HL Deb 04 June 1998 vol 590 cc493-535

(" . The governing body of every maintained school shall publish, once in each school year, a statement on the spiritual, moral, social and cultural development of its pupils which shall—

  1. (a) describe how the school intends to promote such development;
  2. (b) describe what targets the school has set for this development;
  3. (c) describe what means of assessment will be used to monitor this development; and
  4. (d) report upon the achievement or otherwise of those targets.").

On Question, amendment agreed to.

Clause 43 agreed to.

[Amendment No. 158 not moved.]

Clause 44 [Maintained schools to have budget shares]:

Baroness Blatch moved Amendment No. 158A:

Page 36, line 21, after ("is") insert ("calculated to reflect—

  1. (a) the number of children in the school;
  2. (b) the general education needs of those children; and
  3. (c) any special costs associated with the area where the school is based,
and which is").

The noble Baroness said: I beg to move Amendment No. 158A. As the Committee begins to discuss the finance clauses of the Bill it will be of assistance if the noble Baroness is able to answer the straight question: under the new proposals of what is the 100 per cent. a delegation?

Baroness Blackstone

It is a 100 per cent. delegation of the budget for schools that is not designated as the core budget of the local education authorities. That was defined and set out in the document published on Friday.

Baroness Blatch

Schools can be forgiven for the feeling of euphoria around the country. Thanks to the Minister making it available, I have had the opportunity to read in detail the fair funding paper. The news release of the Department for Education made reference to "Byers outlines plans for new 100 per cent. delegation". The expression "100 per cent. delegation" appeared in all newspapers and throughout the press release. I looked very hard at what that meant. I shall return to that in some detail when speaking to these amendments.

In moving Amendment No. 158A I should like to speak also to Amendments Nos. 158B, 158D, 158H and 164A. The first amendment is fundamental and I do not believe is contentious among any party. The principle is that funding for schools should reflect the numbers of children in those schools and their educational needs. Amendment No. 158B is about restricting hold-back. My amendment reflects precisely what was in the Labour Party's general election policy document which stated that no local education authority should withhold more than £50 per pupil centrally from the school's budget. Therefore, I have codified that in an amendment.

Amendment No. 158D refers to the present aggregated schools budget system, and Amendment No. 158H refers to the individual school's budget, which is the new terminology. It does not take a genius to see that there are two different figures there. I shall not move Amendment No. 158D. I prefer to consider Amendment No. 158H, my first amendment having been overtaken by the publication of the paper and my second look at the percentage of delegation to schools by local education authorities which gave rise to Mr. Byers' comment in the first place. He found that the amount of money delegated to schools varied greatly from 85 per cent. in one authority, which was the basic amount, to 96.3 per cent. in another authority. cent. The variation is considerable.

If one takes a 95 per cent. delegation, only 79 of the 131 local education authorities have to delegate between 0 and 5 per cent. more. A further 52 per cent. of the authorities have to delegate between 5 and 10 per cent. more. One is considering relatively modest sums of money that need to pass down to the schools. Those sums are modest in terms of the amounts held by the local education authorities but very significant when they are translated into money for schools. For example, if a local authority delegated at the level recommended in the amendment, it would give £214 more for each child in each school. The figures go down to zero in the case of the best authorities. They are already giving over the 95 per cent limit. For many authorities it means a good deal more for each child in the school. I have taken the figure recommended by the Labour Party.

Amendment No. 164A seeks to remove the terms on which service and facilities are provided by the authority for schools maintained by them. That gives enormous scope to circumscribe the money that schools do not get as opposed to the money that they do get. For the sake of the record, I should like to put some flesh on the bones of the press release of the Department for Education and Employment and put into perspective the expectations of schools and those who have welcomed this statement as to what must be top-sliced from the money that eventually finds its way to the schools.

We start of course with non-school expenditure. As everyone will be aware, that includes education for children under five, adult and community education, life-long learning programmes, student awards, youth service, which can sometimes be dealt with nationally, and revenue funding of capital expenditure which is related to those services. That is one block of money that comes off schools' money.

The second block that comes off is what is called—it is an awful word that I do not like—ongoing school-related commitments. That includes servicing and repayment of school-related capital debts, early retirement and redundancy costs that flow from decision taking before April 1999, expenditure on recruitment and retention schemes and arrangements for personal salary protection instituted by the LEA before 1st April 1999. That is another block that comes off the sum of money before it reaches the schools.

Then we arrive at the local schools' budget. That is interesting. It will include strategic management, access, LEA support for school improvement and special education expenditure. That is a factor with which no one would wish to take issue. Let us look at that category in more detail. It covers some aspects of expenditure that LEAs do not have now. It covers preparation for the LEA's educational development plans, including negotiation of targets with schools, which will be a time-consuming business, monitoring and challenging schools' educational performance, implementation of the programme set out in the approved education development plans which of course includes support for schools causing concern, support to turn around failing schools, schools with serious weaknesses, and any other non-delegated activity. Of course it includes some local authority level activities—advising, inspection, and monitoring duties—and, I have not yet mentioned, organisational committees, adjudicators, accommodation for organisational committees and all the trappings for that which will have to be paid for. That is another block that will come off the money for schools. As the document says, all LEAs will continue to need funding for those roles.

We then move on to yet more money. We come to the heading "Strategic Management" I mentioned earlier. That is to pay for the LEA education chief officer, all the staff, its corporate planning for the service, administration of the authority, audit and monitoring functions, the statutory financial functions of a local authority and the revenue budget for the LMS schemes, all the preparation and administration of grants, the closure and reporting of accounts, the financial monitoring, the personnel management for staff funded by that expenditure, expenditure on legal services relating to the statutory responsibilities for the local authority, and, of course, cross-service statutory plans—there are many of them—children's service plans, inter-agency work, education business partnerships, asset management plans, and so on. One has to consider also grants funding and matched expenditure for cross-service programmes—for example, the single regeneration budget, in which much is involved—information technology systems, and of course the Standing Advisory Committee for Religious Education which will have its work cut out after the previous amendment. So it goes on.

We come to the sub-heading, "Access." I have not yet finished the items of expenditure that will have to come off the money before we get down to what is called 100 per cent. delegation. That includes preparation for the local authority's asset management plan and monitoring of the LEA's school performance against the plan, the management and implementation of the LEA's capital programme, the planning and supply of school places, including preparation of the school organisational plan, the admissions and appeals duties, and the powers of the LEA. I have mentioned the school organisation committees. There is home-to-school transport which has to be paid for, the provision and administration of clothing grants, boarding grants, educational maintenance allowance, and the welfare service and school attendance functions. There is much more.

Will the LEAs be funded to meet their obligations under the national minimum wage? There will be a cost for local authorities. The Minister knows that. It would be helpful to know if those costs will be met. Will local authorities be reimbursed for the costs that they will have to meet under the national insurance changes for all staff earning over £23,000? I did some research on a number of secondary schools, in particular. It would seem that there is an average of about 2 per cent. on salary bills because the national insurance changes for salaries below £23,000 come nowhere near offsetting the costs above £23,000.

Music is a fairly confusing passage in the Bill. It is to be top-sliced, again from the money that would find itself going to schools. What is the proposition in the paper? Is it that music will be paid nationally, because the money will be top-sliced by the department? Will it be fed back to local authorities on the basis of the provision at the time that the Bill is enacted? In other words, there will be a freeze of musical provision across local authorities at this time for three years to fund that level of provision. So school by school, where music education takes place and moneys are received from their LEAs today, they will continue to receive money at that level.

What about schools like the Oratory, for example, which is on a rising curve of expenditure on music because it has introduced a prep school department? Will it be expected to find that money or will that money be funded? At the end of the three-year period, with the move from guaranteed funding, there is to be a bidding system. Does that mean a free-for-all bidding system or is there any intention of continuing to build on what is there and perhaps move on and expand further?

There are many more, but the final area of expenditure to which I wish to refer is that of the reorganisations that will flow from the demise of any grammar school that is unfortunate enough to lose the ballot that will be triggered by a petition. We all know that the paper insists that if a ballot is successful the local authority must produce reorganisation plans to remove selective education from those schools. Trafford LEA has already expressed some anxiety about that, because it knows that its capital moneys will be pre-empted because there will be a cost.

The land and buildings of many of the grammar schools are owned by trusts. Some establishments will be too small, catering only for single-stream ability, to become comprehensive or non-selective schools. There will have to be some physical reorganisation in those authorities. For authorities with a large number of grammar schools, the cost and expenditure will be considerable.

It is important that we hear from which pool the money will come. All the other heads of expenditure that I have mentioned will come from the overall budget for local authorities. The statement made in the fair funding paper uses Tory rhetoric, and uses it well. The spin doctors in this Government deserve an Oscar. They are past masters at producing the warm glow. They have done it this time. There were letters of congratulation, and favourable comment in the newspapers, although one newspaper, the Daily Telegraph, sussed it out, and did so rather quickly. I congratulate it. It saw immediately that no one had said 100 per cent. of what, and no one had itemised or categorised all the heads of expenditure that would have to be top-sliced or removed or deducted from the sums of money.

When one gets down to the basic information, one finds that there will be more costs centrally for local authorities. It is therefore likely that at the very best the delegation will be at about the level that it is at the moment, but, in practice, it could be worse.

I support this aspect very strongly. Much was made of LEAs being encouraged to produce as much money as possible to local authorities so that local authorities can decide whether or not they buy back services. However, there are a couple of stings in the tail. A school and governors may have proven beyond doubt that they can manage their funding extremely efficiently. The grant-maintained schools are praised somewhat in the document. In those LEAs—we all know where they are—where perhaps 80 per cent. vote to leave their money with the local authority on the ground of economy of scales and the persuasive information received from those authorities, the schools will lose the ability to control their budgets.

I shall later press the Minister very hard to accept one of my amendments. An ex-grant-maintained school, a new foundation school or a school which will become a foundation school has produced the evidence that it can manage its funding. Irrespective of how many schools in the authority decide that they would like the LEA to continue to provide services, if the department believe that the school is capable of doing so, the school should be free to control its budget. It should be free to purchase from wherever it wishes, whether from the local authority or elsewhere. That is important.

Returning to the point relating to the figure of 100 per cent., I believe that the headline and the genius of the spin doctors is a confidence trick. My authority gives schools an opportunity to purchase their services back from the local education authority. Quite a number of enlightened authorities do that already. It is not New Labour policy or new old Labour policy. It is existing Conservative policy. I support the fact that the Government agree that it is a good way to manage and that more schools should be encouraged to do that. However, at the end of the day, the figure of 100 per cent. comes very close to the current 85 per cent. to 90 per cent. of money delegated down to schools.

Finally, it is important to know the timescale. We know that the Fair Funding consultation document will not return to the department with responses until, I believe, 30th July. Then there are to be regulations. Then there are to be LEA indicative budgets. At some point schools will need to know precisely what order of additional funds they will receive. There is now a high expectation that schools will receive a great deal more money in the next financial year. If that is so, indicative budgets will be important to local education authorities. They will then be able to pass statistical information to the schools. It will be important to hear whether we shall know by the autumn of this year. Schools will then have some idea before Christmas exactly what their budgets will be.

We hear from the Chancellor now almost on a daily basis that limits will not change; it is the priorities within the policy areas that will change. If that is so, some redundancies will occur in the coming year. If LEAs and schools are to face that prospect, the sooner they know the better. The notices they have to give materially impact upon the costs that have to be found by the LEAs.

The schools have had what amounts almost to a confidence trick played on them. It is deeply depressing. I hope that what the noble Baroness says proves me entirely wrong. I can then join her in lauding the news that was passed down to schools earlier this week. I beg to move.

