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Clauses 14, 15 and 16: Transferring powers to the LSC to establish and dissolve further education corporations
63. The Government's White Paper entitled 'Further Education: Raising Skills, Improving Life Chances' contained a commitment to eliminate inadequate provision across the learning and skills sector by 2008. The Government also undertook to bring about significant improvements in those providers perceived to be coasting.
64. The policy intention in England is to enable the LSC to intervene quickly where a college is underperforming, mismanaged or inadequate. As part of a package of measures, the power to incorporate and dissolve colleges will be transferred from the Secretary of State to the LSC. As far as Wales is concerned, these powers will be exercised by the Welsh Ministers.
65. Section 16 of the Further and Higher Education Act 1992 ("the 1992 Act") enables the Secretary of State by order to establish a body corporate to conduct a new or existing educational institution. Such a body is known as a further education corporation. Section 27 of the 1992 Act enables the Secretary of State to provide by order for the dissolution of further education corporations and the transfer of their assets and liabilities.
66. The provisions for the publication of proposals for the establishment and dissolution of further education corporations under sections 16 and 27 of the 1992 Act are set out in section 51 of the 1992 Act and in regulations made under that section, i.e. the Education (Publication of Draft Proposals and Orders) (Further Education Corporations) (England) Regulations (SI 2001/ 782).
67. Clause 14 transfers the power to incorporate further education institutions in England under section 16 of the 1992 Act to the LSC. In Wales the power will be exercised by the Welsh Ministers.
68. Clause 15 transfers the Secretary of State's power to dissolve further education corporations in England under section 27 of the 1992 Act to the LSC. In Wales the power will be exercised by the Welsh Ministers.
69. Where it is proposed to dissolve a further education corporation, it may be necessary to transfer the property, rights and liabilities of a corporation to the LSC to achieve the best outcome for an area. In such a case the LSC will need to seek the agreement of the Secretary of State before making such provision.
70. Clause 16 amends section 51 of the 1992 Act which requires the LSC, when making a proposal to the Secretary of State to establish or dissolve a further education corporation under section 16 or section 27, to publish the proposal in a prescribed form and consider any representations made on it. The amendment makes appropriate modifications to reflect the transfer of power to establish and dissolve further education corporations from the Secretary of State to the LSC and the fact that for institutions in Wales, this power will be exercisable by the Welsh Ministers. It will be necessary to make consequential amendments to the regulations made under section 51 (see paragraph 66).
71. The provision made by clause 10 is relevant to the operation of sections 16, 27 and 51 as amended by clauses 14 to 16 (see paragraphs 51 and 52).
72. Currently the Privy Council has a statutory power, under section 76 of the 1992 Act, to make orders that enable institutions providing higher education to grant one or both of two groups of awards. Institutions providing higher education may be given a power to grant awards to students who complete a course of study or a power to grant awards to students who complete a programme of research or both. These are commonly referred to as taught and research degree awarding powers respectively.
73. Currently, a number of further education institutions in England provide courses leading to foundation degrees. However, only institutions with full taught degree awarding powers can award foundation degrees in their own right. As no further education institutions have such powers, their foundation degrees are awarded by institutions with full taught degree awarding powers. Clause 17 amends section 76 so as to enable the Privy Council to make orders granting further education institutions the power to award only foundation degrees. In order to be granted this power, institutions would have to meet certain non-statutory criteria, which have been published in draft. As with taught and research degree awarding powers, the Quality Assurance Agency for Higher Education will advise on whether an institution meets the criteria.
74. As a result of this provision, further education institutions providing courses leading to foundation degrees would be able to apply for powers to award foundation degrees themselves.
75. If the Privy Council by order gives a further education institution the power to award foundation degrees, it may in the same order specify that the power does not include the power to authorise other institutions to do so on its behalf (see section 76(5A), as inserted by subsection (9)). The Privy Council may in such an order provide that foundation degrees are not to be awarded unless a person is enrolled at the institution when he completes the course of study for which the degree is granted (see section 76(6A), as inserted by subsection (11)).
