes reports on children’s services, looked at those providers on the profitability measure of earnings before interest, tax, depreciation and amortisation. It says that the profitability of 23 of the major providers, using the EBITDA measure, varied from 27.9%, in the case of the Witherslack Group, down to 4.7%, which is a much more acceptable level; over a third of the 23 major providers had a greater than 20% profitability margin. Typically, it was the private equity-owned providers that had that high level of profitability, not the other private sector providers. I urge the Government to look very seriously at amendment 42, which seeks to ensure that we also crack down on profiteering in special schools.

On amendment 25, tabled by the Conservatives, I actually think the first part of it, about detailing the number of placements available in relevant establishments or agencies, is a good idea. That information should not be published only when the power is triggered; frankly, we should have an annual assessment of the availability of care placements and details of what the Government are doing to boost their availability. It is clear that the lack of provision is what is driving the profiteering. A later clause allows local authorities and others to open new special schools where there is demand. We need a provision that gives local authorities the power and funding to fill a need for social care placements as well, so that we are not filling the coffers of private equity funds and sovereign wealth funds in the middle east, which pay their directors massive bonuses, huge amounts of money, drawn from the public purse, when many of our local authorities are on the brink of bankruptcy.

I rise to speak to amendment 25 and clause 14. I thank the hon. Member for Twickenham for what she said about our amendment. I completely agree that, ideally, we would have what we are asking for on a regular basis, but just to be clear, the requirement on the Secretary of State to report to Parliament details and analysis of available placements is in amendment 25 because we want to keep the focus firmly on supply and capacity, which I think we agree are the ultimate drivers of the problem we are addressing.

As we said in response to the oral statement to the House by the Secretary of State, we welcome the continuing focus on issues that we identified, and we set up the market intervention advisory group to look at that when we were in government. The heart of the problem, however, as I think we all recognise, is the lack of supply of high-quality places in residential, kinship and foster care for looked-after children. Demand for such places outstrips supply, and that is what is causing the high cost of placements.

It is striking that in its 2022 report, the Competition and Markets Authority did not recommend a profit cap because, in its words,

“The central problem facing the market…is the lack of sufficient capacity.”

The CMA concluded that taking measures to limit the profitability of providers would

“risk increasing the capacity shortfall.”

So if we do not take action to increase capacity first, ironically, we risk simply driving up prices and exacerbating the shortage of places.

Likewise, the review commissioned by the last Government and carried out by the hon. Member for Whitehaven and Workington (Josh MacAlister) found that profit caps would not work as it would be,

“relatively easy for providers to reallocate income and expenditure to maintain profit levels”,

a point already alluded to by the hon. Member for Twickenham. The capacity problem rests on the availability of places and the demand for those places. We spoke previously about the need to do much more to grow fostering to reduce demand. Our amendment is designed to ensure that that capacity issue remains at the front of everybody’s mind at both the national and the local levels, so that at neither level do we fall into thinking that we can fix this without primarily fixing supply.

I understand the argument that it cannot hurt to have the power in the clause, which is the reason why we will not vote against it, but it is unlikely to change things very much compared with increasing supply. In fairness, the Bill’s policy notes state that the profit cap power

“is intended only to be used as a last resort should other measures not have the expected impact”.

The hon. Member for Twickenham talked about it being a backstop. My only worry is we should not even rely on it as a backstop. As the previous independent review and the CMA highlight, it would not be easy to use. One reason is that it would inevitably have to be backward-looking. The Government’s policy notes state:

“We are aware that the administration of the profit cap will be a retrospective look back at whether or not the profit cap has been breached in a past period. It will therefore not necessarily prevent breaches in itself, but it will allow action to be taken retrospectively if such breaches have occurred and act as a disincentive for further breaches.”

We will be looking backwards at a sector where there are a lot of complicated financial arrangements, and because we are looking backwards, people will have time to do all kinds of things to make sure that they look like they are complying, for the reasons I have mentioned.

As Ministers take this measure through the other place and consider implementation, I strongly recommend that, if they regulate for fines, they set up an absolutely iron-clad mechanism to ensure that those fines are paid. I was very disturbed to learn from an answer to a parliamentary question the other day that the Home Office has no idea what proportion of the fines imposed for illegal working are actually paid. In that sector, people just move on—they set up a new company, or get their brother to start a new thing. They just move on, and they do not pay the fine. It is widely known that we do not even know how many people are paying those fines. Obviously, we need to prevent that from happening in this sector, where there is equal scope to move on, to set up new things and collapse the old, and so escape fines. I am sure Ministers are seized of that risk; I just wanted to emphasise what they need to do when regulations are made.

Another way out that Ministers might want to try to close off is that some in the sector adopt offshore models of provision. Might the Government want to use this rare legislative moment to discourage, either in primary legislation or by giving themselves the power to regulate, the commissioning of places with providers that are domiciled offshore? They might want to take that power now, but even if they fix it, there will continue to be so many opportunities to fudge and to manage profits with interest and debt.

I do not mean to labour this because, as I listen to some people in the debate, including Ministers, I hear that they understand the difficulties, but then I hear from some other people, and they think, “Oh, we can just control prices to get out of this, without addressing the underlying real problem about supply.” When I was at the Treasury, one reason we were really keen on the work we were leading on through the OECD on base erosion and profit shifting was that we were faced with the endless generation of new tax wheezes and profit-shifting arrangements. They all had these exotic names—the Dutch sandwich, the green jersey and the double Irish; people were constantly generating new ways of moving profits around.

I want to bring that to life a bit by asking some questions. How would profit be defined for the purposes of the cap? The policy summary talks about

“(on average) profits of 19.4% on fostering, 22.6% on children’s homes and 35.5% on supported accommodation.”

I went back to look at the 2022 CMA report from which those numbers are drawn, but it just talks about margins, so I was not clear on whether we were talking about pre-tax, post-tax, or earnings before interest, tax, depreciation and amortisation. I am keen to understand what measure of profit we are using.

What analysis have the Department done to think about the capital needs of the sector over the next five years? It will need large sums, which may make profit capping harder. Fundamentally, there is a big question about what level of profit the Department for Education deems to be acceptable. In in her articulate and thoughtful remarks, the hon. Member for Twickenham mentioned one provider that had a very high rate and another that she said was more acceptable. That is the heart of the issue: given the powers that are being taken, do Ministers at this stage have some rough barometer of what they would regard as unacceptable profits?

Alongside this debate, even as we as we speak, the consultation is running. Obviously, in an ideal world it would have been much better to have had the results of that consultation before the debate and before we moved to legislate. To say we are being asked to sign a blank cheque is an overstatement; I am less worried about it than that. Obviously, though, it would have been much better to have the results of the consultation. What is the timescale of the consultation and when will we have some results from it? Is the Minister already able to share any findings?

