Examination of Witnesses (Questions 705-719)
MR DAVID
MILIBAND MP
23 JUNE 2004
Q705 Chairman: May we apologise that
we are running late; we did start a quarter of an hour late because
of the votes and I am afraid the questioning has overrun a little
bit. Would you like to introduce yourself for the record, please?
Mr Miliband: David Miliband, Minister
for Schools.
Q706 Chairman: Do you want to say anything
by way of introduction?
Mr Miliband: No, I think we should
probably get on with the questions, as long as there is a clear
understanding that I am not going to answer anything about the
negative grant slope. I have to say that my predecessor's degree
of insight and acumen in that area was truly impressive, but it
is an area on which I do not want to trespass.
Q707 Christine Russell: Ring-fencing
and passporting. Why is ring-fencing so prevalent in education
compared with other services? Why do you insist that local authorities
have to passport all resources through to schools?
Mr Miliband: People have written
PhD theses on this. Let me try to summarise a version. First of
all, it is important to say that while education accounts for
about 40% of local government funding, we account for about 30%
of the ring-fencing, which is an interesting starting point. Let
me start with the argument about ring-fencing, which takes two
forms: first of all, grants which are paid to local authorities
for specific functions which government thinks need to be done;
secondly grants which are paid to schools. In the former category
you might think of something like the music services fund and
that has been put there because there was a desperate need to
promote innovation and good practice in music services; about
£60 million a year goes on that. Certainly innovation and
promoting good practice are two good reasons why we have ring-fenced
central grants. To take an example of a ring-fenced grant for
a school, the ethnic minority achievement grant would be an important
example which goes direct to schools and is £120 million
in all. That is designed to tackle a particular inequality. I
think those three reasons, tackling inequality, promoting innovation,
spreading good practice, are three good reasons why one can have
ring-fenced grants.
Q708 Sir Paul Beresford: That is a high
proportion of the total which is ring-fenced.
Mr Miliband: With respect, it
is not actually. Those examples of innovation, inequality and
spreading good practice basically constitute the three heads under
which we ring-fence grants. The question about passporting is
obviously different because that relates to the increase in education
spend which we want to see passed on to the school budget. Obviously
it is for local authorities to decide what proportion of the EFSS
they spend on schools; some local authorities, like Sir Paul's
former authority, decide not to spend at EFSS. In Wandsworth they
spend—I stand to be corrected—about 93 or 94% of EFSS
on schools. They have judged that schools are not the priority.
Other authorities spend above EFSS on schools, but passporting
refers to the increase each year.
Q709 Sir Paul Beresford: If I take your
comment on Wandsworth one step further, in local elections there
is usually a fairly low turnout and there is usually a fairly
high one in Wandsworth. Is that because they feel they are voting
for councillors who have a say and are prepared to have a say,
whereas in other local authorities they are totally dominated
by government?
Mr Miliband: I am pleased to say
that there are high turnouts in South Tyneside Borough Council
elections, above 50% in the previous two elections. There may
be all sorts of reasons to do with the competitive nature of Wandsworth
politics which might explain why there are large turnouts. I probably
would not want to venture too far down that path.
Q710 Christine Russell: Government says
it is actually committed to reducing ring-fencing in the future.
Do you think you will be following that in education? How do you
see the future for ring-fencing as far as education services go?
Mr Miliband: May I take schools
and LEAs separately, because it is important? In both cases the
question for us has to be whether the innovation, the tackling
of the direction against inequality, the strengthening of good
practice become sufficiently embedded in the structure and culture
of local provision that it should be un-ring-fenced. That is a
question we have answered in the affirmative in a number of areas.
In relation to schools, we are moving increasingly towards what
we call a school improvement grant, which is essentially virable
across budget heads. In relation to local authority spend as well,
we have also consolidated a number of budget heads. There are
areas where we have judged, in discussion with local government,
that it is not yet the right time to take off the ring fence,
especially where local government is performing a particular function
on behalf of central government. A good example of that would
be our Key Stage 3 strategy, which is for the 11- to 14-year-olds,
which is where we have a problem in education. We have taken the
decision there for local authorities to play an important role
in that strategy, but we want them to spend the money in that
area on the Key Stage 3 strategy and it is about £25 to £30
million. The direction of travel is the one you have described.
Q711 Mr Betts: We have not really tackled
the issue of passporting, have we? This is a fundamental problem
which many authorities do face. The settlements to local government
generally have been generous, certainly in historical terms, but
when the passporting has been taken out for education and social
services, I think the authorities last year had something like
a 1.4% increase in other services to spend, which was actually
a reduction in real terms. It includes important environmental
services, street cleaning, refuse collection and all those sorts
of things. Is there not a degree of tension and conflict between
ministers and the DfES and ODPM about these issues?
Mr Miliband: It was going so well
until your last half a dozen words. I am forced to say that I
have not felt that at all in the discussions I have been having
with Nick Raynsford and John Healey. Where you are right is that
there are obviously relationships between what you spend on education,
what you spend on other services, what central grant is and what
the council tax rise is. All those things have to be balanced
off and there are difficult decisions for central government about
how much grant should increase and Sheffield, along with other
parts of the country, have been the happy beneficiaries of increased
government investment over the last few years. There are also
decisions for local councils to take about council tax and there
is an interplay between those factors and I certainly would not
pretend at any level that there are not difficult decisions at
a local level as well as national level.
