HL Deb 28 March 2002 vol 633 cc375-84

12.35 p.m.

Lord Davies of Oldham

rose to move, That the draft order laid before the House on 7th February be approved [20th Report from the Joint Committee].

The noble Lord said: My Lords, the contracting-out order is made under provisions in the Deregulation and Contracting Out Act 1994. I am pleased to have the opportunity to debate the order.

The main purpose of the order is to allow local education authorities greater flexibility in the delivery of services. LEAs need this flexibility for two main reasons. First, LEAs are tasked with securing high quality services to the schools, parents and pupils in their areas. They are key to delivering many of the improvements that we want to make. But local education authorities may not be able to deliver these improvements on their own. They will, in most cases, need to work in partnership with others.

We cannot expect all LEAs to house within one organisation all the skills and expertise necessary for their wide-ranging responsibilities. We need to build the capacity of LEAs through effective partnership working. Many LEAs are already using partners to deliver back-office functions but there are also significant capacity issues for LEAs trying to deliver high quality front-line services such as those covered by this order.

Secondly, our policy of best value obliges local authorities to review their services and to consider whether the service needs to be provided and, if so, who is best placed to provide that service. Local education authorities are currently limited in the range of services they can deliver in partnership with others. Whether or not they are the organisation best placed to provide a service, they are obliged by statute to undertake many education functions in-house.

Tasks such as drawing up a school organisation plan, making arrangements for statementing SEN pupils and enforcing school attendance orders currently have to be undertaken by an officer of the LEA. The order will allow LEAs, if they wish, to contract with private or voluntary bodies to deliver services such as these which require the exercise of discretion in individual cases. So the order will give LEAs greater flexibility in securing the most effective delivery of their services.

LEAs will remain ultimately responsible and accountable for all contracted out functions. LEAs will continue to set the direction and the strategy. They will ensure that the implementation of that direction and strategy is reflected in their contracts. While a contractor may carry out functions on behalf of the authority, the authority will retain overall control and ultimate accountability.

To reflect this, we have excluded from the order a number of key strategic decisions that we believe an authority should not contract out. For example, the approval of key plans, such as the authority's education development plans and early years and childcare development plans; setting local policies, such as school admission policies, and reviewing arrangements for children with SEN or behavioural difficulties; putting forward proposals for new schools or to close schools; determining the education budget and the budget share schools receive. These decisions remain for the LEA to determine—decisions for which the authority should be directly democratically accountable.

The order has been the subject of consultation with the local authority associations, local education authorities, trades unions and other interested bodies. We have taken their views into account in drafting the order. LEAs that responded to the consultation have broadly welcomed the flexibilities offered by the order.

I should also stress that this is not a privatisation agenda. The contractor need not be a for-profit commercial company. It could be a voluntary or not-for-profit company, or a company formed as a partnership, or a joint venture between a local authority and a commercial undertaking or voluntary body. LEAs will also be able to take advantage of the new freedoms on trading activity proposed in the recent local government White Paper in order to provide services for other LEAs where they wish. What matters is that the services are provided by the organisation that is best placed to provide the highest quality service, be it in the public, private or voluntary sector.

The order is an enabling measure. It will allow local education authorities to secure better value services for their schools and for the local community. It will remove legislative barriers to partnerships between the public, private and voluntary sectors, trying out new and better ways of delivering services. Whether to contract out is entirely for LEAs to decide, in line with their obligations under "best value". The order has been welcomed by the LEA sector. I commend it to the House. I beg to move.

Moved, That the draft order laid before the House on 7th February be approved [20th Report from the Joint Committee].—(Lord Davies of Oldham.)

Baroness Blatch

My Lords, I am grateful to the noble Lord for setting out and explaining the order. Like him—even on Maundy Thursday—I am pleased to have the opportunity to debate the matter.

The Government are committed to modernising local authority services. As with so many well-intentioned ideas of the Government, implementation invariably means greater complexity, some confusion, certainly more bureaucracy, and greater cost.

