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Baroness Blatch: My Lords, I thank the Minister for setting out the details of the regulations. Delegation to schools and scope for autonomy at school level has proved successful over the past decade or so. I must tell the Minister that LMS is considerably older than nine years. In Cambridgeshire it goes back some 19 years. Indeed my own local authority in Cambridgeshire, together with Conservative controlled Solihull, were the first LEAs to delegate financial control to their schools in the face of vociferous opposition from Labour Party members. Therefore it is to be welcomed that such a change of heart and policy has taken place.

When the fair funding paper was produced last year much was made of 100 per cent. delegation. We asked then--I ask this again now--100 per cent. of what? My reading of the regulations is that it is 100 per cent. of what is left after LEAs have subtracted significant items of expenditure. Schedule 1 contains no fewer than 89 areas where the LEA can hold back expenditure, including such areas as the preparation of the endless plans for approval by the Secretary of State and the incredible level of bureaucracy that will be required to fulfil the additional obligations set out in the School Standards and Framework Act. Organisational committees and adjudicator provisions will have to be funded by LEAs, as will many other matters.

I have worked in local authorities and I know of the constant pressure to hold back resources at the centre, and just how determined one has to be to contain central expenditure. What penalty will be incurred by a local authority that holds back more than the Secretary of State considers necessary? Given that LEAs will have legitimate reasons for increasing central expenditure because of the additional burdens set out in the School

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Standards and Framework Act, it will be difficult for the Secretary of State to take issue with local education authorities on this front.

I have read carefully all that the Minister, Estelle Morris, said about these regulations in another place. I was particularly struck by the number of times the Minister sympathised with points of concern that were made by both my colleagues in another place and indeed by the Liberals, and yet she responded by saying that the Government would have to monitor such areas carefully. There appeared to be a great deal of uncertainty about much of the detail and how it would work. For example, paragraph 23 of Schedule 1 states,

    "Expenditure which enables pupils to enhance their experience of the visual and performing arts other than music".
That appears to me to be a licence to local education authorities to retain yet more resources from schools. In addition, the bureaucracy involved in negotiating the financial implications of every school production and every cultural lecture etc., will be considerable. Can the Minister explain how local education authorities must interpret paragraph 23 of Schedule 1?

I also wish to pose the same question in relation to library and museum expenditure, especially as such expenditure in many LEAs comes under another budget head altogether. Also in Schedule 1 at paragraph 32 local education authorities can hold back,

    "Expenditure on establishing and maintaining electronic computer systems ... in so far as they link, or facilitate the linkage of, the authority to schools which they maintain, such schools to each other or such schools to other persons or institutions".
This is yet another area of reduced autonomy for schools. I also wish to ask the Minister what the impact of the parental leave directive will be. For example, will paragraphs 34 and 35 of Schedule 1 need to be adjusted to take account of the directive?

Regulation 14 sets out that local education authorities may not discriminate between schools by reference to category. Why then should we have different categories? That was a point made by the Liberals in another place. Mr. Don Foster argued for no differentiation between categories of schools. I heartily disagree with that but, if there are to be different categories, those will comprise different schools with different needs. The needs and levels of responsibilities as between schools will be different. For example, ex-GM schools will enjoy in the early years of the new proposals greater levels of responsibility. Therefore funding will need to reflect that. What will happen with regard to education action zones with perhaps one or more governing bodies? Education action zone schools are in a very different category from the other mainstream schools. How do these regulations relate to action zones? The Minister has said little about that.

The Minister in another place, when replying to a question on the use of cheque books by schools, gave a highly unsatisfactory answer. On what basis will interest forgone be charged to any school wishing to have its own cheque book? For example, will the assumption be made on the basis of interest gained on the whole LEA account which will clearly be much greater than the relatively smaller amount relating to a single school account? Why charge interest anyway?

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Regulation 22 needs clarification. The 80 per cent. of funds to be allocated--the figure is not now 100 per cent., but 80 per cent.--is said to be allocated,

    "in one or more of the following manners".
It does not appear to be allocated solely on pupil numbers. For example, reference is made to the reservation of places for reception, nursery and special school pupils. If this is to be included in the 80 per cent. delegation, it would certainly mean that some schools would receive sums greater than the 80 per cent. figure and others less. Is that the case?

The Minister has made much during recent debates about the dual funding system. However, funding for grant maintained schools reflected their additional responsibilities. Can I ask the Minister where a school takes on additional responsibilities ahead of other schools, will that be recognised in the funding? If so, what is the difference between that and the present system? If not, then what will be the incentive for any school to accept additional responsibilities?

A moment ago the Minister referred to grant maintained schools which will receive funding on a cash basis as of this year for 1999-2000. If grant maintained schools are to be sustained in cash terms, then funding will be different from non-grant maintained schools. Is that so? That is another example of differential funding. If this level is to be sustained for 1999-2000, what plans do the Government have for the years beyond 2000, especially where some schools accept different levels of autonomy? I understand from what the Minister has said that it is conceivable that different schools will have different levels of responsibility. If they do, will funding reflect that?

Will the Minister explain Regulation 23, which states that the Secretary of State, where it appears to him to be expedient, can authorise a local authority to determine or redetermine budget shares to such an extent as he may specify. What can the Minister give as an example of a situation where the Secretary of State would wish to use this power?