Baroness Lockwood

The noble Baroness has made rather hard weather of this issue. We are debating the Bill. The document published about a week ago elaborates on some of the clauses. The noble Baroness went through not only the various categories stated in the consultation paper, Fair Funding, but also the additional pages which elaborate those various categories.

Baroness Blatch

I thank the noble Baroness for giving way. Everything I have said is entirely pertinent. This is the scheme that will be in place for schools for the next financial year. The clauses in the Bill are the legislative basis for the money that will go to schools in the next financial year.

Baroness Lockwood

I do not dispute that. I agree with the noble Baroness. All I say is that she makes heavy weather of the issue. We are not debating what newspapers say. We are debating the Bill. To help us we now have this consultation paper. I did not hear the noble Baroness discuss the merits of items for which local authorities will be responsible. I merely heard the noble Baroness list all the subjects under those categories. Only a few days ago the noble Baroness and her colleagues argued that we should not have an adjudicator, and that local authorities should be responsible.

In many ways the noble Baroness argues against herself. It is clear that local authorities have important responsibilities. Those are outlined in the document. I am sure my noble friend will reply to some of the factual questions put by the noble Baroness. However, I believe that the document is helpful and valuable to us in our discussions.

Lord Dixon-Smith

I sympathise with everyone involved in this area, whether in LEAs—where I spent a great deal of my life—the Department For Education and Employment, or even sitting on these Opposition Benches. This subject puts one between a rock and a hard place.

The Bill is immensely detailed. There are many opportunities for differences in practice between different education authorities and different schools. The announcement in the consultation paper last week was made in such terms—I read it in the Financial Times—that I believed that everyone would be on a par with a grant-maintained school. That was an initial reaction. It may have been misleadingly reported in the press. But that reaction would have been common across the general broad perspective of the public. We know that that was not the detailed intention. Anyone with his head half screwed on who thought about it for five minutes would have realised that. But the general public, who are not intimately involved in these matters of detail, may not have seen the actual picture.

When the Minister replies—I sympathise with her in her difficulty—perhaps she will give a pledge which might simplify the situation. Perhaps she will state that, while allowing for variations across the country, no school in future will have less of its budget under its control than it had in the past. If we have that assurance people will be able to relax somewhat, and the concerns of many will be diminished.

5.30 p.m.

Lord Peston

I wish to speak to all the amendments in the group except Amendment No. 158C in the name of my noble friend Lady David. I can see why it is in the group, but it involves slightly different issues. Reserving the right to return to the matter, all I shall say today is that I support what she says about school libraries. All the other amendments are in the name of the noble Baroness, Lady Blatch, who, not surprisingly, did not speak to my noble friend's amendment.

Perhaps I may begin with two or three matters of principle. The document is called Fair Funding and the Government's intention is that there should be fair funding. The noble Baroness, Lady Blatch, was a member of a government who did not believe in fair funding. When I sat in exactly the place she is sitting now, I spent a great deal of time pointing out that extra money was being found for those schools which already had more and that the Government showed not the slightest interest in those schools which needed extra funding. They invented a peculiar formula to the effect that it was "extra" money and therefore not available to be allocated to the schools which needed it.

First and foremost, the Government are to be congratulated on believing in fair funding. I take it that the Conservative Opposition have come round to the idea of fair funding. The Liberal Democrats have always held views similar to ours. Fair funding is important and I am delighted that the Government are to treat schools fairly rather than singling out some for special treatment. That is germane to the point raised by the noble Lord, Lord Dixon-Smith, who might like to reflect on the matter before this section of our deliberations is over.

Secondly, as a matter of principle, those of us on this side have always been supporters of delegation and the local management of schools. We have argued that on many occasions. I certainly did so when I was responsible for education on the Opposition Front Bench. My noble friend Lady Blackstone can speak for herself, but my recollection is that she took exactly the same view. I know that when I was number two to my noble friend Lady David she took the same view. Therefore, no one has any lessons to teach us about the values of delegation and local management or any lessons to teach Labour authorities about it.

The Government's position is that core functions should remain with local education authorities but, in principle, everything else should be delegated. Perhaps my noble friend will confirm that that is the case.

The reason we favour delegation and local management is that it is a way of operating efficiently and gearing the schools to the needs about which they know; that is, the education of their children. That is common ground between us all. I am not sure whether I used the word "openness", but I like the fact that the new document is an attempt to make the funding formula transparent and to move us away from the mysticism of funding.

I turn to the specific amendments. I shall do my best to keep a straight face and take them seriously. Amendment No. 158A suggests that however we fund we must take account of, the number of children in the school; … the general education needs of those children; … and any special costs associated with the area where the school is based". I decided to turn that on its head. Could anyone believe a funding formula which said, "No, the one thing you cannot take account of is the number of children in the school. Of course, you must not look at the general education needs of those children and you must not look at any special costs"? In other words, the amendment is preposterous. Of course, any formula will take precisely those aspects into account in addition to others. I am totally at a loss as to quite what the noble Baroness and the noble Lord have in mind, other than to say that we should always do what is right. I agree with them entirely. So we do not need that amendment.

I am also struck by the provision for £50 per pupil in Amendment No. 158B. The amendment refers to educational expenditure. My noble friend Lady Blackstone knows a great deal more about the matter than I do because she has been briefed and I have not—

Baroness Blatch

Perhaps the noble Lord—

Lord Peston

Is the noble Baroness sure that she wants to intervene?

Baroness Blatch

I am open-minded and will listen to what the noble Lord has to say. I intervene to say that he should not be perplexed about the £50. It is taken from the Labour Party policy document published during the election. Indeed, Mr. Byers thought that no local education authority should hold back more than £50 per pupil.

Lord Peston

I feared that the noble Baroness wanted to say that, which is why I asked her whether she was sure she wanted to intervene. My honourable friend Mr. Byers did not say that. As I understand it—and I am sure that my noble friend Lady Blackstone will remind us—he was referring to administrative expenditure rather than to educational expenditure. The two are not the same. He was saying that there should be a limit on how much should be restricted to administration. He certainly did not mean that that would be the sum which would be retained by the local authority in general. I say "certainly", but as I am a person who always speaks with caution, I am sure that my noble friend the Minister will be able to confirm that. I believe that Amendment No. 158B is peculiar.

I have a final query. The Government's policy is that we are supposed to view as a partnership the LEAs' delegation of schools. That is the Government's philosophy and I strongly support it. Amendment No. 164A implies that there will not be a partnership; there will be a struggle between the two in which schools must be protected from what we might call the appalling behaviour of the local education authorities. There is nothing in the Bill, which I hope will become an Act, that gives the local authority such powers. Therefore, Amendment No. 164A is based on a misunderstanding of what we envisage is developing. However, I rely on my noble friend the Minister to expatiate on that in due course.

It is good that we are making a step forward in the direction of fairness. It will go hand in hand with delegation, which we strongly support, and the sooner we can get this part of the Bill over and done with the better because there are one or two interesting amendments to come.

Baroness David

Although my Amendment No. 158C is in the group, it is slightly different from the others and I have chosen to speak to it separately. As soon as I tabled the amendment Fair Funding came out, but I am pleased to welcome the consultation paper as an innovative way of meeting the difficult problems left by the previous government. The desire to create competition between the schools by differentially funding them was wrong. It would be better for the noble Baroness, Lady Blatch, to admit that past funding policies were wrong—the policies she advocated as Minister for Education—and learn from the Government's courageous attempts to ensure that the education of all children is fairly funded and not left to accident and the school they attend.

It would be a miracle if the Government got everything right in the consultation paper. That is the function of consultation. We look forward to seeing the Conservative Party's response.

My Amendment No. 158C looks at the special case of the school library service. It is a pleasure to note that paragraph 44 of the DfEE consultation paper addresses the need to provide centrally a school library service. The Government should be congratulated on giving at long last the right place for schools library services. It is an invaluable service. If used and funded properly, it can be of enormous help to teachers and pupils. Sadly, it has declined in recent years. Out of 121 authorities, only 47 operate with delegated funding. Since the advent of LMS five services have completely closed. We do not want that decline to continue.

The consultation will tease out the nature of "significant majority" voting and it might have been better if the Government had not included a draft letter for head teachers to send to their LEA. I am sure that all head teachers know how to write letters. What sort of message are the Government trying to convey when the Chief Education Officer is called "Jeeves"? Is the Permanent Secretary a "Wooster"? Can my noble friend the Minister please state whether the Bill will have to be amended to take account of significant majority voting? Will this be a decision made by the head teacher or by the governing body? How can it be done to minimise bureaucracy? Will there be separate arrangements for primary and secondary schools? In a typical LEA only 20 per cent. of the schools will be secondary. Will primary schools be able to outvote secondary schools?

Further, will money for library services still be notionally delegated to schools if significant majority voting takes place? That is to say, will the service be based on an entitlement to schools rather than on the resources that end up in the school's budget? Will a school a long way from an urban centre be disadvantaged compared with a school situated next door to the school library service office? These are important matters that need to be resolved. I very much look forward to hearing my noble friend's response.

Baroness Byford

I should like to follow the comments made by the noble Baroness, Lady David. My contribution is merely a question for the Minister. Under the new arrangements that were announced last weekend, my understanding is that schools will be able to decide what they do and how they do it. In other words, they will have the freedom to decide whether they use the school library service, whether they use other libraries, buy in books, or whatever. I should like to have clarification in that respect from the Minister when she responds, because I am still a little unclear as to what their role will be in this new concept.

5.45 p.m.

Baroness Blackstone

I should point out to the Committee that I am speaking to Amendments Nos. 158A, 158B, 158C, 158H and 164A. I believe that Amendment No. 158D will not be moved. Between them, these amendments touch on most of the fundamental issues of school funding policy. These issues are of course explored in the consultation paper Fair Funding, which we issued last week. It may be helpful, therefore, if I begin with a few general observations before I move on to the more specific questions that have been raised.

I should like, first, to stress that this is a consultation paper and that we want to hear the views of LEAs and all schools which will be affected by its proposals. It is most important that we should take them seriously. I should say also that Fair Funding which was issued last week, will, I believe, be followed up with a similar consultation document to be issued by the Secretary of State for Wales next week. It is likely that the two papers will be very similar but, obviously, the latter will take account of circumstances which will be a little different in Wales. The consultation period in Wales will run until early August and my right honourable friend will announce his decisions after that time.

Of course I sympathise with what the noble Lord, Lord Dixon-Smith, said about the complexity of many of the matters that we are debating today. Indeed, I am grateful also for his sympathy because they are indeed complex. The expression "100 per cent. delegation" is simply designed to point up a contrast with the present LMS rule. As my noble friend Lord Peston said, the present rule is very complicated and requires each LEA to ensure that its aggregated schools budget—that is to say, the total amount delegated to the schools—amounts to at least 85 per cent. of something called the potential schools budget, or PSB. At any rate, that is the position in England: in Wales I understand that LEAs are required to delegate 90 per cent. of the PSB.

I doubt if it would be helpful to take up the Committee's time with a detailed, blow-by-blow exposition of which central budgets fall within the PSB and which fall outside it. What matters is the effect of the rule. What it means in practice is that LEAs are able to retain central budgets not only for the essential core functions which they have to carry out in order to do their own job as LEAs, but also for a range of purposes which relate, in one way or the other, to the operation of the schools rather than the operation of the LEA. That is what we wish to change.

In doing so, the schools and the LEAs have to keep on the right side of the 85 per cent. line. But this still leaves a good deal of leeway. I am afraid that it leads to a situation in which some LEAs, although not all, are holding large central budgets for services which schools could, in principle, obtain from other sources and for which funding has been delegated by many other LEAs. What the "100 per cent. delegation" model seeks to do is to get rid of what one might call this twilight zone, and replace it by a rule requiring full delegation of funding for all services and activities which fall beyond the core responsibilities of the LEA.

