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Lord Higgins: In the light of that invitation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments No. 56 and 57 not moved.]

Clause 22 agreed to.

Clause 23 agreed to.

Clause 24 [Orders and regulations]:

Baroness Hollis of Heigham moved Amendment No. 58:

Page 13, line 43, at end insert--
("( ) A power conferred by this Act to make regulations includes power to provide for a person to exercise a discretion in dealing with any matter.").

The noble Baroness said: This is a technical amendment to copy into Clause 24 a standard provision found in Section 189(6) of the Social Security Administration Act 1992 and elsewhere in social security legislation. It enables regulations to provide for a person to exercise a discretion in dealing with any matter--for instance, where provision needs to be made for the extension of time limits. I beg to move.

Lord Higgins: That was a remarkably brief and cogent explanation and I am sure that the Committee would wish to express its thanks to the Minister for the extremely lucid way in which she has dealt with the proceedings and to congratulate her on her stamina.

On Question, amendment agreed to.

Clause 24, as amended, agreed to.

Clause 25 agreed to.

Schedules 7 and 8 agreed to.

Schedule 9 [Repeals and revocations]:

Baroness Hollis of Heigham moved Amendment No. 59:

Page 53, line 14, at end insert--
("1993 c. 48.The Pension Schemes Act 1993.Section 167(3).")

On Question, amendment agreed to.

Baroness Hollis of Heigham moved Amendments Nos. 60 to 63:

Page 53, line 28, column 3, at beginning insert--
("In section 8(1), paragraph (d) and the word "and" immediately preceding it.")

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Page 53, line 28, column 3, at end insert--
("In section 12(1), paragraph (c) and the word "or" immediately preceding it.In section 14, subsection (2) and in subsection (3) the words "In any other case".")

Page 53, line 29, column 3, at end insert--
("Section 18(1)(a)(iii) and (iv).")

Page 53, line 33, column 3, at end insert--
("Section 21(4).")

On Question, amendments agreed to.

Baroness Hollis of Heigham moved Amendment No. 64:

Page 54, line 8, at end insert--
("S.I. 1996/195.The Employer'sContributionsReimbursementRegulations 1996.Regulation 1(4).")

On Question, amendment agreed to.

Schedule 9, as amended, agreed to.

Clause 26 agreed to.

Clause 27 [Short title, commencement and extent]:

Baroness Hollis of Heigham moved Amendment No. 65:

Page 14, leave out lines 40 and 41 and insert--
("(c) section 4 and Schedule 4, so far as they amend the Taxes Management Act 1970,
(cc) section 17 and Schedule 6, so far as they amend the Taxes Management Act 1970, Schedule 2 to the Social Security Contributions and Benefits Act 1992, or Schedule 2 to the Social Security Contributions and Benefits (Northern Ireland) Act 1992").

On Question, amendment agreed to.

Clause 27, as amended, agreed to.

House resumed: Bill reported with amendments.

Financing of Maintained Schools Regulations 1998

7.14 p.m.

Lord Hunt of Kings Heath rose to move, That the draft regulations laid before the House on 3rd December be approved [2nd Report from the Joint Committee].

The noble Lord said: My Lords, these draft regulations were considered by the Joint Committee on Statutory Instruments on 8th December and by Standing Committee in the other place on 15th December. They cover England and Wales, with variations which have seemed appropriate in the light of differing national circumstances.

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The enabling powers are contained largely in Sections 46 to 48 of the School Standards and Framework Act 1998. As enacted, these sections relate to the new school categories--community, foundation and voluntary--which do not take effect until 1st September. However, the sections have been modified so as to apply, between 1st April and 31st August, to the existing categories of school--county, voluntary and grant-maintained. This modification was achieved by the School Standards and Framework Act (Modification) Regulations, made on 30th October under Section 144 of the Act.