I support greater flexibility for schools and local education authorities, and I support more innovation and enterprise in the provision of services. In principle, all of that is a good thing. However, the way in which local authorities are required to go through the "best value" process is cumbersome; and it is costly. Looking at the three schedules to the order, I am bound to ask: will not the best value testing process be so time-consuming and costly that the ultimate operational and financial benefit will be diminished, if not eliminated?

I noted that in presenting the order the Minister referred to a number of areas that would be outside its provisions: education development plans; early years planning; admissions arrangements; special educational needs and educationally behavioural disordered young people; new schools; merger schools; and budget. He said that the reason was that local authorities should retain the accountability for those services. My understanding of the order is that local authorities will retain accountability for all the services, including those set out in the three schedules. I shall come to that point later.

I want to press the Minister on the issue of local authorities retaining accountability for services that are contracted out. I understand that, if the volume of contracted-out services is to increase significantly, it follows that cost and bureaucracy will increase too, and the areas of activity will be more complex—that is, not simply contracting for teaching or provision of direct services but to involve third parties in, for example, the area referred to in paragraph (y) of Schedule 1: section 406 (prohibition on political indoctrination in maintained schools)". What is it envisaged that a contractor would do in this area? How would the contract be costed; and by what would one measure the effectiveness?

On the issue of the schedules, perhaps I may refer at random to a few examples. Perhaps the noble Lord will be able to offer some clarification as to how, in practice, these provisions will work. For example, paragraph (hh)(ii) of Schedule 1 relates to Section 441 functions under the Education Act 1996: choice of school; child with statement of special educational needs". Again, what 'would a contractor do? Surely it is the local authority which mostly understands about young people with special educational needs. As I understand it, the local authority retains accountability for the service; but what third party contractor would deal with a child with special educational needs?

In Schedule 2, dealing with, Functions conferred by or under the School Standards and Framework Act 1988", paragraph (f) refers to: section 26(1),(2), (3) & (4) (duty to prepare a draft Schools Organisation Plan and consult on it)". Again, a schools organisational plan is an organic activity for the local authority. If the local authority is going to invite, by contract, a third party to devise the educational plan, it can do so only by itself briefing the third party in such a way that the energy and time consumed would be duplicated by the third party.

Paragraph (g) refers to: section 28(5) and paragraph 5, Schedule 6 (consultation on proposals to establish or alter a community or foundation school and implementation of approved proposals". What third party is better, and more knowledgeable, in regard to the need for restructuring in this way than the local authority? Again, a local authority would spend as much time imparting its own information from within the authority to a third party. It is for these reasons that I query the effectiveness of contracting out to a voluntary body, or to a company with profit, or to a company without profit.

Paragraph (h) of Schedule 2 refers to: responsibility to fixing dates of terms and holidays and times of sessions". Schools do not have to farm out such an activity as a distinct, paid-for contract. Fixing school dates, terms and holidays is a relatively minor matter for local authorities. Nevertheless, local authorities will have to go through the best value procedure, even if they believe that the notion of putting such matters out to contract is a nonsense.

Paragraph (s) relates to: section 70 and schedule 20 (requirements relating to collective worship". What on earth is there is in that particular service to contract out, other than perhaps inviting the local vicar to do it? All such activities can be dealt with under the present arrangements. Lay preachers, people from the community, and people from various faith groups come into schools now on a voluntary basis. No change in the law is necessary to allow that to happen. Paragraph (v) of Schedule 2 relates to "parental preferences". We are talking about farming out parental preferences for contract. I wonder what that actually means.

My final example is paragraph (bb) of Schedule 2: section 105 (duty to provide information in relation to grammar school ballots)". I do not see an issue here for contracting out.

These areas will now have to come under the best value arrangements. In each of these areas, local authorities will have to carry out a distinct best value exercise, in regard to lists of activities covering pages, in deciding whether or not to contract out. As the Minister said, this is a voluntary activity; nevertheless, a great deal of time and energy will be expended—and time is money.