I fear that the noble Baroness, Lady Blatch, was just a mite too sceptical about the Government's intentions in that respect. I certainly dispute with her that there has been a confidence trick. I believe that the proof will be in the pudding. We shall demonstrate next year, when they are given their new budgets, that schools will in fact have—and I address this to the noble Lord, Lord Dixon-Smith—rather more control over their expenditure than has been the case than in the past.

As many noble Lords will know, our consultation paper envisages that LEAs will need to retain four main blocks of expenditure so that they can function properly as LEAs. Of course, it is vital that they should be able to do so. Indeed, to suggest that that kind of expenditure should be removed from them—and I am sure that the noble Baroness, Lady Blatch, does not intend that that should happen—would be patently absurd and would damage our education service right across the country.

Those core areas relate to what the paper describes as "strategic management", which means the management of the LEA itself as distinct from administrative and management services provided by the LEA for its schools. I hope that I have made that distinction clear. They also relate to "access" which means, essentially, the various functions of the LEA which are bound up in one way or another with ensuring that school places are available and that pupils can and do attend. Again, that is an absolutely central function which has to be carried out by the LEA. Further, they relate to "school improvement", which we envisage as meaning the cost of preparing and implementing the programmes set out in LEAs' EDPs. The noble Baroness, Lady Blatch, drew attention to that, but EDPs are the key mechanism that the Government wish to use to ensure that standards are raised in all of our schools. Finally, they relate to "special educational expenditure", which in this context should be understood to include expenditure on behaviour support. Again, I believe that Members of the Committee will agree that that must, for the most part, be provided centrally by the local authority.

I am sure that Members of the Committee will appreciate that this is the start of a process which will lead, in the end, to the making of regulations under Clause 45. These regulations will be debated in this Chamber and will, among other things, define the kinds of expenditure which LEAs may retain centrally. I refer here to subsection (3)(a) of Clause 45. While I understand the concerns behind some of the amendments which have been tabled, it would be unfortunate if this Chamber were to try to start writing the regulations at this stage by taking detailed decisions as to what should be in and what should be out of them, especially when we are at the beginning of what should be a very important consultation process. I am sure that we shall receive a great many responses that both the Government and other noble Lords who have spoken in the debate will wish to consider carefully.

The other main issue on which a general comment may be helpful is whether quantitative limits should be imposed on the funding which LEAs are authorised to hold back. I should stress that a good deal of this funding is likely to relate to items which are not subject to any upper limit now. Moreover, some of these items—school transport is a very obvious example—would be very difficult to restrict fairly.

Nevertheless Clause 45(3)(b) enables us to introduce these limits. We do not believe that that is a power to be used indiscriminately. In our view if it is to be used, it is best used on a selective basis, in terms of the kinds of expenditure to be subject to limit. Nor is it a power to be used hastily. However, the consultation paper makes it clear—here I refer in particular to paragraph 69—that we shall be prepared to invoke this power if experience shows that there is a need for restraint which cannot be achieved in any other way.

I now turn to the amendments. Amendment No. 158A is not in fact concerned with delegation, but with an equally important issue; namely, the methods used by LEAs in calculating individual schools' budgets. This again will be a matter for the regulations under Clause 46. As the consultation paper makes clear, the Secretary of State is likely to adopt an evolutionary approach in making these regulations. Up to now LEAs have been allowed a fair amount of freedom to decide the detailed make-up of their funding formulae, so long as they comply with certain basic principles. They have had to distribute a certain proportion of the available funding on the basis of pupil numbers, and have been expected to distribute the rest on the basis of objectively-measurable criteria.

That leaves a good deal of local discretion which we want to preserve. The consultation paper states plainly that, The Government believes that there is no one right way to allocate resources from LEA-level to individual schools. Different arrangements will be right for different parts of the country". The paper also makes clear that pupil numbers can be expected to continue to play a prominent part. That is common sense.

Against this background, I turn to Amendment No. 158A. It is, I suppose, rather difficult to visualise a formula which does not seek in one way or another to take account of the factors which the amendment lists. But on closer inspection, the list looks more problematical. For example, it refers to "general educational needs". Is this intended to imply that LEAs should not take account of special educational needs? I suspect not, but the amendment might perhaps be understood in that way. It could be confusing. Formulations of this kind in primary legislation have a habit of meaning more than anyone suspected at the time of their enactment.

As the Bill stands, these matters would be dealt with entirely through regulations under Clause 46, and I hope that on further reflection the noble Baroness may agree that this is the wisest course, not least bearing in mind that the first regulations to be made under Clause 46 will require the approval of this Chamber following debate, when we shall have a chance to consider this matter in more detail. I hope that she will therefore see fit to withdraw her amendment.

Amendments Nos. 158B and 158H are concerned with the balance between funding held centrally by the LEA and funding delegated to schools, although they approach the matter in different ways. For our part, and as some Members of the Committee may have gathered from what has already been said, we want to break with the previous practice of regulating this balance by the use of overall percentage limits. This is not because we believe in delegation any less than the previous government, but because we want to bring it about in a different way: by establishing a budgetary framework in which funding follows function.

Amendment No. 158B is rather reminiscent of a proposal which we ourselves made when in opposition. As my noble friend Lord Peston has already said, it sought to restrict LEAs' central expenditure on management and administration to £50 per pupil. It was in no way intended to be a total hold back. This has now been overtaken by the proposals in Fair Funding. As currently recorded in LEAs' LMS financial statement, management and administration is a mix of core administration, which the LEA must undertake if it is to operate at all—I assume that the chief education officer has to be paid—and administrative and management support for schools. The first step, then, is to try to disentangle the strands and get the support services delegated, rather than impose a limit on the whole, and that is what we shall do. Once that has been done, the question may arise as to whether a limit should be imposed on those categories of administrative expenditure which are left with the LEA. But that, we think, must await the availability of much firmer evidence of LEAs' expenditure, based on satisfactory definitions.

Having said that, I note that the £50 limit envisaged by this amendment would apply to educational expenditure. If that is really intended, I ought to point out that LEAs currently retain more than this for SEN purposes alone. Construed literally, the amendment would make it impossible for LEAs to do their job. I am sure that is not what noble Lords opposite want. We see much greater difficulty with the idea of imposing a limit on LEAs' central expenditure as a whole, as envisaged by Amendment No. 158H. Many of the items which will quite properly be left with LEAs under the 100 per cent. model would be difficult to restrict fairly, as I have already indicated.

It follows that Amendment No. 158H, which seeks to raise the figure to 95 per cent. is even more unrealistic. In this connection I note that the previous government's 1996 proposals would have required LEAs to delegate 95 per cent. of the much smaller potential schools budget. However, the individual schools budget corresponds not to the potential schools budget but to the general schools budget.

I repeat that we are committed to delegation, in spite of what I thought was undue scepticism on the part of the noble Baroness, Lady Blatch. We will be ready to make appropriate use of the powers in Clause 45 to bring this about. But this should be dealt with through the regulations, prepared after consultation and reviewable in the light of experience. The amendments before us would force us from the outset to make what we are convinced would be an inappropriate use of the powers. I hope therefore that the noble Baroness will agree on reflection to withdraw the amendments and leave these matters to secondary legislation.

I believe the noble Baroness asked some questions about national insurance. That is not a matter of delegation but of central and local government negotiations about what the overall funding of local authorities should be in the light of changes that may have been made in an earlier budget. The noble Baroness also asked about reorganisation and about selective schools becoming non-selective. Over the past 30 years there have been many such reorganisations. The extra costs involved are always covered by local education authorities.

I turn now to Amendment No. 164A, which seeks to remove an item from the list of topics in subsection (2) of Clause 47. This subsection is concerned with the content of schemes which will govern the financial relationship between LEAs and the schools which they will maintain. Clause 47 empowers the Secretary of State to make regulations prescribing the topics which schemes must cover, and subsection (2) provides a non-exhaustive list of some of the main topics likely to be prescribed.

The item which the amendment seeks to delete is the, terms on which services and facilities are provided by the authority for schools maintained by them". I think this amendment is based on a misreading of the provision. Paragraph (e) is entirely neutral. It carries no implication whatsoever as to the nature or scale of the services to be provided. The purpose of prescribing this item in the regulations is simply to ensure that, if the LEA is in the business of selling services to its schools, that is done in accordance with the LEA's scheme. I agree with my noble friend Lord Peston that partnership is a key theme.

The reason for bringing these matters within the scope of the scheme is precisely to protect schools. Schemes will require the Secretary of State's approval, and they must be drawn up with due regard to his guidance. As I hope our consultation paper makes clear, we shall make it our business to ensure that LEAs cannot impose onerous requirements on schools—for example, by insisting on excessively lengthy service agreements, or agreements which require schools to buy a lot of services which they do not want in order to get the service which they do want. I am sure the noble Baroness would agree that that is not in the spirit of delegation and we shall certainly want to prevent that happening. I hope that LEAs would not in any case want to go down that road. I am sure that the noble Baroness, Lady Blatch, will see that as a desirable objective. In the light of my explanation, I hope that she will feel able to withdraw this amendment too.

I now turn to the amendment proposed by my noble friend Lady David. The Government understand, and are very sympathetic to, the concerns which have led my noble friend to table this amendment. However, we have some difficulties with it. First, and more generally, it tries to pre-judge a matter which really ought to be left to the regulations to be made under Clause 45. The clause itself would look strange if it were amended to single out this one service. The Bill will not have to be amended on majority voting; and there will be separate votes for primary and secondary schools.

It is worth noting that at least 40 LEAs showed their planned expenditure on library and museum services—I am sorry to say, as somebody who has long supported both types of service—as zero in their 1997–98 LMS budget statements. Either those LEAs have no central library service of the kind which my noble friend has in mind; or the funding has been delegated and the LEA provides the service on a buy-back or subscription basis. Even if it could be said that the range of learning materials in schools leaves something to be desired in some of those LEAs, I think it might be difficult to show that was true of all of them. I suspect that in some cases the schools will have very good library provision.

It is therefore difficult to accept the notion of requiring all LEAs to hold back funds centrally to support a school library service, if that is what my noble friend has in mind. But we readily acknowledge the important role played by centrally organised library services in many LEAs, and we are all too aware of fears that some of those services might be put at risk if funding were fully delegated to schools. The suggestion, as I understand it, is that the service's viability could be disproportionately affected if even a small number of schools ceased to subscribe to it. We are sympathetic to that worry.

Therefore, in Fair Funding we suggest that LEAs should be allowed to retain central funding for school library services where a sufficient majority of schools have voted for this. We have not arrived at any final conclusion in regard to the proportion; again, it is a matter upon which we wish to consult. The figure of 80 per cent. has been suggested; however, that does not have to be final. This is a consultation proposal, not a decision. But I hope my noble friend will be able to accept it as an important indication of our concern for the future of school library services, and that on that basis she will feel able to withdraw her amendment.

6 p.m.

Baroness David

Before the noble Baroness, Lady Blatch, replies to the whole group of amendments, I should like to thank my noble friend for what she has said. She obviously appreciates the good that the school library service can do. However, I must ask her whether she is not afraid that if these services are not kept with the LEA providing the money for them, they will decline further. They have declined. Would my noble friend not be very upset if that decline continued?

Baroness Blackstone

Yes; this is a decline that began some years ago under our predecessors, and which we certainly want to stem. We are examining the matter and shall be determined in the action that we take following the consultation, when we know the views of the schools and local authorities, to ensure that there is a good library service in those LEAs which wish to retain one and where the schools are in favour of it.