I am labouring the point slightly, but I want the Minister’s reaction to the issue, which I am trying to raise in different ways, of the difficulty of capping profits in this kind of industry with these kinds of players so that the concerns that caused the CMA and the hon. Member for Whitehaven and Workington not to recommend profit caps do not come to bear in practice.

A fundamental question is what the evidence is that, on a like-for-like basis, private sector providers are more expensive than either charities or local authority provision in this area. The numbers may exist, but I have not seen them. If the margins are so high, why are more providers not entering the market? It is a strange thing: there is not enough supply, but we think profits are too high. What is the barrier to entry? It may be that all those questions are addressed in the impact assessment, which is one reason that it is frustrating that we still do not have it.

The DFE says that it is trying to do other things to tackle excess profits. In its policy summary notes to the Bill, it said:

“Until these other measures have had time to be implemented and have effect, we will not know whether regulatory action in the form of a profit cap is necessary.”

That is totally sensible; I completely agree. What are the Minister’s thoughts on timing for making a decision on that? We have a consultation now. The Ministers are trying to do other things to tackle excess profits now; once implemented, they will take time to have an effect, if they are going to have an effect. In what year will we potentially make a decision on the profit cap? As I started to make the mental Gantt chart, I wondered whether this was a decision for the end of this Parliament or the next. I just want a sense of what Ministers think about the timing for making that decision.

Page 53 of the policy summary notes says:

“The level of any future profit cap would depend on a number of factors, including market conditions at the point that we make a decision that a cap is needed.”

That line is a bit mysterious. This may be obvious, but it is not obvious to me—what does that mean in practice? I could not work out which way round it was: would there be no profit capping if supply was too limited, as there would be no scope to do it, or would profit capping come in if supply was limited and prices higher than Ministers wanted? I was not sure in which direction the arrows ran between market conditions and the decision on having a profit cap.

We are not against the clause standing part of the Bill. We are obviously keen on our amendment, and indeed the improvement to it suggested by the hon. Member for Twickenham, but, as an amendment, it is what it is. But all of this is just an aim. We think there are massive limits to how usable this power will be in practice and we do not want it to become a distraction from fixing the main issue, which is supply. To use an example from housing policy, which is apt, given the Chair’s former Select Committee role, the places around the world that have tried to rely on rent controls to fix housing problems generally fail. The people who focus on supply generally do much better. That is the spirit behind our amendment and our questions to the Minister.

It is good to see you in the Chair, Mr Betts. I rise briefly to echo some of the points made by my hon. Friend the Member for Harborough, Oadby and Wigston and to ask a couple of questions. I have total sympathy with what Ministers are trying to do here. Having spent a bit of time at the DFE, I know the pain of seeing the amounts of money going out from local authorities for some very expensive placements.

The thing I always found vexing, and still do to this day, is exactly the thing the shadow Minister mentioned. If there are fat margins to be had, ordinarily, in a Schumpeterian world, people come into that—again, I hesitate to use the word—market. The insurmountable barriers stopping that from happening were never clear to me. It was not just that additional supply was not coming in to bring down unit costs, but that, on occasion, there was no place to be found. It is very important that we understand the underlying economics of this, bearing in mind, as ever, that we are talking primarily about the care of children.

The profit made by an entity cannot be limited, ultimately, because that is the residual left at the end of the year between revenue and cost. All one can do is either to choose not to use an entity that makes a profit of more than a certain amount, or seek some form of clawback. I note from the Bill that it is the latter approach that Ministers wish to take, as in proposed new section 30ZM. Do they seek to use this power as a fine—a penalty—for having a profit above whatever is deemed the appropriate level, or in proportion to it? In other words, do they seek to claw back the entirety of the surplus—the profit made—in excess of what is deemed a fair return?

Amendment 42, in the name of the hon. Member for Twickenham, seeks to extend the powers to cap profits of Ofsted-registered non-local authority providers of children’s homes and independent fostering services to also cover private schools with caring responsibilities and offering SEND provision.

As hon. Members will be aware, the Competition and Markets Authority found the children’s social care placements market to be dysfunctional, estimating that the largest private providers were making profit margins well above what would be expected in a well-functioning market. It is important to be clear that the study was restricted to looking at the state of the market for specific types of placements. It provides clear evidence of excess profit making by some providers of these placements, but its scope did not extend to looking at private schools.

We set out a wider package of measures in “Keeping children safe, helping families thrive”, which we expect will rein in profiteering among children’s social care providers, and the profit cap is intended as a last resort if they fail to do so. Children and young people with special educational needs are found throughout the private school sector, and it is not our intention to introduce a blanket cap on profits in private schools that offer special educational provision.

With regards to private special schools, they can play an important role in the special educational needs and disability system, particularly in meeting low-incidence needs. Many have important expertise, but we recognise that independent special schools have higher costs than maintained special schools and academies. The Government are very aware of the challenges in the SEND system, and we understand how urgently we need to address them. But these complex issues need a considered approach to deliver sustainable change. As part of that work, we are considering the role and place of independent special schools. It would not be appropriate to introduce a profit cap on a completely different sector without proper engagement with stakeholders and an assessment of its impact.

The hon. Member for Twickenham made a number of insightful and helpful comments when moving her amendment, and I hope that I addressed earlier her remarks about private special schools. As I mentioned, private special schools often have higher costs compared with their maintained equivalents. In some cases, that will be particularly because of higher specialist provision to support children and young people, particularly those with complex needs.

Some private schools, of course, operate for profit. We need to ensure that placements in private special schools are used appropriately. It is the Government’s intention that special schools should be reserved for those with the most complex needs. As I have mentioned, we will consider the role and place of private special schools and the potential for a cap on profits as part of our wider reforms to special educational needs.

Amendment 25, in the name of the hon. Member for Harborough, Oadby and Wigston, the shadow Minister, seeks to require the Secretary of State, before making regulations to implement a profit cap, to lay a report on the number of placements for looked-after children in relevant establishments or agencies and the expected impact of a profit cap on the number of places available. As I outlined earlier, we intend to use the powers in clause 14 only if profiteering is not brought under control through the wider package of measures set out in “Keeping children safe, helping families thrive”. Those measures include improving data transparency and boosting the supply and diversity of provision, helping to foster greater competition and to drive down prices and profits to more sustainable levels.

It is crucial that we allow time for those other measures to work before considering regulatory action. If it becomes necessary to use the powers—I hope that it does not—the clause already includes important safeguards through restrictions that ensure that the powers are used appropriately. Regulations may be made only if the Secretary of State is satisfied that that is necessary on value for money grounds. The Secretary of State must also have regard to the welfare of looked-after children and the interests of local authorities and providers, including the opportunity to make a profit.

