HL Deb 17 June 2002 vol 636 cc527-70

  1. (1) Regulations shall designate curriculum provisions as attracting exemptions for all maintained schools, subject to subsection (2) and section 74(1).
  2. (2) Regulations may prescribe circumstances in which a school or category of school will not benefit from automatic exemption under subsection (1), in which case section 6 shall apply.
  3. 528
  4. (3) The regulations in subsections (1) and (2) shall not be made unless laid in draft before, and approved by a resolution of, each House of Parliament."

The noble Baroness said: My Lords, we now come to the part of the Bill that deals with earned autonomy. In moving Amendment No. 12, I shall also speak to Amendments Nos. 13 and 18.

I have deliberately separated the issue of curriculum from that of pay and conditions. First, they are different issues. Secondly, some would prefer to deal separately with disapplications for curriculum matters as against pay and conditions matters, rather than to roll them all up as one proposition, as the Bill provides. The separation is therefore really just for the ease of those who take different views on different aspects of the Bill's provisions.

As I said, we do not wish to stifle schools' aspiration to take greater responsibility for the management of curriculum matters and pay and conditions matters. My amendments presume in favour of all schools enjoying the freedoms, except for those which the Secretary of State deems unsuitable. However, I shall not rehearse all the arguments that were deployed in Committee when we had a very full debate. I also appreciate that time is more precious on Report, which does not allow an iterative process. Nevertheless, I shall repeat what my Amendment No. 12 does not do. It does not remove the Secretary of State's discretionary power under Clause 6. However, it does presume in favour of all schools having the power of exemption, limited only by objective criteria which would be published and well understood by all.

The effect of my amendments would be the introduction of simple, clearer and more open procedures and would reduce yet again the level of bureaucracy necessary to support the Government's proposals. It is ludicrous to suggest that only 10 per cent of schools would qualify to exercise these freedoms. First, that percentage is not only cautious; it is also arbitrary. Secondly, the open accountability of schools is a sufficiently good safeguard to remove the Government's fears about whether schools that are well capable of managing their own affairs should have the freedom to do so. It is another case of central control and central bureaucracy, both of which I believe are unnecessary.

As I said, I note that there is more support for freedom on curriculum management than there is on pay and conditions. That is why we are addressing the issues separately. My colleagues and I support schools which meet the criteria being given the opportunity, within set limits, to exercise self-management over both curriculum and pay and conditions. Although those limits clearly have to be within the Secretary of State's fiefdom, I believe that there should be an automatic trigger to dispense with the need constantly to submit applications.

It is incumbent on the Government to say why they believe that only 10 per cent of schools would qualify. It may be because this is a pilot scheme and Ministers want to see how it works. However, the record book is littered with schools that are capable of taking charge of their own affairs. As we know, some schemes promoting curricular freedom will result from the Bill. Such schemes will increase the type of flexibility in schools that can benefit young people. Moreover, the Bill now contains an obligation—both at its beginning and its end—to offer a broad and balanced curriculum. The Bill therefore contains a caveat, which I know the Liberal Democrats support, on a broad and balanced curriculum.

Nevertheless, I believe that the Government could let go of the reins and trust schools. If only 10 per cent of schools qualify, such a tight parameter will be drawn around schools that they will simply not be allowed to enjoy the freedoms provided in the Bill. We support those freedoms and we believe that they should be extended to all schools that are competent to exercise them. I beg to move.

5.15 p.m.

Baroness Sharp of Guildford

My Lords, I support the noble Baroness, Lady Blatch, in her Amendment No. 12 but not in her Amendment No. 13. We on these Benches have long argued that, like the right to innovate, the right to experiment with the curriculum should be open to all schools and not limited to a few. The noble Baroness's words just now about letting go of the reins and trusting schools summarised very well our position.

The teachers with whom we have consulted on the issue of innovation have made it clear that the key innovation is the right to innovate on the curriculum. They were much less concerned about other issues. Although they would like to experiment, they still regard the national curriculum as something of a straitjacket. As for the national curriculum, the days of what were called "the secret garden" are very long gone. In those days there was no national curriculum and teachers taught what they wanted to teach. In the 1970s, when I was a campaigner on the issue, one simply did not touch on the curriculum and suggest that teachers might approach it more broadly.

Equally, I accept that the days of the highly prescriptive national curriculum, as it was when first introduced in the late 1980s and early 1990s, are now gone. I accept that the national curriculum as set out in Part 6, comprising Clauses 72 to 92, is a much more flexible instrument. However, it is still only relatively flexible, particularly if the objective is innovation and new ways of teaching. Teachers need to be encouraged to think more widely about the curriculum, across horizons, rather than be channelled too narrowly within it. In that regard, one would like to go back a little way back to "the secret garden" and trust the professionals whom we now train very hard and very well. We ensure in the teacher qualification process that teachers are not put in charge of a classroom until we are confident that they are able to take charge.

The national curriculum provides teachers with a broad framework, but let us give them the opportunity to vary it. In earned autonomy, the Government are saying, "We will give them the ability to vary it. But we will do that only for schools which we judge to be good". Schools will be judged by how well they do against performance indicators such as the key criterion of whether pupils at key stage 4 obtain five GCSE A to C grades. However, although schools are considered within free school meals bands and judgments are therefore made about schools in tougher and in easier areas, the fact is that earned autonomy will go quite disproportionately to schools that are already succeeding.

As the noble Baroness, Lady Blatch, mentioned, in the regulations and in our discussions in Committee and those in another place, it was envisaged that only 10 per cent of schools would be touched by those earned autonomy regulations. For us that is not enough. That is a key issue. We should like to see earned autonomy, in terms of curriculum experiment, rolled up much more widely to every school. The amendment that I tabled in Committee suggested every school except those in special measures or showing signs of serious weakness, which perhaps need to be excluded. As the noble Lord, Lord Dearing, mentioned, the power to innovate is there for those particular schools. Since that amendment was not agreed to, the power to innovate is still there. Therefore, they could use the power to innovate.

However, on the curriculum the provisions are much too narrow. If we want to try and inject a feeling of innovation and dynamism into schools, which is what this is supposed to do, it is too meritocratic. It is "jump a little higher doggy and we'll give you a bone". I do not like that attitude. I do not think that we want that in our legislation. Therefore, I support the amendment tabled by the noble Baroness, Lady Blatch.

Lord Dearing

My Lords, perhaps I may offer a view on the subject. During previous stages of the Bill I was critical of the Government's proposals in the clause because they were limited to the 10 per cent highest performers in various categories. I argued that schools struggling with the curriculum needed scope and opportunities for freedom.

As I have understood the Bill—I hope correctly—as it stands with the Government's amendments, we are no longer limited to those schools in the top 10 per cent. Instead of just the top performers, it extends to those that are well led or well managed. So my struggling school, which is well led and well managed, and there are many such schools, will be eligible. I hope that the Government can confirm my interpretation and that the clause goes much further than was originally intended. I welcome that.

I turn to the amendments before us. I start with two propositions. First, after the years of travail—the nightmare of the national curriculum, as it first was—we have something which is good, rather than something about which we should be saying "Alas, for good reasons we want to keep a bit but it should go as a statutory requirement". It is a protection for children in all schools—little ones, big ones, good and not so good. Our children need that protection.

On the other hand, I believe that there is benefit in allowing good teachers opportunities to be innovative. It enables them to respond to the particular children that they have and to the particular learning opportunity that may be available. For example, if I were teaching history in York, I should want to engage the excitement of the children in the Roman origins of the city, the Viking days and perhaps in the railway days. If I remember rightly, the National Railway Museum is there. There are great learning opportunities that I want to free up.

So it is a balance between the safeguards for children which are provided by the kind of sensible national curriculum that we have now and innovation. I think that there is considerable scope for innovation, but I should like to open the doors.

In saying that I want to open the doors I am cautious, particularly about the three core subjects. Those are the incrementally learned subjects. We live in a mobile society where kids move from school to school. We know about the awful problem of the migration from primary to secondary school and the regression that takes place there. Unless children follow a common curriculum in those incremental subjects, many of them will be disadvantaged. So I want the cupboard open more widely. I think that the amendment, which really says, "No, we believe that the time has come largely to say goodbye to the national curriculum", is too soon. I think it is taking too great a risk with the education of all children in all circumstances.

Therefore, I feel that—if I understand the Government's approach—they are opening the door more widely. That will let schools with different levels of attainment come through the door, but maintain as a core, as a reference point to all schools, the national curriculum. Therefore, I want to go with the Government rather than with the more ambitious proposals put forward in the amendment.

Lord Peston

My Lords, later on—if we ever get there or live that long—there are amendments standing in my name and that of my noble friend Lady David on interpreting and adjusting the curriculum to take fully into account the needs of the individual child. That is a subject that I hope that we shall debate to some extent.

However, the amendments relate to something different. I am not entirely sure that I fully understand what the noble Baroness has in mind. I can see her point—and I shall argue it later anyway—that concentrating on what are called "the best schools" may entirely be wrong. It may well be that where one wants flexibility it might not be in connection with the best schools, however defined, one might just want them. I think that that is what the noble Lord, Lord Dearing, was saying; that they wanted something quite different.

That is my first worry. But my central question, which I put to the noble Baroness, Lady Blatch, and, presumably, the noble Baroness, Lady Sharp, is whether they mean all schools at all levels. Do they mean primary and secondary schools, for example, should have this freedom? If they could clarify that it would help me when we reflect on this matter in a few moments.

It would also help me if they told me—and I think that this also applies to my noble friend the Minister—what subjects they have in mind. Again the noble Lord, Lord Dearing, has essentially alluded to that aspect. I would regard it as—putting it not too strongly—catastrophic if these exemptions applied to the three core subjects. The three core subjects are rather different from the others. They are what one builds on. There is no way if one is not literate that one can read history, or anything else for that matter. There is no way if one is not numerate that one can do almost anything. One thing that I despair of is that—I allude to one of our earlier debates on citizenship and so on—our young people are supposed to be great experts on saving the planet, but most of them could not say what the law of conservation of energy was. To be perfectly honest, I would rather that they knew what the law of conservation of energy was and later on in life set about saving the planet rather than the current modish way of doing things.

Therefore, I again ask the noble Baronesses who have tabled the amendment whether they remotely have in mind that a school might be able to not follow the national curriculum on the three core subjects? Is that at all possible because that would worry me enormously?

Lastly, we should not be naive about what drives schools these days. It has nothing to do with education philosophy any more. That went years ago. It has little to do with the national curriculum. They are driven entirely by examinations and testing. What drives schools now is what gets the relevant number of grades at—I cannot remember whether it is 0-levels or GCSEs. It is very difficult for someone of my age group to catch up with all the different things. The examination and testing system drives everything. Again, therefore, even if one wanted to see flexibility in this area, how could that be remotely possible given the examination systems we have? I put that question to the noble Baronesses.

To summarise, I have intervened interrogatively. I should like the answers to my questions so that I can have a better understanding of what they have in mind.

5.30 p.m.

Baroness Walmsley

My Lords, I support Amendment No. 12. Paragraph 5.1 of the document Policy Statements and Draft Regulations supplied to Standing Committee G, states: All schools need to ensure that the curriculum continues to develop, within the statutory framework, and responds to changes in society and the economy, and in the nature of schooling itself". I agree wholeheartedly with the words "responds to changes". Yet, the current curriculum remains overcrowded with content and is strait-jacketed by a rigid system of testing and assessment. It allows little room for dynamic adaptability. There is a strong argument, therefore, in favour of greater flexibility for all schools with regard to the national curriculum. Such flexibility should apply to all schools, not just successful ones—particularly not to successful ones.

At a time when educationists and business leaders agree about the concept of the "creative age", it is salutary to find that those responsible for education policy are lagging behind. Technological advance, organisational change and globalisation have driven a shift from manual work to "thinking" jobs that demand a new range of skills, from problem solving and communication to self-organisation.