Lord Lucas

The noble Baroness's reply raises a number of questions, and this might be a good point at which to raise them, rather than troubling the Committee with them later. The noble Baroness talked about waiting to see how the pattern of local authority expenditure develops in relation to the items which it is allowed to retain under non-school expenditure and the local schools budget. Will the figures in the categories set out on page 9 of the consultation paper be published and available to us in this House as part of the local authorities' budgeting procedure and reports to the DfEE? Shall we know at a fairly early stage what levels are proposed for strategic management expenditure and other items set out in the document, or are they to remain private between the Government and local authorities? What level of information shall we receive as to how the pattern of expenditure is developing?

How will the figures that are to be provided be audited? There is a mention of that in the consultation paper; however, I believe it refers only to auditing the local schools budget, whereas an enormously important aspect in understanding and controlling expenditure is to make sure that the local authority is putting into the general schools budget all the expenditure that it should be. There has certainly been much avoidance of LMS by shoving off schools expenditure under other general headings within the local authority, and money which should belong in schools budgets has been spent in a way which does not appear in the schools budgets. It would therefore be nice to know that that level, too, was audited, so that we have genuinely comparable figures.

The question of music was raised by my noble friend Lady Blatch. This area causes me concern, too. How, for instance, under this proposal, will the specialist music course at Pimlico School be funded? The school looks after a number of London boroughs and provides a specialist course to which children travel from 10, 15 and 20 miles away. How will that sort of course be funded under the proposed arrangements?

To return to a matter that has puzzled me for a long time, what is different about school transport? The idea that a school is not capable of paying a bus company for a bus seems enormously strange. There is a structure of school transport which could be immediately delegated. The schools could merely buy back what is there, and there would be no difference in total cost or expenditure. The system might then develop in a way that was much more cost-effective and which made use of a school's ability to do things in ways that are more innovative and improve its use of money in the same way as happens in other parts of the school budget. What is it about school transport that makes that impossible?

Baroness Blackstone

I shall try to answer all of those questions. Regarding strategic management expenditure, it is right that we should try to provide as much information to Parliament as we possibly can. There will be enormous variations in what that will amount to according to different authorities. However, we can certainly try to provide as much detail as possible on the overall amounts that are likely to be spent in this area. I shall come back to the noble Lord on the likely timing for that. As yet, it is not fixed.

On the question of auditing, local authority financial statements are already audited by the Audit Commission. That will continue. LEAs are under fairly strict auditing arrangements, so there can be no question of schools being audited but LEAs not.

The noble Lord asked about school transport. I think the answer to his question is a commonsense one. There may well be children living in villages quite a long way from the nearest secondary schools but the children may go to a variety of different schools. For each school separately to provide transport to pick up children from 10 different villages, who may be going to three or four different secondary schools in a town which serves a big rural area, would not make much sense. I think the answer to the question is that, for the most part, school transport can be provided more cheaply and effectively if it is provided collectively.

Lord Peston

I am sorry to interrupt my noble friend. As someone who has moved back to a rural area, I have become very sensitive to rural issues. It seems to me that school transport is different from other matters for economy-of-scale purposes. From my observation of what happens in practice, I believe that the noble Lord, Lord Lucas, is right. A local authority does not usually use its own transport; it buys it from the private sector. It therefore meets the objective, anyway. I believe that the noble Baroness, Lady Blatch, referred to returns to scale. Certainly, it was referred to. I believe that this is a straight returns-to-scale phenomenon. I must say to the noble Lord that, although I no longer have children of school age, I am at least as sensitive to the needs of school transport as anyone could be.

Lord Lucas

I cannot see the difficulty in schools co-operating with each other to provide transport. We are in an age of co-operation. Much co-operation is encouraged by the Bill. For the rural areas that I know, the picture that the noble Baroness paints is completely wrong. School transport from the local area around Winchester goes to one school; it does not go to the others. The local authority will not provide transport to any other than the designated school. As far as I know, that pattern is common throughout the country. I am not aware of any local authority which provides rural transport to all the secondary schools in a town so that parents have a free choice. I should be delighted if the noble Baroness could inform me of local authorities where that is the practice; I do not know of any.

Baroness Blackstone

I think perhaps the noble Lord, Lord Lucas, misunderstood what I said, or perhaps I did not make it clear enough. The local authority provides transport across the authority for all the schools. It may not take individual children from particular villages to different schools in the town to which they are going. It is a matter of economy of scale. Maybe the noble Lord is right; maybe in the longer term this is something that could be delegated to schools. We should not be ideological about a matter of this kind. It is a matter of what makes good, practical common sense. If, on consultation, we find that those who have to make decisions about these matters share the view of the noble Lord, Lord Lucas, and can demonstrate that it would be cheaper, more efficient, more effective and more sensible from the point of view of the consumers—in other words, the parents and the pupils—and of the schools, in relation to how they make their arrangements, to provide transport in that way, I see no particular reason why that should not be considered. However, I suspect that the arguments will fall in the other direction.

6.15 p.m.

Lord Lucas

The argument of economy of scale applies to almost all these bits of funding which are being delegated. The local authority has always said that it can buy school books more cheaply and that is why it should do so and distribute them to the schools. Much of the success of LMS has been in proving that many of the arguments about economies of scale do not apply in practice because an individual school can use the money much more effectively, even if it has to pay a little more for the lesser quantity that it uses. This is a side issue. I shall not continue to burden the Committee with it.

Lord Tope

I wished to hear the Minister before intervening briefly. The Minister has demonstrated what those of us who have some experience of these matters know already: that this is an enormously complex subject and not well-attuned to simplistic slogans about how much delegation there is. The noble Baroness, Lady Blatch, was right to ask at the beginning: a 100 per cent. or 90 per cent. of what? This is a difficult issue. There was a little bit of, "Who thought of this first?" and "Who is keenest on delegation?" It was suggested first that it was old Labour, then that it was new Labour, then that it was really the Conservatives. I need to put on record that it was actually the Liberal Democrats who thought of it first, and, indeed, as I am certain the noble Baroness, Lady Blatch, will remember, introduced it first, not far distant from her area.

Baroness Blatch

I hope that the noble Lord will give way. If the noble Lord is claiming that the Liberals introduced this in Cambridgeshire in the early 1980s, I ask him to go back and examine the books. I was the leader of the authority; I and my Conservative colleagues introduced it, and we were the first in the country to do so.

Lord Tope

I readily accept that I asked for that. I shall not pursue the matter now. We have already been down enough byways, rural or otherwise, tonight. I simply wanted to put the matter on record.

Let us accept that all of us favour the greatest possible delegation. It is what it means and what effect it has that is all-important. The Minister was right on this occasion to say that we must await the results of the consultation, which has only just begun. It is consultation we sought when the Bill was in the other place, and I am pleased that it is taking place. We need to await the results. LEAs, schools and others will have useful and important points to make. It is too early, and probably not necessary, to be too prescriptive on the face of the Bill. In fact, I believe it would be positively dangerous to do that. I shall return to that point.

It is said that schools were delighted to know that there would be greater delegation next year. I am sure that, on the whole, that is true. I am sure that schools are delighted to know that they will have more money next year; it would be remarkable if they were not. But it remains to be seen how much money they will have when they have to buy back services. Whether from the LEA or anywhere else, they are going to buy back services. In my experience, most schools, head teachers and governors know enough about the complexities of the matter not to think that a great bonanza has suddenly been unlocked simply through greater delegation. It has not been, and will not be.

Not all schools welcome delegation. I believe I have mentioned before in this Chamber that I am a governor of a junior school with about 300 pupils. Of course, the principle of delegation is welcomed, but the extra administrative burden and buying back services, whether from the LEA or anywhere else, make my fellow governors wonder whether it is worth their time and worry. While a larger secondary school, with perhaps a larger and more experienced governing body, might take it in its stride, and indeed welcome it, that is not necessarily the case with smaller schools, which are usually primary schools. Let us not be too carried away with the rhetoric that all of this is good and that anyone who has reservations about it must necessarily be wrong. That is not the case.

I worry about the Government being over-prescriptive. What is most important is that the balance and the relationship between the schools and the LEA should be right and agreed mutually between them. I readily accept that that is not the case now in all LEAs. If schools generally feel that they are happy to have less delegation, I believe that that should be a matter between the schools and the LEA. Our role as legislators is to ensure that neither party—more usually the schools—is in any way disadvantaged in reaching that agreement. As to whether it is right for government to prescribe that it should be 90 per cent., £50 per pupil, or any other figure, that suggestion makes good headlines but bad practice on the ground.

I want to say a few words on the amendment. The noble Lord, Lord Peston, dealt with Amendment No. 158A extremely well, if a little unkindly. He turned it on its head and asked how one could have a formula that did not include those matters. I wondered about that and thought: why only this? Why is there no reference, for example, to special needs, to English as an additional language and to any number of other factors? Indeed, any number of other factors may be in a formula. The danger of putting some obviously right things on the face of the Bill is that one then wonders about the things that are equally right, but are not on the face of the Bill. For that reason alone I feel not only that the amendment is unnecessary, but also that if it were to be on the face of the Bill, it could be dangerous.

I want to say a few words also about the amendment of the noble Baroness, Lady Blatch, in relation to school library services. That is something which I am sure we all strongly value. We all view with concern the decline in school library services in most areas—some much more than others—for understandable reasons. I do not want to provoke the noble Baroness, Lady Batch, again, but school budgets have been under pressure in recent years—I make that as neutral a statement as I can—for all sorts of reasons. LEAs and schools must look at what they spend and where they have to make unwelcome cuts, and I am afraid that the school library service has too often been a victim of that.

The Minister illustrated the difficulty of those matters when she acknowledged that in some of the 40 LEAs to which we were referring it may be a matter that is being dealt with and shown in a different way. The point that that illustrates, which I come across time and again, is the importance of comparing like with like. One of the dangers of just looking at statistics produced in a column for every LEA in the country is that behind those figures are a lot of stories which do not reveal the whole picture. That may attract one's attention and require one to look behind the figures, but we need to do that to make sure that we are comparing like with like; that one LEA is including in those figures the same factors as another LEA. That is often not the case. The illustration involving the library service is just one aspect of that. It happens, for example, with youth services and all sorts of other factors.

The Minister is right to approach this matter with considerable caution. I am pleased that the consultation is taking place. There is a general feeling in all parties and among government and LEAs in favour of greater delegation. I do not believe that that is an issue any more; what is an issue is what is delegated and how it is delegated. In that regard we are right to proceed cautiously with proper and full consultation and to be no more prescriptive than we need to be.

Baroness Blatch

I am grateful to all those who have spoken because it was important to try to elicit information. My starting point was 100 per cent. because that focused everybody's mind on the fact that all money for LEAs will be given to schools and they will purchase back. As the noble Baroness and other noble Lords said—indeed, the noble Lord, Lord Tope, just repeated it—it is not as straightforward as it seems and the consultation paper makes that clear.

The merits of what local authorities should be responsible for needs reviewing constantly. One needs to ask whether what they are doing is important; whether it could be done in another way and whether the schools themselves could be doing it. That is all part of the delegation budgetary debate. My noble friend Lord Dixon-Smith will know—his comments showed great understanding—of the debate that goes on within local authorities.

When we devised the early financial delegation system, our starting point was whether we had to do everything as a local education authority. I can remember so often when we were adjusting budgets at central level that schools would say, "If you would give us the money, we could make the policy decisions rather than making one policy decision at central level which pleased some schools and not others". The noble Lord, Lord Tope, is right when he says that that is no longer an issue and I am pleased about that.

The truth is that there are additional expenditure items for local authorities to take on board. There are so many in the Bill that I do not intend to go through all of them. The ones we have discussed so far include the management of the class pledge—an interesting report came out today which will add a little more fuel to that debate. But the organisation committees and the adjudicator will have to be funded by education authorities. Even if the matter was delegated to schools it would not make any difference. It is a cost that would have to be paid and therefore there would not be much choice on the part of individual schools.

