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Session 2002 - 03
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Delegated Legislation Committee Debates

Local Government Finance (England) Special Grant Report (No.122) on Local Authorities with Autonomy on Formulaic Capital Allowances

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Second Standing Committee

on Delegated Legislation

Wednesday 25 June 2003

[David Taylor in the Chair]

Local Government Finance (England) Special Grant Report (No. 122) on Local Authorities with Autonomy on Formulaic Capital Allowances

2.30 pm

The Minister for School Standards (Mr. David Miliband): I beg to move,

    That the Committee has considered the Local Government Finance (England) Special Grant Report (No. 122) on Local Authorities with Autonomy on Formulaic Capital Allowances.

I am delighted to serve under your august chairmanship for the second time, Mr. Taylor. I hope that this Committee causes you less trouble than the last one did. I cannot speak for Opposition Members, but I am sure that we Government Members will do our best.

The purpose of the report is to allow my right hon. Friend the Secretary of State to pay capital condition grant to local authorities through the single capital pot. The 1998 local government White Paper committed the Government to delivering the bulk of support to local authorities for capital investment through the single capital pot as an unhypothecated resource. Today's report will allow the payment from the education budget of unhypothecated capital condition grant to local authorities that have educational asset management plans appraised as being of a satisfactory standard. That is 90 to 95 per cent. of local authorities. For those authorities, the formulaic condition grant will form part of local authorities' single capital pot.

We are using special grant report powers under section 88B of the Local Government Finance Act 1988, as current legislation allows the Secretary of State to pay grant only for education or child care purposes. In future, we hope to use the power in the Local Government Bill that is currently in another place. That will make it easier for Departments to release grants paid to local authorities.

All local education authorities receive education capital condition grant through the standards fund for investment in school buildings in line with needs prioritised locally through the asset management planning process. Asset management plans were introduced for all LEAs in 1999 and are seen as having made a significant contribution to improving the capital stock. Those plans prioritised investment in school buildings in a transparent local consultative process based on surveys of the needs of school buildings. The plans are appraised annually by the Department for Education and Skills.

As a contribution to increasing freedoms and flexibilities and to help to meet the commitment to deliver the bulk of capital investment through the single capital pot, the Government have determined

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that local authorities with educational asset management plans appraised as satisfactory should have the freedom to decide how to spend the condition grant.

Mr. Phil Willis (Harrogate and Knaresborough): I apologise to the Committee for being slightly late.

Mr. Graham Brady (Altrincham and Sale, West): The hon. Gentleman missed a good bit.

Mr. Willis: I am sure I did.

We have no great problems with the special grant report, but where do the local authorities' asset management plans and the Minister's comments about those that have passed the Department's test of veracity fit in with the emerging idea of Schools UK? That appears to take away from local authorities their right to manage their assets and to acquire the capital that they need to do that. Where do the two fit in?

Mr. Miliband: The hon. Gentleman will have to enlighten me about Schools UK.

Mr. Willis: Under the Government's new proposals, it appears that they want new asset delivery mechanism that crosses local authority boundaries. That is called Schools UK in the Department's press notice.

Mr. Miliband: I will have to study that press notice carefully. I think that the hon. Gentleman is referring to the joint venture company that we propose to set up with Partnerships UK and the Local Government Association to manage the strategic allocation of the secondary school renewal fund from 2005–06. The two things fit closely together.

The consultation document that we published in February on the development of the capital strategy for secondary schools made it clear that the asset management plans would be the basis on which local authorities would deliberate and take decisions on their secondary school renewal programme. They were also to play a role in the criteria for judging which authorities would succeed at which stage in the roll-out of that programme. Four overall criteria were used. Far from being a waste of effort, as the hon. Gentleman's question seems to suggest, asset management plans remain very much part of the process.

Obviously, the plans cover primary as well as secondary schools. We are keen to build them up and ensure that they provide a useful resource. The hon. Gentleman will know that we are keen to get away from local authorities having to produce plan after plan. We are piloting in 10 local authorities a single plan covering the whole of the local education authority. The asset management plan will form part of that.

I was saying that the unhypothecation of the grant is an important contribution to the Government's drive to give more freedom and flexibilities at the front line in public services. I believe that the Committee should approve the report and I commend it to the Committee.

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2.35 pm

Mr. Brady: The Minister commented before the sitting that he was slightly surprised to discover that the Committee had been called by the House to sit without my having asked for it. I assure him that had it been necessary for Her Majesty's Opposition to seek a debate on this important matter, we would have sought one, because a large amount of taxpayers' money is involved in the special grants. I am sure he agrees that it is right and proper that we should give some scrutiny to the way in which the grants are distributed.