Q712 Sir Paul Beresford: May I quote
to you from an attendee at a LGA meeting? He said that Nick Raynsford
volunteered that one of his problems was getting different ministers
mutually to liaise.
Mr Miliband: I am surprised. I
do not think I was at the LGA conference. I am sure Nick would
have rebutted that suggestion very, very strongly. Obviously we
do have a system in which all parts of government have their interest
in local government spending, or the vast majority of government
departments have that interest and the Treasury have a key interest
in overseeing the public finances and the ODPM are the key players
in the distribution of grant. There is no point pretending it
is not a complex system, but generally lack of liaison is not
the source of whatever difficulties people may have.
Q713 Chairman: It is not a question of
lack of liaison, it is just that you cannot agree.
Mr Miliband: On what have we not
agreed? If you take this year's education provision, which is
2004-05, I do not think anyone from government would deny that
2003-04 was a difficult year for school funding. There were many
changes and some difficulties for a significant number of schools.
For the budget for 2004-05 there has been a very high degree of
liaison between the ODPM, the Treasury and the DfES and local
government, in fact we have worked extremely closely together,
both on the design and the implementation of the school funding
guarantee, in the name of the stability which the whole government
is committed to for the schools sector and I think that has gone
extremely well. I do not detect that disagreement, in fact all
departments are singing from the same hymn sheet in terms of what
we are trying to do for school funding for this difficult period
of 2004-05 and 2005-06.
Q714 Mr O'Brien: Are you happy with the
way passporting is working? Do you have any intentions to change
it?
Mr Miliband: Happiness and local
government finance are two concepts which do not always sit exactly
together. In ploughing through arguments about passporting it
is not always happiness which is the immediate emotion which comes
to mind. What it is fair to say is that the arrangements for 2004-05
and 2005-06 have certainly worked better than those for 2003-04.
There has been a close degree of co-ordination between local government
and central government. We are committed to looking at how those
arrangements have worked and to learning whatever lessons we can
from them. I would certainly say that I am happier with the situation
this time this year than I was this time last year.
Q715 Mr O'Brien: Are you planning to
change the passporting system?
Mr Miliband: No, I am not. We
have just introduced some arrangements to bring stability to school
funding for 2004-05. We have pledged that we will discuss in an
open way with all the stakeholders, be they from local government
or the education world, how it has worked. If there are any lessons
to learn, we shall learn them.
Q716 Mr O'Brien: The Audit Commission
in evidence to this Committee said that ring-fencing and passporting
" . . . do not promote efficient and effective resource allocation
at a local level". How do you respond to that statement?
Mr Miliband: I would point to
some very, very important changes which have happened in the education
system, where I think all sides would actually agree that it has
been beneficial. I mentioned the music standards fund earlier.
That has been a very important strand of the extension and broadening
of education provision. I could also give you the example of the
funding of advanced skills teachers, which is done through central
grant, now 3,500 advanced skills teachers throughout the country.
Those ring-fences have been worked on with local government and
the education sector and both of them would be seen by all the
people I deal with as having been an important, positive step
forward. So I do not agree with the Audit Commission's broad-brush
argument that all the ring-fencing we have is wrong. The passporting
is a separate issue and the passporting debate reflects the priority
the government believes education should have in national investment.
Q717 Sir Paul Beresford: Would you agree
with local councillors who feel that passporting and ring-fencing
are effectively centralisation?
Mr Miliband: If you take passporting
first, there is a big degree of judgment to be exercised about
how local government distributed the grant it gets to schools.
If you look at the local authority formulae for the distribution
of funding to schools, they are very different around the country.
They recognise need in different ways. Some of them recognise
need in a very central way, others do not. There is a significant
degree of choice to be made by local councils about that.
Q718 Sir Paul Beresford: So Wandsworth
does not give you any problems.
Mr Miliband: I did not say that.
I heard myself saying that there was a wide variation in practice
in how different councils recognise need in their formulae for
distributing funds and the choice which is made about whether
or not they recognise need. Some authorities recognise need in
a very overt and clear way and others less so. The passporting
affirmation by the whole of government reflects the commitment
which the whole of government shares to education. In addition,
it is significant that local government increasingly sees education
not as separate from its ambitions for economic and social renewal,
but actually as central to them. The number of local authorities
who now see investment in schools and nursery and under-five provision
as absolutely essential to the renewal of towns and cities is
growing significantly. The idea that education sits in a completely
different box from the rest of local government thinking is not
true.
Q719 Mr O'Brien: So you disagree with
the evidence submitted by the Audit Commission. Another view that
was put to us by the Audit Commission was that the passporting
requirement was one of the factors which led to the 12.9% increase
in Band D council tax for 2003-04. What is your view on that?
Mr Miliband: What led to the rise
in council tax in 2003-04 was the cumulation of all the decisions
which everyone made about grant funding and about council tax
increases. It is no more significant to say that decisions about
passporting were relevant to that increase than that decisions
about social services or EPCS or any other part of the budget,
nor any more significant than government decisions about government
grant.
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