Draft Contracting Out (Local Education Authority Functions) (England) Order 2002

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Mr. Smith: I apologise for intervening again, but my hon. Friend is absolutely right in his response to the hon. Member for Harrogate and Knaresborough (Mr. Willis). Islington, where my constituency is, is a clear case in point. The local authority—which, I regret to say, is Liberal Democrat-controlled—was in cahoots with CEA over a number of unfortunate decisions, including the closure of the Angel school, against which I fought strongly. The Liberal Democrats and the local authority had the whip hand and took the final decision.

Mr. Timms: My right hon. Friend is quite right about that and I am grateful to him for drawing it to the Committee's attention.

Mr. Willis rose—

Mr. Timms: I need to make some progress. I have no doubt that the hon. Gentleman will catch your eye shortly, Miss. Widdecombe, and put his views to the Committee about what has been happening in Islington.

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The order is an enabling measure that allows LEAs to secure better value services for their schools and for the local community. It will remove legislative barriers to partnerships between the public, private and voluntary sectors so that they can try out new and better ways of delivering services. It contains no compulsion and there is nothing hidden. It will be for LEAs to take decisions in line with their obligations under best value. The order has been welcomed by LEAs and I commend it to the Committee.

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Mr. Graham Brady (Altrincham and Sale, West): I join the Minister in welcoming you to the Chair, Miss Widdecombe. It is the first time that I have had the pleasure of serving under your chairmanship, which I am sure will be firm but fair. I look forward to it.

The Minister has made it clear that the provisions arise from the Deregulation and Contracting Out Act 1994. In so far as they are an extension of that Act's intention to increase the flexibility to widen the choice of provision in local authority services, it is welcome. The Minister has said that the object of the order is to give greater flexibility to LEAs, that it will remedy deficiencies and weaknesses in LEA provision and that it will allow wider scope for partnership and for the delivery of services, especially where that is done other than by LEA staff.

The difference between the powers contained in the order and some earlier contracting-out measures is that these take us far closer to the strategic functions of the LEA. I accept the Minister's point that aspects of strategic planning are being reserved for LEAs, but none the less, the order begins to intrude far more closely on their strategic core function than earlier measures did.

Referring to the need to pursue such a course of action under the best value disciplines, the Minister raises an interesting question. He says that there is no compulsion on local authorities to exercise the powers contained in the order but, under best value, he implies that there may be circumstances in which that would be the only appropriate thing for LEAs to do. Hon. Members on both sides of the Committee would welcome the Minister's further comments on what appears to be the central tension in his argument—that on one hand there is no compulsion but on the other a discipline may require steps in that direction.

The Minister must bear in mind that in the context of the Education Bill—which is still fresh in the minds of the Minister, myself and one or two other Committee members who recently served on the Standing Committee of that Bill—and of other policy initiatives that the Government have announced since the end of that Bill's Committee stage, the contracting-out powers in the order will be overlaid by a more complex and diverse pattern of provision. As the Minister knows, we are likely to have a pattern in which educational companies, for want of a better word—companies providing educational services—play a far greater role, whether they are established by

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the governing body of a school under the powers in the Bill or formed by local education authorities or by Ministers. That will be a very different world in which contracting out must be considered.

According to the freedoms contained in the Education Bill, there will also be schools that may have exemptions from some or, potentially, all aspects of education legislation for purposes of innovation. There are interesting questions as to how the contracted-out functions in the order will interface with such exemptions. Clearly, some of the contracted-out powers contained in the order may not apply to those schools.

I think that members from all parties would welcome the Minister's comments on that aspect, as well as his confirmation that schools with exemptions related to innovation may not have some of the powers in the Bill. That might lead to an even more complex pattern of regulation and control, whereby the LEA may retain some strategic functions and may contract out others that would be applied by the contracting body to all schools in the LEA area except for those that have exemptions from relevant provisions of education legislation.

