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Baroness Blatch: Perhaps I may ask the Minister a question. What evidence does the department have of school places deliberately being kept vacant when others in the area who are not of that faith wish to attend those schools? What percentage of available places does that represent?

Baroness Ashton of Upholland: I am afraid that I cannot supply the percentage, but we know that a few schools—only a few—have used these arrangements in order to keep places empty. This led to our discussions with the Roman Catholic authorities. They have been extremely helpful and are in agreement that we must work this through in a practical way which will make sense. On that basis, we believe that the proposal that we intend to bring forward on Report will enable us to ensure that where there is a demand for school places—the noble Baroness gave a good example; namely, the King David High School in Liverpool, where the demand for places far exceeds the number of children from that particular faith—the school will be kept full so that children will be able to enjoy the benefits of the quality of education in the school.

There is no disagreement among those who currently hold places open; it is simply something that we want to move towards. If the noble Baroness would

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like me to write to her setting out the detail she requested, I shall do so. I apologise that I do not have the percentage in front of me.

Lord Lucas: I have been fascinated by the debate. I am delighted to hear that Amendment No. 211 will move in the direction in which I had hoped to find the Churches moving. I had presumed from the fact that it was not grouped with this amendment that that was not the case, but I shall listen to that debate with interest. I hope to hear from the Roman Catholic Church as to what it is doing of an equivalent nature. I do not know how strong a control it has over the policies pursued by its individual schools, but I very much hope that it will find a way. Not being the established Church, it does not have the advantage of our being able to legislate for it. However, I hope that we shall find that the two Churches are moving in unison.

It is important that we do not allow, more than we absolutely have to, the development of separate communities in this country. For children to grow up without experience of anyone who is not part of their immediate community can be all right in small quantities—the world is big and the rest of the world is out there for them to see outside the school gates. However, one can see the ultimate expression of that in Northern Ireland, and the beginnings of its expression in places such as Oldham.

It is possible for the Church school system to become part of an instrument separating a community into constituent parts which grow up without proper experience of each other. I hope that we shall not allow that to continue—particularly when we are examining the possibility of having more faith schools, which I am happy to see. We must make sure that the possible side-effects of that are not allowed to develop in this country. It depends very much on the determination of the great religions to make sure that that is not the way in which matters develop.

Perhaps we can arrive at a position where the Churches are freely able to found new schools, as I shall advocate in a later amendment. In that way, the Churches would be sure of having more than enough places for their own adherents and the ability to draw into their schools pupils whose parents—we are talking about selection in terms of parents, not pupils—may not be members of the religion but who want their children to be brought up in the faith, which they may admire from the outside while not accepting it themselves. I was brought up on stories of Don Camillo. I remember that Peppone had his child christened after great trials and tribulations. That is an approach that we should allow as many people as possible to follow. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 3 agreed to.

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Clause 39 [Determination of specified budgets of LEA]:

The Deputy Chairman of Committees (Lord Murton of Lindisfarne): In calling Amendment No. 160, I would point out that, if it is agreed to, I shall not able to call Amendment No. 161 owing to pre-emption.

Baroness Sharp of Guildford moved Amendment No. 160:

    Page 25, leave out lines 30 and 31.

The noble Baroness said: In moving this amendment, I give notice that I shall not be speaking to Amendment No. 162 or Amendment No. 163, which we have effectively withdrawn from debate.

We now move to the part of the Bill dealing with the setting up of schools forums, which are dealt with in Clause 39. After dealing specifically with the amendment, I want to address more generally the provisions relating to schools forums in Clauses 39 and 40.

The Bill provides for each local authority to establish a schools forum. Most of the functions of the forum, which be made up mainly of heads and governors—it is not an elected body—will be consultative. They are set out in the draft regulations that have been circulated by the department.

However, under Clause 39 proposed new Section 45A(4) gives a forum the power to decide classes of expenditure which can be deducted from schools budgets. Under the draft regulation circulated, the provision will relate only to relatively small categories of expenditure such as primary school meals, licences, subscriptions, museums and galleries, and library services for schools. However, further classes of expenditure could be added at any time by regulation. It is for that reason that we have great reservations about the subsection.

As I have pointed out, the schools forum will not be an elected body. It will be an unelected body, effectively appointed at local level. For it to have the power of decision over classes of expenditure which the local authority, which is elected and is accountable to the local electorate, has traditionally decided is wrong. It is appropriate that where expenditures are made, there should be some accountable elected authority, rather than an unelected authority which takes decisions over and above those of the elected authority. The proposed amendment would provide for a schools forum to have consultative functions only. It would have no power to decide on classes of expenditure.