The noble Baroness, Lady David, referred to the special treatment of grant-maintained schools. That has been almost a fetish for the Labour Party. It is unfortunate because grant-maintained schools were not specially treated. They volunteered to become grant-maintained schools. They received a sum of money from central funds which was commensurate with the extra responsibilities that they had. It was not just a financial delegation; it was the responsibilities that went with it, including being completely responsible for curricula matters and curricula development. They were accountable to parents, governors and external inspectors without any intervention from the local education authority. The delegation we are discussing does not go that far. The LEA interventional powers are back in the Bill and will relate to the grant-maintained schools as they become foundation schools. Grant-maintained schools received those funds.

I want to ask the noble Baroness a question which will be important in the context of this debate. Grant-maintained schools as they exist at the moment receive as a delegated sum of money from their local authorities 100 per cent. of their share of central moneys. They stand completely outside of the LEA. Some work well with the LEAs and the purchasing, but some do not.

Is the new system intended to bring all other schools up to that level of delegation? In other words, can we expect under the new system that grant-maintained schools—as they are now and when they become foundation schools—will be funded at least at the level at which they are presently funded, possibly even greater if there is more money for education, and that all other schools that are not receiving those delegated funds, where they opt for them, will be brought up to the level of grant-maintained schools?

That is an important point. For grant-maintained schools there is an issue of phasing. The noble Baroness talked about phasing this in; that it will not all happen in one fell swoop because it is an extremely big exercise, and I accept that. But does that mean that grant-maintained schools will lose the degree of autonomy they presently have in terms of financial autonomy? Will they go down to the level of whatever the phased level is, and then move back up to a level of delegation as the system is phased in? Or will grant-maintained schools keep their level of financial delegation while the phasing in applies to the community schools and what will be new community schools into foundation schools? That is an important point.

A point I did not make, but which I feel I should make for the record—there are a number of points in the paper with which I agree—relates to insurance. It was dealt with extremely well in the paper. It is a big issue for local authorities and schools. Under a delegated system I am sure that the schools will have much to contribute in the course of the consultation period, which will be helpful. I agree also that there has been a real attempt at transparency. I feel that it will be a more transparent system and I welcome that also. Like the noble Baroness and her colleagues, we have all been concerned about those local authorities which appear to be able to salt away money which ought to go to schools without our being able to find it.

The confusion will arise as people read the words on the page. They will be reassured by the document, as they have been already, but until the local schools budget is known, until schools have some notion about what it is and what it contains, and certainly until figures are put upon it, nobody will be in a position to know what the 100 per cent. will be measured against. It is only when they know what the 100 per cent. will be measured against that they will be able to make a judgment as to whether it is a good or a bad thing.

The noble Lord, Lord Tope, put his finger on another point, which is that what matters is the cash that will go into the schools at the end of the day. Will the level of funding that goes into schools be at least commensurate with the present level of funding, or will it be greater? All the expectations are that it will be much greater because that is what the rhetoric has been from the Government.

The noble Baroness referred to national insurance. That is not a matter of delegation, but a matter for the schools. They have to pay it, even without the level of delegation which the Government are talking about. At the moment, schools pay the salaries of their teachers and if national insurance is an extra cost to them, that cost has to be met. This is definitely a matter for delegation. If it is not, then schools will have to meet it out of their internal funds. Every pound they spend on making up the deficit of national insurance costs will be money that will come out of the classroom.

The noble Baroness did not go far enough on grammar schools. My understanding is that within a relatively short time of this Bill receiving Royal Assent, the grammar school provisions will be brought into play. Once a petition has taken place, and a ballot has been successful, so that a school loses its selective educational system, then the local authority has to move straight in and produce a reorganisation plan. The capital costs of that plan, and the revenue costs that flow from it, will pre-empt all its capital budget, whether or not it is a priority for that local authority.

My understanding is that Trafford is concerned about this. It is the one authority that appears to have looked at this issue. Just one ballot will take the grammar schools out of the LEA. The resulting reorganisational costs to that authority will be extensive indeed. As the Bill progresses through this House we shall want to come back with more detailed questions about that.

The noble Baroness did not refer to the Oratory School special music provision, and I would be grateful for a letter about that, and the way in which that fits in to the proposals in the paper.

The national minimum wage was also not mentioned. That will be a cost on local education authorities. One thinks of school cleaning and school catering. There will be costs there. Who will meet them? Are they part of the system? Will that be additional? Does that come within the present limits? We simply do not know.

I was worried about lines 39 and 40 on page 38 of the Bill because that gives more scope for setting the kind of conditions that inhibit the freedom that I believe the Government genuinely want and which we, too, would want.

As to transport, there are some good examples of individual schools and groups of schools arranging good deals on transport. I am not always convinced, having come from local government, that local government necessarily drives the hardest bargain. There is no greater incentive for driving a hard bargain than when you are dealing with your own money. Local authorities are dealing with someone else's money and when a school is driving a bargain it is dealing with its own money.

On the point made by the noble Lord, Lord Tope, about statistics, I think that will be a difficulty as time moves on, where one local authority is delegating money for libraries and another is not. I agree with the noble Baroness that it will be possible, over time, to look at library services or music services in an authority, however they are paid for, whether that is through delegated moneys or paid for centrally, and make a judgment about the quality of those services, and the amount of money going into them. The source of money will be known; it will be there and it will be transparent. That is an issue. The statistics will be difficult to start with but, over time, I think it will work.

We have not had enough information about the timetable. I am concerned that this consultation paper may not be finished until July. If so, when are we likely to see the regulations that will flow from it and that will underpin the LEA's allocation system? More importantly, when are we likely to see the LEA schemes which will follow that? When will the schools have some idea of when the system will operate in their authorities? When will they know the sums of money that will be available?

6.30 p.m.

Baroness Blackstone

I meant to answer those important questions earlier. If I intervene straightaway it might be helpful.

The Government hope to be able to reach decisions after the end of consultation in the early autumn—around late September—and that regulations will be made in late October or early November, and that the schools will get their indicative budgets in early January. I hope that is helpful.

Baroness Blatch

That is helpful. It will be very important for LEAs to know that as they have to have their budgets set in concrete by, March or April. It is at that time that people will have a real understanding of the position.

The purpose was to solicit information, and we have had quite a lot. I am grateful to the noble Baroness for that. We need a good deal more. I accept all the chastening remarks that were made about my first amendment.

It is important to note that some local authorities weight pupils by age, some start by counting them, and only a small percentage of the budget is based on numbers; and sometimes other authorities base a very large percentage of the budget on numbers. It is a question of the weighting given to all these factors. The amendment refers to the education needs of children, and subsumed within that are all the education needs that have to be met, including special education.

I finish where I started. When we know what the 100 per cent. is 100 per cent. of; when we know the local school's budget and we have some understanding of the individual school's budget, it would be helpful if the noble Baroness were to come back on one important question which I raised on grant-maintained schools. They enjoy 100 per cent. delegation of central funds now. Will the other schools be phased to come up to that level or will grant-maintained schools, as they become foundation schools, go down to whatever the phased level is at any given time and then be phased up to what is deemed to be the 100 per cent. funding level as the system beds in?

Baroness Blackstone

The Government's intention is that grant-maintained schools should stay broadly at the same levels of funding as they are at present. I hope that answers the noble Baroness's question.

Baroness Blatch

It does, but it means that they will have more central funding and, therefore, more of the central services which they purchase themselves for quite a long time until all the other schools come into play.

There is another important question which flows from that. If there is a ballot in a local authority, and 80 per cent. of the schools vote to have central services rather than individual purchasing, does that mean that the authority will go over to providing services centrally and that any grant-maintained school that may be in the 20 per cent. that opted for individual purchasing will lose that control?

Baroness Blackstone

Yes, it obviously would mean that, because the majority of schools, 80 per cent., voted in favour of doing something in a particular way. We would expect a minority of schools to accept that that was the view of the majority of schools. That seems to be the only sensible democratic way of proceeding.

Baroness Blatch

I find that deeply unfortunate. If 20 per cent. of schools—and in many counties that is a lot of schools—have opted to be individually responsible for their own finances and the management of their own schools, but are forced to hand the money back to the local authority, on the one hand, that seems to fly in the face of individual local financial management. On the other hand, if 80 per cent. of schools in an LEA opt for central services, that is the economical, viable figure; then what is the problem about the other 20 per cent.? The LEA has its viable figure. It has 80 per cent. of schools opting for the LEA to provide services. What is the threat from the other 20 per cent.? What stands in the way of that? We shall press the noble Baroness further on that.

I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendment No. 158B not moved.]

Clause 44 agreed to.

Clause 45 [Determination of LEA's general schools budget and aggregated schools budget.]:

Baroness Blatch moved Amendment No. 158E:

Page 37, line 2, leave out (""general") and insert (""local").

The noble Baroness said: This is a tease. This amendment tries to do the Government's job for them. The Government have now rendered these clauses invalid. At some point they have to change. They have to be brought into line with the proposals. We have a conundrum. We have a consultation paper which was issued this week. It is out for consultation and it is not due back until the end of July. I believe that the Government expect this Bill to have Royal Assent by then. Almost as the ink is dry on the Royal Assent, this Bill will be inaccurate.

I have to express some serious disappointment. We have rafts of technical amendments to the changes being made to this Bill. We had some before us on Monday and we have some again today. To incorporate the technical changes the counsel and officials must be extremely busy rewriting this Bill as we go along. We know that these clauses will change and we know what the nomenclature will be. My attempt may be feeble; I do not know. When the question was asked whether the clauses would be rendered redundant if the new system was eventually adopted, the department said that the changes were only ones of nomenclature and that nothing else would change. I could have said "Amen" to that, because the system of delegation is well established and will continue.

To come back again to the point made by the noble Baroness, Lady David, the schools which became grant-maintained schools did so voluntarily. All of the other schools had the opportunity if they had wanted to but they did not take it. Under this system the grant-maintained schools will be foundation schools or will have a chance to be foundation schools and/or voluntary-aided schools. The other schools continue to have an option. They can opt to stay with the LEA for everything or they can opt to become self-governing. So nothing changes—only nomenclature. This is my attempt to change the nomenclature. I beg to move.

Baroness Blackstone

I am grateful to the noble Baroness for doing the Government's work for them. Tabling these amendments, which seek to bring the terminology of the Bill into line with the terminology used in our consultation paper, is most helpful, but I invite her to withdraw them. However, that is simply so that we can check the Bill for any other instances of the old terminology which will need to be changed. Having done that, we will ourselves bring forward appropriate amendments along these lines at Report.

I should stress that the change in nomenclature does not in itself affect the definition of either of the concepts which are being renamed. The local schools budget will be what Clause 45(1) currently says a general schools budget will be. The individual schools budget will be what Clause 45(2) says the aggregate schools budget will be.

Perhaps I may add a word about the reasons for the changes. "Aggregated schools budget" is really a rather mystifying term and the new label "individual schools budget" characterises it much more clearly. I suspect that the noble Baroness agrees with that. It is the quantum or total amount which is available to be distributed to the individual schools as their institutional budgets. As to "local schools budget", that simply brings out that this is the local education authority's schools budget. Although "general schools budget" is understood by those who are initiated in all this, I am not sure that it conveys very much to others. We will be bringing forward amendments at Report stage to put all this on the face of the Bill.

Baroness Blatch

On the basis of that, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 158F to 158J not moved.]

6.45 p.m.

Lord Swinfen moved Amendment No. 159:

Page 37, line 20, at end insert—

("( ) The classes or descriptions of expenditure referred to in subsection (3) above shall in particular include those that relate to—

  1. (a) the local education authority's duties towards children with special educational needs;
  2. (b) services provided by the local education authority to reduce exclusions; and
  3. (c) services provided by the local education authority to increase the inclusion of children with special educational needs in mainstream schools.").

