Previous SectionIndexHome Page

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. We must move on to the next debate.

27 Jan 1999 : Column 301

Highcliffe School

12.30 pm

Mr. Christopher Chope (Christchurch): Originally, I had intended to use this debate to raise the case of my constituent Miss Sujata Halder and her application for exceptional leave to remain in the United Kingdom. However, as soon as my success in the ballot became known, the Under-Secretary of State for the Home Department, the hon. Member for North Warwickshire (Mr. O'Brien), invited me to a meeting at the Home Office.

At that meeting, which was held last Thursday, we discussed the case, and the Under-Secretary promised to reconsider it. On Monday afternoon, the Home Secretary and the Under-Secretary finally decided to exercise their discretion in favour of my constituent and to allow her to remain in this country. I am most grateful to the Home Secretary and the Under-Secretary for having addressed the arguments that I raised on behalf of Miss Halder and for ensuring that justice is done in her case.

I am also grateful to the Under-Secretary of State for Education and Employment, the hon. Member for Norwich, South (Mr. Clarke), who is present this afternoon. His agreement to allow me to change the subject of the debate has given me the opportunity to raise the matter of the funding of Highcliffe comprehensive grant-maintained school. I hope that the Minister will be as good a listener as his Home Office colleagues.

Highcliffe comprehensive is the only grant-maintained secondary school in the ancient borough of Christchurch. Following a decision by the previous Government, it now has a sixth form, which it operates on a collaborative basis with two other Christchurch secondary schools--the Grange and Twynham. I am fortunate in having some excellent schools in my constituency, but none has a better academic record than Highcliffe, which came top in Dorset in the 1998 secondary school performance tables published on 1 December. It is a recognised centre of educational excellence and attracts more pupils than it can accommodate, many of them from Hampshire.

To mention Hampshire is to remind the Minister that no debate about schools in my constituency would be complete without another reference to the gross injustice and unfairness of the Government's decision not to alter the area cost adjustment element of the methodology for grant distribution. That means, for example, that another fine secondary school in my constituency--Ferndown upper school--receives £300,000 a year less than it would if it were situated a few miles down the road in Hampshire. The same is true for the schools in Christchurch.

The Government have decided to freeze the methodology for three years, but I can assure the Minister that the argument will not go away, as the feeling of great injustice about the matter persists in my constituency. That sense of injustice is evident in a letter that was sent to the Prime Minister on 20 January by Dr. Howard, the headmaster at Ferndown upper school. I shall not read the letter in full, but Dr. Howard states:

27 Jan 1999 : Column 302

    I hope that the Minister will listen again to the matters raised in that letter.

Highcliffe school has benefited from its grant-maintained status, which it attained in 1992-93. Since then, the school's governors have acted in what they consider to be a prudent and efficient manner and have used all the funds at their disposal for the benefit of pupils. With the Government's decision to abolish grant-maintained status, Highcliffe has opted for foundation status from later this year. One of the matters that I hope that the Minister will deal with in this short debate is the funding consequence for the school of that change of status. It is far from clear what will happen in the next financial year, but the school fears that it may lose as much as £40,000.

The matter is causing much concern. The consultation paper preceding the Government's legislation to abolish grant-maintained schools stated:

In February last year, the then Minister for School Standards, the right hon. Member for Tyneside, North (Mr. Byers), who is now the Secretary of State for Trade and Industry, told the Committee considering the School Standards and Framework Bill:

    "The Government have repeatedly said that, in accordance with the finding of the Public Accounts Committee, many GM schools received funding over and above that received by local authority schools. It is a question not only of delegated budgets, but of additional support. As a result, the pupil unit costs in local authorities are often far higher for GM schools than for the local authority maintained school. We have said that our objective is not to cut the amount being spent on pupils in GM schools but to increase the funding for pupils in other schools. We are therefore levelling up."--[Official Report, Standing Committee A, 12 February 1998; c. 461.]

So the then Minister, in those remarks, addressed the concerns of a number of schools in the maintained sector and said that, despite the disparities, funding would be levelled up rather than down. Since then, however, the Government have stated that the basic approach to funding in 1999-2000 should be protection, in cash terms, at 1998-99 budget levels per pupil. That suggests that no allowance is being made for inflation and that the funding for former grant-maintained schools will be kept static in cash terms while other schools catch up. Although that appears to be at odds with previous ministerial statements, I hope that the Minister will assure me that that is the wrong interpretation to put on those words.

Another recent development is that Ministers have decided to exclude from the base budget used to calculate the guaranteed amount per pupil the special purpose grant element known as SPG(N). Moreover, it is made clear in a letter from the Department for Education and Employment dated 20 October 1998 that Ministers have also decided that they, and not the local education authorities, will be responsible for calculating the level of GMS protected funding, in consultation with the Funding Agency for Schools.

Those statements have caused much confusion and uncertainty at Highcliffe and, no doubt, at other grant-maintained schools. They are worried about the level of funding that they will receive in the coming financial year.