Crucially, the clause also requires the Secretary of State to consult before making regulations. That will be particularly important to ensure that all interests are considered in determining issues such as how the cap will be calculated and the level at which it will be set. The consultation is particularly important: not only would it inform the details of the proposed cap itself, but it would require the Government to respond and publish that response. That would set out our rationale if a cap were introduced, including the matters in the amendment tabled by the hon. Member for Harborough, Oadby and Wigston.

In addition, the explanatory memorandum to the regulations would set out the policy rationale; in effect, that would already fulfil the amendment’s aim of having a report laid before Parliament. Of course, the regulations would be subject to affirmative resolution, so these matters would no doubt be covered in debate. I hope that the hon. Member is reassured that important safeguards are already in place to ensure that the power to cap profits is appropriately restricted. Existing mechanisms also ensure that Parliament has sight of the information that the amendment covers. For those reasons, I ask hon. Members not to press their amendments.

I turn to clause 14, which inserts new sections into the Care Standards Act 2000. It is a crucial element of our strategy to drive down profiteering in the children’s social care placements market. It will provide new powers for Government to take regulatory action to restrict provider profits if they are not brought under control through our wider package of measures set out in “Keeping children safe, helping families thrive”. While some private providers are doing brilliant work, we want to ensure that all providers are delivering high-quality placements at a sustainable cost. We know that that is not always happening. The Competition and Markets Authority found the placements market to be dysfunctional, establishing that the largest private children’s social care placement providers were making profit margins of 19% to 36%—well above what would be expected in a well-functioning market.

Let me be clear: making this level of profit from providing placements for some of our most vulnerable children is unacceptable and must end. The clause provides important backstop powers to ensure that the Government can take action if needed to end profiteering. The clause also sends a clear signal to providers that Government will not hesitate to take regulatory action to restrict this unacceptable behaviour if profit making is not reined in. If it becomes necessary to use these powers—I hope it does not—then the clause includes important safeguards and restrictions on the powers to ensure that they may only be exercised proportionately.

Regulations may be made only if a Secretary of State is satisfied that it is necessary on value-for-money grounds. The Secretary of State must also have regard to the welfare of looked-after children and the interests of local authorities and providers, including the opportunity to make a profit. Crucially, the clause also requires the Secretary of State to consult before regulations are made. That will be particularly important to ensure that all interests are considered in determining issues such as how the cap would be calculated and the level at which it would be set.

In addition, clause 14 provides for regulations to be made that set out important detail about the administration of any future cap by providing for annual returns from registered providers and the ability to request supplementary information. The detail of these returns, including their contents and format, will be determined after full consultation. We will want to ensure that we do what is possible to prevent profits from being disguised while ensuring that returns are not overtly onerous and burdensome.

I thank the shadow Minister, the hon. Member for Harborough, Oadby and Wigston, for his specific points. I also thank the right hon. Member for East Hampshire for his points on the importance of places and on the profit cap. On the question of why we cannot do an annual report on placement sufficiency, local authorities already have a duty to undertake an assessment of the availability of placements and sufficiency. As discussed earlier, the regional care co-operative will be able to take this forward at a regional level.

The shadow Minister also asked about the annual report on places. We are improving data transparency and boosting the supply and diversity of provision among other interventions, which will have swift, positive impacts. They will help to foster greater competition, which will naturally help to drive down prices and profits to more sustainable levels. The shadow Minister is right to raise the hiding of profits. We are aware that there are numerous ways in which registered providers may seek to avoid the cap or artificially reduce their profits for the purpose of the profit cap return, and legislation will seek to limit that. Should our analysis indicate that providers have attempted to hide profits, we will take that into our account in our determination as to whether the cap has been breached. That can also be considered to be an aggravating factor that could lead to more a severe monetary penalty for breach of the cap.

We are not introducing a profit cap immediately and we are not setting out the level of cap at this stage. The level of the profit cap will depend on a number of factors, including market conditions at the point it was introduced. Full consultation with local authorities and provider representatives, including on the appropriateness of the level of the cap, would need to take place before this power is used. We are clear that we are not seeking to eliminate profit making entirely; it will continue to play a role in the market.

The right hon. Member for East Hampshire asked a range of questions about how this will work in practice. I hope I have covered a number of them already, but the Secretary of State will assess returns, including ascertaining whether revenue not recorded as profit should have been. The process will look retrospectively at profits made in previous periods. Any breaches of the cap will be punishable by fine. The former Education Secretary also asked about how we will enforce the cap. Yes, the Secretary of State will be able to issue a civil monetary penalty if the cap has been breached, and the maximum level of the penalty for a breach may be prescribed in affirmative regulations and changed as needed in future with the approval of Parliament.

Finally, and more broadly, we are committed to taking a measured approach to implementing our reforms and are acutely aware of the importance of not destabilising the market and risking significant disruption to the care of our most vulnerable children and young people. We are confident that the package of reforms set out in the paper published on 18 November last year will address profiteering and ensure that the supportive and caring placements that children need are delivered at a sustainable cost to the taxpayer. However, we will keep the market under close review, and we will not hesitate to take action to cap providers’ profits if needed.

I thank the Minister for his kind remarks about my comments, but he is aware that the SEND system is in crisis—he and his fellow Ministers hear that every other week in the Chamber. He knows that local authority finances are on the brink because of SEND costs, and that those deficits are driven to a certain extent by the spending on private provision. I am curious as to why the Government are so hesitant to take action in this space, yet they are happy to slap VAT on parents wishing to send their children to independent schools. This amendment is about tackling specific providers that are clear outliers in the fees they are charging. It is a targeted intervention that could really help local authorities and, in turn, children who are desperate for more support that local authorities cannot provide.

The right hon. Member for East Hampshire talked about whether we can control profitability. I used to work in the pharmaceutical industry, in which the Government have for many years had a control on not only prices but profits and have clawed back profits. As a monopoly purchaser of services, the Government can act on behalf of NHS trusts around the country, and they could do something similar for local authorities where needed, whether it is with special schools or private social care providers. I would like to press amendment 42 to a vote.

I was quite reassured by the Minister’s thoughtful comments and his clear appreciation of the difficulty and extreme number of obstacles to making this power practicably usable. Kenneth Clark said that he did not know what civilisation was, but he knew it when he saw it, and I think quite a few Members of this House, including those on the Government Benches, have the same feeling about excess profits—we feel that they are too high, but we struggle to say what we think an acceptable level would be. That challenge will not get any easier over time.

As ever, my right hon. Friend the Member for East Hampshire is more articulate than I am, and he made the point well that this is not a profit cap but a retrospective clawback mechanism, which is another reason why it will be so hard to use in practice. Unless we are going to get into problems of retrospection and loads of legal action, we will be giving people advance warning, which will give them time to move money around and ensure that things look compliant.

