Education (No. 2) Bill (Hansard, 17 July 1986)

§ Baroness Hooper
My Lords, I beg to move that this Bill be now read a second time.
1077 This is a short and uncontentious measure. Some of its provisions are highly technical, and I will not attempt to describe them all in detail today. I will limit my remarks to a description of the overall result which the Bill is designed to achieve.
The first clause gives my right honourable friend the Secretary of State for Education and Science specific power to pay grants to the Fellowship of Engineering and to the Further Education Unit. Those bodies have both received grants for several years and I hope that your Lordships would agree that they should by this means be enabled to continue their work. There is, however, a general principle recommended many years ago by the Public Accounts Committee that, where payments, originally made under the general powers of the Appropriation Acts, are to be continued over a period of years, this should be done on the basis of specific statutory authority. Accordingly my right honourable friend is seeking specific authority to pay grants to these two bodies.
The second part of the Bill deals with a system known as pooling. This is an arrangement whereby the costs of certain local authority expenditure on education is shared between all education authorities. It has operated for many years. The purpose of the Bill is to allow the system to continue to operate as it has in the past, but taking account of circumstances which were not foreseen at the time the original pooling legislation was enacted. It affects only the mechanisms for sharing costs between authorities. It may be helpful to your Lordships to know that this Bill will not affect the way in which education provision covered by pooling, and in particular advanced further education is organised.
The central principle of pooling is that all authorities contribute to a pool in accordance with formulae, and all may draw from the pools, either what they spend, or, in the case of most advanced further education expenditure, an amount determined by the Secretary of State. The difference between what an authority is due to receive and what it contributes is known as its pooling adjustment. This may be either positive—if its receipt is greater than its contribution—or negative—if it contributes more than it receives.
The vehicle for operating pooling is the rate support grant system. Under Section 63 of and Schedule 10 to the Local Government Planning and Land Act 1980, the block grant otherwise payable to local authorities may be adjusted to give effect to the education pools. Authorities with a positive pooling adjustment have their block grant increased. Those with a negative adjustment have a reduction in their block grant. The total of positive adjustments matches the total of negative adjustments, and there is no effect on the amount of block grant payable in total.
The situation which has now arisen is that this year for the first time one or more authorities in England may have a negative pooling adjustment which is larger than the block grant payable for the year in their case. The pooling adjustment cannot therefore be effected wholly through a reduction in block grant. The 1980 Act does not provide for such a situation. Clause 2 of this Bill remedies the deficiency by 1078 empowering my right honourable friend the Secretary of State for the Environment to recover directly that part of a negative pooling adjustment which cannot be recovered through a reduction in the authority's block grant.
Clause 3 of the Bill introduces a technical device, substitution payments, to ensure that the operation of the pooling system continues to have a neutral effect on the total of block grant payable. It also puts beyond doubt the right of an authority which does not otherwise receive block grant to receive positive pooling adjustments; this is the position of the Inner London Education Authority.
The remaining clauses deal with timing, definition and extent. The pooling provisions may be required for use in this financial year in England. The Bill also extends to Wales, as with existing pooling legislation. However, a separate pooling system is operated in Wales, and it is not expected that my right honourable friend the Secretary of State for Wales will need to use the new powers.
The Bill has been certified as a money Bill, and in accordance with normal conventions will not be considered by a Committee of this House. Your Lordships will nevertheless wish to know the reasons for it. I hope that these will be clear from the brief explanation I have given. This is a limited measure, but one which is very necessary if the education pooling system is to continue. I commend it to the House.

§ Lord Irving of Dartford
My Lords, after the outbreak of harmony following the Gas Bill it would be churlish of me to change the mood. First, I should like to welcome the achievements of the Further Education Unit. It has played an important part in developing curriculum work, and particularly for adult learning and continuing education. I should also like to pay tribute to the work of the Fellowship of Engineering.
As to the Bill, one of my honourable friends in another place said that he was told it was simple, non-controversial, and simply to rectify some of the anomalies that had presented themselves in recent years. It does not seem at all simple to me; non-controversial, yes, and that can be demontrated by the fact that it took only 23 columns for all its stages in another place.
There was some doubt, however, as to whether it rectified all the anomalies which have arisen in the last few years. It is further complicated, as the noble Baroness has said, by being a money Bill, which means that we cannot amend it anyway, and by the fact that we must pass it within a month, which seems a little academic. I want therefore to confine myself to asking the noble Baroness the result of the reconsideration that the Government said was under way when the Bill had its Report stage in another place.
There was the problem of the 1981–82 capped pool. The reconsideration that was undertaken at that stage had not then disclosed whether there would be need to have new legislation, presumably in due course, as to 1079 the Secretary of State's power to remedy that position. For us, it seems that as ILEA clearly paid an unfair proportion it would seem only fair for the Government to find some way of compensating it. That is for the year 1981–82.
The Government said in addition on Report stage that they were seeking much more important changes to pooling legislation—changes that were urgently needed if the pooling system is to continue to function. Can the noble Baroness tell us anything about that? But in particular can she give us an assurance that the Bill will now rectify all the anomalies, including the one I have mentioned, which have arisen and which were mentioned in the debate in another place?