A long list of local authorities is set out in annexe A to the report. They fall into various categories: there are county councils, London borough councils, the Common Council of the City of London, district councils with the functions of county councils, and councils of metropolitan districts. At first sight, the unwary might think that that would include all local education authorities. It certainly includes the famous 19 local education authorities that Ministers at the Department for Education and Skills recently named and shamed because they judged their practices in the distribution of education funding to be inadequate. Between those 19 local education authorities—Westminster, Trafford, Croydon, Barnsley, Wandsworth, Slough, Liverpool, Newham, Barnet, Herefordshire, Sunderland, Northumberland, Manchester North Tyneside, West Sussex, Essex, Gateshead, Stoke-on-Trent and Harrow—a total of £56,893,609 is being distributed. That is a considerable sum to entrust to authorities that Ministers regarded as inadequate only a little while ago.

However, the list is not a list of all local education authorities—the Minister alluded to this in his opening remarks. Those not included include Bath and North East Somerset, Bury, Redcar and Cleveland, City of London, Greenwich, Haringey, Lambeth, North Somerset, Peterborough, Plymouth, Richmond and Sandwell. We have had from the Minister only the beginnings of an explanation of why those local education authorities have been excluded from receiving grants under this measure. The explanation, if I picked it up correctly—I am sure the Minister will correct me instantly if I did not—is that those local authorities did not submit or have not produced an educational asset management plan of a satisfactory standard, whereas 90 to 95 per cent. of local authorities have done so.

Will the Minister please enlighten the Committee a little further as to the shortcomings of those authorities and their educational asset management plans? What is it about the plans produced by those authorities that fails to meet the criteria, or have they simply failed to produce plans? Whatever the explanation, have they as a result of their conduct missed the opportunity this year to receive some of the large payments of funds for capital projects? This is clearly a significant issue for the residents of those areas, and we should be told about it.

The hon. Member for Harrogate and Knaresborough (Mr. Willis) voiced concern about the future arrangements for capital projects, especially the arrangements for what he termed Schools UK,

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which the Department has renamed or is shortly to rename. Apparently, it went under that heading in the Department's press notice. The Minister said that there was no difficulty, that the current arrangements and the new arrangements sit neatly beside each other, and that the new Schools UK arrangements would build on the current good practice of educational asset management plans—but where does that leave those authorities without educational asset management plans of an adequate standard? Does it mean that not only have they missed out on an allocation of funding for the coming year, but they have a continuing problem that needs to be addressed before the new arrangements are in place and can be relied on to function properly for the whole country?

Will the Minister explain the formula for allocation of the special grants? I am sure that all hon. Members on the Committee immediately read the list of allocations to establish how much money will go to their own local education authorities, even if they are not sufficiently interested in the overall picture to have compared that allocation to others. There seem to be some remarkable disparities between funding levels, even in shire counties. Buckinghamshire received just over £4.5 million and Cheshire received a similar amount; however, Essex received £12.1 million, Hampshire received £15 million and Kent received £10 million. There are similar differences and disparities between different metropolitan areas and metropolitan districts.

It would help hon. Members if the Minister talked us through the allocation formula in layman's terms that we can all follow, so that we can see exactly how the different figures have been arrived at. If he does so, we will be able to see why money is going to Stockport, but not to Bury, Barnet or Lambeth. We will also be able to see whether it is entirely coincidental that Essex—one of the counties hardest hit by the school funding crisis—is receiving more than £12 million, or whether that can immediately be explained by the existing formula.

Will the Minister tell us the total amount of allocations? I went to great lengths to do the sums for the 19 named and shamed authorities, but I thought that it would be more appropriate to leave Department officials to come up with the total amount, of which we should be apprised.

If the allocations have been decided according to the need for capital projects, does the Minister accept that that raises some very serious questions at a time when Ministers are urging schools and LEAs to use capital funds to make up funding shortfalls and to stave off the threat of teacher redundancies? Hon. Members will note that paragraph 7 of the report states that:

    ''The Secretary of State hereby specifies no conditions'',

but continues:

    '' . . . except that capital Condition grant must be used for capital purposes.''

Are the special grants are being paid to bail out local authorities in recognition of the fact that schools are having to raid their capital funds for revenue in the light of the school funding crisis?

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To allay the natural suspicion of Members that this is a firefighting measure designed to plug the gap left by other failed policies, will the Minister say on what date the amounts were allocated for each LEA, whether the total amount has been changed, and on what date the total sum was fixed? Given that paragraph 7 stipulates that the grant should be spent on capital projects, will the hon. Gentleman confirm that there is no requirement of what we might term in current jargon ''additionality'', and that authorities receiving that money will be free to use money previously designated for capital works for other purposes? If the Minister cannot give satisfactory answers to those questions, we will have to assume that this is his latest sorry attempt to dig himself out of a schools funding crisis of his own making.

2.45 pm


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