I am keen to move amendment 25 to a vote. I promise that we will make great progress on subsequent clauses; I am not trying to be a dog in the manger. I understand and accept the Minister’s arguments about the things that the Secretary of State would do before commencing such a power—that was reassuring—but there should be a national assessment of the number of available placements. The Minister said that such things happen locally, and that someone could tot them up; I hope the Government will do that. It would be a powerful thing for the Minister to do and would give him huge clout in driving this agenda forward, so I hope he will do it even if the Committee votes against this amendment.

There should be a German word for a bit of data that we think should exist—we look on the internet and think we should be able to find it, but somehow it does not exist. This assessment of what is available out there is an example of that. I am keen to put our amendment to the vote, to make that point for our friends in the other place when they discuss the Bill, but I am reassured by the Minister’s comments.

Question put, That the amendment be made.

With this it will be convenient to discuss clause 16 stand part.

My Department will introduce civil monetary penalties to compel children’s care providers to comply with the financial oversight scheme and—if implemented in the future—the profit cap. It is imperative that providers comply with the scheme in order to protect vulnerable children from the disruption to their homes and care that could result from a sudden market exit by the providers of their placements. If providers do not comply, we will tackle that effectively by introducing penalties. Penalties could apply up to the highest level of the organisational structure of a provider that has failed to comply with the scheme.

If a profit cap is introduced in future, clauses 15 and 16 provide for civil monetary penalties for breaches of any profit cap, to be issued at provider level. The Secretary of State will be able to issue monetary penalties for breaches of the cap, and for failure to comply with annual return requirements. Both are essential to allow for the proper administration of the cap—if we need to bring it in in the future.

Furthermore, if providers fail to comply, action may be taken against their registration. The Care Standards Act 2000 is amended to give Ofsted the power to suspend or cancel the registration of a person, in respect of a children’s home or fostering agency, if they have failed to comply with either measure.

Clause 16 sets out the process that both the Secretary of State and Ofsted must follow when issuing civil monetary penalties under provisions in the Bill. It will ensure that any penalties are issued fairly and consistently. It places a duty on the Secretary of State and Ofsted, when issuing a monetary penalty, to serve a notice of intention on the recipient. They must also take into account any representations from the recipient of the notice before a final decision to issue a penalty is made.

The clause sets out that the Secretary of State or Ofsted may issue a monetary penalty of any amount. The only exceptions to that are when the Secretary of State has prescribed in regulations a maximum penalty that may be imposed. Proposed new schedule 1A specifies the maximum amount and sets out the factors that must be considered when determining the amount of the monetary penalty to be issued, ensuring transparency.

To ensure that monetary penalties are paid on time, we will have the ability to charge interest on any unpaid penalty and to recover the unpaid amount, including any interest, as a civil debt. The interest will be charged at the standard rate, as specified in the Judgments Act 1838, but the total amount must not be more than the amount of the penalty. All penalty moneys are to go into the Consolidated Fund to help pay for vital public services. Finally, persons may appeal either the imposition of a penalty or the amount to the first-tier tribunal. I commend the clause to the Committee.

I will be much briefer, because this is essentially a consequential clause relating to clause 14, but I want to touch on a couple of things.

A further difficulty in enforcing this profit clawback, and understanding what excess profit is, is that even within a single market not all these institutions are doing the same thing. In a funny way, the remarks that the hon. Member for Twickenham made about clause 14 go to that point. We look at the very large unit costs—that is a horrible expression—or the costs per child of care in independent special schools, and we think, “Gosh, these unit costs are so high. Surely we have to do something about this.” The Government and the Opposition are seized of that point—we do not want to spend money that we do not need to spend—but we should sometimes look at the individual cases.

For example, a child in my constituency who has just been put into one of these brilliant institutions—Red Kite, over in Northamptonshire—literally needs constant help just to keep breathing, so we have to be clear about whether these things are really like for like. It is true that that independent special school is a lot more expensive than a mainstream school, but is it really like for like?

As we think about capping profits in this industry, a further complexity is that, depending on the caseload and the child, the profit and risk levels will be different. Within an individual institution, there could be some unbelievably hard-to-place, hard-to-look-after, very difficult and expensive children, alongside other children, so it will not be easy to work out an acceptable level of profit.

Proposed new schedule 1A(6), on the right of appeal against imposition of monetary penalty, further extends the opportunities for people to game the system. First, it is retrospective—it is about clawing money back from people after the fact, which gives them an opportunity to manage their profits so they look like they are compliant—and then there is a right of appeal. I understand why that is in the Bill, but to return to the metaphor about the lack of proper enforcement with regard to illegal working and the lack of information about the fines that are collected, by the time we have tried to claw money back retrospectively and given people the right of appeal, it would be easy for them to say, “This is in the name of my brother. We have collapsed the company. Sorry, we don’t have any money to pay this fine,” so we may not end up with anything at the end of it. Meanwhile, the people who are really behind the scheme have moved on and are doing the same thing down the road.

I want to highlight those points. This clause is consequential on clause 14. If we have clause 14, it makes sense to have clause 15, so we will not oppose it. I want to emphasise again, however, that there are even more dimensions to why it will be difficult to use this measure, so the focus should be on supply.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16 ordered to stand part of the Bill.

Clause 17 enables information sharing between Ofsted and my Department to ensure the effective functioning of the financial oversight scheme and profit cap regime. Sharing relevant information also supports Ofsted’s functions under part 2 of the Care Standards Act 2000.

For the purposes of a financial oversight scheme, effective information and the sharing agreements that are in place between my Department and Ofsted are crucial, and they will enable us to bring together financial corporate performance and quality indicators about individual providers to inform decision making. This clause does not authorise the processing of data, which would contravene data protection legislation.

I have a brief question. I understand what the Minister is trying to do here; the Secretary of State is taking powers to require the Ofsted chief inspector to share information with them in connection with the functions under this part. Can the Minister explain how that differs from the current ability of His Majesty’s chief inspector to share information with the Secretary of State? As the Minister just said, proposed new section 30ZO(8) is clear that it cannot contravene the GDPR legislation anyway, so I am trying to understand what gap this clause is trying to fix.

I thank the shadow Minister for that. Data will be shared to other parties as part of the financial oversight scheme. It is worth saying that the Department will share with local authorities which providers meet the financial oversight conditions and are subject to the financial oversight scheme. That is to support their local sufficiency and contingency planning.

To ensure that commercially sensitive information is kept confidential, we will not share any provider information submitted as part of this scheme with local authorities or the sector. The Department will use this information to make an assessment of financial risk and issue an advance warning notice to local authorities where there is a real possibility that financial risk could lead a provider to cease operating.