Two years ago, the think tank Demos stated that, while the underlying economic structures of society are undergoing a dramatic transformation, our educational structures are lagging behind. The dominant educational paradigm still focuses on what students know, rather than how they use that knowledge". In Committee, the Minister said: It is our view that non-core foundation subjects need to be protected under earned autonomy. That means that no school will be able to suspend any subject, but will be given flexibility in relation to the programmes of study for non-core subjects, allowing far more freedom in teaching and greater scope in curriculum planning".—[Official Report, 2/5/02; col. 906.] Given the safeguard described by the Minister at the Dispatch Box, it is hard to understand why she will not extend the exemption on the curriculum to all schools. That is why I support the amendment.

Baroness Ashton of Upholland

My Lords, I shall respond to the debate by saying that we are not far apart in our intentions. In Committee, I said that I would reflect further on the nature of the criteria for earned autonomy and on the number of schools that might qualify. I can now tell your Lordships' House the outcome of that reflection. Before I do, I must make it clear that the core subjects—English, mathematics and science—will not be touched by the proposal. As the noble Baroness, Lady Walmsley, said, we are discussing the programmes of study for non-core subjects.

We shall shortly discuss amendments that would bring the judgment of the chief inspector into the criteria for earned autonomy. The reason for that is straightforward. We have always said that we want the best led and best managed schools to qualify for earned autonomy. We now wish to align the criteria for earned autonomy with those for short inspections. That will mean that, if a school has qualified for a short inspection under the current inspection arrangement and has received a good inspection, it will be eligible for earned autonomy. However, if a school receives a good inspection of any sort, we should be prepared to consider whether it might be suitable to give it additional freedoms. It will be for the chief inspector to identify those schools, and that is why the amendments that we have tabled are needed.

I listened carefully to the comments made by the noble Baroness, Lady Blatch, in Committee and today, as, I hope, she will see. Initially, we said that 10 per cent of schools might qualify for earned autonomy. Under the criteria that we propose, we expect that 30 per cent of secondary schools and 60 per cent of primary schools will qualify. I hope that noble Lords will agree that that is a significant move.

It does not end there. We are not prepared to extend the freedom to schools that are not sufficiently well led to manage it properly. I hope that noble Lords will agree that only schools that manage their affairs properly should be able to change such fundamental matters as pay and conditions and programmes of study. However, we want to see all schools well led and managed and able to take on the additional freedom. Our goal is that, over time, all schools should be able to take on the freedoms. We will review the qualifying criteria, if necessary, to achieve that aim. In coming up with new ideas for helping schools to be innovative in all kinds of ways, government should do the job properly and ensure that we roll out programmes to the schools that can make best use of them. We must protect the education of our children. I hope that I have proved that I listened to what was said.

All of that can be achieved without the amendments that we are discussing. Indeed, Amendments Nos. 12 and 13 could also allow us to limit to 10 per cent the number of schools qualifying. Moreover, I should make it clear, particularly with regard to Amendment No. 13, that the legal position on teachers' pay and conditions must be clear for all schools. We should not allow a position in which the law governing teachers' fundamental entitlements is not clear to all current and future teachers. Whatever happens, eligible schools cannot simply decide to exempt themselves from legal pay orders and the schoolteachers' pay and conditions document. There must be a process whereby schools become legally exempt. The provisions proposed in the new clause would remove the safeguards in the Bill.

The Government's legislation will work, but Amendment No. 12 would create an insoluble conflict between this power and the powers in Parts 6 and 7. We cannot place a general presumption against compliance with a key component of the Bill in this new clause, while setting out in Parts 6 and 7 the detailed powers surrounding the curriculum. That is why Clause 6 is drafted as it is, presuming compliance with the general law re-enacted later in the Bill but allowing limited exemption from it in certain qualifying circumstances. With all humility, I must say that the Government's approach is preferable.

The Government's approach already ensures automatic exemption for schools qualifying. It already ensures that the requirements for a broad and balanced curriculum are met. It already ensures that high-performing schools that are well led and managed qualify. In addition—and of particular importance—it ensures that no one is left in any doubt as to the legal requirements for any school.

With regard to Amendment No. 18, I hope that noble Lords will recognise that we have been open about our intentions for the criteria for schools qualifying for earned autonomy. We set out those intentions in a policy statement that can be found in the Library of the House, and we made it clear that we intend to have a full public consultation. The Select Committee on Delegated Powers and Regulatory Reform considered our proposals for regulation-making powers in detail. It was content with the proposed procedures, and I hope that, as is the convention, the House will be guided by the committee's view.

I hope that, on that basis, noble Lords opposite will accept that we have moved considerably and given them what they asked for. The amendments do not help to further their aims. I hope that the amendment will, therefore, be withdrawn.

Baroness Blatch

My Lords, I thank the Minister—as I have done several times this afternoon—for the work that has gone on between the last stage and this. I also thank all those who, in the earlier stages, fought hard for what we appear to have achieved today. It has been acknowledged that many more schools are well able to manage curricular flexibility and pay and conditions. I take the point that those are different issues. The management of pay and conditions must fall to schools that are able and well led; otherwise there will be tension among staff in schools in which management of questionable quality is left to manage pay and conditions. Teachers must have confidence in the quality of leadership and management in the school.

We have come a long way, but there are one or two questions that I must ask. The chief inspector will now be brought into the process, something that I argued for in Committee. Will it be on his say-so and on the basis of the inspections that a school will become able to exercise earned autonomy? Given that earned autonomy is permanent, unless it is revoked for one reason or another— maladministration or misadministration—by the Secretary of State, will the process allow the chief inspector to agree to it? When the Minister replied to the amendment which I tabled in Committee proposing that change to the Bill, she argued that the chief inspector will be involved in advising the Secretary of State. However, now that he is being placed on the face of the Bill, will he have powers to agree that a school should qualify to be an applicant for earned autonomy?

Finally, the Minister said that there would not be an automatic trigger point but that there would have to be a legal process in order to convey qualified status on an applicant. What will the process be because the Minister's comments today render redundant the chapter in the policy papers on earned autonomy? Who will ultimately be empowered to award earned autonomy status, other than the Secretary of State? We are talking about 60 per cent of primary schools and 30 per cent of secondary schools, which represents a great deal of work for the department. Where a school qualifies on criteria set out by the Secretary of State, if a trigger cannot be automatic it should be on the say-so of the chief inspector.

Baroness Ashton of Upholland

My Lords, the decision could potentially be taken by either or both and we are looking for the point at which we could allow a decision to be taken primarily on the advice of the chief inspector. I took the noble Baroness's amendment back after I had listened to what she said in Committee.

We intend to consult on the precise detail and to carry out public consultation on what the process will involve. I want to ensure that noble Lords recognise that we have moved considerably. In terms of the bureaucracy, we have deliberately started with the process of short inspection. That process is on-going and does not have extra bureaucracy. We would enable schools which were not in the process of the cycle of inspection to come forward and ask whether they qualified—that would be reasonable—for a cycle is involved. It means that when the chief inspector is satisfied that the school has qualified, it will be entitled to earned autonomy. That will be that.

If we want to expand the scheme beyond the 30/60 per cent of schools in order to deal with issues raised by the noble Baroness, Lady Walmsley, about being able to move quickly, we will not force Ofsted to review its procedures. We will look for new ways of being able to judge without adding to the bureaucracy. I hope that noble Lords will be pleased to hear that and that it answers the questions raised by the noble Baroness.

Baroness Blatch

My Lords, that reply is helpful. I hope that there will not be a percentage target. The Minister said that the Government would expect about 30 per cent of secondary schools and 60 per cent of primary schools entering the scheme on the basis of "those who qualify qualify". If a school qualifies, it qualifies, and that should be the case. The scheme should not be subject to arbitrary percentages.

I want to speak briefly to my Amendment No. 18—

Baroness Sharp of Guildford

My Lords, perhaps I may pose a question to the Minister. Is the aim to start the programme at the 30/60 per cent mark but to roll it out to as many schools as possible?

Lord McIntosh of Haringey

My Lords, we are moving far away from Report stage procedure if those who do not have the ear of the House ask questions of the Minister.

Baroness Blatch

My Lords, I believe that the Minister gave an affirmative nod in the direction of the noble Baroness, Lady Sharp. I hope that there will be no targets in that sense and that schools which qualify qualify. I am receiving an affirmative nod on that point.

As regards my Amendment No. 18, I am grateful for what the Minister has done since the Committee stage. We have done what we set out to achieve; that where a school qualifies it should be free to do so. If that is so, the criteria will be critical. The framework which surrounds a school managing its own pay and conditions and the curriculum flexibility, with all the safeguards that will need to be put in place, should be considered by this House. The position has changed from what was contained in the original chapter of the policy document and we are grateful for that, but I may return to Amendment No. 18. In the meantime, with warmest thanks to the Minister for what she has done, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendment No. 13 not moved.]

5.45 p.m.

Clause 5 [Interpretation of Chapter 2]:

Baroness Ashton of Upholland

moved Amendment No. 14: Page 4, line 6, leave out from "to" to end of line 7 and insert "one or more of the following—

  1. (a) the performance of the school,
  2. (b) the quality of the leadership in the school, and
  3. (c) the quality of the management of the school."
The noble Baroness said: My Lords, in moving Amendment No. 14, I want to speak also to Amendments Nos. 15 and 19 in the group. Amendment No. 14 would allow for judgments on a school's management to be included in the criteria set out in regulations for earned autonomy.

We have made clear that it has always been our intention that the school's management should be included in the criteria. It is an intention that we set out in the policy statement placed in the Library of your Lordships' House. However, I have considered further the concerns expressed by my noble friend Lord Peston as to whether primary legislation would enable us to make judgments in this area. In addition, we have made clearer distinctions elsewhere in the Bill in Schedule 16 which makes minor amendments to the School Inspections Act, to distinguish between leadership and management. It has always been our intention that the two areas of leadership and management should be used together in making judgments in this area and I trust that this amendment will remove any doubt as to whether primary legislation will enable us to do so.

As regards Amendments Nos. 15 and 19, noble Lords will know that during the debate in Committee I agreed that we would give further consideration to the qualifying criteria by which schools can earn autonomy. We are of course also committed to a full consultation on these criteria after Royal Assent.

We have discussed the issue and I know that there is a feeling on all sides of the House that we need to do more to ensure that schools are able to qualify for earned autonomy and that there should not be an arbitrary figure—a concern expressed by the noble Baroness, Lady Blatch. As the noble Baroness said in our discussion of the previous amendment, those schools which qualify should qualify.

We have had useful discussions with Ofsted about the best approach to adopt in this area. As I have said, we are proposing to place greater emphasis on the judgments from Ofsted about the leadership and management of the school to decide whether a school is suitable for earned autonomy. As I have said, we expect at least 30 per cent of secondary schools and 60 per cent of primary schools to qualify over time.

Ofsted's judgment about whether a school qualifies for short or standard inspection will include factors related to a school's performance as well as judgments about leadership and management. That means that we will continue to rely on all three types of criteria; those related to a school's performance, management and leadership. I beg to move.

Baroness Sharp of Guildford

My Lords, I rise to speak to Amendments Nos. 16 and 17. Before doing so, I want to ask the Minister a couple of questions about Amendments Nos. 14 and 15. Am I correct in believing that the three criteria which appear under the words "one or more of the following" could be taken together but it is not necessary that all three should be judged? The Minister said that leadership and management could be taken together but one alone could be considered.

Secondly, in relation to the insertion of "the Chief Inspector" in subsection (2), "or" is the operative word. Is it to be the opinion of the chief inspector, or the Secretary of State, or, in the case of Wales, the National Assembly for Wales, as distinct from the Secretary of State and the chief inspector?

