---

5.30 pm

I have a letter dated 28 May from Lord McIntosh to Baroness Blatch, which baldly states:

"LEAs would ultimately be liable for the debts of purchasing companies, just as they are for those accrued by purchasing by individual schools."

What will happen if an order is made under clause 2 with the effect that I have just described?

The key question is whether the proposals will work. Lord McIntosh said that one reason

"for using such companies is that schools may want to join together to deliver services to other schools in which they have real strength. That could result in benefits to company members and to other schools, which could receive good quality support."

He then made a brief point about distance learning and publishing skills, before going on to say:

"They may therefore need to bring in outside organisations . . . perhaps a not-for-profit organisation . . . as members of the company on the basis that they will take a share of the profits. And why not?"

Lord McIntosh also said:

"I cannot reconcile the opposition to that idea with what I understand to be the ethos of the Conservative party."

He could not understand why we would not want commercial freedom for the companies in question. The point to which I return is that if there is merit in the principle of giving further freedom, the key question—this is where the Labour party and the Government always fall down—is not whether the Government have bagged one of our ideas and are stealing our clothes to make it look as though they are giving schools freedom to manage, but whether the policy will work. We do not yet know the detail of the regulations. There are no magic wands to be waved in such matters. My questions concern matters that will have to be dealt with on the ground.

There is a further point. We are indeed in favour of innovation, but the amendments tabled in the other House would have allowed even more freedom, and there is a problem with that. It looks to us as though the issues have not been properly thought through, and there have been

15 Jul 2002 : Column 55

no proper answers about culpability, liability and the protection of governors. In the other place, Baroness Blatch asked:

"How on earth will the extra time, money and effort be spent without any impact on the primary duty of a governing body, which is to manage its school?"—[Official Report, House of Lords, 3 July 2002; Vol. 637, c. 252-3.]

Conservatives and Liberal Democrats in the House of Lords made specific points about that.

The key question here is whether the burden imposed on the companies by the proposals would interfere with the management of the schools. There is no doubt, as the Minister in the House of Lords admitted, that a considerable amount of time and effort would be spent in setting up arrangements of this kind. This would be a recipe for imposing administrative burdens on schools.

In a letter to Baroness Blatch, Lord McIntosh wrote, in respect of profits that may be made by such companies:

"We do not propose that profit must be spent solely in the interests of education."

That raises an interesting question. Schools are, by definition, charities. They are almost entirely governed by the law relating to charities interacting with the state education system. Ultimately, they are run in the context of charitable purposes. It would be difficult to imagine that profits made from those schools should not be returned to the schools themselves.

There was some discussion of that question in the other place, but no explanation sufficient to warrant the arrangements now proposed was given. It seems clear to me that the clauses should be left out of the Bill, because there has been no clear indication of what will happen either under the regulations or in the circumstances that I have described.

Mr. Stephen O'Brien (Eddisbury): In the context of distribution of profits, my hon. Friend touches on the relationship with the charitable purposes of education. Does he know whether the Government have considered the point raised in Committee relating to the model of co-operatives, which are run for the benefit of members, especially where schools come together for common purposes? No answer—satisfactory or otherwise—to that question has been given. It strikes me that, of all Members of Parliament, it is Labour Members—especially those who stand to represent the Co-operative movement—who should have considered and answered that question.

Mr. Cash: Indeed, and as one of my forebears invented the Co-operative movement, I have a special interest in the answer. I hope that the Minister will now answer that question, which did not receive an answer either in the other place or in Committee of the House of Commons.

Another important question remains outstanding. It was taken seriously by the Minister in the other place, but has not yet been addressed by the Minister handling the Bill here today. It relates to the question of whether or not undesirable characters could become involved in schools, which they might regard as easy targets for involvement

15 Jul 2002 : Column 56

in commercial activities. Baroness Blatch gave an example of someone who was indeed undesirable, saying that,

"Had the school been unwise enough to engage in any kind of commercial activity with that person, it would have ended in tears".

Extraordinarily, Lord McIntosh's reply to the noble Lady's question,

"How can a set of regulations specify such undesirable or unsuitable people for the purposes of becoming a member of a company?",

was:

"There are two lines of protection . . . First, there is the good sense of the schools concerned."

I hope that hon. Members take some satisfaction from that. The noble Lord continued:

"We are talking about people from more than one school"—

as if that had any relevance—

"so such a person could not be the friend of one of the governors or a friend of the head teacher of one of the schools unless the other schools involved in the company were convinced of the integrity of that friend."

Do hon. Members really regard that as a convincing answer to the question of how to keep out undesirable characters—that people will have to go chasing around, asking all the different schools whether they like this chap or that one? The very notion that that is the solution to the problem is utterly unconvincing.

Lord McIntosh went on:

"However, we have the protection that more than one school will be involved and there will be an independent eye cast over any invitation to join."

On the question of leaving to regulations the matter of people who would be regarded as acceptable members of a company, he added:

"Clearly, that will improve with experience."

We have to discover that undesirable people have, in fact, been running those schools or helping to run them before we learn that from experience.

Even more astonishingly, Lord McIntosh went on to say:

"We can state in regulations that the person who becomes a member of a company shall have educational objectives"—

that is basically the point that I was making about charitable purposes—

" . . . or that such a person has something to contribute to the company educationally which cannot otherwise be found."

Lord McIntosh was simply ducking the question. The Government cannot, in those regulations, prescribe which people will not be desirable, so they turn the problem the other way round. Lord McIntosh continued:

"We can say all sorts of things of that kind, but there will always be crooks."

I hope that the Minister heard that. When asked how he would ensure that people in those companies would be fit to run schools, his noble Friend admitted that there will always be crooks.

So many questions have been asked by my noble Friends in the other place, and by my hon. Friends in

15 Jul 2002 : Column 57

Committee, that the Government have a duty at least to attempt—so far, the Minister has not done so—to answer them. Baroness Blatch said:

"We know that there will always be crooks. However, we should be in the business of protecting our governors of schools. They are there not to be company chairman, company members or board members, but to ensure that good education takes place in schools and that schools are managed well in the interests of the education of the children within them."—[Official Report, House of Lords, 3 July 2002; Vol. 637, c. 241-43.]

I made a similar point earlier.

We must also consider the burdens on company directors and on the people running the schools, as well as the question of costs. I am sure that the Minister accepts that, inevitably, there is a need for lawyers and accountants—no doubt a battery of them—to resolve the many questions in company law that may arise. Will that not increase substantially the cost of running those schools?

Finally, if a company goes into liquidation, there is the question of whether or not the local education authority will have to pick up the tab. We have been assured that the objective of the regulations and the Bill is to provide a light touch. However, there is no evidence whatever from their construction that that will be so—far from it. More likely than not, they will increase the administrative and legal burdens and—I hope that the Minister will deal with this later—the duties imposed by statute on local education authorities would be removed.

Many issues are involved, and as the debate progresses, no doubt we shall hear more about them. The bottom line, however, is that the proposal is not a recipe for good education. Regulations are constantly spilling out of the Government, and huge administrative costs are being imposed. The Minister, I hope, will be able to deal with some of those questions, but will have enormous difficulty discharging his responsibility, as he certainly did not succeed in doing so in his opening speech. He is fairly new to his post—I was astonished by his irresponsible handling of questions that were thoroughly canvassed in the House of Lords and considered carefully in Committee. He gave us about ten minutes of truncated explanation, but did not deal with any of our questions.

---