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Baroness Blatch moved Amendment No. 24:

Leave out Clause 10.

The noble Baroness said: In moving this amendment, I shall speak also to Amendments Nos. 27 and 29.

Again, let me make it clear at the outset that I support commercial freedom for schools. I also accept that these are enabling clauses and that any exercise of the powers set out in Clauses 10, 11 and 12 would be voluntary.

I fully support the level of autonomy enjoyed by city technology colleges and academies, and I lament the passing of the freedoms enjoyed by grant-maintained schools. At the previous stage of the Bill, the Minister said that she hoped that there would be no more CTCs. I have bad news for her: the academies are CTCs by another name. They enjoy the same freedoms; they are set up in the same way; and the entrepreneurs come along with their cheque-book in exactly the same way. My noble friend Lord Harris—who is presently doing a splendid job setting up an academy in Peckham—already has two city technology colleges and knows that academies are the same beast under a different name.

There is freedom under existing law to develop, for example, educational software and to sell it, to exploit the use of buildings and facilities and to act collaboratively and corporately to improve buying power and so on. A few nights ago, I was with a school governing body and spoke to its headmaster. They have already formed companies and are involved in companies. So the freedom that can be exercised under the present law is considerable.

The noble Lord, Lord McIntosh, was kind enough to send me a very detailed letter replying to the points that I raised in Committee. I thank him warmly for taking so much trouble over all the detailed points, of which I gave him no notice. Perhaps I may refer to the letter in order to confess that my concerns have not been entirely set to rest.

The noble Lord suggested that I was concerned that schools may not have the time to form companies. He went on:

"We realise that this will require some work, but it will produce time saving benefits".

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The noble Lord says that—but I am not sure what the evidence is and where the time will come from to set up committees, to bring people together, to meet with lawyers and accountants, and to set up the arrangements for companies.

Secondly, in part 1 of the letter, under the heading "Supervising authority", the noble Lord states:

"The supervising authority will provide light touch oversight of school companies".

There is no guarantee of that. There is nothing in the Bill about "light touch". It has supervising rights over authorities. I shall return to the exercise of supervising rights.

The statement does not allay my concerns. If a company is autonomous, it will be subject to all company law. To superimpose on companies the local education authorities and the Secretary of State is a recipe for disaster. The idea that LEAs have the time and the additional expertise to carry out such a requirement, or even the additional funding, is deeply suspect.

On the second page of the letter, the noble Lord says:

"When taking action, a supervising authority will need to have evidence for its decision, and will be bound by the general duties on LEAs to act reasonably".

That presupposes that in order to avoid problems arising it is dedicated to regular monitoring and collection of data, otherwise it cannot perform that function properly. If it has to collect evidence for any maladministration or for anything that may be going wrong in the company, it has to have fairly regular oversight of the day-to-day activities of the company. The same paragraph goes on:

"LEAs already have similar powers to suspend a school's delegated budget".

Overseeing schools' budgets is a far cry from overseeing a variety of commercial ventures, possibly involving non-education-related third parties, as the noble Lord said in a previous debate. He also said that costs would be minimal, but how can one tell? Nobody knows in advance of setting up a company what the costs will be or what the costs of failure will be. If a company goes belly-up, the local education authority will pick up the bill. How can one say in advance that the costs "will be"—not "are expected to be", but "will be"—minimal?

The Minister said:

"We expect purchasing companies to join together to buy only what their members would normally buy as individual schools within their own budgets".

The Bill does not make clear that that is what the companies are about. It says that they will act within their own budgets, but, as I said in Committee, joint purchasing, with all its advantages, can happen now. I was involved in joint purchasing arrangements in my own authority.

The second paragraph of the letter refers to bureaucracy. Local education authorities do not have spare financial capacity. They are being exhorted—and, if the Bill goes through, will be compelled—to pass on ever more funding to schools. We do not object to that. We believe that schools should have money that is due

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to them. The villains of the piece are not necessarily the local authorities, but the Government, in holding money back from schools. The letter says:

"Once schools have the permission of their LEA to form or join companies, there is no requirement for LEA involvement beyond the supervising authority".

As I said earlier, in order to supervise there has to be some involvement in the day-to-day activities of the company. Otherwise, how on earth can LEAs fulfil their legal obligations to supervise?

The noble Lord goes on:

"we do not expect any Secretary of State involvement in the company".

The Bill gives the Secretary of State an involvement in the company. Either that means something or it means nothing. If it means nothing it should not be in the Bill.

Governors become governors not to form companies, but to run schools. Where is this surfeit of skills? On the top of page three, the noble Lord says:

"this work will be spread throughout the members and supported by the appropriate skills of governors".

We know that some governing boards contain some very entrepreneurial people who are full of ideas. They can be very useful to the governing body, but there are many governing bodies that do not have such people. The noble Lord will retort that this is a voluntary activity. The result is that it will be available to schools that attract stockbroker-belt-type governors, whereas those that do not, perhaps in run-down inner-city areas, will not have the benefit of such expert advice. Nevertheless, the Government come riding in on their white charger with their answer to everything: they will produce guidance.

Paragraph three talks about the suspension of delegation. It is a very messy paragraph. I pointed out that a school could join a company only if it had a delegated budget. However, if a member school has its budget suspended, it is not immediately required to leave a company. It can stay with the company and even become a sleeping partner, as the noble Lord has suggested. A school not fit to hold its own budget being part of a company, with all the responsibilities and ownership that it has to take for the running of the company, seems to be a real problem.

