HC Deb 15 September 2003 vol 410 cc681-92

Lords amendment No. 43.

Mr. Raynsford

I beg to move, That the House agrees with the Lords in the said amendment.

Mr. Deputy Speaker

With this, we may discuss Lords amendment No. 51 and amendments (a) and (b) thereto.

Mr. Raynsford

Lords amendments Nos. 43 and 51 deal with sections 45A and 45B of the Schools Standards and Framework Act 1998, as amended by sections 41 and 42 of the Education Act 2002. Under these provisions, the Secretary of State for Education and Skills and the National Assembly for Wales have a reserve power to set a minimum schools budget for a local education authority when that authority's proposed schools budget is considered inadequate in all circumstances.

Lords amendment No. 43 is concerned with the commencement by the National Assembly for Wales of the amendments made to the Education Act 2002 by Lords amendment No. 51. Lords amendment No. 51 is concerned with two relatively minor changes to these provisions. First, it brings forward by one month to 31 December the schools budget deadline by which local education authorities in England are required to notify the Secretary of State for Education and Skills and their schools of their proposed schools budget for the following financial year.

In his statement to the House on 17 July, my right hon. Friend the Secretary of State for Education and Skills acknowledged that the changes in school and LEA funding arrangements introduced this year led to real difficulties for many schools. As he said, the difficulties have arisen from the coincidence of a number of significant changes to the local government and schools funding systems, and as a result of decisions made at both national and local levels. The House has, of course, discussed the issues in detail on a number of occasions. Everyone has agreed that the current timetable for setting individual schools' budgets simply does not allow head teachers enough time for sensible planning.

On 17 July, my right hon. Friend the Secretary of State set out the measures that he proposed to take to ensure greater stability in school funding for 2004–05 and 2005–06. In doing so, he made it clear that one of the key principles underpinning that work is that central and local government should achieve earlier announcements of the financial allocations to schools, so that heads have greater certainty and more time to plan. As part of delivering that undertaking, my right hon. Friend has given a commitment that, well in advance of the announcement of the provisional local government finance settlement, his Department will provide local authorities with key information on the minimum increase in funding per pupil, on the floor increase in resources for local authorities that will underpin that guarantee, and on the distribution of standards fund grants. The Government are also firmly committed to bringing forward the date of the provisional local government finance settlement as early as is practicable. We will do everything that we can to ensure that the announcement can be made by the middle of November this year. Such early announcements of key information will make it possible for local authorities to decide by the end of December what schools budget they are going to propose. The effect will be to give schools much greater certainty about their funding earlier in the year, so that they can plan more effectively for the following year. The deadline for authorities in Wales will remain 31 January.

The second effect of amendment No. 51 will be to change the deadline by which the Secretary of State for Education and Skills or the National Assembly for Wales must give notice of their intention to use reserve powers to 14 days from the schools budget deadline, instead of 14 days from the date of each individual authority's notification of its proposed school budget. That will ensure a common timetable for consideration of all authorities' proposed schools budgets, which I am sure Members will accept as a more sensible arrangement.

Although we appreciate the helpful intent behind amendments (a) and (b), we cannot support them. As I said, the Government are committed to bringing forward the date of the provisional local government finance settlement to mid-November. We will do everything possible to fulfil that commitment. It is vital that schools receive information about their budgets in good time, and delaying the determination of proposed schools budgets to 31 January would not be in the interest of schools or local authorities, not least because if it were necessary to decide to use the reserve power to set a minimum schools budget for an authority, that authority's actual schools budget might be determined only after the deadline for the authority to set its council tax for the following financial year. Amendment (b) is unnecessary, and would remove from the provisions helpful clarification about financial years. For those reasons, I urge the House to reject those two amendments.

Mr. Graham Brady (Altrincham and Sale, West)

I come to the consideration of the Local Government Bill somewhat late in its passage, but I hope that hon. Members will forgive me, given that I have been dealing with the issue under discussion for a little longer, having served as a Back Bencher on the Committee for the Schools Standards and Framework Bill in 1998, and a Front Bencher on the Committee on the Education Bill last year.

This business is just another chapter in the sorry saga of the Government's mishandling of school funding this year. In spite of the Minister's emollient words—in his usual reasonable tone, he presented this as merely the product of coincidences of various changes in procedure—it is a great shame that hon. Members and schools in our various constituencies have little reason to be confident that this will be the final chapter in that sorry saga.