27 Jan 1999 : Column 303

The crisis that the Highcliffe governors face is made worse by the next problem that I wish to raise on behalf of the school. To the uninitiated, that problem is both complex and esoteric. It concerns the consequences for Highcliffe of a reduction in the school's rateable value, announced in 1994-95 in response to an appeal by Dorset county council as long ago as 1990. As a school with charitable status, Highcliffe has to pay only 20 per cent. of its rates assessment. It has made provision to repay that portion of the 20 per cent. of which it has been relieved as a result of the change in rateable value.

However, the complication arises in the treatment of the remaining 80 per cent. Highcliffe receives some funding that emanates from Dorset county council under what is called LMS replication. Before Highcliffe received charitable status, it was liable for 100 per cent. of its rates. Therefore, under the LMS replication rules, Dorset county council has been paying the Funding Agency for Schools the 100 per cent. contribution for rates, despite the fact that only 20 per cent. of that would be payable by the school to the local authority.

As part of the annual maintenance grant provided to the school, a payment is made to the school to offset the value added tax that it, because it is not registered for VAT, has to pay for the purchase of any items on which is VAT is payable. That grant is referred to as SPG(V)--special purpose grant (VAT). The calculation of that grant is not laid down in any regulations and the Funding Agency for Schools was not bound by any inherited basis of calculation. However, the agency decided that the formula for calculating the grant should be by reference to the rateable value of the school. The system operated on the basis that Highcliffe was given a sum of money sufficient to meet the full rates bill without any allowance for charitable relief.

Once received in the hands of Highcliffe, the actual rates payable were paid to the Christchurch borough council and the remainder of the money was kept to offset VAT. My understanding is that, if the difference between rates payable and the sum received does not exceed 2.5 per cent. of the annual maintenance grant, an additional sum will be paid as SPGV.

The nub of that part of the story is that the calculation for VAT relief bears no relation to the amount of VAT paid by the school on goods and services bought. We are talking about a notional formula that has had some bizarre results, particularly where there has been a reduction in rateable values. Where that has happened, Dorset county council, the education authority, expects to be refunded the difference on the whole sum by the funding agency--an argument with which it is hard to disagree.

The Funding Agency for Schools remained uncertain for several years whether, in such circumstances, it should make a corresponding clawback from the annual maintenance grant. In logic, there was no reason why it should do so because it was a deemed payment for a special purpose but, without the clawback the funding agency would be out of pocket.

The question is simply one of equity: where should the loss fall? Should it fall on an individual school, even if the impact on its ability to meet its requirements might be severe, or should it be borne by the funding agency? I look forward to hearing the Minister's opinion because

27 Jan 1999 : Column 304

the funding agency clearly did not find that an easy question to answer. Sadly, it ultimately reached the wrong conclusion and passed the burden on to the individual school.

As a way out of a dilemma, the funding agency adopted successive strategies. First, it denied a claim by Dorset county council for repayment. When that did not work, it investigated whether it should apply special purpose grant to Highcliffe and the other schools affected, but decided not to do so, and then it considered the circumstances in each school.

I have gone into the technical detail to give the Minister a flavour of the subject. The essence is that, on 3 August 1998, the funding agency sent Highcliffe school a letter to the effect that it intended to recover £83,000 from the school, which had been overpaid. The school cannot afford to repay that sum and it would cause a great crisis in its finances.

The school wanted to find out why the agency had reached its conclusion. The agency had received a report by Robson Rhodes, the chartered accountants, and the school, not unreasonably, asked to see a copy. Despite the efforts of the school, correspondence with the Treasury solicitor and parliamentary questions that I tabled here, the Funding Agency for Schools has refused to divulge the contents of the report. That has created a climate of suspicion.

I hope that the Minister will allow the report to be issued. It cannot be consistent with the principles of open government that a report used to deprive Highcliffe of £83,000 is not available to the school and its governors. They have been told that they will have to show on their accounts that they have an unmet liability for £83,000 and that it will be repayable over three years. They are far from certain as to how that will be done.

I should be grateful if the Minister would say how that liability will interact with the new funding regime, which comes into effect when the school loses grant-maintained status. I should also be grateful if he could explain what he expects the school to do. It is unable to prove that the funding agency made an error in its calculations because it cannot see its workings. Clearly, the agency has been very coy about giving information. A number of straightforward questions, which I tabled to the Minister and which were referred to the funding agency, have been ducked. The agency purports not even to know the total amount of money involved in its dealings with all grant-maintained schools, something that I find disingenuous in the extreme.

Those are important issues and I hope that the Minister will produce a solution for Highcliffe school today. This is a serious problem--£83,000 coupled, perhaps, with the loss of £40,000 next year as a result of the change of status, for a school with about 1,200 pupils. It does not need me to spell out that that will have serious implications for the quality of the education that will be provided by Highcliffe.

Next Section

IndexHome Page