FOURTH REPORT
The Deregulation and Regulatory Reform
Committee has agreed to the following Report:
PROPOSAL FOR THE REGULATORY REFORM (VOLUNTARY
AIDED SCHOOLS LIABILITIES AND FUNDING) (ENGLAND) ORDER 2002
Introduction
1. On 20 November 2001 the Government laid before
Parliament the proposal for the Regulatory Reform (Voluntary Aided
Schools Liabilities and Funding) (England) Order 2002 in the form
of a draft of the Order, together with an explanatory statement
from the Department for Education and Skills.[1]
The proposed Regulatory Reform Order would simplify the arrangements
for deciding liability for the cost of, and thus funding for,
premises-related work at voluntary aided (VA) schools.
2. The House has instructed us to examine the proposal
against the criteria specified in Standing Order No. 141(6) and
then, in the light of that examination, to report whether the
Government should proceed, whether amendments should be made,
or whether the Order should not be made.[2]
3. We have concluded that the proposals should
be amended before a draft Order is laid before the House.
Apart from recommending that the drafting of the proposal be significantly
improved before a draft Order is laid before Parliament, we recommend
only one amendment to the proposal, relating to governing body
capital expenditure under the new arrangements on certain buildings
which they do not own. We did, however, find it necessary to extract
a significant amount of information from the Department in addition
to that contained in the explanatory document before we could
be satisfied that the proposal could proceed. Our detailed comments
on these and other matters arising from our consideration of the
criteria specified in the Standing Order are contained in the
remainder of this Report.[3]
Purpose of the proposed Order
CURRENT SITUATION
4. As noted above, the proposal is intended
to simplify the arrangements for assigning liability for the costs
of premises-related work at VA schools. Broadly speaking, the
current arrangements, as provided for by the Schools Standards
and Framework Act 1998 ("the 1998 Act") are:
- VA governing bodies are liable for capital and
revenue work to the exterior of school buildings;
- LEAs are liable for capital and revenue work
to the interior of school buildings, and for work relating to
all of the other parts of the school premises, including playing
fields and playgrounds;
- LEAs are also entirely responsible for "excepted
buildings" (buildings which form part of the school premises
but which are excluded from the definition of "school buildings"
in the Education Act 1996: they include buildings such as caretakers'
dwellings, medical and dental inspection rooms, school kitchens/dining
halls, and swimming pools).
As the explanatory statement notes, however, the
detailed picture is more complicated than this. A long and prescriptive
list, published by the Department, attempts to categorise all
work which might be necessary on school premises as either capital
or revenue, and assigns liability to the relevant party.[4]
5. The effect of the current arrangements is that
much time has to be spent, often by headteachers and others whose
time might better be spent on other work, determining the exact
division of liabilities for any particular project between VA
governing bodies and the relevant local education authority. They
also give rise to absurd situations: we were told, for example,
that the replacement of that part of a doorknob which is on the
inside of an external door would be the responsibility of the
LEA; but that part on the outside of such a door would be the
responsibility of the governing body.
PAYMENT FOR LIABILITIES
6. Payment to cover these liabilities is made
in a number of ways:
Capital liabilities
- VA governing bodies receive grant from the Department
for up to 85% of their capital liabilities, through either
- New Deal for Schools Devolved Formula Capital
(for small projects)
- LEA Coordinated VA Programme (LCVAP) (for medium
projects up to £250,000)
- Major capital project allocations (mainly projects
over £250,000)
- Capital liabilities falling on LEAs are paid
either:
- directly from the Department, as a proportion
of money paid out from New Deal for Schools Devolved Formula Capital
or the LEA Coordinated VA Programme
- where liability is part of a major capital project,
by "credit approvals" (permission to borrow).
Revenue liabilities
- VA governing bodies receive a formulaic allocation
from the Department for their revenue liabilities, again limited
to 85% of their liabilities. This is known as "Formula Repair
grant"
- LEA revenue liabilities are met from the funds
which are delegated to schools for the everyday costs of running
the school ("Fair Funding budgets")
Governing bodies must pay invoices before claiming
the relevant grant from the Department.
