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12.45 pm

The Parliamentary Under-Secretary of State for Education and Employment (Mr. Charles Clarke): First, I congratulate the hon. Gentleman on securing this debate--it is always moving to hear appeals about poverty from deprived areas of the country, such as Christchurch, which he represents. I also congratulate him on his

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success with his constituent, which led to the change of subject matter for the debate. That is yet another example of the way in which the Government respond to the concerns raised by hon. Members. Finally, I welcome the hon. Gentleman's remarks about the academic success of Highcliffe school and join him in congratulating the school on that success and on its record, which is well known.

I will deal with the two fundamental points raised by the hon. Gentleman in reverse order--first, with the annual maintenance grant and its redetermination and, secondly, with the general issue of funding.

The Funding Agency for Schools for England has considered Highcliffe school and the other cases carefully. It may be worth giving some background. Where the rates bill has been reduced for past years and schools have received more annual maintenance grant from the funding agency than they should have--money that has not been spent because of the reduction in rate assessment--the regulations permit the agency to redetermine the calculation for previous years if any fact comes to light that would have affected it. The rates revaluation is one such fact, although others are involved, such as pupil numbers and so forth.

That practice goes back to the beginnings of the grant-maintained sector. The regulations that permit the funding agency to do that were introduced by the Conservative Government, of which the hon. Gentleman was a member, according to principles to which he subscribed at the time. The Funding Agency for Schools has simply carried through that process according to its responsibility for securing the proper use of public moneys, as is right and proper. In principle, I conclude that the funding agency was right to redetermine Highcliffe's annual maintenance grant and to recover any overpayment.

In exercising those rights, which has to be done carefully, the Funding Agency for Schools considered the situation for a long time--several years, as you implied. It took detailed legal advice because some of the grant-maintained schools affected were worried and the funding agency was correctly concerned to ensure that any decision that it took accorded with the law and could be properly sustained in the courts. It also took detailed financial advice--you mentioned the accountants, Robson Rhodes and their analyses not only of Highcliffe, but of all the schools involved.

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I must remind Ministers as well as Back Benchers of the correct form of address. I think that the Minister is referring to the hon. Member for Christchurch (Mr. Chope). If he uses the second person, he is referring to the Chair.

Mr. Clarke: Thank you, Mr. Deputy Speaker and I apologise for the slip. I was so concerned to refresh my memory as to whether the Member for Christchurch was right honourable or honourable that I missed that point. I apologise to you and to him for the mistake.

The Funding Agency for Schools considered the situation carefully, took detailed legal advice and took financial advice from Robson Rhodes for all the schools involved. It considered Highcliffe and the other schools with which it was dealing in that round at meetings held

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in June and July 1998. At that time, 36 grant-maintained schools were in the position that I described and had received more money than they should have following the rates redetermination. Of those 36, it was decided immediately to recover the funds overpaid from 33. That course of action was not taken for the remaining three schools, which included Highcliffe, because the agency wanted to study in more detail their financial situation to understand correctly the implications of any decision. They considered those matters most carefully.

The hon. Gentleman rightly quoted the cost to Highcliffe as £83,000, which represents about 4 per cent. of the school's £2.14 million annual maintenance grant budget for 1998-99. Although it is a significant sum, it must be considered in the context of the overall grant that the school received for the coming year.

The hon. Gentleman may be interested to know why the rates revaluation is so significant for ex-grant-maintained schools. He described the formula that was used as "complex, if not esoteric". Under the rules that were established by the Government of whom he was a member, schools were funded for 100 per cent. of their rates bills, despite the fact that they had to pay only 20 per cent. The 80 per cent. relief was used to pay VAT charges in a back-of-the-envelope calculation of the type that the hon. Gentleman described. Before the hon. Gentleman described the formula as "complex, if not esoteric", I had noted the phrase "toy-town economics". I am glad that we are getting rid of that aspect of the grant-maintained school regime.

The figures that produced the uncertainties, difficulties and problems that the hon. Gentleman described were ludicrous as they were based not on fact, but on a back-of-the-envelope formula that had been decided by the Government of the day. The hon. Gentleman was right to describe it as esoteric and to criticise the system that created the problem. I hope that he will agree that we were right to get rid of that ludicrous formula.

