Mr. Timms: Our approach is that, subject to basic safeguards, companies should be as free as possible to manage themselves. Companies should have the flexibility to decide the most suitable management arrangements for themselves. School companies will have the protection of the Companies Act 1985 and be fully consulted on the framework put in place by the clause 7 regulations.
The additional restrictions in the amendment are unnecessary. The amendment would require companies to complete processes of due diligence and due process, the nature of which has not been specified. We propose to regulate at a sufficiently detailed level to make such a provision bite. Companies would be required to ensure an absence of conflict of interest, but that is standard practice for company directors under company legislation. It is not clear why we should want to go further here than elsewhere. The general drift of the hon. Gentleman's remarks has been an expression of concern about placing unduly onerous restrictions on companies: the restrictions in the amendment are unnecessary.
Mr. O'Brien: I shall try to highlight without referring to the particular case. Potential directors and members of the company could be current LEA members-they might have retired from the LEA to join the company. It is quite possible to envisage that. Let us suppose that a foreign-owned company applies to place an incinerator in a local community, and that officers and councillors are involved in the decision. If they step down as councillors, they could become directors of the incineration company. That sort of conflict of interest does not arise under current best practice. Potential political conflicts of interests do not usually arise in corporate life. The Bill should specify that such conflicts of interest should be examined.
Mr. Timms: I am not clear exactly how that example applies. Schools will not join companies to establish incinerators. The existing framework of company law covers the hon. Gentleman's concerns. I am resistant to placing in the Bill further layers of restriction that are unnecessary elsewhere. The satisfactory taking of references is another aspect of standard practice.
Amendment No. 61 would add a great deal to the regulations. We intend to consult fully on those regulations. Interested parties will have an opportunity to say what should be included. If it is felt that particular points in the list should be reflected in the regulations, there will be an opportunity to argue that case. Company law prescribes the responsibilities of directors. Directors appointed to represent schools, LEAs and the Secretary of State will have a legal duty to promote the good management of the company as well as a responsibility to their own public body. It is not necessary for the Secretary of State to have further powers to intervene in the running of individual companies. The company's memorandum and articles will specify the rights of shareholders to receive information and make decisions.
In moving the amendment, the hon. Gentleman noted that several of the points are already in the Companies Act, most obviously proposed new sub-paragraph (xi), which says simply that companies should comply with the Companies Act 1985. However, companies will have to comply with all the requirements of that Act anyway, and there is no value in picking out a list of points and reminding everyone that the companies will have to comply with them. The point about an asset register is covered by that, as are several other points.
The Committee will agree that governing bodies will make sensible decisions about the operation of companies in the framework of protection that I described. It would undermine the Bill's intention to impose unnecessary red tape or unnecessarily lengthy regulations. I should comment on proposed new sub-paragraph (xv), on which the hon. Gentleman spent some time, and amendment No. 61, which is related. He made a fair point about the LEA needing to be aware of problems down the line or potential financial difficulties. That is already covered by subsection 11(5)(d), which provides that where an LEA is
He makes a fair point about the LEA needing to be aware of that information, but it is already covered in the Bill. I hope that the Committee agrees that the amendments would not strengthen the Bill, but weaken it.
Mr. O'Brien: The speed of the drafting has meant that the amendment is not perfect. Given its length, it was unlikely to be. I shall not press it to a Division because that would be inappropriate, but the points have been made. It is important to ensure that the regulations are detailed and available at the earliest possible opportunity. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Brady: I beg to move amendment No. 19, in page 8, line 5, at end insert-
I am sure that the Committee is grateful to my hon. Friend, and I can reflect only that, had that weight of expertise from the corporate and legal world been brought to the assistance of the taxpayer in the normal commercial environment, it would have cost a considerable amount of money. It is just one example of how the public receives such a great service from Members of this House.
In moving amendment No. 19, I am conscious of the time and the fact that, due to the repressive, restrictive timetabling under which we are operating, we are unlikely to complete consideration of all clauses. [Interruption.] Someone on the Labour Benches said that we agreed to it. If the Government are prepared to suspend their majority on the Committee before we move into the next sitting of the Programming Sub-Committee, we may put that to the test. Regrettably, we are operating under an arbitrary timetable, and some important aspects of the Bill might get no consideration whatever.
I am keen to give a brief airing to an important concern that relates to clauses 10, 11 and 12, but is summed up in amendment No. 19. In our examination of aspects of clause 11 so far, the Minister has confirmed by implication that, because some people who form or become involved in companies may not have a profit motive, others may have that motive. In essence, the Government want to establish a framework for what could be characterised as a purchaser-provider split in educational services that sees the creation of companies, whether by a school's governing body or the Secretary of State, to provide services or to purchase goods or services. As the Minister confirmed, the governing body remains responsible for the provision of education but, in the Bill's terms, the governing body may not be directly responsible for providing that education.
We have here the bones of a dramatically radical change in the way in which education policy may be delivered in this country. I make no criticism of that and we may be on the verge of providing for an extremely exciting new environment that provides scope for new ideas for the benefit of education. We are, however, contemplating a very dramatic shift, the measure of which is, as the Minister said, that the motivation of those engaged at the public's expense in the provision of educational services may be to make a profit. I have no philosophical difficulty with that, and if the end result is an improved provision of services, that is to be welcomed.
What amendment No. 19 seeks to do, however, is constrain the environment within which a commercial operator may practise by seeking to ensure that these clauses do not also become a means of avoiding normal responsibilities under education legislation.
Earlier in our proceedings, the Government sought to provide for removing controls from schools to allow exemption from education legislation and the requirements thereof in certain circumstances. Yet here, particularly in clauses 10 and 11 but also in clause 12, what the Government seek to do is provide a framework within which any educational provision could be made by a corporate entity and not be subject to education legislation.
In many ways, that exemption goes far wider than those that have previously been discussed. For obvious reasons, I shall not speak to amendment No. 18, but the same theme applies to it as to amendment No. 19: that the principal purpose of those entities must be educational, not purely corporate and commercial.
We seek to establish that a company set up by a school at public expense to provide an educational service must observe education legislation requirements. Where a company operates within a school, the use of facilities for corporate purposes should not be allowed to impinge on the normal expectation of educational activity.
Amendments No. 18 and 19 are absolutely central to the Bill. I have not been able to spend sufficient time on this matter to do it justice, and the Minister, in two minutes, will not be able to give an adequate response, but I am anxious to allow him what time there is to reply.
Mr. Timms: Education legislation does not apply directly to companies; it applies to schools, LEAs, colleges and pupils. The amendment would have little, if any, practical effect.
The misunderstanding may go back to our earlier exchange. Governing bodies will retain their existing duties under education law. Nothing in the Bill sets those aside. Where a company carries out services under contract on behalf of an LEA, the contract will need to impose the same duties and standards on the company as apply to the LEA, ensuring that the LEA fulfils its legal obligations under existing education legislation.
Other types of company-companies purchasing goods and services, and PFI companies-carry out commercial functions related to education, rather than directly providing education. In those types of commercial arrangements, education legislation is not relevant and normal company contract and employment law will regulate the companies' activities. Nothing further is needed. It is meaningless to seek to make those companies subject to education legislation.
The concern that the hon. Gentleman has expressed is already fully met by existing provisions, including the fact that governing bodies will retain their current duties under the law.
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