Amendments Nos. 16 and 17 again address the question of special educational needs and the needs of disabled pupils. A problem which arises in particular in relation to specialist schools and city technology colleges is that such schools—those with a special status—do not have a good record in regard to their provision for special educational needs. I know that some do, but some do not. The proportion of disabled children and those with special educational needs attending such schools is often rather low

The Minister has responded to our concerns with regard to innovation in the context of special educational needs, but I am not sure that we have had the same kind of response in this area. Among the criteria used to judge whether a school is performing well and thus would be eligible for a degree of earned autonomy should be that it can demonstrate high standards of achievement for its disabled and special educational needs pupils. The purport of these amendments is to ensure that that is the case.

Lord Peston

My Lords, I wish to make two brief points. First, when in an earlier amendment my noble friend on the Front Bench referred to "all" children, I had assumed that that would include disabled children with those special educational needs, and that the term would carry over to every provision contained in the Bill. Perhaps my noble friend will confirm that that must be the correct interpretation.

My reading of Amendment No. 14, in particular the phrase, the performance of the school", is that it cannot mean anything other than a reference to all the children in that school. The performance of' a school cannot be distinguished from that of all of its children. Again, perhaps my noble friend will confirm that because if one thing unites all noble Lords, it is the need to ensure that children with special educational needs are not forgotten.

Secondly, I had always assumed logically that "or" includes "and", therefore we do not need to change that. The word "nor" does not include "and"; you have to use the phrase, "or, but not and". My noble friend will be the expert in this area and will respond to the noble Baroness, Lady Sharp. However, I do not think that there is any problem about the word "or".

Baroness Blatch

My Lords, I think that there is a problem here because the two words are different. If a thing is one thing or the other, it is one thing or another. But if it is one thing and the other, both criteria would have to be satisfied. That has always been my understanding of the wording in legislation.

Lord Peston

My Lords, I thank the noble Baroness for allowing me to intervene. This is a point of theoretical logic. The logicians have been studying this subject for a great many years. I can assure the noble Baroness that the word "or" includes "and".

Baroness Blatch

My Lords, we shall wait for the definitive response from the Minister.

I wish to put a different question. In the previous group of amendments and in the amendments now before us, the Minister referred to "short" inspections. I understand that Ofsted has proposed that by 2003, the majority of primary schools will be given "light touch" inspections. Will earned autonomy therefore apply to all primary schools that pass their short inspections? It would be helpful if the noble Baroness could clarify this point.

Baroness Ashton of Upholland

My Lords, I shall begin by addressing Amendments Nos. 16 and 17. I wish to express my total support for the sentiment that lies behind the two amendments; that is, a wish to see disabled children or those with special educational needs at the heart of decisions relating to earned autonomy.

However, I believe that the amendments are unnecessary and do not offer the best method of achieving those aims. Amendment No. 16 would introduce a considerable degree of uncertainty to the application process. It would mean that a school might not know if it was eligible until after it had applied and it had been determined whether the evaluation plan was acceptable. That would be the very opposite of the automatic process for which noble Lords have rightly pressed.

As I have pointed out many times before, safeguards are already in place to protect the interests of children with special educational needs, all of which are included in the inspection regime.

Similarly, with respect to Amendment No. 17, if there were a clear and unambiguous measure of attainment for these children that could be applied in appropriate cases, I should be happy to accept such an amendment. Unfortunately, that is not the case. It is notoriously difficult to develop a simple measure of attainment for children whose educational needs are so varied and where there are huge differences from school to school in the nature of their special needs and special needs provision.

The amendment would require us to specify such a measure in regulations, but there is a real danger that that would turn out to be unfair. It could deny schools earned autonomy because of a measure that was inappropriate to the nature of the special needs that they catered for. A further effect of the amendment—although I am sure that this was unintentional—would be to deny earned autonomy to any school without pupils with disabilities. It is impossible to demonstrate high standards of achievement for children with disabilities if there are no such children at the school in question.

However, I wish to give the following assurances which I hope will convince noble Lords of our commitment to children with disabilities and those with special educational needs. First, I do not believe that earned autonomy poses any threat to children with special educational needs, in particular given that the freedoms available relate only to teachers' pay and conditions and the national curriculum. Within the latter, we have said that no subjects will be dropped, so that only programmes of study will be available for disapplication or modification. In any case, these provisions cannot change any of the special educational needs legislation, so that schools will continue to be required to make the provision and meet the needs outlined in special educational needs statements.

In addition, we have strengthened our commitment to ensure that the needs of special educational pupils are met in schools by putting forward government Amendments Nos. 14 and 15. As I said earlier, we are proposing, as a basis for consultation, to grant schools earned autonomy if they have qualified for a "short" or "standard" inspection by Ofsted and have received a good report. I believe that the noble Baroness, Lady Blatch, used the term, a "light touch" inspection. While this will ensure that more schools qualify, I wish to make the important point that we shall also ask Ofsted to consider whether an assessment of special educational needs provision might be made during all inspections from autumn 2003 and thus be used in determining suitability for earned autonomy from that date.

Furthermore, Ofsted is committed to the use of value-added data as and when sufficient data become available, which will provide yet another means of holding schools accountable for the progress of all children. With regard to earned autonomy, I shall consider further whether it should be a requirement of a school's application to set out how its exemptions will impact on disabled children and those with special educational needs.

I turn now to the specific questions that have been put to me. My noble friend Lord Peston was right to point out that "all" means all children. The way in which we have looked at the issues of management, leadership and performance means that the new drafting allows us to use any combination of the three criteria in the regulations. It is proposed to use all three, but it would allow us to consider that again as we look more deeply into the school system. In this context, I am reliably informed that "or" does include "and", which I hope answers the questions put to me.

On Question, amendment agreed to.

Baroness Ashton of Upholland

moved Amendment No. 15: Page 4, line 9, after first "of" insert "the Chief Inspector, On Question, amendment agreed to.

[Amendments Nos. 16 to 18 not moved.]

Baroness Ashton of Upholland

moved Amendment No. 19: Page 4, line 14, at end insert— "the Chief Inspector" has the meaning given by section 1(3); On Question, amendment agreed to.

Clause 6 [Exemptions available to qualifying schools]:

6 p.m.

Baroness Walmsley

moved Amendment No. 20: Page 5, line 32, at end insert— ( ) In so far as regulations made under this section relate to a curriculum provision, they shall, in addition to providing for an exemption or modification, require persons responsible for the delivery of the curriculum in any school to have regard to the need to deliver a broad and balanced curriculum in that school. The noble Baroness said: My Lords, I wish to move Amendment No. 20 and speak at the same time to Amendments Nos. 21 and 23. Amendment No. 20 is designed to ensure that whatever curriculum exemptions a school may attract under this clause, overall the pupils will retain the right to receive a broad and balanced curriculum. That is clearly the intention of the Government since they have said so in the policy statement accompanying the Bill. The Minister also said that in a letter she sent to the noble Baroness, Lady Blatch, on 17th May. I would assume therefore that the Minister will have no objection to this point being inserted wherever relevant on to the face of the Bill, thus putting it into the public domain.

Noble Lords will by now be aware that we on these Benches are in favour of all schools having a reasonable amount of flexibility to adapt the curriculum to the needs of their pupils. However, pupils currently have under the national curriculum an entitlement to a broad and balanced curriculum and this must not be compromised. There is no reason why, by adapting the currently rather overcrowded programmes of study, a school cannot make the space to innovate while still providing pupils with maths, English, science, IT, a modern language, humanities, the arts and sport.

It would he helpful to have clarification about some slightly contradictory statements by the Government. Paragraph 5.2 on page 4 of the document, Policy Statements and Draft Regulations Supplied to Standing Committee G, states: Without removing the fundamental entitlement of all pupils to a broad and balanced curriculum", and yet, in the same document, we are given the four options for increased curriculum flexibilities and freedoms for qualifying schools. The broad possibilities are: first, suspending some programmes for study outside the core so that schools are required to cover, for example, two of the four programmes of study; secondly, total suspension of all programmes of study but still a requirement on schools to cover all non-core foundation subjects; thirdly, suspending all programmes of study outside the core but requiring schools to teach at least one humanities subject, one art subject and so on; and, finally, total suspension of all programmes of study and each school to determine subject coverage through defining what is meant by "broad and balanced curriculum".

If, as I understand, the Government appear to favour the last one, each successful school allowed earned autonomy could decide for itself what is meant by a "broad and balanced curriculum", in which case, what safeguards are in place for pupils' entitlements? Do not these two parts of the paper contradict each other? The Government are happy for there to be a safeguard on the face of the Bill in relation to innovation, so why not for earned autonomy as well?

Amendment No. 21 requires the Secretary of State or the National Assembly for Wales to consult with a range of bodies, as appropriate, when making an order to exempt from educational legislation. LEAs, governors and teachers all have a role to play in decisions serious enough to require the law on education to be waived and it is entirely appropriate that they are consulted.

In Committee, the Minister said that such consultation would be difficult to operate. She also said that some of the bodies listed may not have a direct interest in the orders, nor have the time or resources to comment. The amendment includes the words "as appropriate" to take care of' that objection.

During the Committee stage, the Minister said: The amendments do not appear to take account of the key point that under employment law, any changes to teachers' contracts that could follow on from pay and conditions exemptions orders cannot be imposed unilaterally on teachers but can take effect only following appropriate negotiation, which may, of course, involve teaching unions". She continued: I therefore do not believe that it is necessary to require consultation on every change, no matter how small, to involve all teacher unions. If teachers at the school were in favour of the application and the unions at local and national level were not, it is hard to know what the governing body would be expected to do with responses. Surely what matters is what teachers at the school concerned think of the application. Any teacher in such a position would be fully entitled to seek advice from his or her union".—[Official Report, 7/5/02: col. 1047.] The problem with this argument is as follows. The Minister is fully aware that in negotiations at a school level, teacher representatives aim to act in the best interest of the teachers in that school, as they try to do at local and national level. For instance, it is not unusual for one union representative to act on behalf of a classroom teacher while another representative from the same union will be negotiating on behalf of a head teacher member. Both representatives will seek the best solution whatever conflicts of interest there may be. I should therefore like to press the Minister on Amendment No. 21.

Consultation with parents and teachers in the way provided for in Clause 7 is not really enough. Amendment No. 23 requires governing bodies to have regard to any guidance issued by the Secretary of State or National Assembly for Wales and to consult parents, teachers and the LEA. In her welcome Amendment No. 22 the Minister inserts only consultation with the local education authority. While we greatly welcome her positive response to the amendment when it was tabled by the Liberal Democrats in Committee, we must press her to go further and to include consultations with the other stakeholder groups as well. I look forward to a positive response from her. I beg to move.

Baroness Ashton of Upholland

My Lords, Amendment No. 22 would ensure that the local education authority would be consulted on the exemptions or modifications that the governing body chooses to apply for under earned autonomy. The amendment responds positively to the discussion we had in Committee on 7th May about the need to ensure effective consultation under these provisions.

I made clear in Committee that there were provisions in the Bill for the key stakeholders who may be directly affected by the application to be consulted by the governing body before an application was made. Clause 7 makes clear that the governing body will need to consult with the appropriate parties, including teachers in relation to pay and conditions, parents in relation to curriculum, and other appropriate persons, before making an application. Similarly, the Secretary of State or National Assembly for Wales will not be able to make orders unless proper consultation has taken place.

We also gave assurance that the guidance under Clause 7(2)(c) will make clear that the LEA which maintains the school should be consulted before any application is made. However, there was some uncertainty among noble Lords about the status of the local education authority in the application process. The amendment clarifies the position. I trust that it will address in full the concerns raised in Committee.

Lord Jones

My Lords, I recollect previously questioning my noble friend the Minister about local education authorities. It seems to me that she has come forward with a positive amendment, which should be welcomed. It will certainly reassure the LEAs and the industry, if I may call it that, as one sometimes does in a cynical moment or two.