This year, the Department for Education and Skills guaranteed a minimum increase in education formula allocations for each local education authority area. None the less, we have seen the worst schools funding crisis in decades. On 17 July, the Secretary of State sought a guarantee at the level of the individual school. He said: I will confirm the minimum percentage increases for 2004–05 and, provisionally, for 2005–06, by the time of the provisional local government finance settlement in November"—[Official Report, 17 July 2003; Vol. 409, c. 455.] We must ask whether this year's guarantee will prove any more durable than that which went before it.

The crisis that has afflicted schools this year was all the worse because it was unnecessary. The Department for Education and Skills was warned in good time by heads and by hon. Members, but was too arrogant or too intransigent to act. Ministers ignored repeated warnings about the effect of increases in employers' national insurance contributions, increases in the superannuation contributions for teachers, and the removal of elements of the standards fund. They did nothing.

It is also true that the specific proposals in the amendment could have been dealt with much earlier. On 8 January 2002, in Standing Committee G on the Education Bill, the hon. Member for Harrogate and Knaresborough (Mr. Willis) and I moved amendments that sought to deal with this precise problem. The hon. Gentleman sought to fix a later end date for the budget round, and suggested that 15 February would be appropriate. I tried to fix the end date as a period of not more than 21 days after the teachers pay review had reported. Either arrangement might have helped had Ministers been prepared to listen to the arguments being advanced. The proposal was one of the unfortunate casualties of the heavy-handed, unnecessary timetabling of our considerations in Committee.

The perfectly sensible arguments that were advanced by members of the Committee on behalf of outside interest groups that had seen clearly what would happen as a result of the arrangements that the Government were implementing were not fully considered. Had they been, it might have obviated the need for these exchanges. Sadly, Ministers would not listen. As a consequence, they have presided over utter chaos in school funding this year.

This measure is a belated attempt to resolve a problem that we foresaw and about which we warned Ministers almost two years ago. The House should turn its attention to whether this belated attempt to solve the problem will work. On 17 July, the Secretary of State set out an approach that depends on a number of different strands: a two-year teachers' pay settlement, an earlier provisional local government settlement and how local authorities choose to fund their local schools. Even so, on 17 July, the Secretary of State accepted that there may be exceptional circumstances in which local education authorities would not be expected to—in the jargon—passport 100 per cent. of the increase in schools formula spending share to the schools budget. That was confirmed in a written answer to me on 8 September from the Minister for Lifelong Learning, Further and Higher Education. I asked for clarification of those exceptional circumstances. I received the following response: In considering whether or not to use his reserve power to set a minimum schools budget for the following financial year for any LEA proposing not to passport, the Secretary of State will consider all relevant circumstances including the reasons put forward by the LEA. He has made no pre-judgment on what would be considered exceptional." So we already have from the Secretary of State an acceptance that there may be exceptional circumstances in which 100 per cent. passporting may not be appropriate or necessary, but no indication as yet of the circumstances in which that judgment would be made.

9.30 pm

What would happen in that event? Would the minimum percentage per pupil increase in the school budget be honoured if, it being considered an exceptional circumstance, the powers to require the 100 per cent. passporting were not implemented? If so, would it be done through direct payment? Is the Minister confident that the amendment would allow sufficient time for the school to be notified if such measures were taken?

On 8 January, I attempted to give Ministers powers to do precisely what they now say they want to do. My amendments would have allowed minimum per pupil funding to be specified for each school or category of schools. It is not clear to me how, without those powers, Ministers will fulfil the aspiration set out in the statement of 17 July of a minimum per pupil increase.