As part of the transitional process, legal responsibility in respect of the three schools that are still facing a problem--it was resolved immediately in 33 cases and three cases are outstanding--passes to the Secretary of State on the advice of the Funding Agency for Schools. I understand that the FAS will be advising in all three cases that the money is recovered in full and paid immediately. According to the FAS, the current balances at Highcliffe school will leave the school with a healthy surplus this year even after payment of the £83,000.

I am grateful to the hon. Gentleman for raising the matter in the House and I shall be happy to receive any further financial submissions from the school if it considers that the advice is inappropriate, for example. On the basis of the advice received from the FAS, the Secretary of State will recover the overpayment in full. Frankly, despite the articulate advocacy of the hon. Gentleman, there is no reason whatever for Highcliffe school to be treated differently from all other ex-grant-maintained schools.

The hon. Gentleman asked whether there had been any exceptions to the position that I described. I am advised that there were two: Wibsey school in Bradford, which is the only local education authority with grant-maintained schools that does not redetermine school budgets after rates have been revalued, and Desborough school in

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Windsor and Maidenhead, which was agreed very early on by the FAS, which then rapidly realised that it would be setting a precedent that would result in a large loss of resource to education in the sector. The FAS decided not to accept that as a precedent although the decision had occurred at the very beginning of the process.

There is no particular reason to reconsider the position of Highcliffe. There have been scores of decisions on schools since the process began. There is no reason why Highcliffe should be treated differently, so in my view the FAS made the right decision.

The hon. Gentleman also raised the issue of disclosure of documentation. As he probably knows, the FAS has given Highcliffe detailed reasons for its decision. It has responded positively to further requests for information from the school governors and set that out fully. The FAS decision not to release the Robson Rhodes report on Highcliffe or any other school was based on counsel's opinion about the nature of the advice that the FAS received.

I now turn to the general issues of current funding that the hon. Gentleman raised at the beginning of his speech. The Government have set out absolutely clearly by law that recurrent funding per pupil is guaranteed for all ex-grant-maintained schools and Dorset is under the same requirement as anywhere else. Beyond that baseline which is guaranteed by law, Dorset will take its own decisions about specific grants and the standards fund. It is instructive to look at the decisions that Dorset has to take. I understand that the provisional budget that Dorset is currently considering has allocated a 4.7 per cent. increase to education in contrast to the 7.3 per cent. increase that my right hon. Friend the Secretary of State for Education and Employment allocated for that purpose.

As the hon. Gentleman will know, Dorset county council comprises 21 Liberal Democrats, 15 Conservatives, five Labour councillors and one independent councillor and is under no overall control. It is governed by an interesting alliance of Liberal Democrats and Conservatives.

Mr. Chope: I assure the Minister that the Conservatives are not involved in running Dorset county council. If they were, the position would be very different.

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Mr. Clarke: Given the current state of the Liberal Democrats, I am always suspicious about with whom they form alliances. I apologise to the hon. Gentleman for maligning his colleagues in that way.

Dorset county council is considering whether to opt for a 6 or 11.2 per cent. increase in council tax. The area cost adjustment factors that the hon. Gentleman mentioned will no doubt come into that consideration although, as the hon. Gentleman will recall, the area cost adjustment was invented by the Government of whom he was a member.

As in all local authorities, there are arguments about the merits of the budget-setting period. I regard the hon. Gentleman's story about the possible £40,000 cut affecting Highcliffe in the same spirit as the letter from Dr. Howard about his school--as part of the general blitz of material that occurs in the budget-raising process. All hon. Members will be familiar with the issues that surround that process. We shall just have to see what happens.

I very much hope that Dorset county council will allocate significant resources to education and that, given its success, Highcliffe will get the resources that it deserves. However, a speculative £40,000 cut in the middle of the budget-setting process is not a basis for making firm statements in the House; it should be regarded simply as one of the options that is floating around.

As the hon. Gentleman knows, the Government have said that transitional funding will continue for costs that the FAS would have met in such circumstances. I appreciate the chance that the hon. Gentleman has given me to set out the way in which the issues have been addressed in respect of Highcliffe and elsewhere.

Finally, I wish to emphasise one fundamental political point. We attach immense importance to a smooth transition between ex-grant-maintained schools and local education authorities. Many issues of history, ideology, circumstance, jealousy and so on have been floating around. Everywhere I go I ask the heads of ex-grant-maintained schools about arrangements with the LEA. I ask LEAs the same question and in general, with one or two exceptions--one of the hon. Gentleman's neighbouring authorities may be one--the response has been extremely positive and the Government very much hope that it will continue to be.

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