76. It is envisaged that the Quality Assurance Agency for Higher Education will advise that a further education institution's powers to award foundation degrees should initially be granted for a 'probationary period' of six years. The Quality Assurance Agency would also recommend that, during this probationary period, the further education institution's powers to award foundation degrees should be restricted to foundation degrees granted to persons enrolled at the institution and should exclude the power to authorise other institutions to award foundation degrees on its behalf.
77. The provision in this clause applies to further education institutions in England as defined under section 91 of the 1992 Act. According to this definition, references to institutions within the further education sector are to institutions conducted by further education corporations and 'designated institutions'. Section 28(4) of the 1992 Act lists the criteria that an institution must meet in order to be designated as a further education institution.
78. Clause 18 requires the Secretary of State to lay before Parliament a report about the effect of clause 17 within a period of four years of clause 17 coming into force.
Power to form or be involved in companies or charitable incorporated organisations
79. Section 19(4)(bb) of the 1992 Act sets out the powers of a further education corporation in relation to companies. Section 19(4A) prohibits further education corporations from forming or investing in companies for the purpose of conducting an educational institution.
80. Clause 19 amends section 19, clarifying the power of further education corporations to form or invest in all types of company and enabling them to do so for the purpose of conducting an educational institution, subject to the agreement of the LSC with respect to further education corporations in England and subject to the agreement of the Welsh Ministers with respect to further education corporations in Wales.
81. Subsection (6) contains retrospective provision that ensures that companies limited by guarantee that have already been formed in the period beginning on 1 April 2001 and ending immediately before the date on which this clause comes into force were formed lawfully.
82. The Charities Act 2006 created a new form of body corporate called charitable incorporated organisations (CIOs) which will be regulated by the Charities Commission. There is a new power in clause 19 for further education corporations to form, participate in forming or otherwise become members of charitable incorporated organisations. Where this is to be for the purposes of conducting an educational institution, it is subject to the agreement of the LSC or the Welsh Ministers, as appropriate.
83. In considering requests to establish companies or charitable incorporated organisations for the purpose of delivering education, the LSC will look at whether the entity should be designated as part of the further education sector (under section 28 of the 1992 Act). Designated institutions are required to comply with all legislation appropriate to further education corporations.
84. This provision is intended to facilitate collaboration between further education corporations and schools, businesses, universities and other partners. The background to this clause is a Government commitment in the White Paper 'Further Education: Raising Skills, Improving Life Chances' to encourage new delivery models for further education provision in England.
85. Clause 20 inserts a new section 49A into the 1992 Act. New section 49A imposes a duty on the governing bodies of further education institutions in England to have regard to guidance from the Secretary of State and for the governing bodies of institutions in Wales to have regard to guidance from the Welsh Ministers, about consulting with learners, with people likely to become learners or with employers in connection with decisions which will affect them. The clause does not define consultation nor does it specify how or when consultation is to be delivered. These issues will be included in the guidance. The clause specifies that guidance must provide for the views of a learner or prospective learner to be considered in the light of his age and understanding.
86. The background to this clause is a Government commitment in the March 2006 White Paper 'Further Education: Raising Skills, Improving Life Chances' to create a demand-led system of further education provision, whereby funding follows the choices of employers and learners.
87. Clause 21 amends section 137 of the Education Act 2002 ("the 2002 Act"). Section 137 as it now stands allows the Secretary of State to make regulations requiring a person appointed as a principal of a further education institution after commencement of that section to have achieved, or be working towards, a specified leadership qualification. Persons who were appointed before the commencement of section 137 are thus exempt from the requirement that may be imposed by regulations.
88. Clause 21 limits to institutions in Wales the exemption from the regulations for those appointed as principals before the commencement of section 137 of the 2002 Act. The effect of this will be to enable regulations made under section 137 to extend to all further education college principals in England.
89. The removal of this exemption applies to principals in England only, although section 137 of the 2002 Act applies to England and Wales.
90. This clause also inserts new subsection (2A) which provides that regulations made under subsection (1) of section 137 may limit the period of time a principal may be given to achieve the qualification. For the avoidance of doubt, this provision applies to England and Wales.