As can be seen from a written answer that I received last week, Ministers do not know how they will fulfil their aspirations either. When I asked the Secretary of State whether the guaranteed minimum per pupil increase would take account of the restoration of standards funds payments or would apply only to the age-weighted per pupil funding, I was told: The Department is working with local education authorities on the methodology for the guarantee, and aims to issue draft regulations and guidance during the autumn. Ministers do not yet know how they will achieve their aim in procedural terms; nor do they even yet know on what baseline the guaranteed increased school funding figure will begin. Another written answer from the Minister for Lifelong Learning, Further and Higher Education stated: local education authorities and schools will work together through their Schools Forums to agree the funding baseline to which the guaranteed per pupil increase will be applied. We aim to issue guidance and draft regulations on this during the autumn."—[Official Report, 8 September 2003; Vol. 410, c. 132W, 140W.] One would have thought it a fairly simple matter to look at a pledge to increase per pupil school funding from one year to the next, and that the baseline must necessarily be the sum per pupil spent the previous year. I have half the answer so far. I do not criticise the Department, because I think that it was impossible to print the other half of the figures that I asked for. I am talking about the per pupil expenditure figure for every school in the country for the current financial year. It is contained in a fairly substantial document, which is in the Library of the House. I am sure that Members on both sides of the House will want to hurry there to consult it. They will find interesting variations in not only the per pupil funding of schools in different parts of the country and different constituencies, but per pupil funding in different parts of the same LEA area. The remarkable thing is that those figures are not the baseline on which the pledge to increase per pupil funding is to be based. I do not understand how anything other than per pupil funding in the present year can be used as the baseline. We have the guarantee of 17 July but, as yet, no methodology, no regulations and no guidance. We do not even know the baseline funding figure on which a school's guaranteed increase will build.

The measures before us are a belated attempt to deal with the problems that have afflicted schools during the current financial year. If the Government had perhaps been a little more willing to listen to rational argument and to be open-minded in their consideration of previous legislation, the measures might already have been in place, or indeed been unnecessary because more effective measures could have been enacted already. We are left with an attempt to improve the position, which is an honest attempt that we welcome. I give full credit to the Minister for that but it leaves us with some serious questions.

The Minister for School Standards(Mr. David Miliband)

The hon. Gentleman is still on the Committee of the 1998 Bill.

Mr. Brady

The Minister comments that he thinks that I am still on the Committee of the 1998 Bill. If Ministers at the time had got more right in the passage of the School Standards and Framework Bill and had listened to argument, schools would be the better for it and we would not be picking up the pieces many years on.

We have had an assurance from the Minister for Local Government, Regional Governance and Fire that everything possible will be done by the Government to ensure that the local government settlement will be brought forward by mid-November. That is extremely welcome. We will, of course, seek to hold the Government to that. I ask for further assurances or clarification on the exact status of the provisional settlement, and how certain schools can be that they are working from a solid foundation in looking at the provisional figures. Can he give the House a clearer idea of the status of negotiations regarding the teachers' pay settlement? I would welcome some further assurance on those points and look forward to the Minister's comments.

Mr. Edward Davey

The amendment, which we will not oppose, tries to deal with a problem that the Government have made for themselves in a number of areas, not only by taking the power to set minimum budgets but by the way in which they approached last year's local government finance settlement and failed to deal with the school funding crisis that we saw as a result of that settlement. What happened last year—I will not give a complete detailed account, as the hon. Member for Altrincham and Sale, West (Mr. Brady) has just done that—was that a number of Departments took different decisions that would affect schools' budgets and no one in this so-called joined-up government put them all together and worked out the net effect on different schools. That was the problem. What we should be hearing from the Government is that they will not allow that situation to arise again—that Whitehall Departments will talk to each other and that a Minister's local government finance settlement announcement in which the Government praise themselves and say how they are going to give local authorities more flexibility will not again be followed the next day by a letter from the Minister for School Standards—who I am delighted to see on the Front Bench—telling local head teachers what they must expect their local education authority to pass to them. We had one Department saying that it was all about flexibilities and freedoms and that authorities would be able to make choices, and another saying that a large slug of the money that had just been announced was earmarked and had to be passported through and that head teachers should expect and demand it. That is not the sign of a Government who believe in localism, or of a joined-up Government in which Departments of State are talking to each other. That was the major problem with the local authority finance settlement last year, and that is why the Government got into such a mess.

The question is whether the amendment and some of the other measures announced by the Secretary of State for Education and Skills earlier this year are up to the job of putting the problems right. I remain unconvinced. The measure may be taking a small step forward; it is clear from what the Local Government Association and others have said that it may help. The question is whether the Government will be able to deliver on the rules that they are setting themselves, but the proposal does not deal with the underlying issues; for example, the balance of funding issue, where if there is a shortfall, the effect on the council tax or on spending on services is so great. Those issues have not been dealt with. I know that a review is on the way but clearly it will not inform this year's settlement. These are fundamental issues with which we must grapple, but what we have are very much sticking plasters and second-best solutions. The Government have not grappled with the fundamental problems.

