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Session 2002 - 03
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Delegated Legislation Committee Debates

Local Government Finance (England) Special Grant Reports (Nos. 118 and 119)

Fifth Standing Committee on Delegated Legislation

Wednesday 14 May 2003

[Mr. Roger Gale in the Chair]

Local Government Finance (England) Special Grant Reports Nos. 118 and 119

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. 118) on Special Grant for Local Authorities Rated Excellent and 3* Education Performers.

The Chairman: With this it will be convenient to consider the Local Government Finance (England) Special Grant Report (No. 119) on Special Grant for the Excellence in Cities and Excellence Cluster Programmes.

Mr. Miliband: I do not think that I have had the benefit of serving under your chairmanship before, Mr. Gale, but I look forward to your keeping us within the rules and on time. The purpose of the reports is to allow my right hon. Friend the Secretary of State to pay two types of grant to local authorities to provide support to high-performing education authorities and to authorities taking part in the targeted education programmes known as excellence in cities and excellence clusters.

The 2001 White Paper on local government committed the Government to reducing the proportion of ring-fenced funding for local authorities. Currently, if the Government want to target funding to areas of need, it has to be paid through specific grants allocated for a particular purpose. Special grant reports are designed to allow us to target funding at particular groups of local authorities without placing restrictions on its use. The two that we are debating are to allow the targeting of grant to high-performing local education authorities and those taking part in the excellence in cities programme, but without the conditions that are attached to specific grants.

We are using special grant report powers under section 88B of the Local Government Act 1988 because current legislation allows the Secretary of State to pay grant only for education or child care purposes. Hon. Members will be pleased to know that in future we hope to be able to use the power in the Local Government Bill, which is currently in another place. That will make it easier for Departments to free up grants paid to local authorities.

Mr. Graham Brady (Altrincham and Sale, West): On a point of clarification, why is it not possible for the Secretary of State to use powers under the Education Act 2002 to disburse funds for any educational purpose?

Mr. Miliband: The strong legal advice that we received was that we did not have the power to use existing legislation. The hon. Gentleman will know that the 3* authorities have been given a degree of

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flexibility that does not exist in other contexts, and that the specific form of the grant that we are considering gives further flexibility in relation to the excellence in cities programme. Perhaps my further remarks will answer his question.

I turn to the 3*, or excellent, authorities. We are offering more freedoms and flexibilities to high-performing local authorities, based on the comprehensive performance assessment that has been applied to every local authority in the country. For education, those authorities rated as both excellent overall and top performers—the 3* authorities—will receive the full range of freedoms, one of which is to spend as they see fit. The standards fund grant is allocated to them for LEA use. That freedom does not apply to those parts of the standards fund intended for schools, which must continue to be passed on to schools. The amount that has to be devolved to schools will continue to be paid as education grant. There are 12 authorities in the excellent category.

The standards fund is the Government's main mechanism for supporting particular education initiatives. Despite the fact that most of it is devolved straight to schools, there can be support work at local authority level, for example, in relation to special needs or music.

The second report—No. 119—relates to excellence in cities and excellence clusters. I am sure that many hon. Members will be familiar with the programmes from their constituencies. Some 58 local education authorities receive additional education grant to fund their participation in the excellence in cities programme, which is designed to remedy the educational problems in our major cities, and the excellence cluster programme, which is designed to help groups of schools in smaller areas of deprivation outside major cities.

As a further contribution to increasing freedoms and flexibilities, the report allows payment of excellence in cities and excellence clusters grant as specific formula grant. Each authority will continue to receive enough funding to enable it to support the work of the excellence in cities and excellence cluster partnerships. Funding is allocated to a local authority if it is part of an excellence in cities partnership or an excellence cluster partnership. The Government will continue to work with the partnerships to ensure that they work towards the agreed outputs in the programmes.

The grants make an important contribution to the Government's drive to give more freedom and flexibility to those delivering our public services. I believe that the House of Commons should approve the reports. I commend them to the Committee.

2.35 pm

Mr. Graham Brady (Altrincham and Sale, West): I have had the privilege, Mr. Gale, of serving under your chairmanship on numerous occasions, and I recommend the experience to the Minister. It is unrivalled, even among the high standards achieved by others on the Chairmen's Panel.

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I thank the Minister for his opening remarks. I shall make some broad, general observations about the nature of the special grants, and then look in rather more detail than the Minister felt able to do at the content of the reports and the way in which they have been structured.