As to Amendment No. 21 and the National Assembly for Wales, I suspect that already teachers in Wales have excellent lines of communication into the National Assembly. My guess is that Assembly Members and Cabinet Ministers therein feel that teachers and their representatives in the various unions have well-established means and rights already. It may be that my noble friend will be able to tell the House what is the situation in Wales in regard to consultations with the teacher unions. That may be helpful during the course of the debate.

Baroness Ashton of Upholland

My Lords, I shall begin by speaking to Amendment No. 20. I agree with noble Lords opposite that every school should deliver a broad and balanced curriculum. In Committee I said that even under earned autonomy this was already a requirement of the Bill. I clearly did not persuade the noble Baroness, Lady Walmsley, of that, and so I shall try once again to convince your Lordships.

Our proposals for earned autonomy will only give schools freedom from aspects of the national curriculum, not freedom from either the basic curriculum as set out in Clause 76, nor the general requirements associated with the curriculum as set out in Clauses 74 and 75. So while earned autonomy will enable schools to tailor elements of the programmes of study to the needs of their pupils, it will not provide them with any relief from the duty to provide a broad and balanced curriculum.

Clause 6 of the Bill contains the phrase "any curriculum provision"—for example, at line 29 on page 4. The term "curriculum provision" is defined on page 4, line 15, in Clause 5(4). It states that "curriculum provision" means any provision of the national curriculum in England or in Wales, as the case may be. I hope that all noble Lords will agree with that. If noble Lords will turn to page 51 of the Bill, they will find, three-quarters of the way down the page, before Clause 77, the heading "The National Curriculum for England". The next heading appears on page 57, after Clause 85. So the phrase "the National Curriculum for England" means Clauses 77 to 85. So the clauses from which exemption may be given under earned autonomy in England are Clauses 77 to 85.

Perhaps I may finally refer noble Lords to page 50. They will see that the general requirements in relation to the curriculum are set out in clause 74 and the duties to implement them are set out in Clause 75. Clause 74(1) sets out the "broad and balanced" definition. Clause 75 means that the Secretary of State, the local education authority and the governing body are required to implement a broad and balanced curriculum. Clauses 74 and 75 are not affected by earned autonomy.

I hope that on that basis noble Lords will agree that the Bill puts in place a duty to provide a broad and balanced curriculum on the Secretary of State, on the LEA and on the governing body even where earned autonomy applies. I hope that the noble Baroness, Lady Walmsley, will therefore agree that her concern has been met in full.

Turning to Amendment No. 21, as we have said previously, we want the process by which schools will earn autonomy to be as simple, efficient and unbureaucratic as possible. Unfortunately, the amendment would require a wide range of representative bodies to be consulted, in addition to those individuals and bodies who will have to be consulted by governing bodies under Clause 7.

It cannot be right that the Secretary of State should be required to consult the Local Government Association, the National Association of Governors and Managers, the teacher unions and so on, on a proposal from a single school to take on earned autonomy. If the staff of a school and the relevant local education authorities have been consulted, that should be the end of the matter. In the light of Amendment No. 22, I hope that the noble Baroness, Lady Walmsley will accept that her main concerns have been addressed.

Turning finally to Amendment No. 23, I hope that noble Lords will appreciate that I believe that consultation is an important part of the process by which schools can qualify for earned autonomy. That is why Clause 7 provides that the governing body will need to consult with the appropriate parties, including teachers (in relation to pay and conditions) and parents (in relation to curriculum) and other appropriate persons before making an application.

We also gave the assurance that guidance under Clause 7(2)(c) will make clear that the local education authority which maintains the school should be consulted before any application is made. I have now brought forward Amendment No. 22, which ensures that there is a statutory duty for the local education authority to be consulted. The amendment responds positively to the discussion that we had in Committee on 7th May about the need to ensure effective consultation under these provisions.

In the light of this, I do not believe that Amendment No. 23 is necessary; nor am I convinced that it will always be appropriate for parents to be consulted on changes to teachers' pay and conditions, as this could be a breach of their privacy. Given these assurances, I hope that the noble Baroness will feel able to withdraw the amendment and that the other amendments will not be pressed.

Baroness Blatch

My Lords, before the Minister sits down, and with the leave of the House, perhaps I may ask one question which has puzzled me from the outset. The Minister constantly tells us that Clauses 74, 75 and 76 are inviolate clauses and that, whatever happens under either innovation or earned autonomy, they will prevail.

Where are the cross-references to those clauses in the early part of the Bill? Clause 6, for example, states that the Secretary of State may, designate any curriculum provision or pay and conditions provision as attracting exemption". He may: designate modifications of any curriculum provision ֵ as being available on a discretionary basis". Clause 2 states that the Secretary of State may make provision, conferring on the applicant exemption from any requirement imposed by education legislation". There is no cross-reference whatever in this part of the Bill to those later clauses. So is this a matter of any legislation other than Clauses 74 and 75 of the Bill?

Baroness Ashton of Upholland

My Lords, my specific reference was to earned autonomy and not to Clause 1. Indeed, that is why we have included in Clause I the reference to the broad and balanced curriculum which noble Lords have sought.

I have clearly not answered the noble Baroness's question properly. Perhaps I may write to her and give a specific answer to ensure that I have covered her point well.

I should say to my noble friend that I am not at this point able to give him details of what happened in Wales in terms of consultation with the teacher unions. I shall ensure that either I write to him or an appropriate Minister writes to him to provide that information.

6.15 p.m.

Baroness Walmsley

My Lords, I thank the Minister for her patience. My intention in moving Amendment No. 20 was to persuade her to make at the Dispatch Box the very unambiguous statements that she has just made. It is now clear that if any school which had been given earned autonomy were to try to institute a curriculum that was not broad and balanced, it could be called to account. In view of the Minister's response, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 21 not moved.]

Clause 7 [Applications for orders under section 6(2)]:

Baroness Ashton of Upholland

moved Amendment No. 22: Page 5, line 37, at end insert— (aa) consult the local education authority, On Question, amendment agreed to.

[Amendment No. 23 not moved.]

Clause 10 [Powers of governing bodies to form or invest in companies to provide services etc.]:

Baroness Blatch

moved Amendment No. 24: Leave out Clause 10. The noble Baroness said: In moving this amendment, I shall speak also to Amendments Nos. 27 and 29.

Again, let me make it clear at the outset that I support commercial freedom for schools. I also accept that these are enabling clauses and that any exercise of the powers set out in Clauses 10, 11 and 12 would be voluntary.

I fully support the level of autonomy enjoyed by city technology colleges and academies, and I lament the passing of the freedoms enjoyed by grant-maintained schools. At the previous stage of the Bill, the Minister said that she hoped that there would be no more CTCs. I have bad news for her: the academies are CTCs by another name. They enjoy the same freedoms; they are set up in the same way; and the entrepreneurs come along with their cheque-book in exactly the same way. My noble friend Lord Harris—who is presently doing a splendid job setting up an academy in Peckham—already has two city technology colleges and knows that academies are the same beast under a different name.

There is freedom under existing law to develop, for example, educational software and to sell it. to exploit the use of buildings and facilities and to act collaboratively and corporately to improve buying power and so on. A few nights ago, I was with a school governing body and spoke to its headmaster. They have already formed companies and are involved in companies. So the freedom that can be exercised under the present law is considerable.

The noble Lord, Lord McIntosh, was kind enough to send me a very detailed letter replying to the points that I raised in Committee. I thank him warmly for taking so much trouble over all the detailed points, of which I gave him no notice. Perhaps I may refer to the letter in order to confess that my concerns have not been entirely set to rest.

The noble Lord suggested that I was concerned that schools may not have the time to form companies. He went on: We realise that this will require some work, but it will produce time saving benefits". The noble Lord says that—but I am not sure what the evidence is and where the time will come from to set up committees, to bring people together, to meet with lawyers and accountants, and to set up the arrangements for companies.

Secondly, in part 1 of the letter, under the heading "Supervising authority", the noble Lord states: The supervising authority will provide light touch oversight of school companies". There is no guarantee of that. There is nothing in the Bill about "light touch". It has supervising rights over authorities. I shall return to the exercise of supervising rights.

The statement does not allay my concerns. If a company is autonomous, it will be subject to all company law. To superimpose on companies the local education authorities and the Secretary of State is a recipe for disaster. The idea that LEAs have the time and the additional expertise to carry out such a requirement, or even the additional funding, is deeply suspect.

On the second page of the letter, the noble Lord says: When taking action, a supervising authority will need to have evidence for its decision, and will be bound by the general duties on LEAs to act reasonably". That presupposes that in order to avoid problems arising it is dedicated to regular monitoring and collection of data, otherwise it cannot perform that function properly. If it has to collect evidence for any maladministration or for anything that may be going wrong in the company, it has to have fairly regular oversight of the day-to-day activities of the company. The same paragraph goes on: LEAs already have similar powers to suspend a school's delegated budget". Overseeing schools' budgets is a far cry from overseeing a variety of commercial ventures, possibly involving non-education-related third parties, as the noble Lord said in a previous debate. He also said that costs would be minimal, but how can one tell? Nobody knows in advance of setting up a company what the costs will be or what the costs of failure will be. If a company goes belly-up, the local education authority will pick up the bill. How can one say in advance that the costs "will be"—not "are expected to be", but "will be"—minimal?

The Minister said: We expect purchasing companies to join together to buy only what their members would normally buy as individual schools within their own budgets". The Bill does not make clear that that is what the companies are about. It says that they will act within their own budgets, but, as I said in Committee, joint purchasing, with all its advantages, can happen now. I was involved in joint purchasing arrangements in my own authority.

The second paragraph of the letter refers to bureaucracy. Local education authorities do not have spare financial capacity. They are being exhorted—and, if the Bill goes through, will be compelled—to pass on ever more funding to schools. We do not object to that. We believe that schools should have money that is due to them. The villains of the piece are not necessarily the local authorities, but the Government, in holding money back from schools. The letter says: Once schools have the permission of their LEA to form or join companies, there is no requirement for LEA involvement beyond the supervising authority". As I said earlier, in order to supervise there has to be some involvement in the day-to-day activities of the company. Otherwise, how on earth can LEAs fulfil their legal obligations to supervise?

The noble Lord goes on: we do not expect any Secretary of State involvement in the company". The Bill gives the Secretary of State an involvement in the company. Either that means something or it means nothing. If it means nothing it should not be in the Bill.

Governors become governors not to form companies, but to run schools. Where is this surfeit of skills? On the top of page three, the noble Lord says: this work will be spread throughout the members and supported by the appropriate skills of governors". We know that some governing boards contain some very entrepreneurial people who are full of ideas. They can be very useful to the governing body, but there are many governing bodies that do not have such people. The noble Lord will retort that this is a voluntary activity. The result is that it will be available to schools that attract stockbroker-belt-type governors, whereas those that do not, perhaps in run-down inner-city areas, will not have the benefit of such expert advice. Nevertheless, the Government come riding in on their white charger with their answer to everything: they will produce guidance.

Paragraph three talks about the suspension of delegation. It is a very messy paragraph. I pointed out that a school could join a company only if it had a delegated budget. However, if a member school has its budget suspended, it is not immediately required to leave a company. It can stay with the company and even become a sleeping partner, as the noble Lord has suggested. A school not fit to hold its own budget being part of a company, with all the responsibilities and ownership that it has to take for the running of the company, seems to be a real problem.

Paragraph five says: A takeover could only happen if school company members holding the majority of the shares agreed to sell their shares to a third party". I think that the noble Lord means that school companies will be private companies, not public limited companies, so shares in them will not be readily available. I raised a point about a school company being taken over by another private company. According to the noble Lord's letter, that can happen. If the company agrees to sell, it can do so. The letter continues: Any member selling all of their shares would then leave the company. The risk of private sector takeover is low for several reasons—school companies will be private companies, they are not likely to be asset rich"— I am not sure that I necessarily agree with that— and only certain prescribed types of body will be able to join these companies as members". It would be helpful to he given some examples, if the noble Lord has any.

