Children’s and Wellbeing Bill: key changes for providers

A year ago, I wrote about the Children’s and Wellbeing Bill, then at the Report stage in the House of Lords. The Bill is now in its final stages and is expected to become law around Easter 2026.

My previous article covered several topics that providers of children’s homes will find useful:

• The introduction of a provider oversight scheme to hold provider groups to account where there are quality issues across multiple settings
• Capping the profit of non-local authority Ofsted-registered children’s homes and fostering agencies
• The expansion of Ofsted’s powers to issue monetary penalties for non-compliance, including for those running unregistered children’s homes.

These provisions have remained as the Bill has progressed through parliament. With the Bill soon to become law, it’s important that providers start planning for implementation if they haven’t already, and consider how it may affect their business.

In this article, I recap some of the key points and outline what the main considerations may be.

Provider oversight scheme and accountability

The Bill requires a provider group to prepare and implement an improvement plan (which will need to be approved by Ofsted) for all settings under the ultimate control of the parent undertaking, if Ofsted reasonably suspects there are grounds to cancel one or more establishment’s registration.

The improvement plan must name an individual with a significant role in the management of the parent undertaking, who can reasonably be expected to ensure the improvement plan is implemented.

Currently, if Ofsted cancels a children’s home registration, anyone significantly involved in the management of, or with a financial interest in that home becomes disqualified from carrying on, being concerned in the management of, or having a financial interest in a children’s home without first obtaining written consent from Ofsted. This can have a far-reaching impact as common directors of a company/companies running a number of homes would be disqualified, affecting their other registrations even if no direct action was taken against those homes.

However, provider groups are not presently held directly accountable for systemic issues across the homes they own and control. The new requirement for an improvement plan allows providers to take action before cancellation procedures are initiated, potentially buying time, which is often needed by companies who would otherwise be facing cancellation proceedings. This has to be a good thing, but it does require buy-in and involvement from parent companies, many of whom have often devolved their interest to the registered entity and may not have the skills or knowledge required to run a heavily regulated business.

Providers will need to review their governance structures from each registered entity, all the way up to the parent company. They should be ready for group-level accountability. Key questions include:

• Is there a clear reporting structure?
• How are matters reported, to whom and how often?
• When issues or concerns arise, are robust plans put in place, with clear lines of accountability for action with sensible but meaningful deadlines?
• Are actions S.M.A.R.T? Vague actions such as “ensure care plans are updated on an ongoing basis” should be more specific – updated how and how frequently?

Capping profit

The Bill provides the Secretary of State with the power to make regulations that prescribe how much profit a private provider can make from children’s homes and fostering agencies. The Secretary of State can only make such regulations if it is satisfied that it’s necessary, having regard to the public interest, to ensure providers are providing placements on terms which represent value for money.

While the government has said that it intends to use this power only as a last resort (there being other provisions in the Bill which it hopes will drive down profiteering), there are concerns that too much is left to secondary legislation, so it’s not yet clear how these provisions will work.

Providers should start to model the potential impact on their business models, future growth plans, strategy and investment decisions if profits are limited. They should consider several levels of profit limiting, including zero profit, which is already the position in Wales and Scotland. It’s not known if this is the ultimate intended direction of travel.

Monetary penalties for non-compliance

Ofsted can currently prosecute providers for non-compliance but the Bill seeks to enable Ofsted to issue fines as an alternative measure. At present, Ofsted’s only option for unregistered providers is prosecution, which was been criticised as insufficient.

While demand for unregistered provisions continues – with commissioners knowingly placing children into unregulated settings (706 children were placed in unregistered provision by local authorities during 2022/23) – fines alone are unlikely to solve the issue. The Children’s Commissioner has also highlighted that providers of highly profitable unregistered provisions are unlikely to be deterred by fines when they are not subject to the Bill’s profit-capping provisions.

Ofsted initiated 845 investigations into potential unregistered homes in 2022/23 but didn’t bring a single prosecution. This should not, however, be interpreted as a green light to carry on unregistered provision. Any provider intending to run a children’s home must apply to register and must not start operating before registration is granted.

Conclusion

Once the Bill receives Royal Assent, it will take a few months – and in some cases years – for all parts of the Act to come into force. It will take a little while for us to see it working in practice, whether it will work and the impact of these provisions.

Taking steps now will help providers get ahead of the game and adapt to the changes when they happen.