The regulations give effect to our aim of establishing a single, equitable funding regime for all state schools in place of the divisive dual system which has existed since introduction of grant-maintained status. Our proposals were originally set out in the consultation paper Fair Funding. This was published in England at the end of last May, shortly before the relevant clauses of the SSAF Bill were considered in Committee by this House, and it was often referred to during the debates in Committee and at later stages. A similar consultation paper was issued in Wales in June.

The House looked in some detail at the clauses, and the ground will therefore be fairly familiar. But it may be helpful to recall our key objectives before turning in slightly more detail to the content of the regulations. There are three main points.

First, we want to put in place a framework which aligns funding with the respective responsibilities of schools and LEAs and promotes greater transparency in funding arrangements. Secondly, we want to give all schools the fullest scope for self-management by requiring significantly higher levels of financial delegation than have been normal up till now in LEA schools; but we want to do this without forcing schools to take on responsibilities before they think they are ready. Thirdly, we want to ensure equitable treatment as between community, voluntary and foundation schools; and at the same time we want to give grant-maintained schools a smooth transition to the new funding framework.

The regulations are the outcome of an extensive, two-stage consultation. There were about 3,000 responses to the consultation paper in England and over 500 in Wales. In the light of these responses, decisions on the main issues were announced by the Government on 23rd September, both in England and in Wales. In England those decisions will mean that around £1 billion more can fall within the total of funds going directly into the classroom; but this shift will be achieved in a way that allows schools to feel comfortable with their extra responsibilities.

Since then, detailed consultation with LEAs and national organisations has led us to modify the regulations in ways which provide valuable local flexibility without losing the essential features. The consultation has been most constructive and I know that my right honourable and honourable friends are grateful to those who contributed to it.

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I shall now review briefly the main features of the regulations. They deal with three important matters. The first is the balance between funding retained centrally by LEAs and funding distributed by them to schools. These matters are dealt with in Part II and in Schedules 1 and 2 which relate respectively to England and Wales. The second is the methods to be used by LEAs to allocate the funding which they are required to distribute to schools. These are regulated by Part III and by Schedules 3 and 4.

Finally, the regulations deal in Part IV and Schedule 5 with the content of the "schemes" which will regulate the financial relationship between LEAs and the schools they maintain and ensure that governing bodies and heads can run their schools without unnecessary LEA intervention.

Part II, made under Section 46 of the Act, has attracted most attention during the consultative process. This is not surprising. It is through this part of the regulations that we have to get the balance right between pushing forward the frontiers of self-management and ensuring that schools have access to essential services. In the event, the two-stage consultation process has led us to make certain changes in the proposals originally published in the summer. Thus we have revised the delegation timetable to give LEAs more time to work out suitable arrangements in consultation with schools.

We have also reconsidered the range of items which may be centrally funded. For example, LEAs will not now have to delegate funding for meals and milk to all primary and special schools, although they will be able to do so if they wish and our intention is that LEAs in England will be required, from April 2000, to delegate funding to individual primary or special schools where they request it. LEAs will be able to continue funding outdoor education centrally if they wish, and we have also made some other marginal adjustments to our proposals on such matters as support for the arts and the funding of supply cover. But this still means much higher delegation for schools currently maintained by LEAs. For example, funding for a wide range of financial, personnel and other administrative support must be delegated by April 2000. Schools will take responsibility for all non-capital building repairs and maintenance from April 1999 in England and April 2000 in Wales. Funding for secondary school meals must be delegated by April 2000, or April 1999 in England if there are no contractual problems.

The process for the approval of education development plans will require LEAs to refocus their expenditure for school improvement. In doing so, they will need to consider very carefully the role, and the cost, of inspection and advisory services. Funding for such services will, in general, have to be delegated from April 1999 in England and April 2000 in Wales if it cannot be justified by reference to LEAs' approved educational development plans.