§ Lord Ritchie of Dundee
My Lords, I, too, should like to thank the noble Baroness the Minister for her explanation of this Bill and to express the willing acceptance from these Benches of its provisions. We are pleased that the two bodies named in Clause 1 are to receive support from the department for the excellent work that they undoubtedly do.
There is one question I should like to ask the Minister for enlightenment. It is about the statement made under the heading "Financial effects of the Bill" in the introductory Memorandum. It is stated that annual grants of £0.45 million and £2.5 million are already paid to the Fellowship of Engineering and the Further Education Unit respectively, and that no net increase in public expenditure is expected. This seems to imply that these sums are fixed for all time, with no allowance made for inflation, and that there will be a consequent gradual decline in the value of the grants in real terms. Is this really the situation? We should be grateful to the Minister for some explanation, if possible.
Regarding Clauses 2 to 4, we have taken on board that pooling arrangements have been in operation for 25 years, and that the basic principles of the provisions in this Bill have been approved by the associations of local authorities. This being so, we are happy to know that satisfactory arrangements are to be made for the very important work of these two organisations.

§ Baroness Hooper
My Lords, I am glad that we are all agreed that this is an uncontroversial Bill. Although its provisions are complex, they are indeed necessary. I should also like to join with the two noble Lords opposite in adding my comments about, and acknowl-edging, the valuable work done by both bodies concerned in the grants in their respective fields; the Fellowship in the maintenance and promotion of excellence in the field of engineering, and the Further Education Unit in the promotion and development of efficient further education provision.
The noble Lord, Lord Irving of Dartford, referred to the position of ILEA and its back years' claim, and the method of calculation of contributions to the advanced further education pools. Perhaps I may respond to this in a little detail. Last year my right honourable friend introduced a new formula for determining contributions following a successful legal challenge brought by the Inner London Education Authority. The ILEA subsequently claimed compensation for the injustice which it alleged it had 1080 suffered through the use of a different formula in earlier years.
It was suggested in the other place that legislation should be introduced to facilitate the payment of such compensation, but the Government do not agree. The regulations in force in the years before 1985.86 were made in good faith and were laid before Parliament. They were not subject to legal challenge at the time. Local authorities, including ILEA, took account of the pooling adjustments due under those regulations in fixing budgets and issuing rates or precepts for the years in question. A restrospective refund for ILEA from the pool would cause considerable disruption to the finances of other education authorities, and in the Government's view there is no case for such a refund, and no case for seeking to amend legislation on this account.
The other part of the noble Lord's remarks concerned the calculation of authorities' entitlements from the pool for expenditure on advanced further education in 1981–82. Exceptionally, the method developed for setting these allocations in 1981–82 involved a recalculation of allocations once actual expenditure on advanced further education for the year was known. This is always some time after the event, and the relevant information has only recently become available.
However, it has also now come to light that the legislation under which this pool is operated may not allow the recalculation to be carried through in the way originally intended. It is possible, but by no means certain, that further legislation may be required on this point. However, in the Government's view it would have been premature to legislate in this Bill, which is required urgently if the pooling system is to continue to function. I hope that that reassures the noble Lord somewhat on the point he raised.
The noble Lord, Lord Ritchie of Dundee, made reference to the Memorandum of the Bill and expressed concern about the level of grants. I understand that the figures quoted at the end of the Explanatory Memorandum are those agreed for the current year, which will not be affected by this Bill. The level of grant in future years will be assessed in the usual way after consultation and on the merits of any particular case. With that, I must finalise by saying that I am grateful to noble Lords for their expeditious treatment of the Bill. I commend it to the House and ask that it be read a second time.

§ Lord Irving of Dartford
My Lords, before the noble Baroness sits down, may I thank her for that hope, perhaps slender, that there may be new legislation in the future?