The Minister may also wish to consider how the provisions for staffing and appointments might affect those schools that earn autonomy, in the Government's jargon, and have exemptions related to school performance. It is not difficult to envisage a large number of schools with the power to opt out of national pay scales. They will have complete control over their own pay and conditions under the freedoms that the Government rightly seek to extend to schools. It is important to know how those schools will operate their pay and conditions regimes. Effectively, national pay scales and national pay bargaining arrangements will end for many schools. How will such arrangements sit alongside contracted-out powers for staffing? The Minister may wish to comment whether, in the case of earned autonomy, a school may itself become the contracting body for the implementation of LEA functions, in the same way that he implied that an education company or other contractor may.

The Minister stressed that, because LEAs remain responsible and accountable, the order excludes some key strategic matters, such as the development of plans, proposals for new schools and proposals for closing schools. The powers that will be retained by LEAs could be summed up as advising, consulting and implementing. However, most of the powers that may be contracted out under the order involve the implementation of policy that previously might have been carried out by the LEA. The Minister must take on board the fact that much of the implementation will now be taken way from LEAs in many cases.

On the consultation exercise that preceded the order, the Minister's only comment was that the LEAs that had responded had broadly welcomed the changes; I will return to the outcome of the consultation process later. Essentially, as he described it, LEAs would shift to more of a contract management role. Those who have been involved in policy in the health arena might consider that an

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example of a purchaser-provider split, which is presumably the direction in which the Government seek to move LEAs.

The Minister said that it was entirely for the LEAs to decide, but we then had an interesting exchange, started by the right hon. Member for Islington, South and Finsbury, who raised the important matter of LEAs that operate in a different context from others in the country. That must be explored further. The Minister correctly described the arrangements in certain LEA areas and cited Islington and Bradford as examples, but might there not be examples of intervention when a contractor providing educational services and a strategic management function in an LEA area, or Ministers through the process of intervention, take a decision to contract out under powers in the order? Perhaps the Minister would put some flesh on the bones that he gave us earlier.

I said that I would return to the consultation exercise and its outcome. The LEAs that were consulted may have given the order a broad welcome, but they also raised some fairly serious concerns, to which I ask the Minister to return. One was that the division between functions seems, in the words of the document from the Department for Education and Skills, to be ''piecemeal and arbitrary''. Some respondents were concerned about the possible fragmentation of services resulting from contracting out and who would co-ordinate them locally. Some felt that there were insufficient providers to provide genuine quality and choice in the market—a concern that, as the Minister knows, is frequently raised by those who are exploring more innovative ways in which LEAs might provide improvements in educational services. That is not a one-off concern in the context of this consultation; it is an important concern. The Minister may want to comment on the possible impact on the achievement of best value and on whether he has any notion of how the problem of shortage of providers might be tackled. In particular, does he envisage the Government's using their power to establish companies, especially powers that the Secretary of State will hold when the Education Bill becomes law, if it does--it has a difficult passage ahead of it in the other place? Does he envisage use of the power to set up companies to ensure a better sufficiency of providers that might come into play for LEAs wishing to contract out those services?

The cost assessment of the order is that no costs are attached to it. When I see that assessment in any statutory instrument or other legislation, I always raise an eyebrow because, as we all know, very few things in life cost nothing. There is real concern that, in reality, much of what is contained in the order might continue in future and give rise to costs. A number of respondents to the consultation believed that costs would be associated with outsourcing and thought that they might be significant for LEAs. The Minister might enlighten the Committee on that and we look forward to hearing what he has to say.

The right hon. Member for Islington, South and Finsbury and the hon. Member for Harrogate and Knaresborough raised one specific question. The

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Minister will be disappointed if I do not ask him about the important shift in the policy for provision of educational services and the powers that may be contracted out under the order, which are derived from the Education Act 1996. Section 321 refers to the general duty of a local education authority towards children for whom it is responsible. How does the Minister propose contracting out a general duty, and what would be the practical effect? For instance, the duty would entail the identification of children with special educational needs and an assessment of the appropriate educational facilities necessary for them.