I agreed with a lot of what the hon. Member for Altrincham and Sale, West said in his castigation of the Government, but it was rich of him to say that this year's funding crisis was the worst for decades. Some of us can remember many funding crises in our schools under the Conservative Governments of the 1980s and 1990s, some of which were far worse than last year's. That does not excuse the Government and two wrongs do not make a right, but it ill behoves Conservative Front Benchers to make such remarks without apologising for their appalling record.

We will support the Government on the Lords amendment, which goes some way towards making a bad situation a little better, but we hope that the Government will learn the lessons from the chaos of last year. We look forward to seeing whether they learn the lessons in this year's local government finance settlement in terms of what it does for schools. Schools need that money, but the Government have to provide a framework and a joined-up approach to enable it to get through.

Mr. Raynsford

This has been a short but useful debate on an important subject. The hon. Member for Altrincham and Sale, West (Mr. Brady) stressed that he came late to the Bill; some would say that he comes at the eleventh hour. We welcome him none the less. He emphasised his involvement in earlier education issues, but I understand that he was not able to attend last week's debate on the very issues we are debating tonight.

I agree with the hon. Member for Kingston and Surbiton (Mr. Davey) that those with longer experience of education will know of the considerable difference between the financial problems that have occurred in the course of the current year—about which we have been open—as against the position when the Conservatives were in government, when schools, local education authorities and teachers faced much larger genuine crises in terms of inadequate funding.

The huge increases in funding for education introduced by the Government have made a difference. and everyone in education knows that only too well. My wife, a teacher, has shown me her new laptop, provided as a result of a Government initiative. That is an interesting indication of the way in which new investment is creating new technology opportunities to improve the ability of, if I may say so, excellent teachers to deliver high standards of education to their pupils [Laughter.] I will say no more than that.

This year's settlement ensured an overall increase of some £2.7 billion in education funding—far higher than the sums that used to be available in the years of the Conservative Government.

9.45 pm
Mr. Brady

But at this point in this year's funding crisis, the Minister must surely acknowledge that nearly all of that money was taken out again through increases in taxation, and through changes in the standards fund and in the pension arrangements.

Mr. Raynsford

None of that money was taken out by the Government through changes in the standards fund; that was the increase available. A range of factors led to difficulties in distribution, when the funds that were available to education authorities were then transmitted to schools. These issues have been debated in this House in the past few months, and we reached an understanding of what the changes were. They were the result of a number of different factors coming together to create what was clearly a period of turbulence.

I shall describe some of those factors, the first of which was the change to local authority distribution of grant. It had been promised for some time, and lengthy consultation had taken place on that complex issue. The change happened to be introduced last year, which created a degree of turbulence in the system. However, every local authority in the country received an above-inflation grant increase—not something that they used to experience when the Conservatives were in power.

Secondly, there were changes to the standards fund. and I should like to highlight some of the issues involved. The standards fund has been hugely important in helping to drive improvement in a range of areas in schools, but it has been ring-fenced. That has had specific advantages in terms of enabling funding to be targeted at individual schools, but ring-fencing does have a downside. When sums have to be earmarked for specific programmes, it creates inflexibility and difficulties for local authorities in managing their wider responsibilities. So it is this Government's policy objective to reduce the degree of ring-fencing, while recognising the importance of what it can achieve in certain circumstances. This involves a difficult balance. In the course of this year, we sought to reduce the overall amount of ring-fenced funding.

Mr. Edward Davey

I have never understood the difference between ring-fencing and passporting; can the Minister help me by explaining it?

Mr. Raynsford

Let me run through the various components. Ring-fencing involves a clear insistence that sums allocated by Government for a particular purpose are used solely for that purpose. The objective is to ensure that those funds are made available for the purpose for which they were granted, and cannot be used for any other purpose whatsoever. The benefit is that that ensures input control, whereby those funds will go to the designated purpose; the downside, as the hon. Gentleman knows well, is that local authorities' freedom to use their overall funds in the most flexible way, taking account of the many pressures that they face, is inhibited.