The noble Lord said: In moving this amendment, I wish to speak also to Amendments Nos. 164 and 165. I say at the outset that these are probing amendments.

The purpose of Amendment No. 159 is to ensure that local education authorities are able to hold back from the general schools budget sufficient expenditure to enable them to meet their duties towards children with special educational needs, to provide services to reduce exclusions and to provide services to increase inclusion. The purpose of Amendment No. 164 is to ensure that local education authorities can build into their schemes for delegation the requirement that schools provide information back to them on particular aspects of their expenditure. The purpose of Amendment No. 165 is to ensure that the amount of money delegated to schools to meet special educational needs is made clear and to ensure that the local education authority publishes an expected level of expenditure on SEN. I should like to take the opportunity to thank the noble Baroness, Lady Blackstone, for kindly writing me a helpful letter after the Second Reading debate.

The Government's consultation paper, Fair funding: Improving delegation to schools, has only just come out and I have given it only very swift perusal. However, it is important to ask for some assurances about what is proposed in that paper. I should say that I am briefed on these amendments by the Special Educational Consortium. As this is only a consultation paper, it is quite obvious that there could be changes before regulations and guidance are produced.

I think there is little doubt that the proposals will make much more transparent a number of areas where LEA expenditure has not previously been so accessible to scrutiny. That is to be welcomed. There will, I understand, be clear blocks of expenditure within the local schools budget, one of which would be for special educational expenditure. Within this, it appears that LEAs will be able to fund special educational needs support services and services concerned with the monitoring of schools arrangements for SEN provision, as well as funding, to promote inter-school co-operation in relation to SEN, or inclusive of pupils with SEN". However, it is less clear how preventive work at earlier stages of the code of practice might be funded, as all funding for stages 1 and 2 will be delegated to schools, as will "general" funding for stage 3, "general" being funding for costs other than the support services and "large and unpredictable pupil-specific costs", which could include stage 3. It would be excellent to have some clarification from the Government, particularly on preventive work at the earlier stages which is emphasised in the Green Paper.

With regard to Amendment No. 164, it does not appear that an arrangement for schools to report back on different aspects of their expenditure would be built into the new arrangements. Clearly, we would want LEAs to be able to require schools to report on their expenditure on special educational needs. It may be argued by the Government that a combination of the schools' SEN policy requirement and monitoring by the LEA could achieve this. The latter is proposed as a function for which LEAs can retain funding. But in respect of the former—schools' SEN policies—these are notoriously weak, according to Ofsted in what it says about the allocation of resources, and this would therefore make for a weak link in the chain. Again, it would be helpful to have some clarification from the Minister. What information might local education authorities be able to require from schools?

With regard to Amendment No. 165, in the consultation paper there appear to be arrangements that will meet these concerns. Paragraph 5 in the appendix on special educational needs says: Without wishing to depart from the principle that a school's delegated budget is an unhypothecated amount, the Government considers it important that each school should be clear what levels and kinds of special need it is expected to meet from its delegated budget, and how much of its budget is notionally attributable to SEN. This is not always the case at present. The intention is that LEAs' schemes, and the revised reporting statement described in paragraphs 83–88, will ensure that LEAs provide each school with details of the way in which its notional SEN budget has been calculated". In theory, such information could be available now, but it is difficult for schools to pull it out of the morass of figures in the statement that they receive from the LEA. It would be helpful to know what specific arrangements are proposed that might make it more clear. Would a separate letter be issued to schools? Would it state how much of its budget is notionally attributable to SEN? The concern is that if this information is embedded in other figures it will continue to be unclear. I have tried to précis my speech. I am still not very good at it. I was not good at it at school, but I hope that it is one of the subjects that will continue to be taught at school both for verbal and written work. I beg to move.

Baroness Darcy de Knayth

As I have put my name to this amendment, I give it my wholehearted support. The noble Lord, Lord Swinfen, has already covered the matter very thoroughly. As he said, Amendment No. 159 ensures that LEAs can retain enough money centrally to provide preventive SEN services. It is very important to hold back enough money to deal with helping in areas outside the school's competence to judge what is needed. The Special Educational Consortium says that it is aware that nearly all initiatives that are concerned with helping children with, for example, behavioural difficulties, are funded from outside.

It is interesting that on the chart of the Centre for Studies on Inclusive Education, two of the LEAs which are highest on its list of those providing an inclusive mainstream education for children with special educational needs, are Newham and Cornwall. They are at the bottom of the league of the delegators. It is very necessary to have support from the LEA. Newham is very successful because as its numbers of pupils included in the mainstream have increased, so, interestingly, its number of excluded pupils has decreased.

As the noble Lord, Lord Swinfen, said as regards Amendments Nos. 164 and 165, it is essential to be very clear what is delegated for SEN and just how it is being spent. Ofsted's report remarks on the confusion and lack of information. My noble friend Lord Rix also has his name to these amendments. He has asked me to give his apologies as he has had to go to an important meeting. As he has sat and spoken alone from these Benches far into the night just lately, and I have not been here at all, I am sure that the Minister will agree that he need send no apology. When speaking in earlier debates he spoke about the anxiety that if money is delegated to help pupils with special needs, it might be bundled into one large parcel and be spent on other things.

In moving this amendment we hope that local authorities and schools will have clear strategies on how money for pupils with special needs will be allocated. I hope that the Minister believes that these amendments are indeed sensible and will be able to respond positively to them.

Lord Addington

I support these amendments. Amendment No. 159 is effectively the substantive amendment. I read them as being about ringfencing for a vulnerable area. As the noble Baroness, Lady Darcy de Knayth, has said, if one has a central body of money it will always be fought over. There is the experience of Parliament and the Treasury when everyone tries to get a certain amount of money and the money is pulled in various directions. That is a much bigger example of what happens when everyone is competing for money.

The provision for special educational needs is often seen as a Cinderella service. It often depends on having teachers of sufficient power and personality within a school or local education authority as to how the funds are allocated. This type of ringfencing will mean that it will be seen where the money goes.

As the noble Baroness also mentioned, if one deals with educational problems it is very likely that one will reduce the number of exclusions because social problems often arise from educational problems. There may be someone in the classroom who is not coping well with the situation because he has an education problem. If it is not dealt with or it is dealt with very late, one has a pattern of established behaviour which is necessary for basic survival in the classroom among the children themselves. That means that the particular child will try to disrupt the classroom to avoid having to face up to the work level. That is a pattern which is accepted by virtually everyone who has anything to do with work in this field. If this kind of amendment or approach is adopted, it will be one step further towards making sure that the correct resources are spent on what was intended in the first place.

Lord Whitty

I apologise to the noble Lord, Lord Swinfen, that I was momentarily out of the Chamber when he began his speech. That was partly due to the fact that the noble Baroness, Lady Blatch, speeded up dramatically in dealing with the last batch of amendments compared with earlier ones. It was also partly due to the fact that I bumped into the noble Lord, Lord Rix. He conveyed his own apologies, but I agree with the noble Baroness that that was completely unnecessary. We know of his deep interest in this area and I am sure that he would have wished to be here to move this amendment.

As the noble Lords, Lord Addington and Lord Swinfen, have said, much of this matter is to do with transparency so it is clear what are the levels of funding on special education and where they fall. We thought at some length about the place of SEN in the new funding framework. As the noble Lord, Lord Swinfen, said, the consultation document has a quite substantial appendix which deals specifically with this point. The final arrangements will depend to a large extent on the feedback to the proposals. In the meantime I hope that I can give some reassurance on the points raised by noble Lords as regards the objective and the way we believe SEN expenditure should be covered in the new situation.

The regulations to be made under Clause 45 will specify categories of expenditure which can and must be retained centrally by LEAs as opposed to being delegated to schools and place limits on other conditions concerning the amounts so retained. That will be dealt with by regulation, but this amendment seeks to ensure that certain SEN-related categories of expenditure are identified explicitly in primary legislation as being candidates for retention. Amendment No. 159 deals also with exclusions which we shall debate later in connection with another group of amendments.

Our whole approach to this matter under Clauses 45 to 51 is to construct in primary legislation a framework within which regulations, and not primary legislation, will be used to set out the detailed requirements. The Government's intention on this is clear as set out in the consultation paper and particularly in the appendix. As regards SEN, it is based on the view that responsibility for pupils with special needs is shared between schools and LEAs. Therefore, it is absolutely clear that the LEAs need to retain a significant amount of the funding centrally. Responses to the consultation paper will inform what are to be the final details of our approach, but it is clear that some of the expenditure on SEN will be delegated and some will be retained centrally. Putting that in regulations, of course, is a significant improvement on the present situation whereby the control of items retained centrally by LEAs is dealt with entirely by administrative action.

Under these new proposals schools will have responsibility and funding to meet most of the needs of most pupils with SEN. That is consistent with the SEN code of practice which refers to stages one to three being school-based. As the noble Lord said, the funding of stages one and two will be largely delegated and the funding of stage three will be partly delegated under these proposals.

It is also clear that the intention of Section 317 of the Education Act 1996 requires schools to use their best endeavours to secure that a SEN provision is made. However, we recognise that there will be circumstances when a school needs extra funds beyond what it can be expected to find from its budget to meet the needs of a particular child with special educational needs. The LMS consultation paper envisages that funding may be held back to meet specific or unpredictable needs and it allows LEAs to retain funds for support services for SEN. That will ensure that LEAs are able to meet schools' reasonable requests for support. Local education authorities can therefore hold back funds. There are measures to promote inter-school co-operation in relation to SEN, to promote the inclusion of pupils with special educational needs into mainstream schools and to provide for behaviour support.

I hope that what I am saying, and what is said in the consultation paper, will demonstrate that the Government are fully aware of the need for LEAs to retain some funding centrally for SEN and related purposes. Our approach to the drafting of regulations, as set out in the consultation document, will be informed by the feedback to that document.

Amendment No. 164 would add a specific provision that the regulations could require schemes to specify information to be provided to the LEA about the use of a school's budget share. I believe that that point also is covered by the Government's approach. There are already requirements on schools to do that. Although some have taken the view that the existing regulations are inadequate, the proposals in the consultation Green Paper should improve the situation.

We agree that schools need to know what is provided in their budget for SEN purposes. The regulations we shall be making under Clause 51, to which we shall come later, will specify the form of budgetary statements to be published by LEAs. They will be able to include a requirement that the funding formula used in relation to SEN should be fully spelt out in schemes for financing schools. In other words, schools will have made clear to them how much of their budget is for SEN purposes. Paragraph 5, the final paragraph of the appendix to which reference has been made, accepts that degree of hypothecation in the budget regime. So I believe that we have met that point.

Although we do not accept that this should be spelt out in primary legislation, I hope that what I have said, and what is said in the consultation document, indicates that the objective which lies behind the amendment is shared by the Government. The final form of the provision will be based very largely on the strategy set out in the consultation document and on the feedback to it. I believe that the regulations will meet most of the concerns expressed in this debate. On that basis, I hope that the noble Lord will withdraw his amendment.

7 p.m.

Lord Swinfen

I said at the beginning that this was a probing amendment to ascertain the Government's position and to seek reassurance. The noble Lord has, on the whole, given me the reassurance that I sought. However, if I may, I shall reserve my position because once my advisers and I have read and studied the noble Lord's response it may be necessary for me to return to the matter to seek further reassurances and make certain that we are on the right lines. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 160 not moved.]

[Amendment No. 161 had been withdrawn from the Marshalled List.]

On Question, Whether Clause 45 shall stand part of the Bill?