Where will the responsibility for that process really lie if it is contracted out by the local education authority? The Minister says that the LEA would retain responsibility, so where exactly would an aggrieved parent go? Will an appeals process be included in the practices of the contracting body? Given that the body will not ultimately retain responsibility for the process, should not the LEA continue to provide an appeals process? Instead of a more efficient, lower-cost provision, we could arrive at a picture of duplication, with two appeals processes sitting one upon the other.

Under section 322 of the 1996 Act, a health authority or local authority has a duty to help a local education authority. If the contracted-out body requests the help of the health authority but the health authority disagrees with the contracted-out body over that request, is there a right of appeal? I think particularly of circumstances where subsection (3) does not apply—when it is not unreasonable, but when the health authority does not wish to apply. Is there a right of appeal to the LEA, or does that decision-making function rest with the contracted-out body? Again, to which bodies does the Minister envisage giving that power?

The powers contained in section 14 of the School Standards and Framework Act 1998, which allow LEAs to intervene in schools, are causing concern. Will those powers of intervention, which are exercisable by the LEA, be contracted out under the order to an outside body or company, or is it only the intervention itself? As the Minister said, we are getting close to the core of the LEAs' discretionary functions. Is he not creating a devolution of the discretion itself? Again, I would welcome his response.

If the powers of intervention are to be contracted out, what additional safeguards have been drawn up—for instance, to prevent companies wishing to take over the running of schools from exercising that power inappropriately? If a company were the contracted-out body for exercising the power of intervention in a failing school, it is conceivable that it might use the power for its own advantage. I am sure that the Minister has considered that controls should be put in place to prevent abuse.

Section 15 of the 1998 Act, too, covers cases where the LEA may exercise powers of intervention. Under subsection (2)(a)(i), the authority must be satisfied that standards of performance are unacceptably low. For instance, the Minister may have contracted out to an outside company the discretion to decide whether a

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school was failing and whether it was likely to continue to fail without intervention. Could that same body take over control of the school? On the other hand, if the LEA retains overall responsibility for the functions, what is being contracted out and how does the Minister envisage its working in practice?

Section 54 of the 1998 Act deals with the staffing of community voluntary-controlled and community special schools. Again, to whom does the Minister envisage contracting those roles? Will the LEA retain a right of appeal, particularly over the dismissal of staff?

Section 55 concerns the staffing of foundation, voluntary-aided and foundation special schools. Subsection (4) specifically says that without

    ''the consent of the authority, the governing body shall not appoint any teacher to be employed at the school''.

Is the LEA giving up that right under the order? If so, to whom does the Minister anticipate giving it? In the case of a foundation or voluntary-aided school, may power be delegated to the school, giving it more effective control of its own staffing decisions?

Subsection (5)(b) says that the authority may require the governing body to dismiss any teacher at the school. To which outside contractor does the Minister envisage giving the power to dismiss a teacher, and what right of appeal would that teacher have? Would it be through the normal employment tribunal process or would there be a right of appeal to the body that he says retains ultimate responsibility?

Section 62 of the 1998 Act gives rise to an interesting question. It concerns the LEA's reserve power to prevent a breakdown of discipline. How is the Minister proposing to contract out a reserve power and what does that imply for the definition of a reserve power? Surely if it is contracted out, it is no longer any such thing.

Section 69 of the 1998 Act concerns the duty to secure due provision of religious education. To whom does the Minister envisage contracting out that duty? Could the function be given to a Church or to a religious foundation that already runs schools? Is he seeking to contract out the duty to secure due provision, or is he contracting out the provision of religious education? If the LEA were to retain the duty, what discretion would be given to the contractor? Similar questions arise under section 70, which details the requirements relating to collective worship.

Many detailed questions arise from the order. The list of powers that may be contracted out is enormous. The extent to which they would move us towards a position in which we contract out what were previously thought of as core strategic functions of the LEA is significant. I hope that the Minister will respond in detail to the questions that I have asked on behalf of the official Opposition about how the contracted-out powers will work in practice. What will be the implication for the final discretion and powers that, he says, remain with the local authority but which may, in so many of the cases that I have outlined, move to a contracting body?

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