Passporting has been a mechanism through which the Department for Education and Skills has sought to indicate the funding that should be passed on from local authorities to schools in any one year. As the hon. Gentleman is an expert in local government finance, he will know that that sum is largely made up of Government grant, but that it also includes an amount assumed to be raised by local authorities through their own council tax. That is the basis on which the formula spending share, which used to be known as the standard spending assessment, was constituted. So the passporting figures for the current year included the assumption that authorities would pass on to education sums related to the FSS for education, which embraced both sums made available by the Government in grant and those that might be raised by authorities from their own council tax, according to the assumption.

The hon. Gentleman knows very well that the difficulties occurred, in the main, when the total sum of Government grant made available to local authorities was less than the sum that they expected to passport on in education. That is one of the tensions, which I have already exposed, in the relationship between specific funding for a particular subject—in this case, education—and the wider issue of local government finance. That is why tensions are inevitably associated with ring-fencing and passporting, and why it is necessary to approach these issues in a sensible and consultative way.

I was talking about some of the changes that occurred this year. We know about increases in teachers' pay, which had a differential impact, with some schools facing more significant burdens than others. There were increases in teachers' pensions and increased pressures on some local authorities for special needs obligations for example, for children with special educational needs and pupil referral units. All of those had differential impacts and the combination of all those factors resulted in some schools not receiving the level of increase that they had anticipated and in some authorities finding it difficult to ensure that education was funded to the extent that the Government wanted without a disproportionate impact on the council tax. We have been open about that and explored the issue in lengthy discussions with representatives of local government, head teachers, the unions and others to get to the bottom of what went wrong this year in order to ensure that it will be put right in future.

Matthew Green

With the benefit of hindsight—I acknowledge that the Minister did not set out to create this year's problems—would he say that making so many changes in one year should be avoided in future because of the problems that it has created now?

Mr. Raynsford

It has always been our objective to try to provide local government with as much certainty as possible. I am saying clearly to local government that we do not intend to make any changes to the methodology of the grant distribution formula—other than where it is absolutely necessary when a change of service occurs for the next two years, which should provide a period of consistency and certainty. However, the hon. Gentleman will recall the strong calls to change the old standard spending assessment. The SSA was discredited; people knew that it was not an accurate reflection of the need to spend; there was a strong argument for a review. Such reviews are always difficult because of the different competing claims from different elements among the local government family. There is a huge amount of lobbying with all groups seeking their own advantage, and it is hard to find a way through. In fact, it is difficult to please anyone because almost everyone finds something wrong with what is finally proposed.

We do not relish making such changes often and I am pleased to say that there will not be another change of that nature for some time. I accept the hon. Gentleman's point that the change happened at the same time as the other changes that I have described and that it contributed to the turbulence that caused the difficulties. We are now trying to minimise the risk of it happening again.

Mr. Brady

One of the reasons that the Minister advanced to explain the difficulties in some local education authority areas was the above-inflation increase in the cost of special needs education, which is a significant problem. Are the Government proposing to ring-fence provision for special educational needs funding, given that measures are being taken to require a per pupil increase in mainstream schools? Is there a danger that it might squeeze special needs education?

Mr. Raynsford

No, the Government want to see funding for special educational needs, pupil referral units and so forth continue to grow where there is a demand for it. However, the Secretary of State for Education and Skills has made it absolutely clear that the increase in funding for that sector should not exceed the increase in funding for schools. That is a perfectly fair wish—to ensure that schools funding is not used to fund central services, but that there should be scope for both to continue to rise in line. I was dealing with our attempts to tackle the problems of the current year and to ensure that next year's arrangements work much better and provide the greater certainty to schools—and, indeed, to local authorities—that we all want to see. One key element will flow from the lack of change to the local government formula, which I described in response to the question asked by the hon. Member for Ludlow (Matthew Green). That will help. Further certainty will be provided by the commitment of my right hon. Friend the Secretary of State to continue the standards fund. We have accepted that it will involve the continuation of a ring-fenced grant. That is a concession on our part, because our objective is to reduce the overall level of ring-fencing—[Interruption.] No, it is a pragmatic approach to deal with a problem that inevitably caused difficulty. A ring-fenced grant such as the standards fund is targeted specifically at a certain area. If it is rolled into the general grant, the distribution is inevitably different. That was one of the problems that caused last year's difficulties. Recognising that fact, we want to ensure that the problem is not replicated. That is why we are going to continue with the grant for the moment.

