Source · Select Committees · Public Accounts Committee
Recommendation 25
25
Acknowledged
Proposed profit cap and oversight scheme for children's care lacks robustness to address private equity.
Conclusion
The Department described the significant levels of profit for some suppliers as the reason it introduced provisions in the Children’s Wellbeing and Schools Bill for a profit cap.69 The Bill will also introduce a financial oversight scheme covering those providers deemed hardest to replace. The Department acknowledged that how it will use the scheme will be covered in further regulation.70 The Children’s Homes Association told us that the scheme would provide an early warning system that providers might fail, but that it did not consider the scheme robust enough to reduce the numbers of private-equity-owned providers.71 One existing model for such an oversight scheme is that operated in the adult social care market by the Care Quality Commission, which has a dedicated financial sustainability function which oversees around 65 of the largest and most significant care providers across England, representing around 30% of its overall care market.72 62 Qq 18, 50, 74 63 Qq 75-76 64 Qq 50, 74 65 C&AG’s Report, para 2.3 66 Qq 2, 22; C&AG’s Report, para 2.4. 67 Q 18 68 Q 50 69 Q 50 70 Q 74 71 Q 22 72 C&AG’s Report, The adult social care market in England, 25 March 2021, para 2.22 16 Co-operation between local authorities
Government Response Summary
The Committee noted that the Department introduced provisions in the Children’s Wellbeing and Schools Bill for a profit cap and a financial oversight scheme. The government explains that the Financial Oversight Scheme will be established and will increase financial and corporate transparency among the most "difficult to replace" providers.
Government Response
Acknowledged
HM Government
Acknowledged
5.2 The Financial Oversight Scheme will be established through the Children’s Wellbeing and Schools Bill. It will increase financial and corporate transparency among the most “difficult to replace” providers and their corporate owners. This will allow the department to make a better, real-time assessment of financial risk (including debt positions), and provide advance warning to local authorities where there is a real possibility that risk to financial sustainability could lead a provider to cease operating, so they can take swift action and minimise disruption to children. 5.3 The Scheme will also require providers or their owners to develop and submit a contingency plan to ensure providers and their parent companies can prepare for the worse-case scenario of financial failure, playing an active role in managing their exit from the market. A similar Market Oversight function exists within adult social care (delivered by the Care Quality Commission) to assess the financial stability of ‘difficult to replace’ adult social care providers. The department has worked closely with CQC to learn from their experience and inform development of the scheme.