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Lord Ewing of Kirkford: It seems absurd that a local authority should have to pay for the privilege of participating in a pilot scheme, but against the background of what the Minister has said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Ewing of Kirkford moved Amendment No. 24:

Page 11, line 25, at end insert--
("( ) The Secretary of State shall make capital consents to local authorities in support of capital expenditure.").

The noble Lord said: Amendment No. 24 is also quite a simple amendment which does not require either a complicated presentation or a complicated answer. It deals with the whole question of capital consents for local authorities. There are a number of local authorities which have very little nursery education, and one I can think of off-hand is the Western Isles. If, after this scheme has been introduced, the Western Isles, as a local authority, were to require capital consent in order to provide the infrastructure to meet the parental choice that the Minister keeps talking about, can we have an assurance that the Secretary of State will readily and willingly give the capital consent?

The Earl of Lindsay: I am grateful to the noble Lord, Lord Ewing, for explaining the question behind Amendment No. 24. If I could set out the background to this, it would help. We believe the amendment is unnecessary for a number of reasons. First, the local authorities are free to set their own priorities for capital expenditure and would themselves not welcome a return to specific consents. Secondly, the voucher value is set at a level which will, in general, cover loan charges and capital repayments, and authorities which give appropriate priority to nurseries as regards using capital consents will be able to put voucher income towards loan charges. Thirdly, renting rather than building may be the better answer. In any event, in many cases new buildings may not be needed. The use of spare or under-used classrooms is an important issue at present, as was highlighted by the Accounts Commission in its report entitled Room for Learning last year. This will often provide an appropriate solution to the problem of finding space for additional nursery provision without the need to meet more than marginal costs. I hope with that background I have reassured the noble Lord on the general issues he raises.

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Lord Ewing of Kirkford: I am a simple chap. I do not understand what the Minister is talking about when he says that in the case of the local authorities the value of the voucher can be offset against the interest charges on the loans. The voucher in the beginning comes from the local authority. The principle of Part II of the Bill is that based on information provided by the Department of Social Security and, in some cases, the Child Support Agency, the parent of every four year- old child in that local authority's area will receive a voucher for £1,100, the £1,100 being deducted from the local authority concerned. This is what we were told at Second Reading. Where does the £1,100 come from?

The Earl of Lindsay: The cost of the scheme when it is up and running will be some £70 million, £30 million of which will be new money. That is new money being injected into the system. So, of the £70 million which will be going into nursery education, only £40 million will be coming from the local authorities' grant. There will be substantial new money in the system beyond that which is being taken from the local authorities.

Lord Ewing of Kirkford: This is an important point that should be clarified. Is the Minister saying, as distinct from what he said at Second Reading, that it is not now the case that £1,100 for a four year-old child in the local authority's area will be deducted from the local authority's education allocation? If that is what the Minister is saying, how much will be deducted per child from the local authority's education allocation?

Lord Sewel: Am I right in saying that there is a major difference in the ratio between old and new money in the pilot scheme and the main scheme? As I understand it, in the pilot scheme it is £1 million of old money coming from the local authorities and £3 million of new money coming from the Government. In the main scheme, it is a ratio of 4:3 of old money and new money. If there is such a difference in the ratio between old and new money, between the pilot and the main scheme, will this not totally distort the evaluation?

The Earl of Lindsay: That factor, which can easily be taken into account, will not totally distort the evaluation. It is a matter of the evaluators keeping a clear head and simply coping with the information which the noble Lord has just described.

I offer a further explanation to the noble Lord, Lord Ewing. On national implementation of the voucher system in 1997-98, we propose to deduct funding from local authorities' AEF so that it can be reissued in grant through the voucher mechanism. The actual sum will be the equivalent of the voucher value multiplied by the number of children in the pre-school year who would have been educated by education authorities in the absence of a voucher system. Our current estimate of that is just over £39 million.

As regards the method of distributing the deduction among authorities, we suggested two options in the consultation paper published last August, but there was no consensus on the preferred option. In any event, none of those matters has yet been decided, nor should it have

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been. It will all be discussed with CoSLA in the usual way of the local government finance negotiations. I hope that gives noble Lords some of the information that they sought.

Lord Ewing of Kirkford: Perhaps I may take this simple fellow down the road just a little further. If the value of the voucher is to be multiplied by the number of four year-olds in the local authority's area and the value of the voucher is £1,100, am I not right in saying that the local authority will have deducted from its education allocation £1,100 multiplied by 10,000 if there are 10,000 four-year olds in its area? That is what I have been saying all along. The Minister seems to be taking a long round-about road to say that I am wrong. Am I wrong or am I right?

The Earl of Lindsay: I told the noble Lord that he is right. If there are 16,000 four year-olds in an area 16,000 vouchers will be regularly spent in that area. In fact, a greater degree of money will be spent on the provision of nursery education after the voucher system has been introduced. Therefore if the local authority happens to be the principal provider it will stand a very good chance of remaining the principal provider for the extra 4,000 four-year olds who will suddenly come into the system.

Lord Ewing of Kirkford: This is not a private discussion and anyone should feel free to join in! At present, the local authorities provide nursery education at a cost of roughly £2,500 per four-year old child. If there are 16,000 children, as the Minister says, in a local authority's area and the parents each receive vouchers for £1,100, and even if the £1,100 is returned to each local authority with no ability to top up, then less money is being spent. The top-up scheme does not apply to local authorities; it is only in the private sector that parents can top up the voucher.

Baroness Carnegy of Lour: Surely this matter should be dealt with when the central government grant is arranged with the local authorities. As I understand it, the local authorities will lose £1,100 for each child who is with them at the moment. The noble Lord is right in saying that. If those children return to their nursery schools the local authorities will get that back and they will be exactly where they were before. In the Minister's own area, Fife, a small proportion of four year-olds are not in the local authority schools. The question will be: where will those children go? If they go to the local authority schools it will help them. If they do not, it will be a question of how other provision is made. The schools will be in the same position provided that the families do not leave them to go to other nursery schools. Then the schools will lose some children, which obviously will be a problem for them but they will have to adjust. Is that not correct?

The Earl of Lindsay: I should like quickly to deal with this point. If the authorities create more voucher sponsored places with the new arrangements than they were providing before the new arrangements, they will be better off than they were under the old system.

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Secondly, it is up to local authorities to decide among themselves as to whether they want to top up.

The Deputy Chairman of Committees (Lord Lyell): We have a Division and I believe that it is the wish of the Committee to adjourn for a Division. The Committee is adjourned for 10 minutes.

[The Sitting was suspended for a Division in the House from 6.23 p.m. to 6.33 p.m.]

The Earl of Lindsay: Because of the quantity and density of detail in this area, the most constructive offer I can make is that I write quickly to the noble Lords opposite setting out the detail and what is behind some of the issues we have been discussing. I would just clarify one point with regard to the deduction of the £1,100 times the number of pupils in a local authority area. The deduction will be the number of four-year old pupils that that local authority is presently educating, not the total number of four-year olds in that specific local authority area.

The other small point which I might clear up at this moment regards the ratio that the noble Lord, Lord Sewel, was worried about of the pilot scheme where some £3 million of new money is contributing towards an overall package worth about £4 million, versus the main scheme where we anticipate £30 million of new money playing its part in an overall scheme of about £70 million. In the pilot scheme areas, that £1 million of local authority money represents the extent to which they are educating pupils at present who are four-year old pupils. Therefore, that reflects the number of pupils who are not being educated at the moment--hence the government contribution of £3 million.

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