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Lord McIntosh of Haringey: My Lords, the letter was dated 28th May. I cannot think what went wrong. The letter was addressed also to the noble Baroness, Lady Sharp.

Baroness Sharp of Guildford: My Lords, I have received many letters from the noble Baroness, Lady Ashton, and also from the noble Lord, Lord Davies of

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Oldham. However, the only letter I have received from the noble Lord, Lord McIntosh, concerned academies which I received over the weekend.

Lord McIntosh of Haringey: My Lords, I apologise.

Baroness Sharp of Guildford: My Lords, perhaps the letter went astray. I have not had the benefit of seeing it. However, the noble Baroness, Lady Blatch, discussed the letter in detail and raised many points. As we on these Benches said in Committee, with staff in schools and teachers so overloaded at present and with governors also complaining of overwork, we need this measure like we need a hole in the head. What we want our teachers to do is to teach and what we want our governing bodies to do is to concentrate on governing their schools and not to have to be involved in running companies.

From what the Minister said in Committee, it is clear that in any case schools can already set up companies in their own right as corporate bodies. They can run companies for the benefit of their own schools. The reason for including the clauses we are discussing is to enable them to establish companies jointly with other schools. Why would they want to do that? It is said that they would want to do that in order to gain economies of scale from purchasing on a bulk scale. However, these days, many schools co-operate with other schools and purchase on a bulk scale. In any case, one does not need a company to set that up. LEAs have done that for a long time. Some schools opt out of LEA purchasing schemes but others still opt into them. The benefits to be derived from economies of scale can be gained through that process.

The measure would also enable schools to set up providing companies to gain economies of scale. In Committee reference was made to software in that regard. However, it is clear that in any case a school can do that in its own right. Two teachers who have developed a software package can set up a company in their own right. They do not have to set it up through the school. There are few occasions when the measure that we are discussing is likely to be necessary. It appears to be a case of taking a sledgehammer to crack a nut. In Committee I was not convinced by the Minister's arguments. I have reread the Committee proceedings on a couple of occasions and I did not find the Minister's arguments at all satisfactory.

It is also highly unsatisfactory that if a purchasing company runs into trouble, the LEA is liable for that company's debts as it is using LEA money. If things go wrong, the LEA, which is supposed to vet the company, is landed with having to pay out. The whole provision does not hold water. For those reasons, we have little sympathy with either Clause 10 or Clause 11.

Clause 12 is a slightly different matter as it concerns the Secretary of State setting up a company. We are told that the measure is necessary to enable the Secretary of State to form companies, for example with the Church of England, in order to promote a PFI. I believe that the Government are anxious to get something back for the amount of money that they have already invested in

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developing Curriculum online. Therefore, they are interested in setting up a company in that regard. That is fine although I am not convinced that Secretaries of State ought to be doing that. I do not see why a voluntary-aided school cannot set up a company jointly with the LEA rather than the Secretary of State doing that. A perfectly good joint company could be set up with the LEA as regards a PFI. I am not by any means convinced that PFIs necessarily give good value for money. There are a great many examples of PFIs going wrong. I am not sure that we should not try to eliminate the clause to prevent the Church of England making mistakes. I do not have much sympathy with that clause either.

I wish to discuss the amendments that we have tabled. We have tabled two to Clause 11. Amendment No. 25 seeks to eliminate the words, "if regulations so provide" in subsection (3) of Clause 11. We had a long discussion on that matter in Committee. We said that the matter would be rather awkward if there were no regulations. The Minister said that there would be regulations. We asked why, in that case, the phrase "if regulations so provide" should be included in the Bill. It is, as my noble friend Lady Blatch would say, otiose. It is unnecessary. It does not serve any purpose so why is it included? Let us get rid of it.

I now wish to discuss Amendment No. 26. I refer to the whole question of a company limited by guarantee and of any profits that are made being invested back into the participating schools. In that sense it would be a not-for-profit company. In Committee the Minister said that that would not necessarily be the case and that it could constitute a great disincentive to setting up a company. We pointed out that people, particularly governors, involve themselves in many activities in relation to schools to which they devote a great deal of their time and attention. They happily plough the profits from those activities back into the schools and therefore we do not see that to do so poses a major disincentive.

