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Mr. Willis: It is a pleasure to follow the hon. Member for Stone (Mr. Cash). When I saw the right hon. Member for Hartlepool (Mr. Mandelson) appear on the Government Benches, I wondered whether he intended to enter the debate, and whether we would go back to old times.

I am grateful to the hon. Member for Stone for using his expertise in these matters to ask the Government some searching questions—I say that quite genuinely. As an opportunity for us to examine the Bill, the Committee stage was a travesty. The one thing that we failed to get was a clear explanation of the Government's proposal.

5.45 pm

For the Minister to come along and give a very brief exposé of what the Government are trying to achieve by restoring the two clauses does him and the House a disservice. I say that rather sadly. Either there is a great deal that the Government are trying to hide, or they do not know the answers to the questions. In either case,

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given the appalling record of private companies formed out of public sector organisations, it is important that we get it right in the case of schools, if we go down that road.

I shall not repeat all the arguments advanced by the hon. Member for Stone. We hope that the Minister will respond to each of the points that he made. The question who will guarantee a company's debts is crucial. I shall speak to amendment (aa) in a moment, but first I shall deal with some of the other amendments, particularly the Government's insistence on restoring clause 10. I shall return to the question whether or not the companies are limited by shares; I have a particular reason for raising it.

Let us say, for argument's sake, that the company is a shareholding company and that the shares are, as the hon. Member for Stone said, as much as £10. The liabilities on the shareholders are therefore relatively small, compared with what could be the company's debts. What would happen to that liability in terms of the assets? As it is a school company, let us say that it is operating from a computer suite within the school, as it may well do—a computer suite that had been funded partly by capital provided as part of a joint company by shareholder capital from outside.

The Minister shakes his head. With respect, that has been the attitude of Ministers throughout the discussion. Every time we ask a question, they shake their head as if to say, "That is irrelevant." Let us say that the company goes bust. What happens to all the equipment in the suite that was used by the company? The shareholders may pay up to their limit. Does the local education authority then come in and pay out the debtors, or the creditors, whichever is the case? If an LEA must be responsible as a backstop for every company set up under the Bill, it will have to find funds from other schools to pay those debts. We need answers to all the important questions of liability that arise from the clause.

We never got a clear answer as to whether the school's assets would be involved in a company. Let me give the Minister another example. There is nothing to stop a group of governors setting up a company to manage the school and its assets—or even a group of schools—and transferring the assets into that company. For example, 3 E's in Guildford set up the new King's College campus. Why should not that company take over all the schools in Guildford as a single company, form a separate company limited by shares, and then be bought out by a major plc and traded on the stock market as part of that company's portfolio? What would happen at that time? What would happen to the assets if the company got into difficulties? If it wanted to realise some of its assets to fund new developments, would it be able to close the school and sell the land, buildings or whatever else? Lord McIntosh rather alarmingly said in another place that people could take profit out of the companies. The Government have made it clear that that is possible. If a company takes profit, it also needs to share the risk.

Mr. Stephen O'Brien: I thank the hon. Gentleman for giving way. He will remember that many of those questions were asked in Committee, so it is hardly that the Government have not been given notice of them. Let us return to his example of the ICT suite, where there are assets, even though their value will be rapidly depreciating. What will happen if there is recourse to those assets, but no contract between those who are damaged and the LEA? Has the Minister discussed that

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matter with the Chancellor, with a view to computing contingent liabilities on the Government, as the ultimate guarantor for the LEA? Those are the reasons for the hon. Gentleman's questions and why we are looking for answers. The matter is too uncertain for anybody to have certainty about entering into a contract.

Mr. Willis: I am grateful to the hon. Gentleman for raising that issue. He and I know that most local authorities, especially shire local authorities, have fewer assets on their balance sheets than some individual schools. The £1.1 billion on school balance sheets exceeds significantly the assets of a number of LEAs. Recourse to the Chancellor might well be needed in such cases. In Committee, although the Minister was not present at the time—[Interruption.] I apologise; the hon. Gentleman was not a Minister at that time, so I do not hold him responsible for the answers that the then Minister gave. None the less, the Government can also invest in the companies. What will happen to that investment? Does the LEA have responsibility in that regard or is it ultimately part of the Government's liability? We need to know the answer to that question.

The hon. Member for Stone made a crucial point about the relationship between part 1 and the rest of the Bill. The Bill is to become the Education Act 2002, but part 1 is about innovation and the ability to disregard all other education legislation. There is a huge contradiction between part 1 and the intention to introduce school companies. We must be given an answer in that context.

My noble Friend Baroness Sharp of Guildford asked an important question in another place: what is the fundamental role of our schools? I do not think that she received an adequate answer. We have heard from the Chancellor today and I think that we shall hear from the Secretary of State tomorrow—

The Secretary of State for Education and Skills (Estelle Morris) indicated assent.

Mr. Willis: The Secretary of State will make a major statement about investing significant resources in schools.

Mr. Miliband: Not enough?

Mr. Willis: The Minister must wait for my speech to find out the answer.

We have heard today about a raft of new controls that will be placed on schools in relation to accessing the new resources. That is the reality of what we heard today: it is not freedom for schools; it is greater centralisation. We shall debate that issue on another occasion, but it is ironic that one of the Conservative amendments from another place deals with cutting bureaucracy. I am sure that the Secretary of State agrees with the premise of innovation and autonomy, but greater controls and obligations are being imposed on schools at the same time. My party and I believe that the core business of a school and its management and governors is to run the school effectively for its youngsters. I do not want companies to take away from that core function and I think that we need some assurance about that.

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It is interesting that neither of the head teacher associations supports that part of the Bill. Neither of them wants the greater levels of autonomy—[Interruption.] The Secretary of State chunters away from a sedentary position, but the private sector does not want those things either. In the private sector, which has the freedom to do all those things, there is no desire to set up companies as well.

Mr. O'Brien: I thank the hon. Gentleman for giving way a second time. In relation to his argument about regulation, is he aware that significant expertise will be required around the board tables of the new school companies to ensure that there is sufficient knowledge about running a company and the associated liabilities and responsibilities? It is difficult to imagine that such expertise currently exists in schools and governing bodies. In support of his argument that, far from enhancing freedom, the regulations that underpin the provisions will be more burdensome, I suggest that that expertise will be needed somewhere to ensure compliance with all company law regulations.

Mr. Willis: That is what is so confusing. What is behind the provisions, and what is their objective? The hon. Gentleman is absolutely right that the bureaucracy, controls and financial investment that will be needed in order to achieve that objective are staggering, but the Government have yet to persuade us about the overall benefit.

Mr. Cash: The hon. Gentleman makes a powerful point in conjunction with my hon. Friend the Member for Eddisbury (Mr. O'Brien). Does he also accept that one of the most difficult aspects of dealing with what is meant to be a standard arrangement with regard to company law, even allowing for the fact that a great deal of competence is needed, is fitting in the required knowledge with all the requirements laid down by model constitutions and regulations? Does he agree that it will be a field day for lawyers and accountants?

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