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6.15 pm

I must now admit that some progress was made—the Baroness offered a further safeguard, to which the Minister did not refer, which greatly surprised me. She stated:

"We have decided that, under the regulations, companies will provide an interim financial report to the supervising authority as well as annually audited accounts."

I welcome that. It reflects to some extent, perhaps, my remark that we had to know before a company went bust what its financial position was. It is certainly true that an interim financial report and audited accounts would be a step in the right direction. That does not, however, alter the ultimate question: if a company goes bust, what will happen?

The question of profits, which the Minister raised with my hon. Friend the Member for Altrincham and Sale, West, was dealt with in the other place in previous debates. We have still not had a proper answer to the question—several contradictory answers were given—of where the profits would go. One Minister says that the profits will go back into the school, while the other says that the profits will be shared. Baroness Ashton stated:

"The profits will be shared, and school members of companies will receive their due amount."—[Official Report, House of Lords, 23 July 2002; Vol. 638, c. 220–23.]

Will the Minister explain exactly what the Government's position is on the question of profits, and for what purpose those profits will be used? Will he also deal with the question of what would happen if there are losses? That is the other side of the equation.

Mr. Andrew Turner (Isle of Wight): Does my hon. Friend accept that what the Minister seems to misunderstand in saying that schools should be able to make a profit is that the other side of a profit is the risk? People and private companies who make profits generally do so by risking some of their assets. If, for instance, a school company were to publish a CD-ROM, it would risk money in publishing that CD-ROM, which it may not recover. That loss—the company may even have borrowed money to pay for it—has not been explained by the Minister.

Mr. Cash: I am grateful to my hon. Friend for that point, which also relates to a point that was raised by

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the noble Lord Dearing. He asked what would happen in relation to the capital and the servicing of these companies. He asked a very important question, which has not been answered, and which I ask the Minister, again, to answer. What skills will be available to these companies? From where will they get advice? Do they have the kind of skill to be able to assess the risk to which my hon. Friend the Member for Isle of Wight (Mr. Turner) refers, which, in certain cases, could be very considerable in terms of capital outlay? Are they capable of making the right decisions? Furthermore, will they be able to get access to the capital? I think that the noble Lord Dearing stated that he, or somebody that he knew, had come across circumstances in which someone who had engaged in CD-ROM activities tried hard to transfer the project into the private sector, but, unfortunately, had neither the capital nor the skill to be able to do so. My hon. Friend therefore asks an important question.

The Minister also referred to insurance liability in his opening remarks. We do not need to go into all the points that I placed on the record in the previous debate that we had on this issue. However, when a company overtrades or faces legal liabilities, he simply cannot say, "Oh, well, insurance and school trips do not come into this." The fact is that liabilities can accumulate from a variety of sources and a company could be afflicted by substantial liabilities. If it gets into difficulties, what will happen in practice?

The Minister also touched on the membership of the companies. We have made slight progress on this issue. Lord McIntosh was replaced by other Ministers after a long stint dealing with these issues.

Mr. Miliband: It will be the hon. Gentleman next.

Mr. Cash: There is no prospect of that. We are dealing with the issue extremely effectively, and the Minister may find that he is replaced if he does not do a bit better.

The bottom line is that Lord McIntosh referred to crooks, but the Minister seemed to dismiss that suggestion. He seems to think that there is no question of crooks taking over schools, but Lord McIntosh clearly thought that that was a possibility. I will not repeat what went on in another place, but it is clear that the Government have conceded that the individuals who will not be able to join companies will be those who are not currently permitted to be school governors or to teach. That is a step forward in response to our representations, and we are partially grateful. However, it took an intervention from me for the Minister to recall what was said in the other place. As we are now dealing with the same clauses, I presume that what was said in the other place will now be binding on him. I would be grateful for confirmation of that.