Paragraph five says:

"A takeover could only happen if school company members holding the majority of the shares agreed to sell their shares to a third party".

I think that the noble Lord means that school companies will be private companies, not public limited companies, so shares in them will not be readily available. I raised a point about a school company being taken over by another private company. According to the noble Lord's letter, that can happen. If the company agrees to sell, it can do so. The letter continues:

"Any member selling all of their shares would then leave the company. The risk of private sector takeover is low for several reasons—school companies will be private companies, they are not likely to be asset rich"—

I am not sure that I necessarily agree with that—

"and only certain prescribed types of body will be able to join these companies as members".

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It would be helpful to be given some examples, if the noble Lord has any.

Paragraph six, on permission to join companies, says:

"Schools wishing to join a school company will need permission from their LEA".

Why? Some LEAs are in special measures. Some LEAs do not perform as well as some of the schools over which they have jurisdiction. That could result in a go-ahead school having to seek permission from an LEA, which may have a philosophical objection or may not even be up to making a proper judgment on whether it should run a company.

Paragraph seven is about market scan. I asked what the reference to "carrying out a market scan of alternative broker/provider organisations" means. The noble Lord replied:

"It is one example of the activity undertaken by the North Romford School Improvement Consortium (Havering LEA) New Model".

I assume that that is already in place and happening under existing legislation, so I am not sure that the new proposals add very much.

In the first paragraph of the letter, the Minister refers to companies spending only within their budgetary limits. However, if a company fails owing large debts, the LEA will be responsible for debts that may well exceed the budget of the school.

Paragraph eight is about dedicated staffing resource. I questioned the meaning of, "staff would also benefit from a division of labour using a dedicated staffing resource so as to free teaching staff". That is so jargon-ridden that I do not understand what it means. The noble Lord goes on to say that,

"A company may wish to employ a bursar to act on behalf of all".

A group of schools can employ a bursar now, so that is nothing new. Many schools come together because it is the only way in which they can afford to have a bursar.

In paragraph 10, the Minister argues both ways. He writes:

"The purpose of including this clause is to clarify the Secretary of State's powers in this area, rather than add any new ones. We believe there is a need to ensure that primary legislation clearly states the ability of the Secretary of State to be involved in the operation of companies".

If Clause 12 is only for clarification and adds no new powers, as the noble Lord claims, it is not necessary. Why is it in the Bill? We are always told that repeating statutes does not make for good legislation. If this is not a new power, the Secretary of State can already be involved in the operation of companies. Either it is a new power or it is not. If it is, it needs to be in the Bill. However, paragraph 10 of the letter reads both ways.

Later in paragraph 10, the Minister writes:

"During the debate, you asked why the National Society could not procure the expertise they require, or work with Partnerships UK (PUK), thus negating the need for the Secretary of State to invest. The answer is that there is nothing to prevent anyone from procuring such expertise. However, the costs would, in all likelihood, be very high and almost certainly not represent value for money. By establishing a joint venture, we hope to ensure that the advice is available as and when needed and is of a consistent quality that meets the needs of the National Society".

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The right reverend Prelate would have an interest in this. This is the kind of issue on which one expects public authorities or local authorities to say it will not cost because it is being done by the local authority or the Government and not by highly paid expertise that would have to be bought in. However, if the Government are getting involved, there is the cost of the time of the expertise that is made available by the Government to the company. It is not cost-free. Therefore, if we are talking about company law, a value would have to be placed on that company and that would have to be shown in the accounts. After all, the Government make voluntary bodies do that. I sit on a number of voluntary bodies. We have to account for anything that is given to us in kind as it has a value to the charity. It has to be shown in the accounts.

I am concerned about many of the points in the noble Lord's letter. I am not convinced that most of what a school, or schools, would wish to do commercially can be done under present legislation. The clauses we are discussing represent a complex proposition for schools. I do not think that the answer to the matter is to say that not many schools are expected to exercise the power or that because it is voluntary we should not be over-concerned. Schools are desperate for staff. They are overburdened with non-teaching duties. Governors are in short supply. In recent years many additional responsibilities have been placed upon them. Schools do not readily have access to the kind of expertise, or the funds to buy in such expertise, to indulge in setting up companies subject to the full panoply of law. If governors are financially liable, we may find that they do not come forward in the same numbers as formerly.

As I said at the outset, schools enjoy considerable freedom now to act commercially in their own interests. I refer to city technology colleges and academies. As I said, only the other day I visited a maintained school which was itself a company and enjoyed the freedom that that status conferred. I do not believe that the clauses we are discussing are properly thought through, nor do I believe that the sky will fall in if they are removed. I beg to move.

6.30 p.m.

Baroness Sharp of Guildford: My Lords, my name is attached to Amendments Nos. 24 and 27 which propose respectively that we should leave out Clauses 10 and 11. I wish to speak also to Amendments Nos. 25, 26 and 28.

We had a long debate on the matter in Committee. I have not received a copy of the letter that the noble Lord, Lord McIntosh, sent to the noble Baroness, Lady Blatch. Perhaps it arrived today and I must confess that I have not emptied my in-tray.

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