EFFECT OF THE PROPOSALS
7. The proposals would have the following effects:
(a) Placing liability for all capital
work on school premises with VA governing bodies. This includes
capital work on "excepted buildings"; but excludes playing
fields, which will remain the responsibility of LEAs. Governing
bodies will be notified of an allocation of grant which they may
claim from the Department in respect of up to 90% of the costs
of meeting these liabilities (see (c) and (d) below);
(b) Placing liability for all revenue
work with LEAs. LEAs will pay the money to meet this liability
directly to schools through "Fair Funding" budgets[5];
The following table summarises the effect of a) and
b) above:
Liability
|
Legal burden removed from
|
Legal burden transferred/added to
|
Internal revenue work |
(no change)
|
(with LEAs) |
| Internal capital work | LEAs
| Governing bodies |
| External revenue work | Governing bodies
| LEAs |
| External capital work | (no change)
| (with governing bodies) |
| Excepted buildings (revenue items) | (no change)
| LEAs |
| Excepted buildings (capital items) | LEAs
| Governing bodies |
| Some additional capital items of furniture, fixtures and fittings
| LEAs | Governing bodies
|
| Some additional capital items | LEAs
| Governing bodies |
| Playing fields and buildings (capital and revenue)
| (no change) | (with LEAs) |
(c) Raising the rate of support for VA governing bodies
for their liabilities from 85% to 90%. Provision is also made
to pay 100% of liabilities arising from a backlog of work at the
point of transfer of liability; and to pay up to 100% of liabilities
in "exceptional circumstances".[6]
(d) Changing claims and payment arrangements so that
grant can be paid in respect of expenditure which is to be incurred
by VA governing bodies, rather than expenditure which has been
incurred and paid for. This change will mean that schools
can claim grant from the Department for work done before they
have to pay for it, thereby improving cashflow.
(e) Providing a broad statutory definition of "capital"
expenditure. This will reduce the need for the long and prescriptive
list, referred to above, allocating responsibility for various
types of premises-related work, and make it simpler for VA schools
and their advisers to decide which funding stream to use for any
given work. This definition would be a 'subordinate provision'
and could be changed by order subject to the negative resolution
procedure.
(f) Setting a de minimis level beneath which
expenditure would not be considered to be capital, and could not
therefore be met from capital budgets. This level is currently
set administratively at £1000. Under the proposals, it would
initially be set, by the Order, at £2000, but could be changed
by subordinate provisions order subject to the negative resolution
procedure.
8. It is intended that the Order take effect from 1 April 2002,
the beginning of the next financial year. In addition to the provision
to pay 100% of liabilities arising from a backlog of work at the
point of transfer of liability (referred to above), the Order
must also therefore make transitional provision for existing projects.
Those transitional provisions are:
(a) to provide that the existing division of liability
and rate of grant to governing bodies should continue to apply:
(i) in the case of projects under the LEA Coordinated
VA Programme (LCVAP) begun before the beginning of financial year
200102; and
(ii) in the case of projects for which the school's entitlement
to funding began before 1 April 1999;
and
(b) to provide that the existing division of liability
should continue to apply, but that governing bodies should be
entitled to apply for up to 90% grant in reimbursement for their
share of the costs:
(i) in the case of projects under the LCVAP begun within
financial year 200102, but which are not yet financially
complete; and
(ii) in the case of projects (other than those referred
to in para (a) (ii) above) for which the LEA has received either
a Supplementary Credit Approval, or the appropriate funding through
the Standards Fund, before 1 April 2002, but which are not yet
financially complete.
9. The transitional provisions were not clearly explained in the
explanatory memorandum, nor (perhaps as a result) were they properly
translated into the proposed Order. We asked the Department for
a fuller explanation of the transitional provisions, and this
explanation, together with an explanation of the arrangements
for unspent grant allocations, may be found in its supplementary
memorandum.[7] We comment
further on the drafting of the proposed Order below.[8]
1
Copies are available to Members from the Vote Office and to members
of the public from the Department for Education and Skills. It
is also available on the Cabinet Office website: www.cabinetoffice.gov.uk/regulation/act/
proposals.htm. Back
2
Standing Order No. 141(2). Back
3
Where a criterion specified in the Standing Order does not appear
in this Report, there are no matters which we wish to raise under
that heading. Back
4
Explanatory statement, para 16. See also Annexes B and C of the
consultation document which was issued prior to the laying of
this proposal (Voluntary Aided (VA) Schools in England: Proposals
for Governing Body and Local Education Authority Financial Liabilities
and Funding for Premises, DfEE, May 2001; also available on
the Cabinet Office website referred to above). Back
5
The term "Fair Funding budgets" refers to the funds
which are delegated to schools by local education authorities
for the everyday costs of running a school. Back
6
See paras 59-61 of the explanatory statement. See also para 31
below. Back
7
See Appendix 2 below, pp. 27-30. Back
8
Paras 56-57. Back
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