Clauses 22 and 23: Amendments to the Industrial Training Act 1982
91. Clause 22 amends section 11 of the Industrial Training Act 1982 ("the 1982 Act").
92. The 1982 Act currently requires an Industrial Training Board (ITB) to demonstrate that a levy proposal has the support of organisations representing more than half the employers who are likely to be liable for levy payments and organisations representing employers who together are likely to pay more than half the total amount of levy payable, before the Secretary of State imposes that levy on the industry. These representative organisations have traditionally taken the form of employer federations and trade associations. However, an increasing proportion of employers no longer choose to be members of such organisations. This is making it difficult for ITBs to demonstrate support for a levy among employers within their industry, even where this support exists.
93. This clause amends the 1982 Act to allow support for levy proposals to be demonstrated by consulting more widely with employers, whether or not they are members of representative organisations. It allows the Secretary of State to make regulations about the detail of how support for levy proposals is to be demonstrated, including allowing a sample of employers to be consulted.
94. A levy order is an order issued by the Secretary of State requiring that employers in a given industry pay a levy and that the ITB for that industry collect and administer the levy. A levy order also includes provision for exempting employers from payment of the levy in appropriate cases.
95. Current practice is for ITBs to make proposals for levy orders annually. However, levy rates have remained unchanged for a number of years.
96. Clause 23 requires ITBs who wish to submit proposals for levy orders to submit proposals for three-year levy orders to the Secretary of State. These proposals must specify up to three levy periods for each three-year period. There are certain exceptions to this. The levy is imposed in respect of the levy period.
97. The ITB submitting the proposal for a three-year levy order must also specify a base period for each levy period of the proposed order. A base period is usually a period covering a financial year (6 April to 5 April) prior to the beginning of a levy period. The emoluments and net payments for subcontract labour paid by employers during the base period are used as the basis for calculating the levies due as a consequence of passing the proposed levy order.
98. The first and second levy proposals made by an ITB do not need to cover a three-year period; they may specify one levy period. Subsequent levy proposals, if the ITB chooses to make them, must cover a three-year period, subject to certain exceptions.
Clause 24: Power of a higher education corporation to form companies or charitable incorporated organisations
99. The Charities Act 2006 created a new form of body corporate called charitable incorporated organisations (CIOs) which will be regulated by the Charities Commission. Clause 24 clarifies the power of higher education corporations to form or invest in companies and gives them a new power to form or become members of charitable incorporated organisations.
100. Subsection (4) contains retrospective provision that ensures that any companies limited by guarantee that have already been formed between 1 April 2001 and the date on which this clause comes into force were formed lawfully.
Clause 25: Powers of National Assembly for Wales
101. This clause makes amendments to Part 1 of Schedule 5 to the Government of Wales Act 2006 ("GOWA 2006"), so as to confer enhanced legislative competence on the National Assembly for Wales in specific subject areas. Section 94 of GOWA 2006 provides that a provision of an Assembly Measure is within the Assembly's competence if it relates to (or is incidental or consequential on provision that relates to) one or more of the matters specified in Schedule 5. Part 1 of Schedule 5 to GOWA 2006 now sets out twenty fields and some matters in respect of one of those fields. Assembly Measures may include any provision that could be made by Act of Parliament, subject to specific restrictions set out in Part 2 of Schedule 5 to GOWA 2006.
102. Clause 25 introduces matters into field 5, which is entitled "Education and Training". These matters include:
103. Clauses 26, 29, 30, 31, and 32 contain general provisions, including: those relating to the exercise of powers to make orders and regulations; general interpretation provisions; commencement; extent of the Bill; and the short title of the Act.
104. Clause 27 introduces Schedule 1 which contains miscellaneous and consequential amendments.
105. Clause 28 introduces Schedule 2 which specifies the extent to which the enactments listed are to be repealed.
106. It is not anticipated that any additional expenditure should fall on the Consolidated Fund or the National Loans Fund as a consequence of this Bill.