The Minister raised an apparent paradox when explaining that the measures are designed to allow the targeted use of funds but that they place no restriction on their use—an interesting creation for the admittedly complex and arcane world of local government finance and education funding. We should explore that a little further.

The Minister said that it is not possible to use the powers given under the Education Act 2002. That is surprising. I had the pleasure of serving on the Standing Committee that considered that legislation, and it seemed to me that the power being given to the Secretary of State was so broad that it would be difficult to find any educational purpose or activity that could not be funded directly through that mechanism. I hope that the Minister, with the benefit of a brief period for further reflection and research, will be able to respond to that point in greater detail.

My concern is that the problem might lie precisely in what appeared to be an extraordinarily broad definition in the 2002 Act of any educational purpose, and especially in the use of the word ''educational''. From what the Minister said, it seems that the intention of the money being devolved to local education authorities is that it should be available in the broadest possible way and with the fewest possible restrictions on its use.

That is somewhat perplexing at a time when the Government find themselves in a highly embarrassing situation with regard to school funding. Many people think that they should have seen it coming, but sadly they did not. In response to the sudden realisation that increasing the costs for schools by more than the increase in funding is causing a significant budgetary shortfall for schools in the current financial year, Ministers used one of those responses that they keep in the drawer. One of the responses is to criticise officials for failing to see what Ministers should have seen. The other, the one used in this instance, is to criticise local authorities and to say that the local authorities are to blame. [Interruption.] The Minister has the support of at least one Labour Back Bencher, who may wish to make some observations about local education authorities in Norwich.

Given that the Government's response has been to criticise a number of local education authority areas for failing to passport money to schools, is it not bizarre that the Minister should seek to make a virtue of the fact that these two vehicles for passing further funds to LEAs should place no restriction on the use of the funds?

The Chairman: Order. There is a Division on the Floor of the House. The Committee will resume in 15 minutes—or 15 minutes after a second Division, should there be one.

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2.39 pm

Sitting suspended for a Division in the House.

2.54 pm

On resuming—

Mr. Brady: It is tempting to exploit the temporary majority that the Opposition have on the Committee. The Whip has the task of organising the House of Commons versus House of Lords tug of war for Macmillan Cancer Relief. I hope that he is able to muster Labour Members for the tug of war, even if he has not managed to muster sufficient Members from the governing party for our sitting.

I am pleased to resume my brief remarks. There is a certain oddity about the two reports, when read together. One might say that report No. 118 is concerned with rewarding excellence. It provides for the paying of a grant, in the words of the report,

    ''to provide support to local authorities in England who have been recognised by the Audit Commission through Comprehensive Performance Assessment for their achievements in raising educational standards.''

A high-performance local authority is one that has been rated as excellent, and 3* for education in the National Audit Commission's 2002 comprehensive performance assessment. In the first instance, we have a report, for the purpose of rewarding excellence.

I am delighted to see that the Whip has returned to his place. I am sure that he will take in good part the mild ribbing to which he was subjected in his absence.

The nature of report No. 119 is entirely different. Its aim is to fund educational activities that are specific to city areas. That report could be considered to be a vehicle for making additional payments, typically—but not exclusively—to less successful educational areas, because it tends to be directed towards urban areas and areas of greater deprivation. Among the 79 LEA areas that are covered by report No. 119, there are some that have particular problems of which the Minister will be aware.

Let us consider the percentage of people aged 16 in LEA areas achieving not one GCSE in 2001–02. In Leeds, one of the areas that received funding, that figure was about 8 per cent. Leeds receives funding of £9,793,670 through this measure. Liverpool received a broadly similar sum, and also has about 8 per cent. of children who get no GCSE results. Sheffield has nearly 9 per cent. who achieved no GCSE results. More than 11 per cent. of children in Bristol do not get a single GCSE. Nottingham and Newcastle upon Tyne—close to the Minister's constituency—have a 12 per cent. level. Manchester has a corresponding figure of 13 per cent.

There is an oddity whereby some local authority areas receive moneys when they are already succeeding, and another set where there are problems that need to be tackled. That is not necessarily inappropriate, but it is important to be certain that the money that goes to those authorities experimenting with the excellence in cities initiative should be getting results and making positive progress through the measure that we are discussing.

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It is interesting that seven of the 79 LEA areas covered by report No. 119 are also covered by report No. 118. There is a coincidence of grants. Both of the grants are being paid to Camden, Cheshire, the City of London, Hartlepool, Kensington and Chelsea, Kirklees, and Wigan. That is an eclectic mixture of LEA areas.