I turn to Amendment No. 29. Where the Secretary of State wants to set up a company, that company should be subject to the same limitations as any company set up by a school, as set out in subsections (3) and (4) of Clause 11. We argued, once again, that there was much to be said for that proposal—if the Secretary of State wanted to set up a company, it should be limited by guarantee and it should be a non-profit company. We feel that, in view of the way in which the clauses are drafted, the amendments are still valid and we hope that they will be agreed to.

Lord Jones: My Lords, this is a big and challenging clause, and to remove it would severely mutilate the Bill. What new additional guidance will Her Majesty's Government give to our schools in relation to the making and running of companies and in aiming for the profitability of companies? In a few words, from whence cometh their guidance? Where is the school company practice, so to speak, that the head and governing body will reach for? Will there be, for example, company doctors?

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I believe that the clause is worth while. It is, perhaps, a clause of its time. However, we need an assurance from the Minister that the Government have thought the clause through. Have they, for example, looked to the other side of the hill? What will the consequences be? Our schools need careful and detailed guidance if we are to go forward in this regard.

The Lord Bishop of Blackburn: My Lords, I begin by declaring an interest as chairman of the national society to which the noble Baroness, Lady Sharp, referred. I am always prepared to accept guidance from her, particularly in relation to such an issue. I am quite out of my depth. I shall therefore read my brief much more closely than I normally do.

The view of the advisers of the national society on financial advice is different from that which the noble Baroness has just given us. I hope that I can persuade the noble Baroness not to press the amendments. We believe that they would have a significant effect on the replacement—or the non-replacement—of buildings of many voluntary-aided schools. The clauses that the amendments would remove are designed to enable the department to work in partnership through the PFI to extend the school building and replacement programme, which is well in hand. Since the introduction of that programme, as a replacement programme, there have been some high profile successes, but mainly one-off rebuilds of large secondary schools or LEA projects to replace school buildings and to run services.

The PFI has not worked anything like so well in relation to primary and other small schools, especially in rural areas, outside LEA projects because they do not provide potential for a large enough return for the private-sector investor. Many small school buildings that need replacing are not attended to through that method. Delivering the curriculum for the 21st century is made much more difficult by poor-quality accommodation. Pupils are being denied equality of educational opportunity by poor learning environments, which serve to stifle teachers' morale and the efforts to raise standards. Such school buildings can no longer provide value for money for the governors because they are a constant drain on the school's budget, needing constant "patch and mend" maintenance.

As the Minister, the noble Lord, Lord McIntosh, explained in Committee, the Church of England, through the national society, has been working with the department and Partnerships UK to create a national model, through a jointly owned charitable company, for replacing smaller time-expired schools. That will operate by clustering schools in regional PFI projects, and it aims to make the legal processes easier and quicker for the governing bodies concerned. The arrangement is quite advanced now in terms of consultation and negotiation. There will be great disappointment around the nation if the programme cannot go ahead.

The DfES indicated that the very lowest estimate of PFI credits that are available for voluntary-aided Church of England schools alone are worth some 40 million. That amounts to 20 new primary schools. Potentially, the figure could be more than double that

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sum. The national model of PFI will not undermine the conventional means of procurement for small Church of England schools. That pioneering model would eventually be available to all maintained schools—community, VA, VC and foundation—and would benefit schools in urban and rural areas. The power to form companies is key, as we see it, to enabling the PFI to work for clusters of small schools.

I believe that it was the noble Baroness, Lady Blatch, who charged that we have the powers already. However, my advisers are not convinced of that. The amendments would prevent the great majority of small schools accessing PFI credits and replacing time-expired buildings. It is for those technical reasons—they are, however, fundamental, not least in relation to the education of children in our smaller schools, particularly rural schools—that I hope that the amendment will be withdrawn.

6.45 p.m.

Baroness Blatch: My Lords, I wonder whether the right reverend Prelate can help me. I genuinely want to understand what he said. My understanding is that the Church of England, through the national society and working with the Government, is putting together an arrangement, if I can put it that way, or forming a company that will allow for procurement in relation to many Church primary schools. I refer to building, capital and refurbishment. Given that that is already being done, what is the brick wall up against which that body has come, which makes it impossible to proceed without the provisions in the Bill?

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