Finally, where providers or their corporate owners, as I mentioned earlier, breach the requirements of this scheme, the Department will publish information on civil monetary penalties imposed. That is to be transparent about providers who fail to comply with the scheme.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.

Clause 18

Use of agency workers for children’s social care work

Question proposed, That the clause stand part of the Bill.

Clause 18, through the introduction of a regulation-making power, will allow the Government to take stronger action to alleviate the significant affordability and stability challenges that have arisen from the increase in the use and cost of agency workers in local authority children’s social care in England. This clause ensures that, while agency workers remain an important part of local authority children’s social care, they do not become a long-term replacement for a permanent, stable workforce.

The clause will allow the Secretary of State to introduce regulations on the use of agency workers in English local authority children’s social care services. It will strengthen the existing regulatory framework for the use of agency social workers in local authority children’s social care services, which is currently set out in statutory guidance. It will also extend the framework beyond the social workers to the wider local authority children’s social care workforce, such as agency workers delivering targeted early intervention or family help.

We remain committed to working in partnership with stakeholders across the children’s social care system, including agencies, to ensure that the proposals implemented are proportionate and effective. The clause provides a duty to consult ahead of introducing regulations.

Regulations will make it clear to local authorities, the recruitment sector and agency workers what they should expect from each other. The consistency that that brings to the market will benefit all parties. Reducing local authority spend on agency workers will allow local authorities to invest more in services supporting children and families and enhance the offer to permanent employees. I hope that the Committee agrees that the clause should stand part of the Bill.

We have not tabled an amendment to clause 18, but I have a lot of questions similar to those we have been asking about attempts to introduce profit capping for children’s care homes.

The Government clearly have two quite different hopes for this measure. On the one hand, the explanatory notes on the Bill say that strengthening the regulatory framework for the use of agency workers within local authority children’s social care services will improve the stability and quality of the agency workforce. That is the first hope. However, the notes also say that reducing local authority spend on agency workers will allow local authorities to invest more in services supporting children and families and enhance the offer to permanent employees. Those are two quite different objectives in different clauses of the Bill.

The last Government were taking steps to increase the number of people in social work. Those steps included the “step up to social work” scheme and the creation of social work apprenticeships, as well as advertising some of the amazing things that people can do and be part of as social workers. I take this opportunity to pay tribute to our social workers. They are amazing people. Theirs is a tough job, but people feel an enormous sense of pride in what they do, and when they look back on their careers they can reflect that they have helped a lot of people. It is an amazing profession.

According to the most recent DFE statistics, there were over 33,000 full-time social workers in post in 2023. That is 4,600 more than in 2017, or a 16% increase. The caseload per full-time equivalent worker had dropped from 17.7 cases to 16, the lowest in the series. We can say that that number is still too high, but it has at least been going in the right direction during my time in Parliament. Just under one in five of the full-time equivalents is an agency worker, and the agency share has gone up, but sometimes people assume that it has gone up more than it has. In fact, from 2017 to now, it has gone up from about 19% to just under 22%. That is an increase, but we must keep these things in perspective. As with children’s homes, issues with agency workers are probably more likely to be resolved by addressing issues of supply and career progression, rather than attempting to freeze or cap prices without addressing supply. Crudely trying to cap prices runs the risk of increasing vacancies in social work teams, lengthening lead times for families or at-risk children to get help, and putting more pressure on all the other staff.

When we look at the map, we see that not all local authorities are in the same position, facing the same costs, market forces and challenges. There are huge variations in the share of agency staff, even within regions, and in some regions, such as London, the use of agency staff is consistently higher. Applying the same rules, caps or limits to places facing totally different situations would be risky. That is why the last Government were talking about encouraging authorities in an area to come together on a voluntary basis to agree things, but were not forcing the pace or applying a hard national cap on a one-size-fits-all basis. Sometimes when we look at the map, we can see what we think is the rationale—for example, Trafford is more expensive than Manchester. Trafford is quite expensive, but then we see other parts of the country where the issues are not connected to the costs. Why are Bradford and Leeds so different? Without understanding the story, it is pretty dangerous to move to a one-size-fits-all solution.

Instead of alleviating significant workforce affordability pressures, which the explanatory notes say is the aim in the clause, a one-size-fits-all regulation could make things worse. Interestingly, a poll found that only 16% of agency workers agreed with the idea of national rules, which suggests that many are choosing to work in this way. In other fields we sometimes want to regulate agency staff for the good of the staff, or because we are worried that they are being exploited. In this case, however, we should be clear that they are overwhelmingly not looking for new national rules—although it is worth saying that the same poll shows that local authority staff take a different view. We should be trying to understand why that is the case.

I imagine that both the flexibility and the wider conditions are among the reasons people want to work as agency staff, and they are far from alone in that. Across almost every public service, in each new generation there is a much higher level of demand for flexible working—being able to work at the times and in the places that people see fit. That is, in one sense, a good thing. The workforce is more female, for example. We can understand why people want it. On the other hand, it poses a challenge for public services to adapt and manage.

As I said, the clause has a dual goal, which the Government sets out in the notes. One part of it is potentially capping pay rates or numbers. The other part of it is to improve stability, so that there are better relationships and quality is higher. Proposed new section 32A(4), on page 35 of the Bill, lists the reasons why Government can act under the clause. Paragraphs (a) and (b) are about quality; they are about agency workers’ specified requirements, such as qualifications. Paragraph (b) is also about how they are managed, and it is very open ended. Paragraph (c) then says,

“including the amounts which may be paid under such arrangements”.

I see no limit—although the Minister may tell me that there is one—on what the Government can do under that paragraph. Might they be able to set individual limits for individual local authorities? I see no obstacle to them doing that; it is a very strong power. If Minister were so inclined—I am sure that none is—they could micromanage the whole situation and try to run it from the centre.

I am interested to hear the Ministers’ views on the Government’s intent. How plausible do they think using those powers is, and what do they think are the obstacles to fixing the problem by directly regulating against it, rather than by improving supply overall?

We are, in a sense, again being asked for a blank cheque in so far as everything is in regulations. We do not have the promised impact assessment, although of course there is a commitment to engage extensively with the sector before introducing secondary legislation. There will be public consultation, and the regulations will be subject to the affirmative procedure, but as the Minister knows, that means they cannot be amended, so we will have no steer over them. It is a very strong power to heavily manage almost every aspect of the use of agency workers. There is, more or less, nothing that the Government cannot do under subsection (4).

Rather than asking lots of specific questions, I want to get a general sense from Ministers of how they feel about that. A lot of people say, “There are too many agency staff.” It is not obvious to me that there has been a ballistic growth in their numbers, or that there is a “right level”, which we are not at. I said that the level is now about a fifth; should it be what it was in 2017? Was that the right level, or was it the level it was in 2010 or 1997? Quite often, we hear people say that it is terrible that there are so many agency staff, but what is the right proportion? It is probably not zero.

