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Baroness Blatch: My Lords, if I am out of order I will be advised and I will remove them.

Lord Carter: My Lords, the noble Baroness is not out of order because she has been allowed to table the amendments. I am asking how she feels her amendments, which remove a whole chapter from the Bill, fit the guidance in the Companion.

Baroness Blatch: My Lords, if I am in order, then I am in order. I have spoken to my amendments. I beg to move.

Lord Peston: My Lords, that is simply not acceptable. I have been sitting here, as has my noble friend Lord Carter, wondering why we bother to have the Companion. This does not apply only to these amendments; it applies also to others. For the years when I sat on the Benches opposite, I and my noble friends stuck religiously—if I may use that word standing just behind the right reverend Prelate—to the spirit of the Companion.

I am with my noble friend Lord Carter. I should like an explanation because we are not even discussing misbehaviour on the part of Back-Benchers; we are discussing what the Opposition Front Benchers are doing. This may be a new departure but the notion that one is in order is not the same as meeting the courtesies—a large part of them are courtesies—of the

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Companion. My noble friend Lord Carter is entitled to a reasoned reply to the question he put perfectly reasonably.

Baroness Blatch: My Lords, I shall be repetitive. I took advice. I believe I am in order. If I am out of order, I will be advised and will respect the advice I am given.

Secondly, I have been entirely consistent throughout this Bill, from the first day, with my concerns about these clauses. We go through a Bill at each of the stages, both reflecting on what we have said and Ministers reflecting on what they have said. We had an interesting process of letters. As I say, if I am out of order I shall withdraw my amendment; if I am within order, I beg to move.

Baroness Sharp of Guildford: My Lords, my name and that of my noble friend Lady Walmsley is attached to this amendment. We have had no indication from the Clerks that it is out of order and we must therefore proceed as planned.

We have had much discussion in Committee and on Report on these clauses. My name is attached to Amendments Nos. 7 and 11, which apply to Clauses 11 and 12 but not to Clause 13. We learn, as a result of our extensive discussions, that in fact the powers to form companies, as Chapter 3 says, are limited powers; it only applies to two or more schools who wish jointly to form a company to do things together. The governing bodies of schools, already as bodies corporate, have the power to form a company for an individual school. The problem is that they cannot form companies with two or more schools to undertake joint purchasing or the provision of joint services. That is what the two clauses involve.

So this is a misleading title, both to the chapter as a whole and to Clause 11, which says,

    "Powers of governing bodies to form or invest in companies".

The power is to form and invest in joint companies.

We from these Benches have also opposed these clauses from the start. Although I have learnt more about what the companies are supposed to be about and why the Government wish to set them up, we have not changed our view that on the whole we do not wish to see these two clauses in the Bill.

Why is that so? There are four main reasons. The first is that we feel it sends out the wrong message. On the whole, from these Benches, we do not feel that the heads of schools, teachers and governors should be getting involved in companies on behalf of schools. Schools are not companies; they are community institutions. Given all the other pressures on their time, teachers, governors and head teachers should be concerned with running their schools and not running companies. So we feel that the clause sends out the wrong message.

Secondly, we are worried about the implications of these clauses for the local education authorities. We have received all kinds of assurances from the Minister about the role of local education authorities. Yes, it is

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a light touch supervisory role. But they end up having to bail out or pick up the tab if anything should go very wrong.

I worry also whether local education authorities have the competence to act as supervisory authorities for setting up companies. By and large local education authorities do not employ accountants and lawyers who have a lot of knowledge about setting up companies. Again, they are hard pressed to do the job they have to do in terms of running the schools in their local area; they do not want to have to spend time looking at the details of companies that schools are setting up and making sure that they are not doing the things they should not be doing.

So again we feel that this is not something we want our local education authorities to spend time doing. Nor do we feel it is right that money taken from local taxpayers to help pay the costs of schools should be put at risk perhaps by nefarious doings on the part of some governing bodies.

The third argument relates to the degree with which we feel there is justification for setting up the companies. Can the Government really justify a case for setting up the companies? Their answer is that they want schools to purchase jointly. As the noble Baroness, Lady Blatch, pointed out, many schools have come together to purchase jointly for many years. LEAs were set up in part to reap the economies of scale of joint purchasing and we believe that that can still be achieved. As regards the provision of joint services, we spoke a great deal about the possibility of the development of software; that is, having two teachers from different schools developing software and perhaps deciding to form a company. We argued that they may not want to set up a company for themselves because they may want the profits to go back into the schools, but the company could be limited by guarantee. The answers to those arguments do not hold true.