Paragraph six, on permission to join companies, says: Schools wishing to join a school company will need permission from their LEA". Why? Some LEAs are in special measures. Some LEAs do not perform as well as some of the schools over which they have jurisdiction. That could result in a go-ahead school having to seek permission from an LEA, which may have a philosophical objection or may not even be up to making a proper judgment on whether it should run a company.

Paragraph seven is about market scan. I asked what the reference to "carrying out a market scan of alternative broker/provider organisations" means. The noble Lord replied: It is one example of the activity undertaken by the North Romford School Improvement Consortium (Havering LEA) New Model". I assume that that is already in place and happening under existing legislation, so I am not sure that the new proposals add very much.

In the first paragraph of the letter, the Minister refers to companies spending only within their budgetary limits. However, if a company fails owing large debts, the LEA will be responsible for debts that may well exceed the budget of the school.

Paragraph eight is about dedicated staffing resource. I questioned the meaning of, "staff would also benefit from a division of labour using a dedicated staffing resource so as to free teaching star. That is so jargon-ridden that I do not understand what it means. The noble Lord goes on to say that, A company may wish to employ a bursar to act on behalf of all". A group of schools can employ a bursar now, so that is nothing new. Many schools come together because it is the only way in which they can afford to have a bursar.

In paragraph 10, the Minister argues both ways. He writes: The purpose of including this clause is to clarify the Secretary of State's powers in this area, rather than add any new ones. We believe there is a need to ensure that primary legislation clearly states the ability of the Secretary of State to be involved in the operation of companies". If Clause 12 is only for clarification and adds no new powers, as the noble Lord claims, it is not necessary. Why is it in the Bill? We are always told that repeating statutes does not make for good legislation. If this is not a new power, the Secretary of State can already be involved in the operation of companies. Either it is a new power or it is not. If it is, it needs to be in the Bill. However, paragraph 10 of the letter reads both ways.

Later in paragraph 10, the Minister writes: During the debate, you asked why the National Society could not procure the expertise they require, or work with Partnerships UK (PUK), thus negating the need for the Secretary of State to invest. The answer is that there is nothing to prevent anyone from procuring such expertise. However, the costs would, in all likelihood, be very high and almost certainly not represent value for money. By establishing a joint venture, we hope to ensure that the advice is available as and when needed and is of a consistent quality that meets the needs of the National Society". The right reverend Prelate would have art interest in this. This is the kind of issue on which one expects public authorities or local authorities to say it will not cost because it is being done by the local authority or the Government and not by highly paid expertise that would have to be bought in. However, if the Government are getting involved, there is the cost of the time of the expertise that is made available by the Government to the company. It is not cost-free. Therefore, if we are talking about company law, a value would have to be placed on that company and that would have to be shown in the accounts. After all, the Government make voluntary bodies do that. I sit on a number of voluntary bodies. We have to account for anything that is given to us in kind as it has a value to the charity. It has to be shown in the accounts.

I am concerned about many of the points in the noble Lord's letter. I am not convinced that most of what a school, or schools, would wish to do commercially can be done under present legislation. The clauses we are discussing represent a complex proposition for schools. I do not think that the answer to the matter is to say that not many schools are expected to exercise the power or that because it is voluntary we should not be over-concerned. Schools are desperate for staff. They are overburdened with non-teaching duties. Governors are in short supply. In recent years many additional responsibilities have been placed upon them. Schools do not readily have access to the kind of expertise, or the funds to buy in such expertise, to indulge in setting up companies subject to the full panoply of law. If governors are financially liable, we may find that they do not come forward in the same numbers as formerly.

As I said at the outset, schools enjoy considerable freedom now to act commercially in their own interests. I refer to city technology colleges and academies. As I said, only the other day I visited a maintained school which was itself a company and enjoyed the freedom that that status conferred. I do not believe that the clauses we are discussing are properly thought through, nor do I believe that the sky will fall in if they are removed. I beg to move.

6.30 p.m.

Baroness Sharp of Guildford

My Lords, my name is attached to Amendments Nos. 24 and 27 which propose respectively that we should leave out Clauses 10 and 11. I wish to speak also to Amendments Nos. 25, 26 and 28.

We had a long debate on the matter in Committee. I have not received a copy of the letter that the noble Lord, Lord McIntosh, sent to the noble Baroness, Lady Blatch. Perhaps it arrived today and I must confess that I have not emptied my in-tray.

Lord McIntosh of Haringey

My Lords, the letter was dated 28th May. I cannot think what went wrong. The letter was addressed also to the noble Baroness, Lady Sharp.

Baroness Sharp of Guildford

My Lords, I have received many letters from the noble Baroness, Lady Ashton, and also from the noble Lord, Lord Davies of Oldham. However, the only letter I have received from the noble Lord, Lord McIntosh, concerned academies which I received over the weekend.

Lord McIntosh of Haringey

My Lords, I apologise.

Baroness Sharp of Guildford

My Lords, perhaps the letter went astray. I have not had the benefit of seeing it. However, the noble Baroness, Lady Blatch, discussed the letter in detail and raised many points. As we on these Benches said in Committee, with staff in schools and teachers so overloaded at present and with governors also complaining of overwork, we need this measure like we need a hole in the head. What we want our teachers to do is to teach and what we want our governing bodies to do is to concentrate on governing their schools and not to have to be involved in running companies.

From what the Minister said in Committee, it is clear that in any case schools can already set up companies in their own right as corporate bodies. They can run companies for the benefit of their own schools. The reason for including the clauses we are discussing is to enable them to establish companies jointly with other schools. Why would they want to do that? It is said that they would want to do that in order to gain economies of scale from purchasing on a bulk scale. However, these days, many schools co-operate with other schools and purchase on a bulk scale. In any case, one does not need a company to set that up. LEAs have done that for a long time. Some schools opt out of LEA purchasing schemes but others still opt into them. The benefits to be derived from economies of scale can be gained through that process.

The measure would also enable schools to set up providing companies to gain economies of scale. In Committee reference was made to software in that regard. However, it is clear that in any case a school can do that in its own right. Two teachers who have developed a software package can set up a company in their own right. They do not have to set it up through the school. There are few occasions when the measure that we are discussing is likely to be necessary. It appears to be a case of taking a sledgehammer to crack a nut. In Committee I was not convinced by the Minister's arguments. I have reread the Committee proceedings on a couple of occasions and I did not find the Minister's arguments at all satisfactory.

It is also highly unsatisfactory that if a purchasing company runs into trouble, the LEA is liable for that company's debts as it is using LEA money. If things go wrong, the LEA, which is supposed to vet the company, is landed with having to pay out. The whole provision does not hold water. For those reasons, we have little sympathy with either Clause 10 or Clause 11.

Clause 12 is a slightly different matter as it concerns the Secretary of State setting up a company. We are told that the measure is necessary to enable the Secretary of State to form companies, for example with the Church of England, in order to promote a PFI. I believe that the Government are anxious to get something back for the amount of money that they have already invested in developing Curriculum online. Therefore, they are interested in setting up a company in that regard. That is fine although I am not convinced that Secretaries of State ought to be doing that. I do not see why a voluntary-aided school cannot set up a company jointly with the LEA rather than the Secretary of State doing that. A perfectly good joint company could be set up with the LEA as regards a PFI. I am not by any means convinced that PFIs necessarily give good value for money. There are a great many examples of PFIs going wrong. I am not sure that we should not try to eliminate the clause to prevent the Church of England making mistakes. I do not have much sympathy with that clause either.

I wish to discuss the amendments that we have tabled. We have tabled two to Clause 11. Amendment No. 25 seeks to eliminate the words, "if regulations so provide" in subsection (3) of Clause 11. We had a long discussion on that matter in Committee. We said that the matter would be rather awkward if there were no regulations. The Minister said that there would be regulations. We asked why, in that case, the phrase "if regulations so provide" should be included in the Bill. It is, as my noble friend Lady Blatch would say, otiose. It is unnecessary. It does not serve any purpose so why is it included? Let us get rid of it.

I now wish to discuss Amendment No. 26. I refer to the whole question of a company limited by guarantee and of any profits that are made being invested back into the participating schools. In that sense it would be a not-for-profit company. In Committee the Minister said that that would not necessarily be the case and that it could constitute a great disincentive to setting up a company. We pointed out that people, particularly governors, involve themselves in many activities in relation to schools to which they devote a great deal of their time and attention. They happily plough the profits from those activities back into the schools and therefore we do not see that to do so poses a major disincentive.

I turn to Amendment No. 29. Where the Secretary of State wants to set up a company, that company should be subject to the same limitations as any company set up by a school, as set out in subsections (3) and (4) of Clause 11. We argued, once again, that there was much to be said for that proposal—if the Secretary of State wanted to set up a company, it should be limited by guarantee and it should be a non-profit company. We feel that, in view of the way in which the clauses are drafted, the amendments are still valid and we hope that they will be agreed to.

Lord Jones

My Lords, this is a big and challenging clause, and to remove it would severely mutilate the Bill. What new additional guidance will Her Majesty's Government give to our schools in relation to the making and running of companies and in aiming for the profitability of companies? In a few words, from whence cometh their guidance? Where is the school company practice, so to speak, that the head and governing body will reach for? Will there be, for example, company doctors?

I believe that the clause is worth while. It is, perhaps, a clause of its time. However, we need an assurance from the Minister that the Government have thought the clause through. Have they, for example, looked to the other side of the hill? What will the consequences be? Our schools need careful and detailed guidance if we are to go forward in this regard.

The Lord Bishop of Blackburn

My Lords, I begin by declaring an interest as chairman of the national society to which the noble Baroness, Lady Sharp, referred. I am always prepared to accept guidance from her, particularly in relation to such an issue. I am quite out of my depth. I shall therefore read my brief much more closely than I normally do.

The view of the advisers of the national society on financial advice is different from that which the noble Baroness has just given us. I hope that I can persuade the noble Baroness not to press the amendments. We believe that they would have a significant effect on the replacement—or the non-replacement—of buildings of many voluntary-aided schools. The clauses that the amendments would remove are designed to enable the department to work in partnership through the PFI to extend the school building and replacement programme, which is well in hand. Since the introduction of that programme, as a replacement programme, there have been some high profile successes, but mainly one-off rebuilds of large secondary schools or LEA projects to replace school buildings and to run services.

The PFI has not worked anything like so well in relation to primary and other small schools, especially in rural areas, outside LEA projects because they do not provide potential for a large enough return for the private-sector investor. Many small school buildings that need replacing are not attended to through that method. Delivering the curriculum for the 21st century is made much more difficult by poor-quality accommodation. Pupils are being denied equality of educational opportunity by poor learning environments, which serve to stifle teachers' morale and the efforts to raise standards. Such school buildings can no longer provide value for money for the governors because they are a constant drain on the school's budget, needing constant "patch and mend" maintenance.

As the Minister, the noble Lord, Lord McIntosh, explained in Committee, the Church of England, through the national society, has been working with the department and Partnerships UK to create a national model, through a jointly owned charitable company, for replacing smaller time-expired schools. That will operate by clustering schools in regional PFI projects, and it aims to make the legal processes easier and quicker for the governing bodies concerned. The arrangement is quite advanced now in terms of consultation and negotiation. There will be great disappointment around the nation if the programme cannot go ahead.

The DIES indicated that the very lowest estimate of PFI credits that are available for voluntary-aided Church of England schools alone are worth some £40 million. That amounts to 20 new primary schools. Potentially, the figure could be more than double that sum. The national model of PFI will not undermine the conventional means of procurement for small Church of England schools. That pioneering model would eventually be available to all maintained schools — community, VA, VC and foundation— and would benefit schools in urban and rural areas. The power to form companies is key, as we see it, to enabling the PFI to work for clusters of small schools.

I believe that it was the noble Baroness, Lady Blatch, who charged that we have the powers already. However, my advisers are not convinced of that. The amendments would prevent the great majority of small schools accessing PFI credits and replacing time-expired buildings. It is for those technical reasons—they are, however, fundamental, not least in relation to the education of children in our smaller schools, particularly rural schools—that I hope that the amendment will be withdrawn.