I need only add that we shall be keeping a close eye not only on school improvement expenditure but also on central expenditure more generally. Addressing the North of England Education Conference last week, my right honourable friend the Secretary of State for Education and Employment made it clear that he will be publishing tables early in the summer to enable the

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performance of individual LEAs to be compared. He also made it clear that he will not hesitate to use the power, conferred by Section 46, to set limits to the amounts which LEAs may retain for particular purposes, if this appears necessary. I ought to add at once that, if he uses these powers, my right honourable friend's target will be wasteful bureaucracy, and he will not be seeking to restrict essential central expenditure on special educational needs and other vital support services.

Part II contains special provisions for GM schools. Our aim all along has been as far as possible to level LEA schools up, in terms of delegation, rather than levelling GM schools down. So we have made it our general principle that, where funding for a particular service must be delegated eventually, LEAs must delegate it to GM schools from April 1999. This is reflected at various points in Schedule 1 for England and Regulation 5 for Wales. I shall have more to say about GM schools in a moment.

Finally, there is one specific outcome of our consultation which might have been noticed by noble Lords opposite. The English consultation paper suggested that schools might be invited to determine the future funding arrangements for some services by majority vote. However, in the light of consultation, we have decided not to proceed with the majority voting proposal.

Part III and Schedule 3 deal with the way in which the individual schools budget is distributed to schools through LEAs' funding formulae. Here, we attach a good deal of importance to continuity. LEAs have a good deal of flexibility to reflect local circumstances and priorities in their formulae, and we do not want to force them to make major changes if they themselves see no good reason to do so. So Schedule 3 to the regulations offers LEAs an extensive a la carte menu of factors from which they can select to meet local requirements. However, 80 per cent. of primary and secondary school funding must be allocated on a pupil-led basis, essentially as at present. The rule has been the subject of some debate, but at the end of the day we believe that 80 per cent. is right.

It is important that formulae are fair to all categories of schools and take full account of the schools' views. The regulations accordingly prevent LEAs from discriminating between different school categories, unless there is an acknowledged difference in the functions of their governing bodies. They also require LEAs to consult all schools, including those which are currently grant-maintained, about their formulae; and to do so in time for responses to be taken properly into account when the LEA takes its final decisions. That requirement includes consultation on certain matters--for example, the age-weightings used in the formula--on which LEAs have not been statutorily required to consult in the past.

We do not wish GM schools to experience unmanageable changes in their budgets on entry to the new framework. The "levelling-up" principle which I mentioned earlier should go a long way towards achieving this. But we intend also to protect the amount

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of funding per pupil received by GM schools in England at its 1998-99 level, in cash terms, for 1999-2000. In Wales, the number of GM schools is much smaller and the funding system has differed in certain respects from the English GM funding regime. The upshot is that the difference between GM and LEA school budgets has been less marked in Wales than in England. Having considered the position, my honourable friend the Minister for Education in Wales has decided not to introduce transitional arrangements for GM schools in Wales.

I think it fair to note that these arrangements for managing the transition of GM schools' budget arrangements continue a process of aligning their budgets with other schools which was begun by the previous government, who had set in hand a phased removal of the unfair cash protection which had applied, in England, to the so-called "central" element of the annual maintenance grant.

It may be convenient to take this opportunity to comment on certain concerns expressed in a note which I received yesterday from the Grant Maintained Joint Monitoring Group. It is fair to say that that note registers general satisfaction with the regulations as they have turned out. The concerns which have been put to me both relate to certain responsibilities which will rest by law with the governing bodies of foundation schools but with the LEA in the case of community and voluntary controlled schools, just as they rest with the LEA in the case of county and controlled schools now.

On the one hand, there are certain responsibilities which derive from the fact that staff in foundation schools will be employed by the governors and not the LEA. This has implications for the governors' responsibilities in certain fields such as health and safety. As I understand it, the concern of the Grant Maintained Joint Monitoring Group is that LEAs will retain expenditure centrally in respect of these responsibilities, even in relation to schools for which the relevant responsibilities lie with the governing body. It does not seem to me that paragraph 25 of Schedule 1 permits this. It deals with expenditure in relation to the LEA's functions, not anyone else's. Moreover, in the particular case of health and safety, the regulations are designed to ensure that funding is delegated as far as is practicable even in the case of schools where the LEA is the employer.