I suspect that delegation will be no more, and may be even less, than at present when this scheme is up and running. It is clear that it is a far cry from the 100 per cent. delegation promised in the publicity blurb. Certainly the bureaucracy will be difficult to control given the considerable extra burdens laid upon local education authorities.

As I have said, even the Minister has had many doubts about how this system will work in all its detail. What matters to schools is that they receive the maximum amount possible from the local education authorities, that bureaucracy is held to a minimum and that the promised transparency claimed by the Minister will be evident. We shall watch the introduction of these new arrangements with interest.

7.42 p.m.

Lord Tope: My Lords, I too should like to thank the Minister for his very full explanation of the regulations. I also thank the noble Baroness, Lady Blatch, for her several references to the many concerns and comments made by my honourable friends in another place. Your

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Lordships will be relieved to know that I do not intend to repeat tonight all that was said in another place, but merely to note that those concerns and comments were expressed.

I start by giving a broad welcome to these regulations. I have a few points to make, but we certainly welcome the thrust of the regulations. On these Benches we have always supported the concept of delegating both financial and operational control from LEAs to schools. I will say very carefully in the presence of the noble Baroness, Lady Blatch, that the Liberal Democrats were among the earliest pioneers of local management of schools.

Baroness Blatch: No, you were not.

Lord Tope: My Lords, one day I shall make a comment on this with which the noble Baroness, Lady Blatch, can agree.

We believe we were among the first pioneers of local management of schools and have certainly always supported it.

It is good to note that arrangements under Part III will enable LEAs to target funding at schools with particular needs or problems. We are pleased to note that at a time of crisis in teacher recruitment and retention, a wider range of supply cover may be funded centrally where such flexibility might be helpful. It is also good to see flexibility in the funding arrangements for "low-incidence" SEN units in mainstream schools and in the delegated funding for meals and milk. Your Lordships are aware that we greatly favour local determination and professional independence. Any small changes in that direction are certainly to be welcomed.

I turn now to the first of my concerns. I remain uneasy about the Government's attitude to the role of the LEAs in monitoring the quality of education provided in their areas. I have long believed that the use of high quality advisers for subject areas, advisers who can evaluate, support, assist and train teachers in their schools, is more likely to raise standards than the Ofsted "name and shame" strategy. On these Benches we prefer "praise and raise".

I looked hard and unsuccessfully to find in the regulations where it is prescribed that LEAs can include the salaries of such advisers in the budget that they retain at the centre. I understand from the Minister's speech this evening that they cannot retain it at the centre and that it must be delegated. Perhaps the Minister will clarify that when he responds. If that is the case, it causes me some concern. I know that already in some areas advisory service and in-service training are bought back. But experience has already shown that this pseudo-market actually puts advisory services at risk. Schools often dare not spend funds on what is really optional when they can barely afford what is compulsory. I hope that the Minister in his response will indicate whether the Government still support the concept of LEA quality control for their schools.

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I have one or two other more detailed queries. It is splendid to find a requirement in Regulation 10(2) of Part III that LEAs should determine a funding formula which is,

    "simple, objective, measurable and predictable in effect, and clearly expressed".
I hope very much that that is the practice. I shall be interested to know from the Minister how the DfEE will monitor this. I urge him that when he finds a funding formula that is simple, objective and clearly expressed, he gives it great publicity and wide circulation as a model of good practice. It is certainly a desirable aim, even though, with a little experience, I have some doubt about its achievement.

Quite a lot of space is very properly taken up with funding arrangements for pupils who are either permanently excluded or being reintroduced into other schools. Can the Minister say if the Government are considering, or will consider, making schools financially responsible for the on-going education of pupils who they permanently exclude, at least until they are formally admitted to the roll of another school? We feel that that might be a powerful factor in controlling the rise in expulsions.

Your Lordships will know the importance which we on these Benches attach to proper provision for children with special educational needs. May I say how pleased we are to see acknowledged in Regulation 22(d) the needs of those pupils who have problems with their learning but do not have statements. Many schools have felt that the only way to get money for these people was to statement them. It will be good if we can avoid that bureaucratic nightmare wherever possible.

I should be grateful for an explanation of the effects of paragraph 18(2) of Schedule 1 on the school meals service provided by schools which were formerly grant maintained.

I have expressed our pleasure at the Government's recognition that music, drama and visual arts provision needs to be made at LEA level, or indeed by a consortia of LEAs, and that this is guaranteed by the provisions in paragraphs 22 and 23 of Schedule 1.

Can the Minister explain why there are significant discrepancies between the arrangements for England and Wales? I note that in paragraph 42 of Schedule 2, Welsh authorities can retain money at the centre for the repair, maintenance and cleaning of schools. Similarly, in paragraph 43, Welsh LEAs can retain the money to organise library and museum services throughout their areas. For some reason this desirable situation is not possible in England. Perhaps England should be pressing for its own national assembly? I should be grateful for some explanation of that.

Finally, a word about the arbitrary division between the maintenance of school buildings and plant--mostly revenue expenditure, I know--and capital replacement. It seems to me to be a recipe for schools to say "If we do not spend our money on maintaining our outdated central heating boiler it will blow up and then the LEA will have to pay for a new one". I have to say that this does not seem an altogether sensible way of doing things.

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I end where I began by saying that we give a broad welcome to the measures which are set out in these regulations.

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