6.45 p.m.

Baroness Blatch

My Lords, I wonder whether the right reverend Prelate can help me. I genuinely want to understand what he said. My understanding is that the Church of England, through the national society and working with the Government, is putting together an arrangement, if I can put it that way, or forming a company that will allow for procurement in relation to many Church primary schools. I refer to building, capital and refurbishment. Given that that is already being done, what is the brick wall up against which that body has come, which makes it impossible to proceed without the provisions in the Bill?

The Lord Bishop of Blackburn

My Lords, this is a highly technical and legal matter and, as I said, I was speaking from a brief. I understand that bringing together a series of school governing bodies into such an arrangement is prevented or that there is some doubt about whether that can be achieved. Perhaps the Minister, who spoke so cogently about this matter in Committee, will be able to help the noble Baroness. I assure her that I should not take up the time of the House if our people did not believe that that approach was necessary.

Lord Peston

My Lords, I and my friends in education would not cry ourselves to sleep tonight if these provisions were not in the Bill. I know—or, rather, I knew—of no one who wanted these provisions, other than the Government; I now discover that the Churches want them. We shall have a word on that in a moment.

When I first saw the Bill, it had not occurred to me that the provisions had anything to do with the replacement of schools. When reading Clause 10(1), it does not immediately leap to mind that it relates to school buildings and similar matters; it refers to "services", "facilities" and so on.

I read very carefully the remarks of my noble friend. I am not an expert on these technical economic matters but I do not see where the value added—the extra output—comes from in the PFI initiative. I have never understood that; and in this case I do not understand at all how resources can be there via the PFI that are not there via some other arrangement. Perhaps my noble friend can explain that.

On Amendment No. 26—the amendment of the noble Baronesses, Lady Sharp and Lady Walmsley—I stick to the view that schools exist to be schools. They exist to educate young people. Whatever else follows from that, if it cannot be demonstrated that the net gain is made available to the young people who are being educated, I have two questions. First, where does the net gain go if not to the young people who are being educated? Secondly, why are schools in that type of business if it is not for that purpose? I am completely at a loss in this regard; why is the answer to Amendment No. 26 that the provisions are already somewhere in the Bill because that is what schools exist for? If there is any doubt about that, it should be said very clearly that schools should not be engaged in any activities whatever that are not proper for schools. I regard schools as places that are to do with educating people, not with other matters.

This is no big deal. I was persuaded last time not to make a great song and dance about this matter. I do not believe that many people will get involved. However, if it turns out to be a big deal, I should at least like to be persuaded, first, how the net gain exists and, secondly, that the net gain is education.

Lord Brooke of Sutton Mandeville

My Lords, I rise to support my noble friend on the Front Bench on Amendments Nos. 24 and 27. The noble Lord, Lord McIntosh, will recall that this is the second occasion in three weeks on which we have discussed small business, of which we both have some experience.

When I looked at the earlier parts of the Bill, my mind went back to the remarkable series of films about St Trinian's and the cameo part played by Mr Richard Wattis as a civil servant in the Ministry of Education who had to deal with the school. I was reminded of the role that he played then when I thought of the innovation schemes coming into the department. Of course, in the St Trinian's films George Cole played a role of a spivvish nature which was a trailer for his later notable television series.

I was greatly relieved that in Committee the noble Lord, Lord McIntosh, said: It will not be permitted for them"— by that he meant the companies— to have a general trading object".—[Official Report, 7/5/02: col. 1097.] I looked for the explicit statement of that non-permission in the primary legislation and did not find it. But I acknowledge that it was implicit.

In these remarks I do not speak on what I would call the "defensive provisions" in these clauses—that is, the efforts of economic consolidation, about which the right reverend Prelate spoke. However, I say to the noble Lord. Lord Jones, who said that this clause was of its time, that simultaneously local authorities are being widely encouraged to become enablers rather than providers. The Bill seems to be going a little in the opposite direction.

I want to dwell on what I would call the "positive enterprise" aspects of the Bill, which I recognise to be a significant part. I echo what my noble friend said from the Front Bench about the amount of time involved. For more than a quarter of a century I was a trustee of a charity which had been going for more than 100 years. We had a very successful shop, as government are always encouraging that type of body—it was a museum—to do. But, due to carelessness within the engine room of the trust, arrangements were not made for the earning capacity of the trust in profit to be translated into a dividend back to the trust. One may say that that was a simple thing, but experienced trustees failed to realise that it was not occurring. We then had a profoundly long argument with the Inland Revenue, which proposed to tax us on all those profits rather than allowing them to be passed to the charity in an untaxed capacity as a dividend.

The amount of time that that renegotiation took is an ominous warning of what such a venture can lead people into. I certainly echo my noble friend—further allusion was made to it in the debate subsequently—in relation to the LEAs, which, in Clause 11, will need to have the skills to decide whether or not a school should be allowed to have such a company. It was said during the debate that they would not have the skill. However, if they have to acquire the skill, that will also require a heavy investment of time.

In summary, of course I understand that pressures are coming from different parts of the system for such companies to be allowed. However, I am not convinced that the upside potential from the companies which can do it, and which go ahead and do it, will exceed the downside potential cost if inexperienced schools are allowed to use such powers and then meet with unfortunate consequences, which, I fear, only too clearly might be the case.

Lord Lucas

My Lords, one cannot serve both God and Mammon, but it appears that the trick is to make Mammon serve God and then one can square that particular circle.

What worries me about this type of arrangement is the liabilities that the directors or shadow directors of the companies will land themselves with. Limited liability is not what it used to be. One can find oneself getting into all sorts of hot water if one does things which are outside the proper way of trading or if one does not take proper care of a company in which one is a director or shadow director. Very few governors of schools really have the time properly to exercise the duties of a director. Although they may well be considered to be shadow directors, they may suddenly find themselves banned from being a director of other companies. They may find themselves liable for the company's debts.

I believe that, at the very least, clear guidance will have to come from somewhere—I do not see a provision for it in these clauses—as to exactly what the liabilities are, how they should be handled, and how, if a company is to be set up, those who may be considered to be shadow directors, must conduct themselves. Layer upon layer of company law now presses down on company directors. We cannot allow ordinary people who become governors of, for example, a Church primary school to be laid open to that type of liability without first giving them a great deal of guidance. Although I have not been sent a copy of a letter as I did not participate in the debate in Committee, I have not yet heard anything in Committee or from the Government today which leads me to think that we are looking after such governors in the way that we should.

Lord Baker of Dorking

My Lords, I believe that in this debate one should recognise that a great deal of entrepreneurial activity is taking place in the education system at various colleges. It is occurring in city technology colleges and in some of the new specialist schools. And it is certainly part and parcel of the Government's intention that it should take place in the new city academies. Such activity is happening in a whole variety of ways— sometimes on an individual school basis, sometimes through a group of teachers coming together, and sometimes through a school taking an active interest in promoting a particular part of the curriculum and selling it to others. Therefore, as my noble friend Lady Blatch said from the Front Bench, a great deal of activity is already taking place.

I believe that we must he persuaded—I hope that we shall be—that this extra step is taken for other reasons because the present arrangements are inadequate. I was interested to hear the speech of the right reverend Prelate the Bishop of Blackburn. I considered that he made a very persuasive case for PFI—rather more persuasive that any Ministers are prepared to make. I believe that a little touch of capitalism from the Church is to be seriously welcomed.

In effect, the right reverend Prelate said that the advice that he has received from governing bodies on how the Church arranges such matters is that this arrangement is necessary to ensure that the benefit of PFIs is spread widely in a clutch of schools. Basically that is what he said. I dealt with advice bodies for several years when I had responsibility for this matter and I was always very impressed with their professionalism. I would expect, and hope that the Minister will confirm, that the provision is necessary. If that is the case, then I believe that these clauses should remain part of the Bill. I have nothing against them in principle.

The noble Lord, Lord Peston, is against them in principle, as he made very clear in Committee. I remember what he said. I treasure every word that the noble Lord says; he is one of the few remaining spokesmen of old Labour in this House. He does not like profits and dividends, which this type of arrangement is likely to throw up. I say to the noble Lord, Lord Peston, that profits and dividends are a rather good thing as they make the world go round. So long as the profits and dividends flow back into the educational world, that will be another reason for welcoming these changes.

I hope that, in replying, the Minister will be able to say that, in one way or another, the present arrangements are inadequate along the lines set out by the right reverend Prelate the Bishop of Blackburn. If that is the case, I believe that the clauses should remain part of the Bill.

7 p.m.

Lord McIntosh of Haringey

My Lords, I shall introduce my remarks on this group of amendments by saying two things. First, although the noble Baronesses. Lady Blatch and Lady Sharp, have put their names to the same amendment, my recollection from the Committee stage is that they approached these clauses and proposals from very different points of view. The noble Baroness, Lady Blatch, as she confirmed today, was fundamentally in sympathy with the proposals for school companies and entrepreneurial activity, as the noble Lord, Lord Baker, called it. However, the noble Baroness, Lady Sharp, was deeply suspicious of the whole thing. She would not have called it a "capitalist plot", as my noble friend Lord Peston would have done, but she was getting close to it. Therefore, let us remember the different points of view which are coming together for the purpose of this group of amendments.

The second point that I must make at the outset is that this all arises because we have been extremely open in describing the proposals. After all, the speech which the noble Baroness, Lady Blatch, made in Committee arose because we had a 13-page policy statement on school companies. The noble Baroness made a very detailed criticism of that policy statement. I have no objection whatever to that. She subjected it to a fine-tooth comb textual analysis.

I then sent the noble Baroness a five-page letter, a copy of which—I am sorry to say—did not reach the noble Baroness, Lady Sharp. It was certainly intended to; indeed, my file copy was marked to the effect that a copy would be sent to the noble Baroness at the same time. Now the noble Baroness, Lady Blatch, has subjected my letter to a detailed textual analysis, which lasted 15 minutes. Well, that is what legislative scrutiny is for. I cannot have, I do not have, and, indeed, I shall never have, any criticism of the noble Baroness for doing so. It is because we have tried to be as helpful as we possibly can in our explanation of these proposals that this degree of detailed analysis has arisen.

Perhaps I may try to deal with as many of the points raised by the noble Baroness as I can. I was not able to deal with them on the first occasion, because, as she said, I did not have notice of them. However, at least I have the letter in front of me this evening, and I shall now try to interpret my own letter.

The noble Baroness started by saying that schools might not have the time to form companies, and questioned whether they would produce time-saving benefits. There are two points to consider here. The first is why we must have companies, and why they can do things that other organisations are unable to do. The fundamental answer to that became clear in Committee. Although individual schools can form companies, groups of schools cannot do so. There is no way in which they can commit each other to the kinds of activities that a company can undertake. It also became clear in Committee that the powers are simply a useful enabling device, which is not essential for all of these joint arrangements. Nevertheless, they can be helpful.

There are very few things in life for which a company is essential. Indeed, this could be achieved through a partnership rather than incorporation. The advantages of having incorporation in a company are, first, that it allows limitation of liability. I listened to the remarks made by the noble Lord, Lord Lucas, but the restrictions on the limitations of liability under the Companies Act mean that you have to go to very considerable neglect, or even fraud, to become personally liable under that legislation. Secondly, a company is simple, transparent, and every one knows what it does. The Companies Act applies, and there is an existing legislative framework—you do not have to invent it all from scratch. Forming a company may not be essential, but it can be most helpful for schools that want to do so. I cannot see why anyone should want to deny schools this freedom.

As regards the examples given of schools combining to purchase jointly without this power, that is perhaps a possibility. But what about those from whom they are purchasing? Surely the people from whom they are purchasing will want there to be someone against whom there is some come back, so to speak. We have already observed that the local education authority has to pick up the tab if things go wrong. The existing power to have a school that takes the lead or employs a bursar means that the school is acting as agent for other schools. That is not the framework for joint decision. It does not give an individual school the protection of limited liability that the company arrangement would provide. As I say, suppliers are likely to be reluctant to give savings on a bulk order where they have to be content with a contract with several individual schools rather than with one company that represents all of them.