Lord Lucas

Many of the matters that I wanted to raise on the Question of clause stand part have already been covered. If the noble Lord, Lord Whitty, can tell me that the information for which I asked earlier as to what data will be provided, and when, on the breakdown of the budgets of individual LEAs, and what work will be done by the Audit Commission or anyone else to ensure that the figures provided are consistent and comparable, I shall be delighted to withdraw any opposition to this clause standing part of the Bill. Perhaps the noble Lord can provide me with such information by way of a letter before Report stage.

Lord Whitty

Perhaps the noble Lord and I can have a word about exactly what information he will require before Report stage. I shall be happy to assist him.

Clause 45 agreed to.

Clause 46 [Determination of a school's budget share]:

Baroness Blatch moved Amendment No. 161A:

Page 37, line 24, at end insert— ("( Every maintained school shall have the right to receive and have control over its full share of the individual schools budget.").

The noble Baroness said: This is an amendment about which I feel extremely strongly, particularly given the reply of the noble Baroness a moment ago about grant-maintained schools which wish to continue to manage their own affairs but which will lose that right if they happen to be in an authority where most schools vote not to become self-managing. It is not inconceivable that that will continue to be the case. The noble Lord, Lord Tope, rightly said earlier that even when schools were completely free to opt to become grant maintained, many considered that option positively and then quite positively decided that they wished to remain within the bosom of the LEA. It is also conceivable that the economy of scale argument will be used persuasively by LEAs.

I return to the example of the Oratory School which is in an authority where 80 per cent. of the schools could easily vote to stay with the LEA. The Oratory School has proven beyond any doubt that it is able to manage its own affairs, but it may not be allowed to do so. That could happen in any other authority.

Grant-maintained schools have now become accustomed to running their own affairs. What will happen to schools in the foundation school category which, over time, build up expertise and are successful at, and philosophically enjoy, managing their own affairs? Eighty per cent. of schools in an authority may create a block of economically viable schools for which the LEA is to run the services. But are they then to deny the other 20 per cent. their right to be self-managing for no better reason than saying, "If the LEA controls 80 per cent., it might as well control 100 per cent.?"

The amendment is now crucial. My understanding is that grant-maintained schools have enjoyed self-governing status. I believe that one of the reasons they have gone along with what the Government have been saying about foundation schools—I think that they are wrong; I do not think that they should have been quite so trusting—is that they believed that at least they would continue to be self-governing, but under the foundation school system. There is now a proposition that if 80 per cent. of schools decide that they would like to remain with the LEA, all schools would have to be subject to central provision from the LEA. I know that that is still a proposition and that the paper is out for consultation, but I think that it is now a point of principle that we must establish the right of every maintained school to continue to determine its own affairs. I am not speaking only about grant-maintained schools. I use grant-maintained schools as an example simply because they have visibly proven their worth at running and managing their own affairs. Any school in the maintained sector which opts to have a delegated budget and makes a success of it should continue to enjoy the right to run its own affairs.

If that cannot be guaranteed by the Government, we must question many of the things that have been said to the grant-maintained sector. The Government have said, "Don't worry; under the foundation school system you will continue to enjoy delegated functions and the system of self-governing at which you have been so successful." However, we now know that the Government are also saying, "That is subject to the other schools in your authority not opting for self-governing status".

The current system is voluntary. Any school in the land may opt to become grant maintained. By the next stage of the Bill I shall have done the arithmetic, but in many local authorities 80 per cent. of schools are still with the LEA. If they have already chosen positively not to have a full delegated budget, it is conceivable that they will continue to do that. They may wish to continue to stay with the LEA because they are completely satisfied with the LEA's provision. That will continue because nothing in the Bill forces schools down the road of self-regulation. That is why I believe that grant-maintained schools are at much more risk than has hitherto been judged to be the case.

I hope that tonight the Government will respond positively and give every school the right to receive, and to have full control over, its full share of the budget. I beg to move.

Lord Whitty

This amendment appears to be directed at the question of how under the new system LEAs conduct their relationship with all schools. I believe that it is a fairly broad brush amendment. I am not clear from the comments of the noble Baroness whether it is intended to be quite as broad brush as it appears. The noble Baroness dealt primarily with the situation of existing grant-maintained schools. Clearly, there is a serious difference of strategy and opinion here. The whole point of the new funding arrangements is that we wish to bring the current grant-maintained schools back into the overall umbrella of local education authorities while delegating budgets to all schools in a new relationship with LEAs with maximum funding ability in relation to all schools.

As to the 80 per cent. ballot, we are consulting. It is not intended to be an indiscriminate, across-the-board provision. We shall consider very carefully which services of the local authority are to be covered by it. We want all schools to be in a different relationship with the local education authority with the delegated financial arrangements that flow from that.

Baroness Blatch

The Government are not delegating money to all schools but making it available to them. Schools can opt for self-government or pass the money back to the local authority to continue to run the schools. Unless the noble Lord is putting forward a new policy on the hoof, nothing in this Bill does anything other than allow money to be devolved down to schools, with a good deal of encouraging rhetoric from the Government. The Government would like to see greater delegation to schools, as would I and the noble Lord, Lord Tope, and his noble friends. The noble Lord is wrong in what he said. If, when the requisite number of schools vote to have their services provided by the LEA—the percentage may be 70, 80, 90 or some other figure—a school that is presently self-governing will lose control over its central finances.

Lord Skidelsky

I support my noble friend. Why should schools in an LEA wanting to remain self-managed be compelled to surrender that right because 70 or 80 per cent. want them to do so? The noble Baroness the Minister says that this is democratic. That appears to be the basis of the argument. I do not believe that democracies have any right to compel minorities to surrender liberties unless the exercise of those liberties injures the interests of those minorities. If 80 per cent. of people vote to pay taxes clearly the majority has the right to compel the minority because the 20 per cent. cannot be excluded from the benefits that are provided by the taxes. That is a very clear philosophical argument as to why the majority should prevail. What is the argument in this case? If 80 per cent. agree, why should 20 per cent. be brought into the system? I do not believe that that is democratic; rather, it is illiberal.

7.15 p.m.

Lord Whitty

To revert to the point raised by the noble Baroness, we are delegating budgets to all schools. We seek to introduce a regime that will apply broadly to all schools. In many situations former grant-maintained schools may wish to continue to provide internally services that would still be provided centrally by the local authority. Some schools will wish to buy into them and others will not. The 80 per cent. simply refers to the fact that in a very limited number of cases it will not be sensible for particular services to be provided unless 100 per cent. of the schools do so. We are talking about limited services, not local authorities controlling everything that grant-maintained schools previously controlled. If the vast majority of schools wish to buy back into a limited service in certain circumstances it will be sensible for all schools to do so. But we do not envisage that to be a broad-ranging power across services or areas.

Lord Skidelsky

Can the noble Lord give an example of the services he has in mind which have to be provided either to all schools or none at all?

Lord Whitty

We have had a lengthy debate about transport. It could be that there was a transport system run by a local authority and it was judged that that could not be provided centrally unless all schools bought into it. That is a hypothetical example, and there may well be others. If the noble Lord wishes, I shall ask for advice on what other services may be considered in these circumstances. I envisage that in certain small education authorities library services may be part of it. There may be a number of services that are not viable unless all schools buy into them. I believe that it is only in those circumstances that the 80 per cent. provision is intended to apply. However, we are still consulting on the whole area.

However, the general proposition—that is what I believed was addressed by this amendment until the noble Baroness spoke about the 80 per cent.—is that there will be delegated budgets for all schools, both ex-GM schools and ex-local authority schools, and control over those budgets by the local education authority will be as limited as possible. However, the amendment as drafted appears to be designed to deny LEAs the basic right to put in place safeguards over the deployment of those budgets or to do away with the right of LEAs to suspend delegation for mismanagement in certain circumstances under Clause 50 and Schedule 15. If the amendment is as wide ranging a prohibition as that, the Government certainly cannot accept it. I hope that the noble Baroness will understand that and on reflection withdraw her amendment. She may wish to consider alternative wording at a later stage. If the noble Baroness intends to achieve a more limited objective we are prepared to look further at that and consider the possibility of a more modest amendment at a later stage. The amendment as drafted appears to impose a very drastic limitation on the powers of LEAs.

I appreciate that there is some anxiety in parts of the former GM sector as to the balance between local authority control and their own delegated powers in future. We do not want the return of GM schools to the local authority sector to involve the re-imposition of unnecessary controls. But in the new circumstances there must be a degree of accountability, just as there was a degree of accountability for the management of the budgets of GM schools under the rules and procedures of the Funding Agency for Schools.

Inevitably, there will need to be changes in the way in which accountability operates. Because of the statutory responsibilities of local authority chief finance officers under the Local Government Act, LEAs will require a degree of flexibility to decide on such matters as accounting and audit requirements. We intend that they should be reasonable and clear to the schools when operating delegated budgets. We are considering how the best features of the package used in the GM sector— the rainbow pack system—can be transferred not only to ex-GM schools but across the board to local education authority schemes.

I believe that that provides some reassurance that local education authorities do not intend to be heavy handed in their exercise of what ultimately must be their accountability for the schools budget. Our aim is a light touch regime supported by no more restrictions than are properly necessary. We must safeguard propriety and accountability. We must ensure that LEAs are not exposed to unfair risks on their own resources and assets.

Action or inaction by a governing body could leave an LEA with a liability to pick up. LEAs are entitled to protection from that. We want to confine all this to cases where LEAs are genuinely at risk. That is the philosophy behind this proposal. We cannot accept the amendment as drafted because it appears to remove even that light-touch control that we envisage for LEAs under the new regime.

The Lord Bishop of Ripon

Before the noble Lord sits down, he returned briefly to the subject of transport. Perhaps I may make a point that I should have made earlier. I speak here on behalf of my Roman Catholic colleagues. Many Roman Catholic schools have a considerable number of pupils requiring transport. Were there any thought of transferring that aspect of the budget from LEAs to schools, it would raise huge problems for some of those schools. If there is the slightest thought that that might be a possibility, the Catholic Education Service should be consulted.

Lord Whitty

I take that point. Part of the consultation will no doubt yield the concerns of the Roman Catholic schools about that prospect.

Baroness Blatch

I am deeply depressed by the noble Lord's answer on that. I say to the right reverend Prelate that I do not wish to cut across that issue, because my understanding is that at the moment the Government presume in favour of schools' transport money remaining with the local authority. I am talking about those funds that the Government themselves envisage transferring to the budgets of schools. They are then giving schools the option to purchase from wherever, including local authorities.

The noble Lord gave some examples. I have read the words on the page. There will be some services about which the local authority will say, "If we are only left with a rump of schools to provide for, we regard it as uneconomic to provide the service". Therefore they may take a vote in the primary and/or secondary sector to get an economically viable unit. If they achieve their 80 per cent., they will have an opportunity to take back that service. The answer I received to my first question from the noble Baroness was that that would mean that 100 per cent. of the schools would have to do it.

The noble Lord has not said that the subjects for delegation will be limited to prescribed areas. That is new. It is not in the paper. The paragraph preceding the paragraph that mentions the 80 per cent. merely says that some LEAs have argued that without a minimum level of buy-in from schools—it is claimed that this level is sometimes at a high percentage for economic reasons—they cannot afford to run any service for any school. While the Government do not wish to preside over any control by the majority, they also wish to avoid the actions of a minority, preventing those schools from having what they want. In other words if most schools—that is, 80 per cent. is the suggestion—want a particular service from the LEA, the view is that all schools shall have it.

I did not mean by my amendment that schools which fail in self-management should continue to have full control over their budgets. There are measures in the Bill which override that anyway. There are provisions in the Bill which allow special measures to be taken where a school fails in its self-management duties. I wish that to remain because, whether or not they have delegation, that is important.