It is not necessarily wrong that we should pay special grants to authorities at the top end of the performance scale, or, indeed, to help with the problems of those at the bottom end. However, it is important that the Minister should understand the frustration of many local authorities in the middle, which sometimes feel that they do not qualify for any of the additional funds that the Department disburses. Certain local authorities and, indeed, certain schools feel real frustration because they never seem to benefit from specific grants that are made available for one thing or another.

The areas covered by such authorities may have pockets of deprivation, but the average for the whole area may mean that they fail to qualify, because of an arbitrary cut-off point calculated according to the authority's administrative boundaries. Alternatively, an area may be pretty deprived across the piece, but it might not quite reach the threshold.

The threshold in report No. 119 is that 24 per cent. of children should have been receiving free school meals in each of the past three years. What if 24 per cent. of children received them in two of those years but not in the third? Authorities might feel that they are losing out and that they should qualify for additional assistance, but they will not. The Minister will know that many schools and head teachers feel frustrated because they fall on the wrong side of the local authority boundary. Sometimes, schools have identical circumstances and identical demographics, but they happen to be on different sides of the boundary.

I have raised the issue repeatedly with Ministers over the years. Generally, I have had perfectly sensible, emollient responses, saying that the Government recognise the problem and will do something about it. Once again, however, we find that grant is being calculated according to an arbitrary threshold, and that leads to the frustration that I mentioned.

I want to raise another issue, to which my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) may return. At a time when the Government are accusing at least some LEAs of failing to pass on resources to schools, it is odd that several of those authorities should be on the lists before us. The 3* and excellent LEA areas in report No. 118—the high performers—include West Sussex, which the Government named and shamed in the list of 19 authorities accused of not passing on adequate funding. If the Government were right to accuse West Sussex of not passing on funding, it is perhaps rather irresponsible to give it another £3,188,233, with no guarantee that that money will be passported to schools. If they were wrong, perhaps the Minister will apologise to West Sussex and some of

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the other LEA areas, and admit that most of the problem was caused by the Government piling on to schools additional costs far in excess of any additional resources.

I return to the question of whether local authorities will be free, as the Minister implied, to use the grants as they please. Will the grants have conditions attached? Paragraphs 6 and 7 of report No. 118 say that no conditions are attached, but does that mean that none will be attached as long as the additional expenditure goes to schools, or that authorities would be free to use the money on, for example, social services? Furthermore, paragraph 6 says that no conditions will be attached to grants,

    ''with the exception of grant that must be devolved to schools.''

How can there be grant that must be paid to schools if, as it appears, no conditions are attached to the payment of the funds? If there are conditions, will the Minister explain what proportion of the money must be paid to schools and what means have been used to calculate it?

The Minister might also wish to explain how the grant for each authority that qualifies has been calculated. It is clear from the report that widely differing levels of grant are being paid to different authorities. All the LEAs in report No. 118 have by definition achieved excellent status and all qualify according to the rubric used by Ministers, yet there is a wide range. For example, although I accept that the City of London has very few schools, it receives merely £81,000, whereas the county of Cheshire, which according to today's newspapers is the best place in the country to live, receives £2,589,042, while Hampshire, which many people might think of as an affluent part of the country, receives a grant of £6,435,000. I would therefore appreciate it if the Minister would explain how the different levels of grant are calculated for each local authority area that is contained in the report.

Turning to report No. 119, we see an even more remarkable coincidence involving the authorities that the Government named and shamed for failing to pass funds on to schools and the authorities that are to receive special grant. Of the 79 authorities that receive special grant in that report, 12 are on the list of 19 LEAs that the Government say failed to pass money on to schools. Again, the Minister may have a simple answer to that. Perhaps those authorities will be required to passport the additional money to schools. If not, the matter is surely one of concern.

In the category in question we find the authorities of Barnet, Barnsley, Croydon, Gateshead, Liverpool, Manchester, Newham and North Tyneside, which is not so far from the Minister's constituency interests, Stoke-on-Trent, Sunderland, Wandsworth and Westminster. According to the Government, those authorities cannot be relied on to pass funds on to schools, and yet it seems that they are considered suitable to receive, in some instances, large additional sums—nearly £8 million in the case of Manchester, for example. According to paragraph 7 of report No. 119, however, that money will be sent to LEAs with no conditions imposed.

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