The power being given is big, sweeping and general, and I do not have a firm sense from Ministers of what they want to do with it or when they will know what they want to do with it. When I listen to some people in this debate—not necessarily Ministers—I am struck by the naiveté of Ministers riding in and saying, “Right, you’re banned from having any agency workers,” or, “You’re all capped at a maximum of x per day or x per hour,” and thinking that that will not cause problems. In a country like England, with all our divergences, the Government would quickly get into big trouble if they did those things. I do not think Ministers are so unwise.

I would like to get the Minister’s response to the concerns I have raised about the limits of action on pay. I am less worried about whether agency workers should all have qualifications; we should do everything we can to drive up continuous learning and professional development. That is all good stuff. I do not have a big problem with making agency workers more like local authority workers and making them part of the team. What I am more wary about is proposed new section 32A (4)(c), which seems to suggest that the Government intend to attack profiteering. I would be interested in the Minister’s response to those concerns.

I join the shadow Minister in paying tribute to our social care workforce. Social care is an incredibly tough job, and I take my hat off to anybody who goes into the profession.

I understand the Government’s motivation and objectives, which are similar to those behind the provisions on care providers and the costs involved. We should also think about the children’s experience. Whenever I have spoken to care-experienced children, they have told me that their biggest frustration is with the huge turnover of staff, which means that they have to share their stories and relive their trauma a number of times. Often, they have a new social worker every few months. It is therefore important to try to clamp down on the use of agency workers.

However, I share the shadow Minister’s concerns about what the measures will mean in terms of ensuring that we have an adequate workforce. They do not necessarily tackle some of the root problems that motivate social workers to opt for agency contracts. They do not tackle challenges around costs and pay and conditions in the context of the cost of living crisis, nor do they address the fact that workers may get flexibility through agency working that they do not get in a permanent role. We need also to look at supporting continuous professional development for qualified social workers, as we do with doctors, who receive 10 years-worth of funded training and development on the job. We do not do something similar for social workers.

I want to hear more from the Minister about whether the Government have a workforce strategy to address the root causes of more and more social workers opting for agency contracts, which is not good for taxpayers or for the child’s experience. How can we address the fundamental causes and get more people into the workforce?

I thank both hon. Members for their probing of the clause. No amendment has been tabled, and there seems to be general agreement that the principle is right. Over-reliance on agency workers contributes to workforce instability, which has implications for both the workforce and the children it is there to serve. It also puts pressure on local authority budgets. I thank both hon. Members for recognising the challenging but hugely valuable work of social workers, which is often unrecognised and un-thanked. It is good that we take the opportunity to put on record our collective gratitude to them for the difficult work that they do.

Many local authorities are already demonstrating success in transitioning agency workers into their permanent workforces. People who work in social care need the right environment so that they can thrive, personally and professionally. We recognise that regulation alone is not the answer, but the Government are supporting local authorities to attract and retain children’s social workers and provide positive working environments for all who work in children’s social care, because ultimately children will benefit.

Local authorities will still be able to use agency workers if doing so is the most appropriate resourcing option and in line with the regulatory framework, but it is important to reduce local authority spend on agency staff and to allow local authorities to reinvest in the permanent children’s social care workforce. Statutory guidance that has already been issued on this matter has allowed the Government to act quickly to introduce a new framework. The framework focuses on social workers, but other Government Departments are working on the same issue.

Guidance can be departed from in certain circumstances, so introducing regulations on the use of agency workers is appropriate and proportionate. It is important that we strengthen the regulatory framework on the use of agency workers in children’s social care to ensure that it is legally binding, so that we bring greater transparency and accountability to the use of agency workers, as the right hon. Member for East Hampshire suggested. We will continuously consider the evidence, ensuring that we take an informed approach to those regulations.

There is a statutory duty to consult before introducing regulations. We commit to working in partnership with stakeholders across children’s social care, ensuring that any proposals that we introduce are proportionate and effective. We are also working with local authorities and regions on developing price caps. We will look at the data later this year, before introducing those changes, and the raised regulations will be subject to consultation and the affirmative procedure. With those comments and queries responded to, I hope that Members feel that they can support the clause.

I think the Minister answered this question when she said that, in respect of caps, she was working on a regional basis, but does the provision give the Government the power to cap on any basis, including at a local authority level? The Government could say that the cap is x in Westminster and y in County Durham—is my understanding correct?

As is becoming more evident as the Committee progresses, the hon. Member is very focused on the detail. Obviously, that is something that we will work through as part of our development of the statutory regulations. We will consider developing price caps on a regional basis, but we will look at the evidence and consult as well. That is important, because I think we all agree in principle on the provision, and we will work hard and consult to ensure that we get it right.

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19

Ill-treatment or wilful neglect: children aged 16 and 17

Question proposed, That the clause stand part of the Bill.

Clause 19 amends sections 20, 21 and 25 of the Criminal Justice and Courts Act 2015. That Act protects over-18s in regulated social care settings and everyone provided with certain healthcare from ill treatment and wilful neglect, and the Children and Young Persons Act 1933 protects all under-16s from cruelty, so if someone is under 16 or over 18 there is protection in place to prosecute perpetrators of abuse. However, there is a gap that means that carers or care providers involved in the wilful neglect of 16 and 17-year-olds in regulated children’s social care settings or youth detention accommodation cannot be prosecuted. We are therefore expanding the 2015 Act so that the offence includes protections for 16 and 17-years-olds.

The change means that where there has been ill treatment or wilful neglect by those providing care or support in regulated establishments, the law will support the relevant authorities in prosecuting the individuals and providers involved. I am sure we all want the right legal protections to be in place for all children, and for the law to support action being taken against those involved in abuse or neglect. I hope the Committee agrees that the clause should stand part of the Bill.

We support clause 19, which closes an important gap in the law regarding the ill treatment and neglect of 16 and 17-year-olds. I have some specific questions. Have the Government considered making the ill treatment or wilful neglect of a child aged 16 or 17 in a children’s home or other regulated setting, as set out in the Bill, an aggravating factor in the sentencing of those cases? The low level of the terms “ill treatment” and “wilful neglect” sits uncomfortably beside the context, reality and vulnerability of those children. Will the Government think about the criminal justice side of that?

My second question is about children who are held on remand in the youth estate. Members who have read my Substack will know that, both under the last Government and this one, I have complained a lot about the growth in the remand population in the adult and youth estates, and the court delays that drive that. A lot of children now in the youth estate are held on remand—about 40%—so can the Minister confirm that these provisions will apply to children who are held on remand in youth detention accommodation, and not just to those who have been sentenced? Those on remand are there temporarily, and as we fix one important hole in the law, I want to check whether we need to fix another one, or whether it is already covered. I am happy if the Minister wants to write to us on that point because it is quite detailed.