The Minister is now saying—this is important for the schools which are listening to the debate or which will be reading it—that a grant-maintained school and/or a foundation school, or even a community school, in the future, may opt for self-management. In other words, it opts to keep all its central funds to purchase services. If there is a vote on any particular service—the noble Lord mentioned two, but, as I say, there is no definition—in a primary and/or a secondary sector and 80 per cent., or whatever the required percentage is, votes to have the service provided by the LEA, those schools will lose that degree of delegation. If that is what he is saying, there will be deep consternation about that outside this Chamber. I ask the noble Lord to answer me on that point.

Lord Whitty

I thought that I had said earlier that the areas to which the 80 per cent. suggestion would apply would be limited and not indiscriminate. It would not be down to individual local authorities to decide which areas could be subject to that. The Government could prescribe which areas would be subject to the voting procedure. The LEA would not be able to decide for itself.

There is some misunderstanding here. When we started, the presumption seemed to be that we were talking about buying back into all centrally-provided local authority services, and that the 80 per cent. provision would relate to that. In fact, we do not envisage a large number of services being subject to that provision. We are still consulting as to whether we need the provision at all. It does not affect the vast bulk of the new financing arrangements.

The noble Baroness is starting fears in former GM schools, and possibly elsewhere, that they will be overridden in areas to which it would be extremely unlikely that this would apply. If the noble Baroness wishes to consider the amendment as it stands—it is a broader amendment—she will no doubt come back to it. There will be other parts of the Bill to which the voting procedure would be more appropriately applied. It is not our intention to override the minority of schools in the vast majority of cases. When we say "delegation", we mean delegation. When we say a light hand from the LEA, we mean that.

Baroness Blatch

The noble Lord totally misinterprets me. He has done it every time he has returned to the Dispatch Box on this point. I am not talking about the whole package of delegation. There will be services within delegation for which the local authority may take a view that it needs 80 per cent. of the schools or it cannot cope. I give another example. The schools in a local authority, especially a relatively small local authority, may decide that they want to have payroll services from the local authority. The local authority may say, "Of course we will provide payroll services, but unless we get a certain percentage of schools in this area to agree it, we cannot provide them".

That then becomes an issue for this majority voting. The noble Lord is making policy on the hoof. He is now suggesting that it applies to one or two subjects only. Is it one or two? Which are they? These are only down here as examples. I have given another example. There may be many more examples of where a percentage of schools wants a service from the local authority. There may be some schools—I suspect that the noble Lord, Lord Tope, is right—that will want the local authority to continue to provide all their services. They do now, and they may want that to continue in the future.

In future, local authorities will have to turn round and say to them, "We need an economically viable number of schools". That will trigger a ballot in the primary or the secondary sector. If the noble Lord is saying that we are going to discount certain elements of delegation, fine, let us have what they are. They are not in the consultation document. The noble Lord has not given me a straight answer. Is the noble Lord saying that if a school enjoys a level of delegation, and a vote takes place on any aspect of delegation, and the vote reaches the required percentage—whatever that may be—all schools will lose their right to have control over that particular service?

Lord Whitty

The noble Baroness referred earlier to paragraph 59 of the consultation paper, where all this is set out. It describes that the Government would welcome views on that issue, in particular the 80 per cent.—as we are calling it—formula in relation to particular services. We do not prescribe the services there. The noble Baroness is correct. We do not prescribe them for the very good reason that we are consulting as to whether schools and LEAs think that this provision should apply to certain services.

However, at the end of that consultation, such services will become subject to majority voting only if the Government prescribe them. We will not prescribe them unless the result of the consultation is that there is widespread support for some services to be treated in that manner. I cannot go further than that in describing the services to which it would apply, except by example.

7.30 p.m.

Baroness Blatch

I know that it is a consultation paper. I have said it endlessly over the course of the afternoon. I know that the consultation does not finish until towards the end of July. If the Bill is passed, it will have had Royal Assent by then. Under the proposals, I wish to encode on the face of the Bill the right of a school which has enjoyed self government not to have that right of self government taken away from it. I do not know what the Government have to fear. The local authority may require 60 per cent., 70 per cent. or 80 per cent., and receives that percentage. The local authority has its viable number. What is the problem in allowing the other 40 per cent., 30 per cent. or 20 per cent. to be self governing?

The Government have nothing to lose. Those schools which opt for self control have it; and those schools which opt for self government have it. Those self governing schools which have enjoyed their freedom for so long will come into a sector where all the promises made to them in the back room will seem empty.

The noble Lord puts much store on the "light touch authorities". "Light touch authorities" is an exhortation. There is no breach for being medium or heavy touch other than promising legislation in the future. I know that the Government, rightly, have an antipathy to local authorities' packaging; I agree with them. If a local authority genuinely believes it needs an economically viable number, and puts to the vote any one single service, or a selection of services, the schools lose their autonomy. I am fighting for the right of the schools to keep their autonomy.

Lord Whitty

I do not think that the noble Baroness's amendment achieves the objective she states. There is a clear non-meeting of minds on this. The noble Baroness does not want to wait until the end of the consultation period. She does not accept that even in the most acute circumstances the substantial democratic majority of schools in the area should decide the issue. She does not accept the central provision of the changes. We are not concerned simply with those schools which were GM schools. We want a regime which applies to all schools. The Opposition have never accepted that. That is reflected in the contributions from the noble Baroness to the debate on the amendment.

In addition, the noble Baroness is hoping that we shall take a decision which will pre-empt the outcome of consultation. I do not think the amendment achieves what the noble Baroness intends. It could have a damaging effect on the new framework which I do not think she intends. Nevertheless at the end of the day it is clear that the Opposition have not accepted that the new framework will attempt to treat all schools equally. Schools will come from different backgrounds. They will take clearly different decisions as to how they will conduct their budgets, the degree of delegation and the buying back of services that they want.

That level playing field does not seem to be accepted by the Opposition. That is a central problem on the Bill. However, the amendment does not do what the noble Baroness wishes. Perhaps she will see fit to withdraw it.

Baroness Blatch

I shall not withdraw the amendment at this moment. The noble Lord continues to misinterpret me. I am becoming quite cross about that. The noble Lord said that we do not agree that schools should be treated equally. We do agree with that. We agree that all schools which presently do not enjoy self government should have the opportunity to become self governing. We agree with delegation; we agree with further delegation; we agree with the further development of delegation. We have had arguments about what is meant by 100 per cent. delegation. That is history. We shall wait to see what happens in practice.

The noble Lord says that I do not accept the democratic majority. I accept the democratic majority. I argued for accepting the democratic majority. If 80 per cent., 70 per cent. or 60 per cent. (whatever is the required percentage of people) vote, and it is economically viable for the local authority to provide one or more services for that unit, I accept that and believe it to be right. What I do not accept is that that majority should drag the other 30 per cent. or 40 per cent. with them. If it is an economically viable unit for the local authority, why does one need the others? It is pure administrative tidiness. What is wrong with having your cake and eating it? What is wrong with allowing the schools which want an LEA service to get it from the local authority, and those which want self government to have it? I simply fight for the right of a school which enjoys self government, and has proved itself able and skilled in managing its own affairs, not to be dragged into a situation which it does not want.

I remind the noble Lord that in the grant-maintained schools the parents voted for self government. The 80 per cent. of other schools would take that facility away. It seems absurd. The noble Lord continues to misinterpret me. The democratic majority can have its way. I fight now for a minority. I refer to allowing community and foundation schools to enjoy the same delegation, and the same level of financial management which has been enjoyed until now by grant-maintained schools. I accept what the noble Baroness says: that there will be no diminution in the level of delegation for grant-maintained schools; and that all other schools will be brought up to the level of GM delegation. I accept that and think it right. I accept the transparency. I accept much of what is written in the paper, although I have argued about the mechanics of delivery. I find it extraordinary that the Government set their face against an individual school having the right to control its own budget.

My amendment is not flawed. It achieves the right for an individual school to have control over its own budget. If the Government are prepared to accept that, I shall bring forward an amendment to ensure that if any school fails, it shall be subject to the special measures that are set out in the Bill, which we support.

Lord Whitty

I do not think that we should carry on this ding-dong much longer. Clearly the noble Baroness has misunderstood me. She claims that I have misunderstood her.

In the vast majority of cases, we are proposing that schools will be able to do exactly as she proposes and decide whether or not they buy back into local authority services. However, the noble Baroness keeps going back to special treatment for GM schools, which we do not accept. Paragraph 59 relates to a very limited area of schools. It in no sense destroys the principle of delegation. It in no sense destroys the principle that we are giving delegated powers to all schools, whatever their previous capacity. The noble Baroness is making a mountain out of a molehill on an area which will be limited in effect even if the consultation process yields a positive result. Therefore it would be extremely misleading for her to take through such a draconian measure and one which she admits would require substantial amendment in order to meet the problems I have outlined.

Baroness Blatch

I shall test the opinion of the Committee. My amendment is modest. It simply asks that each school shall be given the right to control its budget once it has been given to it. I rise to protect the minority when an economically viable number of schools have voted to have LEA services. I seek to protect the position of those schools. The end of the consultation process will be too late. If the Government hedge now because they cannot go along with the amendment, I am deeply suspicious that they do not intend to agree with the amendment after 30th July. Therefore I wish to test the opinion of the Committee.

7.39 p.m.

On Question, Whether the said amendment (No. 161A) shall be agreed to?

Their Lordships divided: Contents, 21; Not-Contents, 61.

Division No. 2
Baker of Dorking, L. Miller of Hendon, B.
Blatch, B. Northesk, E.
Byford, B. [Teller.] Park of Monmouth, B.
Carnegy of Lour, B. Pilkington of Oxenford, L.
Dixon-Smith, L. Rennell, L.
Glenarthur, L. Seccombe, B. [Teller.]
Skelmersdale, L.
Hardwicke, E. Skidelsky, L.
HolmPatrick, L. Vivian, L.
Jopling, L. Young, B.
Lucas, L. Zouche of Haryngworth, L.
Acton, L. Berkeley, L.
Addington, L. Blackstone, B.
Allenby of Megiddo, V. Borrie, L.
Archer of Sandwell, L. Callaghan of Cardiff, L.
Carlisle, E. Hughes of Woodside, L.
Carter, L. [Teller.] Irvine of Lairg, L. [Lord Chancellor.]
Chandos, V.
Clinton-Davis, L. Janner of Braunstone, L.
Cocks of Hartcliffe, L. Jay of Paddington, B.
Currie of Marylebone, L. Jenkins of Putney, L.
David, B. Kennedy of The Shaws, B.
Davies of Coity, L. Lovell-Davis, L.
Dean of Beswick, L. McIntosh of Haringey, L. [Teller.]
Desai, L. McNair, L.
Dixon, L. Maddock, B.
Dubs, L. Mar and Kellie, E.
Evans of Parkside, L. Molloy, L.
Ezra, L. Monkswell, L.
Farrington of Ribbleton, B. Ponsonby of Shulbrede, L.
Gallacher, L. Puttnam, L.
Gilbert, L. Randall of St. Budeaux, L.
Gladwin of Clee, L. Richard, L. [Lord Privy Seal.]
Grenfell, L. Simon, V.
Hanworth, V. Stoddart of Swindon, L.
Hardie, L. Symons of Vernham Dean, B.
Hardy of Wath, L. Tope, L.
Harris of Greenwich, L. Tordoff, L.
Haskel, L. Walker of Doncaster, L.
Hilton of Eggardon, B. Wedderburn of Charlton, L.
Hogg of Cumbernauld, L. Whitty, L.
Hoyle, L. Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.

7.47 p.m.

Lord Haskel

I beg to move that the House do now resume. In moving this Motion, I suggest that the Committee stage begins again not before 8.45 p.m.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

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