I have to ask the noble Lord the following question. Would each LEA be required to review each and every aspect of service listed in the three schedules to test for best value? If LEAs are to be exempt from going through that test, why are they not exempt from going through it on any other matter that precedes the order? How time-consuming would all that be, and how costly? There must be a more efficient way of achieving cost-effective and, more significantly, operationally efficient contracted-out services.

Local education authorities are now inspected. That is a good thing. Inspections will cover the degree to which an authority is well managed, and the quality and cost-effectiveness of its services. That is also a good thing. Many of the functions set out in the schedules encroach more and more on the strategic and core functions of local education authorities. The Minister must tell the House how, in contractual terms, an LEA will retain distinct boundaries between service provision and strategic and core function accountability. Will it require yet more guidance—as if schools do not have enough already?

It would also be helpful if the Minister could explain the interaction between the present contracting-out arrangements and relationships between schools and LEAS and commercial or voluntary enterprise, and the proposals for setting up companies as set out in the current Education Bill by the Secretary of State—and by the LEAs and the schools themselves.

A point raised by my honourable friend Graham Brady in another place was the degree to which schools which exercise powers of exemption under Clause 2 of the Education Bill could potentially disregard those provisions if they had applied successfully to innovate in order to raise standards by converting the cost of what would be incurred by conforming to the orders and implementing the provisions to areas of classroom expenditure which could, indeed, provide a better educational return. Does the Minister agree with a comment made by my honourable friend in another place that, under this order, LEAs would be reduced to advising, consulting and implementing the strategy being farmed out, leaving the LEAs as mere contract managers? I ask that question for clarification, as much as anything, about where the Government expect to see local education authorities over the next few years.

The Minister in another place appeared to dismiss the consultation exercise on these measures. A number of points raised by respondents have not been adequately addressed. Like us, the respondents to the consultation exercise broadly welcome the principle of improving the delivery of services by contracting out with the commercial, private and voluntary sectors. However, they were concerned, as, indeed, we are, about the split functions, the quality and the quantity of providers, and, again, the interaction of the proposals in the current Education Bill giving the Secretary of State power to form a company.

An additional, very real issue is the cost of implementing the order. It is disingenuous—almost misleading—to suggest, as the Government have done, that it is cost-neutral. The additional work at local education authority and school levels will cost. Once again, that cost will have to be met by raiding money that should be spent on children in the classroom. For example, a great deal more coordination will be required. That is time-consuming, and, as I said earlier, time costs money.

I noted that the Minister in another place, in answer to a question by my honourable friend Graham Brady, concerning the contracting-out of services for identifying children with special educational needs and assessing appropriate provision for them under Section 321 of the 1996 Act, said that it would not present any problems. However, I must ask the Minister a question concerning the case of an aggrieved parent who was critical of a judgment made by a contractor. According to the Minister, the parent would simply appeal to the LEA where the accountability lay. But can the Minister explain what the situation would be if, in such an event, the LEA was taken to a tribunal for the failure on the part of the contractor not because the contractor was incompetent or inefficient but because the parent disagreed with the judgment made by the contractor? The situation is hardly straightforward and it would cause a great deal of confusion.

Many examples given by my honourable friend and by Members on the Liberal Democrat Benches in another place threw up complex and often confusing aspects of this order, especially the area of responsibility for strategic functions and the diffuse delivery of the service. Given the fact that this is Maundy Thursday and that this is the last item of business, I shall not—this may come as a relief—pursue some of those details further. However, I want to raise one point.

The Government claim that the aim of the order is to increase flexibility, to widen choice in the provision of LEA services and to provide better value for money. We support those aims. However, the Government will know that there is considerable disquiet about the practical implementation of these measures and their impact on LEA schools and, more especially, on children. We shall take the Government on trust by not opposing the order. But I hope that the Government will be vigilant in monitoring its effects and will seek to remedy any shortcomings in order to pre-empt any possible adverse, even if unintended, consequences.

Baroness Scott of Needham Market

My Lords, from these Benches we also offer our broad support for the aims of the order, as outlined by the Minister. However, that support is given very much on the basis that this process should be driven by the local education authorities themselves in the best interests of the people whom they serve and not in pursuit of ticking boxes on government forms or adhering to a raft of best-value performance indicators. I declare an interest as a member of a local education authority. I have been a county councillor in Suffolk for a decade.