The Minister also has a responsibility to explain the manner in which governing bodies will operate. In exchanges with my hon. Friend the Member for Altrincham and Sale, West and in relation to the written reply that was held up, the question of whether the governing body can or cannot contract out of the duty to conduct the school raises an issue in relation to clause 2. The Minister therefore has an obligation to the House to explain it. In particular, how can anyone prevent a school from delegating functions to a company? If it did, what would happen? That also raises the question of who foots the bill. Is it intended that staff will be brought in—supply

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teachers and others—and, as a matter of principle, do the Government intend to dispense with existing staff when, for example, they find that the school does not operate in a way that they would like? Is it possible that the school would end up with locums and supply teachers? What do the unions think about that?

Throughout the entire proceedings on the Bill, Ministers have completely failed to answer the questions that I have put in this House or in relation to issues raised in another place. For example, Lord Northbourne asked the Minister in the other place

"whether the companies, if they are to be limited by guarantee, will be supervised by the Charity Commissioners".

We have not had an answer to that question because, as far as I can see, the Minister in the other place did not reply to it.

The question of whether the local education authority would be a fall guy if things went badly wrong was raised in the same debate. The Minister in the other place again did not answer that question except by reference to the simple statement that the Government keep on making. She said:

"It is important to understand that the Government do not seek to do anything that would force anyone to set up a company."

The bottom line is not whether anyone is forced to do that, but whether the powers are available. Presumably the Government intend that those powers will be implemented. If they are implemented, will the Minister be good enough to explain what will happen and on what scale? Is it intended—I would like him to give a straight answer—that companies at large would be created under the Bill's provisions? Is it intended to use the powers to deal with a problem that the Government believe already exists in education, or have they been introduced simply because the Government think that they might be a good idea but are not prepared to issue the guidelines or code of practice to ensure that they are implemented?

The debate has gone on between the two Houses for a long time and it has raised questions that the Government are not prepared to answer. That has been the prevailing characteristic of our debates from beginning to end. The Minister says that there is no hidden agenda, but he does not attempt to answer the questions. He hides behind provisions that are so wide that my noble Friend Lord Kingsland referred to the Government view in his concluding remarks to the debate in the other place. Referring to Baroness Ashton, he said:

"What the noble Baroness thinks Clause 10(1) does and what it does are two entirely different things."—[Official Report, House of Lords, 23 July 2002; Vol. 638, c. 230–36.]

He is completely right. Clause 10(1) states:

"The governing body of a maintained school may form . . . companies . . . (a) to provide services or facilities for any schools . . . (b) to exercise relevant local education authority functions."

As my noble Friend said, it is clear from the Bill that services can be provided because "relevant education authority functions" are teaching services. Indeed, there is no limit to the extent to which that can be done.

The plain fact is that the Government are not prepared to answer our questions or to explain the Bill properly. That is why we will persist in opposing these provisions. They are not in the interests of schools, governing bodies, teachers or children. They are our first priority. There may be something to be said for giving more freedom, but the manner in which that is being done, the mechanism that

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is being employed and the complete void that is left in the absence of the Government providing clear answers ensures our continued opposition to these provisions.

Mr. Willis: I am grateful to the hon. Member for Stone (Mr. Cash). He should abandon his European campaign and work full time on these issues. As ever, he made an incredibly valuable contribution. I shall not go over the issues that he raised, particularly that of liability, in respect of which we have still not had a satisfactory answer.

The Minister says that this is ultimately a matter of trust. Lord Dearing referred to that point in the debate in the other place yesterday. I accept that it is a question of whether we trust the Government, but the Liberal Democrats do not, simply because far too many questions remain unanswered.

I wish to raise the issue of individuals taking out profit—a subject on which the Minister would not allow me to intervene. He cannot have it both ways. In Committee, the Minister then responsible for the Bill—now the Minister for E-Commerce and Competitiveness—made it clear that it was possible for the individuals who had put capital into the company to take out profit. That is in direct contradiction to what the Minister has said in this debate. The Government cannot have it both ways. Such contradictions are totally unacceptable.

The Minister says that there is nothing new about this—that schools have been involved in such activities for as long as he can remember. I can remember a little further back than he can, and he is right. One has to ask why we need this huge sledgehammer to crack a relatively small nut. For example, charitable status is not covered anywhere in the Bill. Why is it possible for some of the largest independent schools in the country to be run on the basis of charitable status when it is not possible for a small company set up by a school or a group of schools to do the same?

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