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The Earl of Onslow: My Lords, owing to the absolutely super economy which the present

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Government inherited from their predecessors, has it not been noticeable that the recruitment of teachers has now become rather more difficult and that there appears to be a shortage of teachers? How, therefore, shall we decrease the number of pupils in a class if it is more difficult to recruit teachers without increasing expenditure by rather more than the present Government have pledged to do?

Lord Whitty: My Lords, despite some improvement in the economic situation, we inherited a situation in education whereby spending per pupil had declined for each of the past three years in real terms. We have already started to reverse that and we shall continue to do so.

There is not an overall national problem in relation to the recruitment of teachers but there is a problem in particular specialties, in some head teacher posts and in particular in London. Your Lordships will have noticed that on Monday of this week, the Teacher Training Agency announced a major new programme for the recruitment of teachers. That also forms part of our strategy for improving the quality of teaching which is delivered to our pupils.

Lord Merlyn-Rees: My Lords, I understand that those two sums of money are for different purposes. Can we be assured that priority will be given to the inner city areas, which are areas where people of influence do not live? Therefore, inner cities are often forgotten.

Lord Whitty: My Lords, many of your Lordships and I live in the inner cities and I am sure that there is some influence in this House on inner cities. When assessing educational priorities, it is the intention that the social needs of schools of all sorts will be taken into account. It can be seen immediately from the individual allocations, where it is clear which schools will obtain what in England, that the deprivation of some inner city schools is being urgently addressed.

Baroness Blatch: My Lords, can the Minister confirm that the figures he gave on the Scottish and Welsh allocations are in fact consistent with the Barnett formula? Further, can the noble Lord at least give the House an assurance that, without special measures or ring fencing arrangements, there can be guarantees that this money will be spent locally in the way intended by the Government given the fact that local authorities determine local spending priorities at a local level?

Lord Whitty: My Lords, on the capital allocations in England and, in a slightly different sense, in Wales, local authorities have to submit bids and therefore it is absolutely clear directly where the money is going. As regards the recurrent funding, we have reached agreement with local authorities on what their priorities should be. At the end of the day, it is of course the delivery mechanism, which I do not believe any party in this House has challenged, that the local authorities have to deliver this money to local schools. I do not believe I mentioned the figures for Wales but, as for Scotland's allocation, this will indeed fit in with all the

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formulae established by the Treasury. Indeed, I suspect that my right honourable friend the Chancellor of the Exchequer would not have allowed it had that not been the case.

Baroness Blatch: My Lords, my question was not whether it would fit in but whether it was consistent with the Barnett formula?

Lord Whitty: My Lords, I understand that to be the case.

Lord Tope: My Lords, is the Minister aware that there is great concern among local authorities about how the Government will distribute such additional resources as there may be? Will the Minister, therefore, give an assurance to those local education authorities which have always made education a priority that they will not be disadvantaged in relation to those local authorities which have never made education a priority and might, because of that fact, be seen to have greater needs?

Lord Whitty: My Lords, clearly there could be some conflict within the field. It is not the intention to undermine those authorities which have always made generous provision for education. However, in some of the areas it is clear that the capital depredation needs addressing as a matter of urgency. There is therefore some concern in those areas but I believe that we can explain the situation and bring along the local authorities with us in the allocation of this money.

Lord Elton: My Lords, will the Minister remind the House from what fund the extra £2.3 billion came and say whether it is the same fund from which the extra money now going to the NHS came? If that is the case, can the Minister say how much is left in that fund for future use?

Lord Whitty: My Lords, it is true that some of the money came from reserves in this case. However, that is not the situation with the extra money for the NHS which has been announced during the past few days. That was a reallocation of existing budgets within existing targets.

Earl Russell: My Lords, is the Minister aware that the Government's attempt to claim to have spent additional money has proved no more persuasive to the Institute for Fiscal Studies than it has to my noble friend Lady Williams? In the light of that fact, should not this Question have been covered by the rule that Ministers do not answer hypothetical questions?

Lord Whitty: My Lords, it would restrict the number of Questions tabled in this House significantly if we were to follow that doctrine absolutely. Obviously some

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of that money has not yet been spent. In general terms I am aware of the views of the Institute for Fiscal Studies. So far as concerns local authorities and the education system, it is pretty clear that we are talking about extra money. As regards both the capital and the recurrent expenditure, it is real money which they are obtaining now to improve services over and above the inheritance from the previous government.

Utility Regulation: Review

3.33 p.m.

Lord Paul asked Her Majesty's Government:

    What progress is being made with the review of utility regulation.

The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, the Government are pressing ahead with the review which is considering whether changes are required to the existing systems of regulation in telecommunications, electricity, gas and water, against the guiding principles of transparency, consistency, predictability and accountability. We wish to ensure, in as far as we can given the dynamics of these new markets, open and predictable regulation, which is fair to all consumers and to shareholders; and which, at the same time, provides incentives for managers to innovate and improve efficiency. The review will report to Ministers by the end of the year. If Ministers conclude that change should be contemplated, a consultation paper, setting out the options, will be published early next year.

Lord Paul: My Lords, I thank my noble friend the Minister for that Answer. I have two further questions for him. First, regarding the report from the London School of Economics, are we sure who will assess the true cost of the regulators? Secondly, there was a wide perception in the previous administration that consumers were not getting a fair deal. Therefore, are we going to give consumers a higher priority?

Lord Simon of Highbury: My Lords, the intention is that consumers will be given equal priority with the other interested parties. Perhaps I may use the word "stakeholders" in that context. However, the question of cost must be answered separately. At present there is no statutory duty to assess cost. The crucial issue--and it is one that has been raised by the utilities--is the flow of information required in order to understand both consumers' requirements and those of the utilities. We need first to get the right information base. Then we shall need to discuss whether the costs are appropriate and indeed whether it will be necessary to apply controls.

Lord Ezra: My Lords, while it is satisfactory to note that Ministers will be considering the matter by the end of the year, can the noble Lord assure the House that any action required will be quickly taken thereafter because we are talking about very important issues? In particular, can the Minister confirm that among the issues to be considered will be the desirability of

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bringing the regulation of gas and electricity together in view of the fact that an increasing number of firms are dealing with those two fuels? Further, is the Minister prepared to say whether there will be an attempt to depersonalise the system of regulation by having non-executive directors associated with the regulators?

Lord Simon of Highbury: My Lords, as regards the speed of enacting any decisions that are taken to change the system, I can assure the House that we shall take any action as quickly as possible, consistent with a consultation process. As for the question of the gas and electricity regulatory processes being merged, that is indeed one of the key issues now being studied by the report team. It would be premature for me to give an answer to that question at this stage. Finally, I would rather leave the question of non-executive directors to the report team rather than preview it here today.

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