The fundamental point about this part of the argument is that a company is the easiest way for several schools to act together because it is on a template that already exists, and which has existed for many years. It is applicable only where there is more than one school that wants to act jointly in this way. The costs referred to are the costs of setting up, but they are really quite minimal and will become even lighter at later stages when the company is established.

The noble Baroness, Lady Blatch, had a whole series of questions about the supervising authority and about what I described in my letter as the "light touch". However, she did not quote my comments on what a supervising authority might do: it may direct the company to provide it with information on the company's finances, management and contracts; it may direct a governing body which is a member of the company to reduce its involvement in the management of the company; and it may direct a governing body, which is a member of the company to resign as a member of the company". The latter are not constant day-to-day interventions in a company, but they are the necessary protection for the local authority. That is why I stated in my letter that a supervising authority needs to have, evidence for its decision, and will be bound by the general duty on LEAs to act reasonably". It will not be second-guessing every decision of the company, but it will have the powers to come in and act if anything appears to be going wrong—just as happens now with its powers to suspend a school's delegated budget. Incidentally, the noble Baroness, Lady Blatch, used the phrase "cost free". I never said that it was cost free; I said that the costs are minimal because of the existing template.

The noble Baroness queried the mention in my letter of purchasing companies joining together, to buy only what their members would normally buy". Such restrictions will have to appear in regulation, and they will have to be imposed on local education authorities in their two roles: first, as approving the company in the first place; and, secondly, as acting as the supervising authority.

As regards the section in my letter headed "Bureaucracy", I said that there is no requirement for the LEA to be involved other than in the role of supervising authority, but I stated that that would apply once the schools have the permission of their local education authority to form or join companies. Those are the two significant roles. As to the role of the Secretary of State, I should remind the House that the Secretary of State only becomes involved when we reach Clause 12, which deals with the PFI on which the right reverend Prelate and the national society were so eloquent. I agree with every word that the right reverend Prelate said in that respect. But, to return to the question of whether or not it is a purchasing company, a "service providing company", or a PFI, I should point out that all of these things are voluntary; nothing is forced on any school.

The noble Baroness asked me about schools that are under suspension. In my letter, I said that, if a budget were only suspended for a short period, leaving the company may not be necessary … [but] if a budget were suspended for a long time it may be better for the school to withdraw from the company". The issue of a possible take-over seemed to worry a number of noble Lords. We are talking about private companies. There is no market in their shares, and, therefore, no possibility of a hostile take-over. A takeover could take place only if a majority of the school company members agreed to sell their shares to a third party. Under what circumstances could that happen, unless it were to the benefit of the schools? Frankly, I cannot imagine it happening. However, under company law I suppose that we have to allow for the possibility that it might happen. But, fundamentally, if there is no market value for the shares, the opportunity for a takeover and for anything that gets away from the education system—which, I suspect, is the fear behind this—is minimal, if it exists.

The noble Baroness asked about the, market scan of alternative broker/provider organisations". I too find that jargon horrible. Where that exists, it is felt that at present there are not the powers to complete plans, as the North Romford School Improvement Consortium feels. That is why that consortium supports this.

On the issue of dedicated staffing resources, I have to reiterate what I hope was made clear in Committee, that a company cannot employ a head teacher; he or she has to be employed by a governing body. No teacher can be obliged or even bullied into moving to work for a company. Only if the activities of a company are complementary to the activities of the schools, for example educational activities—I agree with my noble friend Lord Peston—would the transfer of staff arise. The idea of employing a bursar who may otherwise be called a manager of a company does not appear to me to be so extraordinary.

I believe I have answered the question that the noble Baroness, Lady Blatch, raised about the ability of the Secretary of State to be involved in the operation of companies. There is no provision for that in Clauses 10 and 11; only in relation to Clause 12, when we come to the PFI option for school companies, could the matter arise.

I turn to the specific amendments of the noble Baroness, Lady Sharp. On Amendment No. 25 she rightly described the different purposes of school companies to purchase goods and services together or to deliver services. I believe that she was worried about the idea of regulations providing for a company limited by shares and that that may go wider. I recognise the strength of those concerns, which have been expressed twice, so I am willing to return at Third Reading with amendments that will require companies to be limited either by shares or by guarantee, which would be the normal situation, and we shall bring forward an amendment requiring regulations to be made limiting who can join companies. I hope that we have made it clear what the regulations were to do, but we shall make it even clearer by putting that purpose on the face of the Bill.

Amendment No. 26 is a relatively limited issue. If, under the amendments that we shall bring forward and under regulations, outsiders are to join in—they may be printers or, horrors, marketing people—surely they would want to be involved on a profit-sharing basis. The profits would have to be shared fairly and the role of the schools would have to be protected in the way in which the profits were shared. But one may lose the opportunity to acquire willing and useful partners if there was not a possibility that they could take a share in the profit. However, the fundamental principle must be, as my noble friend Lord Peston rightly said, that there must be a net gain from such an activity to the young people in the schools concerned.

Amendment No. 28 has been dealt with. It concerns the role of the Secretary of State. The amendment would have some funny implications, like a requirement for the Secretary of State when she invests to seek external approval for any borrowing, and it is difficult to know what that external approval may be. I believe that through this debate it has become clear enough what is the role of the Secretary of State and that both the Government and the Churches believe that the existing powers are not suitable for those purposes.

I apologise for the time taken to reply but it was a long and complicated debate. I hope that the amendments will not be pressed.

7.15 p.m.

Baroness Blatch

My Lords, I am grateful for the detail with which the noble Lord has responded to the amendment. He may heave a sigh of relief when I tell him that this morning the amendments were to form three groups and I suggested that we have a portmanteau debate on the whole subject of companies so as to deal with them in one fell swoop. Taking that into account I believe that we have done well to achieve all that in an hour.

I want to read what the noble Lord has said. This subject is complicated and we have a number of concerns about it. I do not expect an answer immediately, but I would like to know about the case in point put by the right reverend Prelate. What is the company to which he referred? Who are the members? Given that the bodies will be national bodies, who will pick up the liability should the company fail? Clearly, it cannot be the local education authorities. Although the right reverend Prelate talked about small primary schools, he used the word "involving" and did not say that they would become company members. Is it intended that they should become part of the company in penny packages? Where a school has been refurbished or a capital programme has taken place, should that school for that purpose become a company member?

The Lord Bishop of Blackburn

My Lords, perhaps I can write to the noble Baroness on behalf of the National Society to spell out the situation. I would like someone more knowledgeable than I am on this subject to respond.

Baroness Blatch

My Lords, I am grateful for that. One cannot spirit £40 million plus out of the air. It has to be paid for. There will be a continuing liability to meet the cost of securing £40 million plus. I would like to know what is better, cheaper and easier under that arrangement than they would be under PFI arrangements or under the normal catalogue programme arrangements. 'The right reverend Prelate spoke of the likelihood of replacing 20 or more primary schools for £40 million. That cannot be done under the present arrangements, so given that we are still talking about large sums of money, most of which have to be funded in some way, what will make that happen?

I am interested in what the Minister has to say about limited guarantees. When companies go belly up somebody somewhere loses a lot—of money. Are we saying that the LEAs do not pay, that the schools do not pay, and that the company members are not liable, except perhaps for £10 liability? Who will go to the wall? Who will pick up that liability? I do not understand that, so it would be helpful to have an explanation of the involvement of the National Society. I do not want to be a party-pooper. If there is a solution to capital programmes I believe that we should support it, but I want to know precisely to what we are agreeing.

The Minister said that the difference is that groups of schools can become companies as opposed to single schools becoming companies. But so far all the examples that we have been given show that they can come together corporately. The Minister made the point about buying power and suppliers need a single point of contact to ensure that the bills are paid. It is simple. Groups of schools come together; they all look at the catalogues that the suppliers make available; they all give their corporate order, which goes in; the schools pay into the pot; and the goods are distributed around the schools. The savings will be enjoyed by all the schools because they will buy books, pencils, computers and so on at a cheaper rate. The suppliers are willing to work in that way. If there is a sale they will be happy to ensure that it is concluded.

I am very sceptical about what the Government say about the supervising authority. In this Bill the supervising authority has a number of obligations under the law which the Minister spelt out in detail. They cannot possibly exercise that supervising obligation without knowing what is going on. They can only know what is going on either by the information provided to them by the company or by going into the company. If something goes wrong, it is important not to find out too late. The supervising authority should provide a guiding hand to the company so it needs to be involved.

Perhaps I can take a moment in trying to be unequivocal. I can remember a governing body of which I was a member. A certain character came to that governing body. Whenever we were talking about, for instance, school uniforms, he would say, "You want school uniforms? I can get school uniforms". Then we would talk about something else and he would say, "You want that? I can get it", and that went on. He turned out to be a really bad lot and the school was well rid of him when he left. Perhaps as an after-dinner speech I will describe the manner of his going; it was very interesting.

But it was not amusing. Under these clauses, that sort of person could serve on a governing body and say, "Look, all we have to do is become a company. We can provide school uniforms. We can do this and that". I am in the business of making sure that whatever we do and whatever we agree to legislate for, the protection is there for some very innocent people whose job it is to see that the school is run well, that teachers teach and that children learn. At the end of the day it is right that we should be devil's advocate with some of the questions we pose.

There does not appear to be any requirement that the activities of the companies need necessarily be educational. We have talked about third parties who have no educational interest whatever being part of the company. Again, having been involved with charities over many years, I recognise that schools are also charities. These companies will not be charities. Laws govern how charities spend their money; they have to spend it for the benefit of the charity. But in company law there is no such requirement governing where a company's profit should be spent. I want to know what it is that legally obliges the company to spend its profits in the interests of education.

I am sorry I have taken up the time of the House. These are important questions. If, we are to legislate in this way, we should ensure that all the safeguards are in place so that the schools benefit and the education of our children is not disrupted. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 [Limits on powers conferred by section 10]:

[Amendments Nos. 25 to 27 not moved.]

Clause 12 [General powers of Secretary of State in relation to companies]:

[Amendments Nos. 28 and 29 not moved.]

Clause 13 [Power of Secretary of State and National Assembly for Wales to give financial assistance for purposes related to education or childcare]:

Lord Peston

moved Amendment No. 30: Page 9, line 13, at end insert— ( ) Financial assistance provided for education or education services to a school or local education authority must relate to an objective need of the school or local education authority. The noble Lord said: My Lords, I rise in an extremely bad mood. I had very much hoped that my noble friend on the Front Bench would have moved the adjournment of the House during pleasure so that this serious subject would not be rushed through. I pause for a moment in the hope that he might still do that.

Lord McIntosh of Haringey

No, my Lords. The procedure in this House, which is recognised by all parties, is that we stop at the end of the group which is being debated at 7.30 p.m. That does not mean that we are restricted to seven minutes' debate on this group of amendments.

Lord Peston

My Lords, my experience of this House is that sometimes courtesy is extended to noble Lords on important matters. I know of no hard and fast rule and therefore I repeat my extreme ill humour at this matter.

I now go on to make another remark. I have the right to ungroup my amendments and I now propose to do just that. I shall therefore speak only to Amendment No. 30 at this stage and come back to Amendment No. 31 at a later stage of the evening. That does not get rid of the ill humour. It is simply my strategy for at least not being messed around.

Amendment No. 30, which stands in my name and that of my noble friend Lady David, and the noble Baronesses, Lady Sharp and Lady Walmsley, is fairly technical but contains material of considerable significance. We ought to start by noting that we are now in the section on financial assistance for education and childcare. Within Clause 13, having referred to "Financial assistance", subsection (2) gives us a long list of the purposes for which that financial assistance can be given.