That brings me to the more general discussion of Clauses 39 and 40, which set up the statutory framework for the new system of funding councils and schools in England from April 2003. Under the new system there will be separate funding assessments (standard spending assessment blocks) for expenditure on school pupils, which are deemed to be the schools budget, and the central functions of the local education authority, which will be deemed to be the LEA budget. The bulk of the schools budget will,

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therefore, be placed directly under the control of individual schools and will be known as the individual schools budget.

In addition to schools forums being able to set limits or conditions on some items of expenditure, there is a new requirement to notify the Secretary of State of the proposed level of the schools budget by the end of January. The Secretary of State will have a reserve power to intervene and to impose a prescribed minimum level, in all circumstances, where the council's proposal is considered to be inadequate.

This would have significant implications for budget setting. It would effectively require the education budget to be set to an earlier time-scale than that of other services, and would divorce spending decisions on the main local authority service from consideration of the council tax.

The Local Government Association has been concerned by those developments. It has consistently opposed the concept of the reserved power, which is often referred to as ring-fencing. The Government have recognised some of the arguments against ring-fencing of local government expenditure. They pointed out in the finance Green Paper of September 2000 that it weakens local accountability and democracy, whereas delegating powers to local authorities encourages democracy and encourages local authorities to take their responsibilities seriously. When funds are ring-fenced, some local authorities may give less attention to their proper responsibilities for strategic planning and quality improvement of schools.

Ring-fencing also erodes local authorities' financial responsibilities and freedoms and leads to weaker co-ordination between education and other local services, which can make a lot of difference to schools and families. It also creates pressure for ring-fencing in other services. If we ring-fence education funding, there will be calls to do the same for social services, transport and other services. That takes away from the basic democratic rights of local authorities. Already, many of their responsibilities have been eroded and taken by central government.

If we are to get people interested in participating in democracy, they must see it as something that affects them. If all the decisions are going to be taken away, people will think that local authorities make no difference. That is already a tendency at local election time. Ring-fencing detracts in many ways from the necessary vibrancy that we ought to be trying to inject into local democracy.

While the proposed reserved power does not constitute wholesale ring-fencing, its application would involve an erosion of local accountability and financial discretion. Although the Bill has remained unaltered after the initial stages in the Commons, we recognise that a significant number of ministerial assurances have been given that it is the Government's intention, in keeping with the local government White Paper, to reduce the number of ring-fenced and specific grants for education and to transfer resources

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to the general budget grant. On the specific issue of the reserved power, Ministers have said that the Secretary of State will consider the implications for other council services before setting the minimum schools budget and that the reserved power will be used very sparingly.

Despite those assurances, there are still deep reservations on these Benches and from the Local Government Association about the move. We hope that greater consideration will be given to the general impact of these two clauses and their potential significance in relation to local democracy. I beg to move.

5.30 p.m.

Baroness Blatch: I have no hesitation in saying that the Government are the greatest guilty party on the funding of schools. An unprecedented amount of money is now top-sliced from the education budget. Initiative after initiative is made almost daily—certainly several each week. That comes from the main education budget. Then, the Government are guilty on a second count, by imposing additional burdens on local education authorities. This Bill, the School Standards and Framework Act 1998 and other legislation have created enormous burdens on local authorities. They all have to be paid for. The only place from which that money can come is the overall education budget. That erodes yet further the core funding that should go into our schools.

Make no mistake, the Government are being heavy-handed in producing an unaccountable system that second-guesses local authorities. The Government, not the local authorities, are guilty. That is inexcusable and I support much of what the noble Baroness, Lady Sharp, has said about giving freedom at local level and about the whole issue of the erosion of accountability.

I have serious reservations about the schools forums. They are not elected, but are simply established in the local area. Other bodies akin to the make-up of a schools forum already exist. Before setting a budget, most well run authorities—this is certainly the case in my own local authority in Cambridgeshire—will have roadshows to meet parents and the local community and will definitely talk with the local heads forum, the school teacher unions and the teacher representatives. There will be a great deal of discussion before the budget is finally set. The statistics show that most well run education authorities spend above their standard spending assessment on education, often at the expense of other services, because they consider education a priority at local level.

There is no reason to regulate in this way. If the noble Baroness, Lady Sharp, wishes to press that Clause 39 should not stand part of the Bill, I shall be with her. I fully support Amendment No. 160. I am not sure what was in the noble Baroness's thinking to remove,

    "or the authority's schools forum",

under Amendment No. 162, but I assume that those words would disappear anyway under Amendment No. 160.

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Accountability is important. The members of our local education authorities are elected and have sharp accountability with their local communities—at least until the Government in their wisdom remove them and take responsibility further away to regional government. Our schools deserve more of their share of core funding. That can come only from government initiatives to relinquish some of their propensity for holding back money at the centre.

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