I thank the hon. Gentleman for his support for the clause. To answer his second question, the change will affect regulated establishments in children’s social care, including youth detention accommodation. It will therefore cover children’s homes, residential family centres, accommodation where holiday schemes for disabled children are provided, and supported accommodation settings. There are other measures already in place to protect all children, including 16 to 17-year-olds, against abuse and neglect within children’s social care settings and youth detention accommodation. This clause is specifically intended to address the current legal gap.

I think the most natural reading is that those children should be covered, because they are in the YOIs. I just wondered whether there was a potential issue because they are not permanently there; they are just on remand. I wonder whether the Minister could check with her officials to ensure that we are not missing an opportunity.

I will double-check on the hon. Gentleman’s behalf, but my understanding is that they will be covered, given that they come within the remit of youth detention accommodation. I will certainly convey his point about wilful neglect being an aggravating factor within the criminal justice system as a query to the Ministry of Justice, as it may be worth considering with the change being brought through in this education legislation. With that, I commend the clause to the Committee.

Question put and agreed to.

Clause 19 accordingly ordered to stand part of the Bill.

Clause 20

Employment of children in England

Question proposed, That the clause stand part of the Bill.

The clause seeks to amend the Children and Young Persons Act 1933. To help to develop this policy, we spoke to both children and employers. The changes in the clause are the ones that they told us they would like to see. The clause will require all children in England to have an employment permit in order to undertake suitable employment. The permit will make local authorities aware of the children working in their area. It will ensure that children are safeguarded as they undertake valuable employment, while still having access to their education.

The measure will give more flexibility to children and employers in relation to when children can work, which will give children more opportunities to take up suitable employment while still ensuring that their health, development and education outcomes are supported. Allowing children to work additional hours on a Sunday, and before and after school, will help them to benefit from additional suitable employment opportunities. Employment can contribute to a child’s development, introduce them to the world of work and develop key employability skills.

The clause will also replace a power for local authorities to make byelaws in relation to child employment with a power for the Secretary of State to make regulations in relation to the employment of children in England. Having a single set of regulations that apply to all children who work in England, rather than each local authority having its own byelaws, will ensure fairness in outcomes for all children in England.

Our changes will also make it easier for children and their parents to understand what roles they can undertake, and for employers to know on what basis they can employ a child. They also mean that as types of work change, we will be able to restrict new types of employment that are not suitable for children more quickly. Additionally, we will be able to make previously restricted employments available for children, should changes in the way that they are carried out make them suitable. That will ensure that the legislation stays current.

I hope the Committee agrees that the clause should stand part of the Bill.

As the Minister says, the clause essentially centralises and harmonises differences in rules on children’s employment, which are currently set partly at the local level. As a localist, I start with a small degree of nervousness, in so far as we are taking away a local authority power. We have done that an awful lot over the last 40 years.

I do not have a great objection to this measure, because in general it is a liberalisation overall. The notes provided by the Library are quite good, in so far as they talk about the extensions in different ways that this will bring about in most local authorities. I do have one slight nervousness, though, from a practical rather than a philosophical point of view. When we replace a complicated patchwork quilt and a lot of variation with a single national rule, we must check that every place is clear about the impact. To pick a random example used in the Library briefing, the byelaws of Birmingham city council do not include the line allowing 13-year-olds to work on car washing by hand in a private residential setting that is present in Richmond upon Thames and in the model byelaws.

I do not know whether the Government have a spreadsheet or an assessment somewhere detailing the current differences between the laws in all the different places. I hope that they do, because although in general it sounds like we are harmonising all these things across the country in a way that is liberalising, by having more times when young people and children can work, in some cases there might be a restriction, and it would not be a small thing for anyone caught by that restriction to be found breaking the law on the employment of children.

Although ignorance of the law is no defence, one might feel that it perhaps should be where people have been happily working away on the basis of their local authority’s byelaws for some time, when suddenly, without them clocking it—because they do not read Hansard every day—the law changes and they can no longer do what they were doing before. Those people could easily be caught out, as the rules change and we move from a patchwork quilt to a single national standard.

As I say, I have some philosophical questions about the loss of local authority autonomy. However, because the direction of travel overall seems to be more liberalising than not, I do not think that we will oppose the clause, although I would ask the Minister to commit to producing that assessment of what the rules are now, compared with what they will be, which might be a sensible thing to do purely from the point of view of any legal challenge.

The Minister might stand up and say, “We’ve already done that—obviously,” but if that has not happened already, will she commit to doing it, so that we are super-clear for individual local authorities about how the rules will be changing? Such a document or spreadsheet would be of benefit not just to those of us discussing these things nationally, but to the local authorities—the laws are changing in their areas—and to the actual employers of young people, so that they are not caught out by some of the changes and, indeed, are potentially alerted to the new opportunities that the more liberalising aspects of the clause will bring about.

It is a good thing for young people to be in employment at an early age—some of the best jobs I have ever had were when I was a young person working on a farm. That was an absolutely fantastic experience. We want young people to be able to get on with their lives, not to be held back. We are generally supportive of the liberalising aspects of the clause, but we have that nagging doubt.

We strongly encourage the Minister to do that work—indeed, we hope she will commit to doing it—on how the move from a patchwork quilt to a single set of national rules will affect each local authority, so that someone has done the work, not least for the legal protection of the Minister herself, but for the legal protection of those on the ground who will be affected.

I am not at all opposed to the clause, but I am curious to know what prompted it. What outside world events made us rethink the regulations? I heard what the Minister said about consulting young people, but I am struggling slightly to picture that conversation, where the kid goes, “You know, what we really need is a change in the employer licensing regulations.” But fair enough.

The changes are in some ways liberalising by increasing the latest hour from 7 o’clock to 8 and allowing Sunday working, but in other ways they are restricting. I am interested in what is behind that. There are risks to guard against in the employment of children, but the employment of children is not in itself an ill to be mitigated. There are many benefits to the child in having that opportunity. In fact, the biggest gripe we hear from employers about young people—it happens again and again—is about what some call soft skills, or employability skills or workplace skills. Whatever we want to call it, those are skills that people develop at work. Many times over the years, whenever I have had a group of leaders and industry together, I have gone round the room and literally asked, “How old were you when you first did a day of paid work?” The most typical, most common answer is 14—some say 15, and for some it is younger. It is important that we learn from that.

In the last 25 years, there has been a sharp decline in the number of under-16s and under-18s doing paid work. That is partly because of the decline in certain job types—there are not many paper rounds or milk rounds any more—and partly because of social attitudes. When we had public exams in the lower sixth and upper sixth for most children, that probably had an impact for the slightly older age groups. One of the reasons that employers find it daunting to employ children is that they are often unclear about what the regulations are, but they have a sense that there are risks, including reputational risks and so on.