I pause immediately because I am well aware that in the context of your Lordships' House, anything to do with the expenditure of public money is something we must treat with great care. We must not overstep the bounds, which now go back 100 years, as to what we are and are not allowed to talk about. I assume that this material would not be in front of us if we were not allowed to say, quite legitimately, "This is a correct way to spend public money", and, "That is not a correct way"; and that we would not in any way be infringing the rights of the other place in making such remarks.

The list in front of us, taken at face value, provides for most of us no problem whatever. Going through it, with one minor exception, I see nothing with which I would not agree. My only exception is that in subsection (2)(e)which refers to, "the promotion of learning"—I like the word "learning"—we would normally expect to see the word "scholarship", not "learning". However, I take the word to mean "scholarship", and that is admirable. My question is: under Clause 13(1), where it refers to the giving of financial assistance to any "person", I assume—I speak not as a lawyer—that "person" includes bodies of all sorts and not just an individual person, otherwise a great deal of what is in this provision cannot make sense. It must include bodies corporate and such things. I hope that my noble friend will be able to enlighten me on that matter.

I say all of that before coming on to discuss Amendment No. 30, which essentially says that financial assistance, if made to a school or an LEA, must relate to an objective educational need of the school or local education authority. I interpret that to mean that if public money is being spent in ways that do not meet that criterion of an objective educational need, that money is being misspent.

That takes me on to the hidden agenda—I now hope to interest the noble Baroness, Lady Blatch, in this matter—namely, the former grant-maintained schools. In practice, when the grant-maintained schools were introduced, they were given extra finance that no one at the time could see had any connection with objective educational need. Indeed, they were given extra finance in order that grant-maintained schools would be a success. But that is not an educational need; it is a political need. Noble Lords who take an interest in these matters will recall that the Public Accounts Committee in the other place referred to the practice of the extra funding of GM schools as "unacceptable". Since that committee had a Conservative majority at the time it reported, I would assume that that report was highly objective.

But times change and new governments come to power. The grant-maintained schools ceased to exist as grant-maintained schools, but they did not cease to exist as schools. What is interesting, and what prompted me to place this matter very seriously before your Lordships, is that earlier this year The Times Educational Supplement informed us that the schools that opted out—the former grant-maintained schools—continue to receive the extra funding benefits that they received under their original guise. That cannot possibly be justified on any educational grounds of which I am aware, and certainly not on any objective educational grounds. Indeed, I would argue that we would expect the reverse. We would expect extra funds to be given to those inner-city schools with the biggest educational problems of any schools in the country, not to schools with the easiest task before them, schools that in practice we know, despite their protestations to the contrary, are quite selective.

The Times Educational Supplement article states that the Dunraven School in Lambeth received more than £500,000 in extra funds. The Bishop Thomas Grant School in the same borough received more than £400,000. Three schools in Wandsworth received almost an extra £500,000 each.

My purpose in moving the amendment is to argue that we should use this part of the Bill to prevent precisely such financing. Otherwise, I, for one, feel extreme disquiet about Clause 13. As I said at the beginning of my remarks, when I first read Clause 13, I thought that it contained an extremely good list of things that we should try to achieve, but I must ask: is that actually what special funding is being used for?

My last point, before I ask a question, is that one of the things that the Government seek to promote is diversity. I, too, favour diversity if it is diversity on my terms and not on others'—naturally, I would say that sort of thing. It has never occurred to me that all our schools should be the same; neither has it occurred to me that all our schools were the same. Certainly, when I visited many schools, what struck me overwhelmingly was how different was each individual school and how remarkable schools were in adjusting to the job before them, even though they are often constrained by things such as the national curriculum. So I am not against diversity, but I am in favour of using public money properly. I therefore expect public funds to be used to promote the kind of diversity that corresponds to educational need.

I end with a question: in so far as the state feels that it ought to use funds in a discriminating fashion to improve children's education, does my noble friend agree that that should relate, again in the terms of the amendment, to educational need and not have any connection whatsoever—I use those words in that precise form—with what we may call the status of a school? In other words, the fact that the school has high status provides no logical basis for saying that it should therefore have more money. Indeed, I tend to take the view that if it has high status it should have less money. The schools with a low status are the ones that need the money. I beg to move.

7.30 p.m.

Baroness Walmsley

My Lords, I rise to support the amendment, partly out of curiosity as to what the Government will say about the comments of the noble Lord, Lord Peston, but partly because I, too, have a nasty, suspicious mind. I notice that subsection (2)(g) allows for, the provision of any form of training for teachers or for non-teaching staff". Without the amendment moved by the noble Lord to ensure that the money is used for educational purposes and in accordance with educational need, people could run riot with that provision. We could have singing lessons for maths teachers and goodness knows what.

That is a small point, but a more serious point is that it has tended to be specialist schools located in predominantly middle-class areas—areas in which there may not be a high level of education need—that have received additional money. The principle that a child should not have extra money spent on its education simply because of the accident of which school it goes to is right. For those reasons, I support the amendment.

Baroness Blatch

My Lords, in view of our last debate, staff could be trained to be company directors.

I agree with the noble Lord, Lord Peston. On reading all of the amendments and their grouping today, I had not realised how substantial are Amendments Nos. 30 and 31, which is on a different subject. I have only one question about Amendment No. 30, but I should like to de-couple Amendment No. 32, on which I want to make a technical, editorial comment, whereas Amendment No. 31 is different in substance.

My question concerns what use money should be put to. I question subsection (2)(b), not because I do not believe that money should be made available for childcare and that Secretaries of State should have power to make such provision, but as I understand it, childcare is childcare and provision for it should not come from the education budget.

Some forms of childcare are definitely educational—the provision of playschools, playgroups, nursery classes, nursery schools and under-fives provision. But there is a great deal of funding for childcare which is definitely for another department. If so, the normal tradition in Whitehall is that moneys are transferred from one department to another. I do not want there to be a new obligation on the Secretary of State unless there is new money to fund it or money from the department that currently has responsibility for childcare.

That is my only comment. I reserve what I want to say about Amendment No. 32 for later.

Lord Davies of Oldham

My Lords, I apologise to my noble friend. He began in ill-humour because of the timing of this debate. He should recognise what a difficult art form it is both in Committee and on Report to arrange precise timings to the convenience of movers of amendments. Even with the best will in the world, one can sometimes work out for exactly how long Opposition Members may speak, but the problem is always when Members speak from one's own Back Benches. The length of their speeches is much less predictable.

I recognise my noble friend's point—the noble Baroness has followed him in it. The grouping of these amendments lent itself to a substantial debate. I think that that would have been for the convenience of the House—that is why it was promoted. I fully recognise that, given that this debate would then have fallen athwart the dinner hour, my noble friend exercised his right to separate this amendment. That is a pity in some respects, because it detracts from the coherence of the total debate. Nevertheless, I shall address his amendment and the issues that he raised.

My noble friend will recognise that the provisions in Clauses 13 to 17 offer the Secretary of State a streamlined power to provide funding to ensure that every child can receive a high quality education. Of course, different initiatives and programmes are needed to do that in some cases. We seek to drive change across the whole education system, such as in our strategies to improve literacy and numeracy—I know that my noble friend supports them—reducing infant class sizes; developing diversity in secondary education; and reforming the teaching profession to increase its effectiveness. In other cases, we need to target resources to address the specific needs that children face in situations of deprivation and disadvantage. My noble friend will recognise the extent to which the Government have targeted resources in these areas. Examples include our support for children with special educational needs—an issue which has cropped up repeatedly in our debates on this Bill—and the Excellence in Cities programme of driving up standards in the inner cities.

In all cases, however, the funding provided by the Government is aimed at a real need: to raise the standards of attainment in schools and colleges. I recognise my noble friend's valid attempt to introduce the concept of "objectivity" into this exercise. As I think he will recognise, however, all who advance the cause of education say that they seek objectively to meet the needs of children. I have no doubt at all that, despite his and my trenchant criticism of the previous administration and some of the policies they pursued, they pursued those policies on the basis of an objective assessment of the needs of the children of this nation. We simply differ. I think that that probably identifies to my noble friend the real problem with the concept of "objective" in this context.

My noble friend will recognise that his Amendment No. 30 has acted as a trigger for a fairly substantial debate on the allocation of resources. I also note his linked amendments which will give rise to general debate after dinner. As for Amendment No. 30, however, I do not believe that the Bill would be strengthened by defining how the Secretary of State ought to go about the business of allocating scarce resources.

My noble friend asked me some specific questions. "Person" is a technical term which certainly does encompass bodies. I heard what he said about the word "scholarship". He is occasionally quite disarming in making comments that indicate that he may not be entirely au fait with recent developments in education. I am not saying that learning is a recent development in education, but I am sure that he will recognise that, as a major objective of government education policy, learning not only supersedes but includes scholarship. I hope that he will accept that point.

In reply both to my noble friend and to the noble Baroness, Lady Walmsley, of course we recognise that everyone must pay significant attention to the issue of support and school status. The Government are clearly seeking to ensure that over a course of time resources go to children whose needs in education can be objectively defined as the greatest; hence the special programmes which are in place. Nevertheless, this is not a process that we can pursue overnight. My noble friend will recognise that we must work through legislative patterns in order to change the education system. As he will recognise, we are currently trapped in a framework within which resources are allocated on an institutional basis to which he does not fully subscribe. In some respects, that is precisely the Government's position. He will see in this Bill just how we are seeking to change those priorities and, accordingly, how we are seeking to reallocate resources.

The noble Baroness, Lady Blatch, raised the issue of childcare funding. We shall continue to maintain the division in funding between education and childcare as she has enjoined us to do. Most childcare funding is in fact provided by the Department for Education and Skills, albeit in a separate budget, and the different budgets will remain. We therefore respect the noble Baroness's point that there needs to he a separation of budgets in childcare provision. We intend to maintain that division.

The noble Baroness, Lady Walmsley, raised a further issue on teacher training. It is implicitly understood that teachers should be trained to teach what they are employed to teach. Consequently, unless a maths teacher is also teaching singing, it is unlikely that resources would be used to teach him how to sing. As she will recognise, however, within this framework we all value the allocation of resources to enhance the qualities and professional capacities of our teaching force. It is therefore only proper that developing the capabilities of teachers is identified within the appropriate sphere of resource allocation. As we shall see in later debates, and as we have already recognised in Committee, we propose very significant provision in that regard.

I hope that my noble friend will recognise that we did not intend to begin this debate in ill humour but are trapped by the exigencies of the timetable. He has very neatly extricated us from that gap, so that I am now overrunning the normal dinner break by only 20 minutes. Although he will have established an unfortunate pattern if we begin decoupling whole groups of amendments, that privilege is open to Members of this House. He has exercised that privilege. I hope he recognises that he has addressed himself solely to Amendment No. 30. I hope, too, that I have sufficiently met his arguments for him to consider withdrawing the amendment.

Lord Peston

My Lords, I thank the noble Baronesses, Lady Walmsley and Lady Blatch, for their interventions and my noble friend the Minister for his very interesting reply, with most of which I agree. He may be interested to know that I am now in a less grumpy mood. I was partly in a bad mood because I blamed myself for the position we had reached. I was so busy until just before today's debate started that I had not even noticed that the two amendments were coupled. If I had not spent so much time last week on economic affairs I would have decoupled them then and we would not have had this problem today.

We have, however, had the debate that I wanted to have, and my noble friend the Minister has gone on record to say what I most wanted him to say. We still have serious problems in this sphere. As special funding for GM schools is coming to an end, and may already have ended, we shall from now on be in a position in which former GM schools continue to receive extra funding quite explicitly at the expense of other schools. It is an astonishing state of affairs for a Labour Government. Nevertheless, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

7.47 p.m.

Lord Davies of Oldham

My Lords, at last I beg to move that further consideration on Report be now adjourned. In moving the Motion, may I suggest that the Report stage begins again not before 8.47 p.m.

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