107. Regional councils will incur costs, estimated most recently as being of the order of £1.8 million a year, but there will be savings from the ending of local learning and skills councils and the two committees of the national LSC. Once completed, the LSC's total re-structuring package will release up to £40 million per annum in savings, which will be ploughed back into supporting front-line activities.
108. The cost to the LSC of the duty to have regard to guidance about consulting learners, potential learners, employers and other specified persons is difficult to ascertain. It depends on how the LSC chooses to perform consultation. For example, costs associated with a web-based consultation would be relatively minor. The LSC should build some costs into its budget as part of its strategy for improving the quality of provision. The cost to the DfES of providing guidance on consultation is estimated at about £80,000, on the basis of current projects issuing guidance to the sector.
109. The public sector cost of the duty on the LSC to encourage diversity in education and training and to increase opportunities for learners and employers to exercise choice is not yet clear. There may be an increase in administration costs for the LSC, but it will be hard to attribute costs specifically to this provision.
110. The provision in the Bill clarifying the power for the LSC to form companies limited by guarantee as well as companies limited by shares will not create any additional cost.
111. The duty on the LSC to comply with the strategies of bodies designated by the Secretary of State will not create significant additional public sector costs.
112. However, the cost of implementing sharing of support services is significant. Upfront investment will be required to cover the transitional cost of change as well as the purchase of new technologies and the redesign of business process. Additionally, there will often be a lead time of one to two years from the time of investment until benefits from the change programme will start to flow.
113. Investment may be estimated as £129m-315m for the further education sector and between £1.6 billion and £4 billion across the wider system. This range of investment assumes a payback period on investment of between eighteen months and three years.
114. Partnerships with the private sector may be established to minimise the upfront investment necessary for programmes of this scale.
115. Once it is clear what services the LSC will provide, a further, more detailed, analysis of the costs will be made.
116. There will be no increased funding as a result of the provision in the Bill transferring powers of the Secretary of State to establish and dissolve further education corporations to the LSC. The LSC will incur certain additional costs in exercising the powers, but these costs are difficult to ascertain.
117. No additional funding is being made available for colleges wishing to use the powers provided in the Bill enabling them to form or invest in companies or charitable incorporated organisations.
118. The cost to further education institutions of the duty to have regard to guidance about consulting learners and employers is difficult to ascertain (see paragraph 108 above). The cost to the Department for Education and Skills of providing guidance on consultation is estimated at about £80,000, on the basis of current projects issuing guidance to the sector.
119. The power granted to the Secretary of State to regulate the qualifications of all college principals should not generate significant public sector financial costs. The costs associated with persons undertaking a programme of training leading to a specified qualification and the costs associated with dismissing a principal who does not achieve a specified qualification within the time allowed by regulations under section 137 of the 2002 Act will mostly be met by individual colleges.
120. No additional funding is being made available for further education institutions to award their own foundation degrees.
121. Amendments to the Industrial Training Act 1982 made in the Bill do not create any additional public sector financial cost.
122. No additional funding is being made available for higher education institutions wishing to use the powers provided in the Bill enabling them to form or invest in companies or charitable incorporated organisations.
123. There are no public service manpower commitments arising from the Bill which would give rise to additional requirements. It is estimated that the overall effect of the Bill on public sector manpower will be negligible.
124. The Regulatory Impact Assessment analyses the possible impact of the proposals in the Bill on business, charities, voluntary sector organisations and the public sector. A copy has been placed in the Library of both Houses. It is also available online at www.dfes.gov/ria and in hard copy from the Department for Education and Skills.
125. The provisions in the Bill are focused on the public sector and are generally enabling in nature. Most proposals in the Bill will have little direct impact on business, charities and the voluntary sector. However, provisions amending the Industrial Training Act 1982 will have an impact on individuals and organisations in the private sector.
126. Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement before Second Reading about the compatibility of the provisions of the Bill with the European Convention on Human Rights (as defined by section 1 of that Act). The Secretary of State for Education and Skills has made the following statement: "In my view the provisions of the Further Education and Training Bill [Lords] are compatible with the Convention rights."
127. There are some areas where it would be helpful to provide further comments for clarification, as follows.
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