As regards compliance, particulars of an LEA's central expenditure will be included in the statements which LEAs will be required to produce under Section 52 of the School Standards and Framework Act 1998 which we audited under Section 53. More generally, the performance tables that I mentioned will show which LEAs are retaining excessive amounts for administration. But if schools see continuing grounds for concern once the new system is in place, I am sure that they will make these known to us and we will consider what further action may be required.

The other matter arises from the position of foundation schools as admission authorities. The suggestion is that these schools should receive additional delegated funding in respect of this

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responsibility, which rests with the LEA in the case of community and controlled schools. We have considered this with care, but it has to be borne in mind that the position of foundation schools as admissions authorities is no different from the long-standing position of voluntary-aided schools. As far as we know, the latter have not received additional, delegated funding from their LEAs for their admissions functions, although we understand that many LEAs have provided various forms of admin support for the admissions process in voluntary-aided schools. Of course, that can be done without infringing the prerogative of voluntary-aided governing bodies on matters of policy.

It is clear that we have to treat foundation and voluntary-aided schools on the same basis under the new framework. To insist that all foundation and voluntary aided schools should carry out all their own admission arrangements with delegated funding would have the effect of disturbing existing local arrangements which have worked well. Accordingly, our aim in the regulations is to allow for appropriate arrangements to be negotiated locally.

Paragraph 17(c) of Schedule 1 contains a flexible definition of the admissions-related expenditure which LEAs may choose to retain. If, in the event, LEAs decide to retain funding centrally in respect of admissions administration at some kinds of school but not others, Regulation 13 will require them to reflect this in their formulae. Paragraph 5 of Schedule 3 specifically allows LEAs to include factors in their formulae which reflect the extent to which admissions costs are being centrally funded.

This, as I say, provides a framework within which suitable arrangements can be worked out locally by LEAs, taking account of the views of both foundation and voluntary aided schools. The implication is that foundation schools seeking to persuade LEAs to change established arrangements will need to work closely with voluntary aided schools to get them on their side. However, as I have said, any other approach could mean upsetting existing local arrangements even where they are regarded as satisfactory by most of the schools affected.

Part IV and Schedule 5 deal with the contents of the schemes for the financing of schools which LEAs will have to draw up in accordance with Section 48 of the Act and Schedule 14. Each scheme will define the financial relationship between an LEA and the schools which it maintains, and will require approval by the Secretary of State.

The purpose of the regulations is simply to identify the topics which must be covered. Statutory guidance to be issued by the Secretary of State under Schedule 14 will indicate in more detail how we expect LEAs to cover them. A draft of that guidance has already been issued in the form of an "outline scheme", to help LEAs undertake consultation in good time.

I think I need make only two more general points. First, the outline scheme--and the schemes which LEAs themselves will submit--cover ground already covered in greater or lesser detail in existing schemes for the

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local management of schools. The arrival of the new school funding regime provided a timely opportunity to review LEAs' financial provisions after nine years of LMS.

Secondly, an LEA's scheme is as binding on the LEA as it is on the schools. It is the means of securing crucial rights for schools--for example, in the right to a bank account, and, even more fundamentally, the right to determine spending priorities. We will also expect schemes to define carefully the circumstances in which LEAs may charge particular costs against a school's budget. Part IV sets out publication requirements to ensure that schemes will be available for reference by parents and others interested.

In conclusion, these regulations are the outcome of a consultation process which has been thorough, even though it has undoubtedly been rapid. There is still work to be done to set the new system in place for 1st April, but the efforts made by all concerned in the past few months have shown that we were not asking for the impossible. The regulations strike a fair balance between the legitimate requirements of LEAs and schools, and I commend them to the House.

Moved, That the draft regulations laid before the House on 3rd December be approved [2nd Report from the Joint Committee].--(Lord Hunt of Kings Heath.)

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