The explanatory notes state:

“The Secretary of State will have a power to make regulations in relation to child employment which will replace the power local authorities currently have to make bylaws. The regulations may prohibit the employment of a child in certain types of work, make provision in relation to child employment permits, authorise the employment of 13-year-old children and set out the number of hours children can work per day or week, their entitlement to breaks and leave and to specify other conditions of employment”.

It is quite a list.

Today, to be clear, children can work part time from the age of 14. In some council areas, the minimum is 13. Are the Government now saying that the minimum age will become 13 throughout the country? What limits do they envisage in ordinary times for additional regulation? There is rightly already plenty of regulation about the employment of anybody and further regulation about the employment of people who are below 18. What additional regulation do the Government envisage?

The Government will say that there will be secondary legislation under the affirmative procedure and that it will all be fine, but we know how secondary legislation works—often in this very room—under the affirmative procedure. Often people do not know about it very far in advance. A Committee of Members of Parliament comes here and debates the secondary legislation—I was going to say that the MPs vote on it, but often they do not—the legislation cannot be amended, and then it moves on. Given that we are talking about the primary legislation, it would be helpful to get on the record what the Government are thinking about doing in this area.

As my hon. Friend the shadow Minister rightly said, having a standardised system of permits nationally is okay in principle. Indeed, benefits may well come from that, but it goes somewhat against the direction of travel from a Government who are introducing devolution in local government and changing the levels at which responsibility is held. The danger with a national system for something like this is that we could lose some of that local knowledge and variability, for example, in rural areas of the country with heavy agricultural sectors. Employment can be different there. In seaside towns with more seasonal employment, that might affect the employment of children. Can the Minister give us some reassurance that there will not be scope creep, for example through the introduction of further regulations for the employment of children in the family business or activities such as babysitting? Can she also assure us that the minimum age exemptions with a performance licence for the creative industries—theatre, film and television—will not be lost?

I do not have a philosophical problem with this clause either. I was slightly surprised to find it when I was reading the Bill and to hear where it came from, but I understand what the Government are attempting to do.

Before press releases start going out suggesting that the Lib Dems want to promote child labour, I will preface my next question with some feedback from the National Network for Children in Employment and Entertainment. It has raised some concerns that the later hour set out in the legislation does not fully address the employment of young people in televised and live sporting events. That is particularly the case where we now have the benefit of floodlights and roofs—I think of the late matches on centre court at Wimbledon, when we have ball boys and ball girls from the local area working there. I understand that there is a different licensing regime if children are participating in sport, but this measure would apply to some of the children working at those sporting events. What consideration have Ministers given to those sorts of situations? Have they spoken to the National Network for Children in Employment and Entertainment?

For organisations with particular shift and working patterns—for example, those involving non-performance roles in theatres, including in lighting or backstage—the National Network for Children in Employment and Entertainment suggests allowing hours later than 8 pm on a Friday or Saturday for older teenagers, provided that the next day is not a school day. I am not necessarily suggesting that that is the right thing to do, but that is a suggestion made by that organisation given its needs. It would be good to get some clarification on when the current byelaws for child employment will cease and when regulations from the Secretary of State will replace them.

Importantly, what consideration has been given to safeguarding and DBS checks of employers where young people are working? The right hon. Member for East Hampshire touched on that. We have self-employed young people offering their services as tutors, babysitters and gardeners. I understand that some of them are offering their services through apps and things nowadays, and they are presumably not touched by these regulations, so what consideration have Ministers given to children in those sorts of services?

Considering the level of agreement on this provision, there is a significant amount of interest and questions around it. It might help if I clarify that currently a child can work for a maximum of only two hours on a Sunday and up to 7 pm at night, which restricts employment opportunities. It may not make business sense to employ a child who is able to work only a very short shift. We spoke with children while developing this policy, and they were pretty universally of the view that they would like to have more flexibility in when they can work, not necessarily in the amount that they wish to work. Clause 20 will not change the overall number of hours that a child can work, but it will give children much greater flexibility to maximise the opportunities that hopefully will become available to them as this area becomes more clearly set out as part of the legislation.

Employers and sector bodies have set out the difficulties in being able to offer employment to a child either on a normal trading day or when they experience peak demand when the child has worked their requisite two hours. That often closes down opportunities that children could easily have had and would have enjoyed having. Businesses would appreciate having those children as part of their team, but the restrictions in the current arrangements often make that difficult to accommodate.

I have a question about babysitters, which are one of the hardest cases here. This question is as much about the existing law as it is about the proposed change in the cut-off from 7 pm to 8 pm. Are people who employ babysitters after 7 pm or 8 pm committing a criminal offence under the clause?

I do not believe that people register with their local authority to ask someone under the age of 16 who they know to babysit in their home. My understanding, therefore, is that these regulations would not apply in those circumstances.

To explain another issue that these measures are intended to fix, the vast majority of local authorities simply follow the byelaw model, so they are already in place. However, some local authorities have additional restrictions in their rules for employing children. That has led to some local authorities, which may be geographically located directly next door to each other, having different restrictions. For example, one local authority might decide to add a role to the restricted employment list, but the other might not. That leaves children, parents and businesses, which do not always operate within local authority boundaries, somewhat confused. As the right hon. Member for East Hampshire pointed out, that can put employers off employing children, even where it might be to the benefit of both that these opportunities are available.

Replacing the power for local authorities to make byelaws with the power for the Secretary of State to make these regulations will ensure fair outcomes for all children right across England. That means that a child, their parent or a business can know what work can be undertaken, and when and by whom, wherever they live in England. National employers will also hopefully be encouraged to employ children who are looking for these opportunities, as they will not be put off by inconsistencies around the country that create bureaucratic obstacles to opportunities. That will provide much-needed employment for businesses across the country. I hope that I have responded to the majority of concerns about this largely—I certainly get the impression—uncontested clause.

rose—

It would, however, appear that the shadow Minister has another query.

I thank the Minister for her patience. Will the Government undertake to have an authority-by-authority assessment of what the patchwork quilt looks like now? For everyone’s ease and benefit, what will the changes mean for those who are not just following the model byelaws, because they are maybe different in each different place? Is the Minister happy to at least go away and have a look at that?

As part of the work to create the draft legislation that we are debating, an assessment of local authorities was undertaken. That assessment has not changed the view that a more consistent approach across the country would be beneficial to children, employers and their families—indeed, it threw up the fact that the vast majority of local authorities do follow the current byelaw framework. This clause not only creates a nationally consistent approach; it creates a better and more flexible approach for children, which will hopefully unlock opportunity for them to take their first steps on the employment ladder.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Vicky Foxcroft.)