I am sure that there will be many occasions when this order can be used usefully in order to respond to temporary circumstances as well to deliver the type of partnership and new arrangements for service delivery which the Minister has outlined. However, we also remain profoundly concerned about the accountability aspects of contracting out. Although we broadly welcome the assurances given by the Minister in terms of the strategic functions being retained by the LEAs, we nevertheless remain concerned that many of the issues which are contracted out should also be democratically accountable. At present, people who seek to challenge the system are faced with a minefield. If there is now to be an added layer for them to fight through, it will be very difficult for people to challenge decisions or simply to make their voice heard when they are not happy. With those caveats, we support the order.

Lord Davies of Oldham

My Lords, I am grateful for the contributions to the debate from both Front Benches. It has been a particularly lively debate, even though it has taken place somewhat late in this part of the parliamentary Session. I appreciate the fact that support has been expressed on all sides for the concept of achieving best value. I accept straightforwardly that the noble Baroness, Lady Blatch, is right when she says that initial costs are bound to be involved in the drawing up of a contract and that a local authority would have to take account of those costs in working out whether it would obtain best value from the contract.

However, those initial costs might relate to a contract which would obtain over several years. Therefore, the assessment of the viability of the contract and the advisability of going forward with it would obviously have to take into account such costs. However, they might be reflected in the achievement of best value by the quality of the service that could he guaranteed from the contract. I want to emphasise—I believe that it was the subject of significant debate in the other place and has been reflected, in particular, in the contribution of the noble Baroness, Lady Blatch, today—that the question of best value must mean that built into the contract is a guarantee of the efficiency of the service.

As the noble Baroness indicated, it is possible that special provisions will need to be made in certain areas. In anticipating this debate, I did not doubt that the noble Baroness would refer to the case of a child with special educational needs. I know of the very keen interest that she has always taken in this area and of her expertise in the field. Of course, the contract which would be developed in such a situation would involve the LEA being liable if the contractor took a decision which the parent of a child disputed. Therefore, the structure of the contract would contain the necessary appeal procedure in order to guarantee that, where the parent justifiably felt aggrieved, the decision would have to be taken at the local education authority level. That would be consistent with the Bill which I recall debating with the noble Baroness a short while ago. During our discussions, we expressed concern about the issues of appeal procedures and the rights of parents who, inevitably in this area of educational provision for children, take the most keen interest and who need to be satisfied that the best possible service is being offered to their children.

With regard to one or two other areas, I shall write —

Baroness Blatch

My Lords, I am grateful to the noble Lord for giving way. I want to raise a point before he leaves the subject of special educational needs. My concern relates to the example that I gave where it is not incompetence or inefficiency that is being appealed against but the judgment made by a third-party contractor. If the tribunal considers only the process—in other words, if the process is immaculate and is not at fault in any way—then the local authority is exonerated from any responsibility. That leaves an aggrieved parent with no one to turn to. There is no process set down for the contractor to he accountable to the parent. As I understand the order, the LEA is accountable to the parent, but an unaccountable third party makes the decision. That leaves the parent of a child with special educational needs in a difficult position.

1 p.m.

Lord Davies of Oldham

My Lords, I understand tie noble Baroness's anxiety, which needs to be relieved. As we have indicated, local authorities have a particular and obvious responsibility for policy relating to special educational needs. Any such contract would make it clear that the local authority took responsibility for the parent's appeal against the decision and the work carried out by the contractor. It would be a different kind of contract from that used for less significant and sensitive areas of education provision.

I recognise and accept that considerable care would need to be taken in the drawing up of contracts in that area and that there would be some initial cost. If local authorities did not feel that there was a contractor capable of providing better-value service, the service would remain with them.

The noble Baroness questioned whether a third party should provide a service, which she recognised as essential and proper for the local authority, and whether the third party would have a role to play. With regard to parental choice and—perhaps I may tread on this sensitive area—grammar school ballots, a third party could not necessarily be ruled out. Of course local authorities take responsibility for the ultimate decision on the provision of places and the admissions strategy in their area. However, I recall the noble Baroness's government ensuring in legislation that third parties were involved in ascertaining the democratic voice.