The Minister also said in Committee:

    "As regards the examples given of schools combining to purchase jointly without this power [to form joint companies], that is perhaps a possibility".—[Official Report, 17/6/02; col. 559.]

But what about those from whom they are purchasing? Surely they will want to have someone against whom there is some comeback. We have already observed that the local education authorities have to pick up the tab if things go wrong. I repeat that schools have been purchasing, and purchasing jointly, for many a long year. Quite frankly, there is no need to have such comeback; there is no need to form a company. As regards all these issues, the argument does not ring true; there is no real justification for the provision.

Finally, we have doubts about precisely why the Government want to set up these companies. Is there perhaps some subtext? One aspect is the new contracting-out order procedure which we approved in March this year; it is the assumption that LEAs will be able to persuade schools to form companies to take on and deliver the services which LEAs no longer feel competent to provide. We have discussed at length purchasing and providing, but I ask your Lordships to

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look at Clause 11(1) regarding the power to form companies. Paragraph (a) of that subsection relates to companies being formed:

    "to provide services or facilities for any schools".

Paragraph (b) reads:

    "to exercise relevant local education authority functions".

Paragraph (c) reads:

    "to make, or facilitate the making of, arrangements under which facilities or services are provided for any schools by other persons".

What are the local authority functions? We are most perplexed. Is there an unwritten text? Are the Government looking for a route to semi-privatisation? We on these Benches would oppose that. We do not want to see the privatisation of education. We do not understand that subsection and believe that it may contain a subtext. We had doubts as to what it was all about.

I return to our fundamental objections. Schools, teachers and governors should be concentrating on running schools, not running companies. The proposition is misguided and we believe that it should be removed from the face of the Bill.

The Lord Bishop of Blackburn: My Lords, I must intervene to express my gratitude to the noble Baroness, Lady Blatch, for saying that she will not press Amendment No. 12. However, I could wish that she had replied to my letter, which other noble Lords have not seen. It might have been helpful for them to have seen it before we had a debate about its contents. As the noble Baroness well knows, I do not have back-up in the House and these are highly technical questions in relation to companies which I cannot answer. However, I am grateful to her for putting forward some of the concerns, but I have to admit to the House that I am not in a position to answer the specific points the noble Baroness made. Sometimes fact is more strange than fiction and to have the Conservative Opposition's lead speaker on the Bill opposing the establishment of companies and a diocesan Bishop speaking up for them is an extraordinary set of events.

I listened carefully to other parts of the debate and I do not want particularly to become involved in them. However, I heard what was said about LEAs by the noble Baroness, Lady Sharp, and I have concerns about that. I am not worried about the public/private partnership. I believe that that might be a way forward for some schools. However, are we not dealing with secondary education in the Bill? The White Paper was about secondary education.

I am a little troubled that we are preventing responsible governors of secondary schools from taking actions, using illustrations from higher and further education. It seems that the governors of other institutions within the public sector—and certainly the governors of independent schools—are able to do that. I may be wrong about that, but, having noted the cautions, I would want to be supportive of the enabling power. I have greater trust in the governing bodies I come across.

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There are bound to be failures—there are failures in almost any walk of life—and risks have to be taken. However, I thank the noble Baroness, Lady Blatch, for saying that she will not press her amendment. If she did so, that would cause great difficulties for us. My advice is that the provision is a way forward to help smaller schools with projects and I trust the advice I have been given.

4.45 p.m.

Lord McIntosh of Haringey: My Lords, without raising questions of procedure or of what is or is not in order—it is not my job from this Dispatch Box—I am a little surprised by the way in which the amendments come before us. In the nearly 20 years I have been in this House I have been used to the difference between Committee, Report and Third Reading. Generally speaking, in Committee we explore the areas of potential difficulty with the Bill. Each clause must positively stand part of the Bill and the debate on clause stand part is used to explore the Government's justification for any aspect of a clause. It is often difficult for Ministers to respond to that, but they must do so—it is the nature of the job.

In Opposition, one tries to refine one's objections and to pick out the points which remain objectionable after they have been explained. At Third Reading, if difficulties arise out of that debate, one tries to deal with those particular points. However, we find ourselves debating amendments, which have been accepted by the Public Bill Office, removing the whole of the clause. That is what I must respond to.