A third element is giving earlier indications of the minimum per-pupil increases. That is a clear commitment by my right hon. Friend the Secretary of State for Education and Skills to ensure that schools have much greater certainty at an earlier stage, because last year the figures emerged relatively late in the budget-making process and that was a difficulty for schools. Of course, we also want to see earlier decisions on the local authority settlement. That is difficult, because—as with so many other issues, a tension exists.

Local authorities tell us repeatedly that they want the earliest possible indication of the provisional settlement. That is not surprising. They also tell us that they want us to use the latest available data. However, much of the data only becomes available late in the process. One of the key elements, from the education point of view, is the secondary school pupil numbers, which are being collated only now. By the time they are collected, checked and passed to us, it will be later in the process, and that is an inevitable constraint.

We could, of course, give earlier provisional settlement figures if we worked on figures that were a year out of date, but local government wants us to use up-to-date figures. I understand that. It is a reasonable request and we try to accommodate it. That is why our aim will be to produce the provisional settlement by the middle of November. We are working hard to make that possible. It will not be easy and it will require enormous hard work by my officials to achieve it, but we are committed to do it to help to provide greater certainty.

Additionally, my right hon. Friend the Secretary of State for Education and Skills has pledged additional funding and we have given a similar pledge to ensure that all authorities are able to passport 100 per cent. of the schools funding requirement without having to take funding from other areas or increase council tax disproportionately. Increases in council tax have been far too high in recent years and it is essential that councils moderate their demands in future. The public are far from happy with the excessive increases, which came predominantly from Conservative authorities. We will watch very closely the average increase in council tax, which was significantly higher—by five or six percentage points—in Conservative areas than in Labour areas and, indeed, Liberal Democrat areas. It is Conservatives who have driven up the council tax, and we will watch that closely in the coming months.

Mr. Edward Davey

Will the Minister give way?

Mr. Raynsford

I do not have time to give way.

All the issues that I have mentioned have involved detailed discussion with local education authorities, schools, local authorities and relevant Departments. For those reasons, we have not been able to make full announcements on all the points about which the hon. Member for Altrincham and Sale, West asked me. We are discussing them with local authorities and schools. That is the right approach to ensure agreement and engagement, and to get the mechanisms right.

The hon. Gentleman acknowledged—I thank him for doing so—that we are making an honest attempt to ensure that the problems that occurred this year will not he repeated next year. That is what we are determined to do. He asked about the certainty of the provisional settlement. The answer is that we publish the provisional settlement and give local authorities a period of time to respond to it and make submissions. We will consider those and then confirm the final settlement. However, I can say that the practice in recent years has been that the final settlement has not differed from the provisional settlement to any marked degree. I hope that that provides some certainty.

We have also introduced a system of floors and ceilings to give local authorities confidence that they will not face a wide variation in the amount of funding with which they have to budget. All those changes are designed to improve the arrangements and give a better settlement in the coming year. The final question the hon. Gentleman asked was about the teachers' pay settlement. That is still in the hands of the School Teachers Review Body and we are awaiting the outcome.

The hon. Member for Kingston and Surbiton raised wider issues of local authority finance. He knows that we are conducting the balance of funding review, and that is the right formula to address those wider issues. This year, we are not concentrating on the longer term issues but on getting the mechanisms right to overcome the practical problems that occurred with the distribution of the 2003–04 settlement and the impact on schools. Getting that right for 2004–05 is our fundamental objective. We are working hard at it and we will continue to do so. Our aim is to achieve a proper framework that provides certainty for schools and ensures that the additional money that the Government are putting into education finds its way to the right places.

Lords amendment agreed to.

Lords amendments Nos. 44 to 56 agreed to [One with Special entry].

Committee appointed to draw up Reasons to be assigned to the Lords for disagreeing to their amendments Nos. 3,6 and 19: Paul Clark, Mr. Edward Davey, Linda Gilroy, Mr. Philip Hammond and Phil Hope; Phil Hope to be the Chairman of the Committee; Three to be the quorum of the Committee.—[Paul Clark.]

To withdraw immediately.

Reasons for disagreeing to certain Lords amendments reported, and agreed to; to be communicated to the Lords.