The industrial relations legislation indicated that ballots should be held under proper terms. In many cases they are carried out by a third party. The Electoral Reform Society has established a significant reputation for carrying out sensitive ballots. It may not be that particular body, but comparable bodies have the expertise to carry out the appropriate processes of ascertaining—under the direction of the local authority on what needs to be ascertained—the views of the people concerned. We could surely see a third party undertake that process without any direct implications for the value judgments eventually involved in the local authority's decision.

The process of electoral testing has not been the subject of great controversy in any of the sensitive areas of national life where third parties have played their part. However, I accept that this is a strategic issue for which the local authority is ultimately responsible.

Baroness Blatch

My Lords, I agree with the Minister that the Electoral Reform Society is greatly involved in that process. But what else relating to grammar school ballots could additionally be contracted out?

Lord Davies of Oldham

My Lords, the order lists all the areas currently undertaken by local authorities where they may choose to employ a third party. There is no question about the decision being taken by the local authority. Following widespread consultation, we have sought with this order to create the greatest freedom for local authorities to make the choice. If in an area as sensitive as grammar school ballots—into which I seem, somewhat ill-advisedly, to have clambered—the intrusion of a third party might in some way be a derogation of the local authority's responsibility, local authorities are wise enough not to put themselves in jeopardy with regard to process. I believe I can reassure the noble Baroness on that matter.

The noble Baroness raised parental choice in general. Local authorities will set agreed admissions policies. The process by which parents express their choices could be provided by another competent body with the expertise to carry out a survey of parental choices. As we have made clear with regard to the legislation, local authorities are responsible for their admissions policies. The process of ascertaining a choice and defining the issue could be contracted out to those capable of ascertaining opinion.

The legislation draws a clear line between the strategic issues of principle, on which the noble Baroness and I are in agreement, which are the responsibility of democratically-elected local authorities, and the process through which the basis on which decisions are taken can be improved. In that sense, this is enabling legislation. Local authorities are under an obligation to achieve best value. Bearing in mind the reservations expressed by both noble Baronesses, if an authority is engaged in an exercise in which the process of drawing up the contract defeats the objective of getting better value for money, it will not act in that area. However, it is surely right that the order should maximise the opportunities and lead to democratically elected local authorities taking the decisions.

The noble Baroness, Lady Blatch, drew a number of other detailed points to my attention. If I have omitted to cover them in sufficient detail, I shall write to her. I am grateful for the fact that both noble Baronesses have recognised the value behind the principles of the legislation. The noble Baroness, Lady Blatch, said that she would take the Government on trust. I shall not ask her for the timescale of that commitment—it is probably until our next debate. Under best value procedures we expect to be able to establish that the legislation works to the benefit of the people whom we serve and provides them with the best services that can be secured. If there are difficulties in that respect, the issues will have to be revisited, but in the meantime, I commend the order to the House.

Baroness Blatch

My Lords, before the noble Lord sits down, there is one more question to which it is important that we receive an answer before we close the debate. I asked specifically whether a local authority will have to go through the exercise of best value on every one of the considerable number of items listed in the three schedules.

Lord Davies of Oldham

My Lords, the categorisation of best value for local authorities has considerable breadth. These are areas in which, if they so choose, they may establish best value for the services provided under a contracting out principle to their own satisfaction. If they choose to do it that way and are able to establish to their satisfaction that they can achieve best value, they will pursue that course.

There is no question of every detail being a checklist against which a local authority will be evaluated. We have produced an extensive list of discrete functions because the legislation covers that range of functions. Following consultation with local authorities, we want to maximise their opportunities to achieve best value targets. However, we also accept that there are certain discrete areas that ought to be reserved to the local authorities. That is the basis of the order.

On Question, Motion agreed to.

House adjourned for the Easter Recess at eleven minutes past one o'clock until Monday, 8th April