Select Committee on Deregulation and Regulatory Reform Fourth Report


  12. Much wider in its scope than any proposal put forward under the old Deregulation and Contracting Out Act (unlike the Special Occasions Licensing Order, the only RRO to have been made so far, which was very similar in its effects to the 1999 Millennium Licensing order), this can perhaps be regarded as the first true regulatory reform proposal. In most respects, it gives rise to no doubts at all about its appropriateness for delegated legislation, and indeed embodies precisely the sort of welcome change envisaged under the Regulatory Reform Act. However, we were concerned to examine further one aspect of the proposal which, due to its potentially controversial nature, might have given rise to doubt as to whether it ought to be included in the Order in its current form: namely, that which would raise, from 85% to 90%, the rate of grant support which the Secretary of State can provide to VA governing bodies towards their liabilities.


  13. VA schools, the overwhelming majority of which are what have become known as "faith schools", have specific rights in relation to the constitution of the governing body, the arrangements for pupil admissions, and the employment of staff. The requirement that they should make a contribution towards the cost of premises-related work is the quid pro quo for those rights. This requirement has been set down in primary legislation since the 1944 Education Act, when it was set at 50%;[10] it has been subject to change since then, most recently in 1975,[11] but always by means of primary legislation.

14. Three reasons were adduced by the Department in support of their claim that this change was necessary:[12]

  • to compensate for the additional liabilities which are being placed on VA governing bodies;
  • to compensate for increases in VAT since the last change in the rate of support was made;
  • to enable governing bodies to take advantage of the increased grant available from the Department (grant which is being made available regardless of this proposal).

15. The first of these reasons appears to us entirely consistent with the purpose of the Order. The total cost of those liabilities which will be the responsibility of governing bodies following implementation of these proposals is considerably greater than the cost of those for which they are currently liable (see "Financial Impact" below). Nor does it appear to us that it would be inappropriate to take the opportunity of amending the rate of support to take into account the increases in the rate of VAT since the rate of support was first set at 85%.[13] The final reason, however, raised the question of whether the proposal would result in VA schools gaining financial advantage whilst nevertheless retaining their rights unchanged.

16. The Department argued, in the explanatory memorandum, that no additional funding was being made available. The change would simply enable VA schools to access funding which is already available, but which they could not afford to take advantage of if they had to match it with 15% from their own funds, rather than just 10%. It argued that the change was necessary if the requirement for VA schools to make a contribution was not to prevent the achievement of Government policy to improve the condition of schools.[14] However, it did not appear to us to address the argument that, even if additional support would be provided from funds already allocated to the sector, VA schools should still, as a matter of principle, have to pay a contribution equivalent (in terms of the percentage of the total cost of premises-related work) to that which they paid previously if they were to access the funds available.

17. We therefore asked the Department:

  • what proportion of the 5% increase would be accounted for by the need to compensate VA governing bodies for VAT increases and changes in the allocation of liabilities; and what proportion by the desire to make increases in available capital funding affordable to VA schools;
  • what responses relevant to the increase in support to faith schools had been received to the further consultation on the White Paper; and what implications, if any, those responses had for this aspect of the proposal; and
  • how the Government responded to the argument set out in the preceding paragraph.[15]

We also invited the Education and Skills Committee to comment on this aspect of the proposal.[16]

18. The Department's reply to the second and third of these questions was not entirely satisfactory, being based apparently on a misunderstanding of what exactly we were asking. However, in view of its response to the first, we did not find it necessary to pursue either point. The Department told us (and demonstrated with the appropriate figures[17]) that, of the five percentage point rise in the rate of grant support, some 4½ percentage points would be accounted for by the increased costs falling on VA governing bodies as a result of the changes in liabilities.[18] It added that it was not possible to split the remainder between the other two elements, but the balance being so small, it was likely to be absorbed entirely by increased VAT.

19. We are therefore content that the change in the rate of grant support confers no significant financial benefit on VA governing bodies over and above that which is necessary to compensate for the changes in liability, and that no issues relating to the appropriateness of this proposal for delegated legislation therefore arise. We note that the Education and Skills Committee, having seen the Department's response, has reached the same conclusion.[19]


  20. Whilst not impinging directly on the appropriateness, or otherwise, of this proposal for delegated legislation, we were nevertheless interested to examine further its relationship with the Department's wider legislative programme. Shortly after this proposal was laid before Parliament, the Government introduced an Education Bill, which Ministers described as a 'deregulatory measure'.[20] The Bill contains, among other things, provision to give governing bodies the power to provide after-school childcare, one of the list of 51 examples of potential regulatory reform orders which the Government published during passage of the Regulatory Reform Act.[21] We asked the Department for some clarification of how this proposal fitted with the remainder of its legislative programme, and to explain why no proposals contained in the Bill had been brought forward as regulatory reform proposals.[22]

21. The Department's reply is printed with the Appendices to this Report.[23] We accept that, in the circumstances, it was appropriate for the Department to pursue other legislative change through the Education Bill, whilst proceeding with this regulatory reform proposal under the Regulatory Reform Act procedures in order to give the best chance of implementation by the beginning of financial year 2002-03. Nevertheless, we were pleased to note the Department's acknowledgement of the benefits of pursuing the Regulatory Reform Order route to legislative change. "[This] route has helped in building awareness of our proposals and achieving a strong consensus for change amongst all key stakeholders," it says, and quotes a response from the Chief Building Surveyor at Portsmouth City Council which commented favourably on the explanatory document laid with this proposal.[24] We hope other Departments, and other interested parties, will find the Regulatory Reform Order route similarly attractive, and we welcome the stated commitment of the Department for Education and Skills to using the procedures available under the Regulatory Reform Act.[25]

10   Education Act 1944, s102. Back

11   Explanatory memorandum, para 51. Back

12   ibid, para 51 and elsewhere. Back

13   1975; for increases in the rate of VAT since then, see Appendix 2, page 44, para 10, below. Back

14   Explanatory memorandum, para 59. Back

15   See Appendix 1. Back

16   See Appendix 5. Back

17   See Appendix 2, pages 40-41, paras 1-4. Back

18   Appendix 2, Increase in the rate of grant support, para 4. Back

19   See Appendix 5. Back

20   Minutes of Evidence taken before the Education and Skills Committee on 21 November 2001, HC 304­iv, Q237. Back

21   Now available as Annex D to the Explanatory Notes to the Regulatory Reform Act 2001 ( Back

22   Appendix 1, para 8. Back

23   Appendix 2, pages 41-42. Back

24   Appendix 2, page 42, para 2. Back

25   ibid, para 4. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 5 February 2002