Education Bill

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Mr. Adrian Bailey (West Bromwich, West): As this is the first time that I have spoken in a formal debate in this Committee, may I belatedly welcome you to the Chair, Mr. Griffiths? First I should declare a non-pecuniary interest. I am an honorary vice-chairman of the Local Government Association, an organisation that was often quoted on Second Reading. My views are totally my own. Indeed, I am not sure what the LGA's position is on this issue. I speak from the perspective of someone who was chair of finance of the large metropolitan authority of Sandwell between 1992 and 1997, and I am concerned about the clause. The amendment is well intentioned, but although it could solve some problems, it might create others. I should like to explore some of the issues with the Minister and seek some reassurances.

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The hon. Member for Harrogate and Knaresborough said, quite legitimately, that local authorities have great difficulty in determining the level not just of their education budget, but of other budgets, within the timetable outlined here. The provisional revenue support grant settlement is normally given in early December. There follows a detailed consideration within local authorities of how that should be allocated department by department on the basis of their figures. As the hon. Gentleman said, January is usually taken up with a procession of chairs of finance to the Minister making special pleading for their local authority budget.

Incidentally, there was a far greater problem for local authority finance chairs between 1992 and 1997. None the less, the ever increasing demands upon the services from local authorities do not mean that those budget problems have gone away. Detailed consideration still has to be made of how the annual budget increases are to be allocated by the local authorities. Following those submissions, budgets are occasionally altered, but the local authorities will not normally know that until the end of January. It would therefore be difficult for them, within the time scale outlined, here to make the necessary adjustments to their budget in time to give the Minister a definitive education budget. I should like to hear the Minister's perspective on that.

I can see a further problem in amendment No. 220. By leaving it as late as 15 February, one runs into the timetable determined for the settlement of the council tax and in effect the final putting to bed of the budget. If that determination were not made until 15 February and if it were necessary for the Government to intervene and alter the education budget, the local authority would be hard put to make the necessary adjustments in other departmental budgets prior to the concluding date for the budget process, so leaving it until 15 February would cause a problem.

The problem is not theoretical or hypothetical: one year my local authority had its budget altered by £500,000. Given that education comprised 60 per cent. of the total budget, we are talking about a £300,000 adjustment—a significant figure—in my local authority's budget. If this scenario applies when the local authority has to provide the Minister with figures—by the end of January—it would cause a significant variance. The £500,000 was a cut, where another year saw a slight improvement, but the key point is that many authorities face this scenario and the deadline could present them with real problems. If ministerial intervention were necessary, different problems might arise. Other adjustments would then have to be made to local authority budgets.

Mr. Willis: The hon. Gentleman makes a powerful case. Does he agree that the January deadline means that local authorities have to determine the education aspects of the budget significantly ahead of the end of January, before the final RSG settlement is announced? Would not the whole local authority budget have to dance to the tune of the education budget and everything fall in line?

Mr. Bailey: I agree with the hon. Gentleman. Education usually comprises between 55 and 60 per

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cent. of a metropolitan authority's budget. It would have to be determined ahead of other budgets, although in practice local authorities might well try to determine the lot at the same time. Either way, the deadline—and, indeed, the 15 February deadline—presents problems. Any adjustments will impact on other departmental budgets.

Will the Minister give an assurance that if adjustments to a local authority budget are made about the time that the figures for the education budget have to be provided, local authorities will not be penalised by any subsequent adjustment? The process must be flexible; otherwise it could make a serious impact on local authority budgets.

Mr. Brady: I am pleased to follow the hon. Member for West Bromwich, West (Mr. Bailey) whose first contribution to our proceedings has been worth while and helpful to both sides of the Committee. I am sure that we can look forward to further well-informed contributions from him.

Amendment No. 192 sits alongside amendment No. 220. Approaching the problem in a slightly different way should help shed light on some of the difficulties identified with amendment No. 220. That amendment was designed to replace one date set in stone with a more accommodating arrangement for local authorities in setting their budgets. The flaw is that it would have replaced one date set in stone with another, but I accept that the proposed date might have been more realistic. It was a genuine attempt to deal with the problem.

Amendment No. 192 is more flexible. It is designed not to fix a specific date, but to provide a minimum period following the settlement of teachers' pay, which must be known to the local authority and Ministers before such a determination can be made. In theory, the date 21 days after the publication of the teachers' pay settlement might fall before the end of January; that would allow Ministers to proceed according to their timetable. However, if the 21-day date falls after the end of January, the amendment would provide a little cushioning, which might allow some of the identified pitfalls to be avoided. In an earlier speech, possible relevant variables, other than the teachers' pay settlement, were identified. By fixing a degree of flexibility in the system, amendment No. 192 would go some way towards helping in that respect.

Mr. Willis: May I try to help? The hon. Member for West Bromwich, West made a powerful contribution. He raised an issue that I considered when drafting the amendment and which I discussed with the Local Government Association. The problem with going later into February is that one falls foul of legislation that requires authorities to set their council tax. I have been told that 15 February is the latest one can go without falling foul of other legislation.

Mr. Brady: I am grateful to the hon. Gentleman. As I have already made clear, I accept the principle of what he is trying to do. I hope that Ministers will reflect on the fact that both the official Opposition and the Liberal Democrats have tabled amendments that are driving towards the same point, and share the concerns raised by the hon. Member for West

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Bromwich, West. There are genuine problems with the Bill, and I hope that the Minister will reassure us that he has an alternative solution for tackling them.

Mr. Timms: Under the terms of the clause, we will ask local authorities to give us their proposed school budgets by the end of January. My hon. Friend the Member for West Bromwich, West rightly said that, in some circumstances, there will not be what he termed a definitive budget by the end of January; I accept that. Like him, I was responsible for some years for a local authority budget. I think that he will agree that there will certainly be a proposed schools budget by the end of January. That is what the clause asks for. In fact, it is a more generous timetable than is now in place.

At present, we approach local authorities early in January and ask them to indicate whether they intend to passport the increase in the education budget. Our experience is that few authorities have difficulty getting that indication to the Department by the middle of January. As my hon. Friend and other members of the Committee know, local authorities prepare their budgets over a considerable period, and much of the work is done a good deal earlier than the dates that we are discussing.

Amendment No. 192 would mean that we would not normally receive information on a local authority's proposed schools budget until the end of February. Amendment No. 220 would make it somewhat earlier than that. However, I suggest that both dates would be too late for the process that is envisaged of setting a minimum budget for an authority's schools before the new financial year. That is the purpose of the measure, and we will debate it shortly. However, for local authorities to take into account the Secretary of State's intention, if she has one, to set up a minimum budget, they must be aware of it before the last date on which they can set their budget and council tax demands. The hon. Member for Harrogate and Knaresborough commented on the date for precepting authorities, which I understand is the end of February. The hon. Gentleman should therefore accept that the Secretary of State cannot receive the information less than a fortnight before the budget and council tax for that authority is fixed.

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We are not asking LEAs to tell us how much the teachers' pay award will cost them and their schools. There may be some variation. The pay for other support staff in schools is often not set until well into the financial year, and that uncertainty is part of the system. It is crucial for the Secretary of State, in making her judgment, to know whether authorities are passing on to their schools the increase in resources that we have made available for the schools budget. The initial proposed figure is made before Christmas, typically at the end of November. It is not unreasonable to expect LEAs to declare their intentions by the end of January. I re-emphasise that we are talking about the proposed budget. It may not have gone to members for a final decision by the end of January, but there will be a proposal, on which the clause requires LEAs to report.

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