I do not believe that the noble Baroness, Lady Blatch, has and would argue that Ministers have not responded to her in great detail on the points she has raised both in speeches in the House and in detailed letters. I believe that we have addressed—I would say answered—all the points she has made so far. The question must be turned around. The noble Baroness, Lady Sharp, objects to the proposal because she believes that it is unnecessary and will not take place. I shall later deal with her point that this is perhaps some subtle plot to introduce semi-privatisation and to persuade schools to have that. I shall put that on one side for the moment.

Surely, in considering these amendments, our starting point must be the proposals which are purely voluntary. We must ask: on what basis is it the wish of anyone in Opposition parties to deny those schools—it may be a few—which have expressed a need for such facilities and which want to use them the right to take advantage of them? That must be the starting point, not the other way around.

Some schools are already forming companies on their own. The noble Baroness, Lady Blatch, gave examples. They have not found it too big a burden, so why should we prevent schools from joining together and thereby reducing the burden of forming companies? We have not plucked this policy out of the air—it is not blue-skies thinking in the Department for Education and Skills. It is a response to those who

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have come to us and indicated that they want to work together in new ways. They are confident, creative schools which want to work together in new ways to raise standards in their own schools and in others.

I repeat what I have said at each stage: the decision is entirely voluntary. I say to the noble Baroness, Lady Sharp, that they will not be forced or persuaded to form companies. They will do so only if it is for their benefit and only if, in their view—it is their view that matters—they will not be interfering with what I agree with the noble Baroness, Lady Sharp, is their main task: providing education for the pupils in their schools. Those companies are not an end in themselves; they are simply the best mechanism available to facilitate joint activity.

There are limits. A few minutes ago, I said, perhaps too broadly, that those companies are designed only for more than one school acting together. That is not quite accurate. They could be formed by a single school that wanted to provide services for other schools as well. That is presently not possible and will be made possible by this chapter. But the main users, I suspect, will be schools joining together, first, to reduce their administrative and purchasing burden. The noble Baroness, Lady Blatch, misunderstood that when she queried the phrase, "other persons". She thought that that referred to providing services for other persons. It does not. It refers to providing services for schools and only for schools by other persons. If she reads the Bill, she will see that that is right.

The second reason for using such companies is that schools may want to join together to deliver services to other schools in which they have real strength. That could result in benefits to company members and to other schools, which could receive good quality support. Let me give an example. Schools may have an educational idea but lack the distance learning or publishing skills appropriate to enable it to be made more generally available. They may therefore need to bring in outside organisations—perhaps a not-for-profit organisation, an educational institution in the field of further or higher education or a commercial publisher or distance learning skill provider. They may bring in such people as members of the company on the basis that they will take a share of the profits. And why not?

I cannot reconcile the opposition to that idea with what I understand to be the ethos of the Conservative Party. It simply does not make sense to me. If I can understand the ethos of the Liberal Democrats, their opposition does not make sense to me either. There could be real benefit to the quality of services offered to other schools through such companies by joining together private and voluntary partners with schools.

Let me make it clear that when talking about profits there is no question of governing bodies taking their share of the profits to use for anything other than the educational needs of their schools. There is no possibility of siphoning off profits, as has been suggested.

I turn to the issue of local education authorities. Again, there is an element of suspicion that is not justified by what the Bill provides. If and when such

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companies are set up, they will operate in a positive, productive partnership with their local education authority. They will have to, because local education authorities will give the go-ahead for their formation and will act as the supervisory authority thereafter. School companies will operate within a protective regime, correcting the balance between giving companies freedom to govern themselves—of course, there are some dangers, although the noble Baroness, Lady Blatch, overstated the case—to innovate and to use the fruits of that innovation for the benefit of education more generally. Much of that provision will be contained in regulations under Clause 12 and we shall listen carefully to the views expressed on that.

I am glad to hear that opposition to Clause 13 will not be pressed because the speech of the noble Baroness, Lady Blatch, contained a number of new misunderstandings. First, I can assure her that there are no changes to the tendering rules. There will be savings in bidders' costs, but they will be entirely passed on to the schools for the benefit of education and will not go outside. The amendment to leave out Clause 13 may not be pressed, but Clauses 11, 12 and 13 form a package. They enable individual schools to join in joint-venture companies to benefit from the good quality advice and support that they will acquire for use in private finance initiative schemes, if such schemes are appropriate as, for example, in the case of the proposed Church of England company.

The opposition to the clause is paradoxical. If it had been advanced by those who are opposed to entrepreneurial activity, innovation and the dissemination of good practice and new ideas, I should have understood it and handled it. But to have such opposition advanced at this stage by the party of capitalism and by the party of liberalism strikes me as strange. I hope that the amendments will not be pressed.

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