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Baroness Blatch: My Lords, I have opposed schools forums at each stage of the proceedings on the Bill. They will be the latest in a line of costly quangos. On Report on 19th June, the Minister said (at col. 808 of the Official Report) that the cost of such quangos was based on them "meeting three times a term". I have to point out that that amounts to four-and-half days per teacher per year; that 10 teachers would mean 45 days out of school; and that 20 teachers in an average-to-large LEA would mean 90 days out of school. If you multiply that by the number of LEAs, we would have yet more teachers out of school, away from the classroom, and, therefore, not teaching children. That is something that I simply cannot support.

I should add that there are those who believe that forums will in fact mean more money going into schools. In practice, I am afraid that that would not be the outcome. LEAs would need to hold money back to fund such bodies, as the Minister said. The Government could make a very real difference by not imposing yet more quangos and by releasing some of the central funding that they hold back to provide more money for schools.

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Finally, the London/Brent authority has already sent out a form asking for volunteers to sit on the schools forums. The authority has said that the forum is not a decision-making body, which is wrong. It is a decision-making body. It has said that there will be around 20 members, half of whom will be teachers—so we are talking about the numbers of days out of school to which I referred earlier. On the question of how the forum will operate, who chairs it, and how it conducts its business, the authority states that that will largely be a matter for the forum itself to decide. That is equally not true: the Bill will specify that through regulation. If the forums are allowed to decide how they operate, why cannot the same apply to governing bodies? That is a matter about which we argued at an earlier stage.

These forums are quangos. They are unnecessary. I do not believe that they will enhance the experience of children in the classroom. I support the amendment.

6.45 p.m.

Baroness Ashton of Upholland: My Lords, I take the point that both the noble Baroness, Lady Sharp, and the noble Baroness, Lady Blatch, do not like schools forums. However, I shall still endeavour to convince them.

I shall begin by speaking to Amendment No. 22. I listened most carefully to what the noble Baroness, Lady Walmsley, said in her introductory remarks. I have to say that I am still unclear as to what the noble Baroness has against the clause that leads her to wish to get rid of it in total. I understand her concerns. As the noble Baroness rightly said, she has raised the issues of the role of schools forums and the reserve power at each stage of the Bill.

Although schools forums and the reserve power make brief appearances in the clause, they are not the main purpose of the clause. Most of the clause seeks to do something that I hope we all agree is worth doing, whether or not we have the forum or the reserve power. Above all, it is about transparency. We believe that we have already achieved a great deal in this respect. LMS—the funding system that we inherited—was based on the general schools budget, which was rather narrowly defined. The financial statements that LEAs produced under LMS gave a breakdown of the general schools budget, but it was difficult to see the GSB in its wider context because the available information on LEAs' overall education budgets was contained in a return collected by what was then the Environment Department, and the two returns were not well dovetailed.

The funding system that we introduced in 1999 is based on the local schools budget, which is broader than the GSB. Each education authority now has to produce a single financial statement that sets the LSB in the context of its education revenue budget as a whole. In other words, we now have a much better basis for judging how far the money provided by government is getting through to schools. Nevertheless, we believe that there is scope to reduce still further what I have described as a "funding fog".

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The school funding system is based on the local schools budget and the LEA funding system is based on the education SSA. Both are broad in their coverage, and yet their coverage is not the same. Moreover, as noble Lords will be aware, there are concerns about the fairness and the transparency of the SSA. Part of the problem is that the SSA has perhaps been trying to assess too much at once. That is why we intend to introduce two spending needs assessments instead of the present SSA. One will relate essentially to the cost of provision for pupils, and the other will cover the essential functions of the LEA. The assessments will be introduced under local government legislation.

However, corresponding to the assessments, we shall have the separate school and LEA budgets. The key purpose of Clause 40 is to bring in these two budgets in place of the present local schools budget. LEAs' expenditure on front-line provision can then be bench-marked against a spending needs assessment that relates specifically to front-line provision.

We believe that that will make for greater clarity and make it easier for the spending plans of education authorities to be scrutinised in an informed way. I had hoped—indeed, I would have expected—that we could agree on that as something that we would all wish to achieve. I should add that, in developing such proposals, the department has worked closely with the Local Government Association and other relevant interests. There has been debate around the detail, and I have no doubt that there will be more, but the LGA welcomes the principle of separate budgets and assessments as a means of improving clarity.

Therefore, on Clause 40, I hope that noble Lords will not allow their reservations about schools forums or the reserve power to stand in the way of what the bulk of the clause is designed to achieve. There will be opportunities to address these concerns, to which I shall refer later. But to reject the whole clause on the basis of such reservations would, in a sense, be to allow the tail to wag the dog. On the basis of wanting to have greater transparency and ability for informed scrutiny, which must be a desire of Liberal Democrats, I hope that the noble Baroness will feel able to withdraw this amendment.

I turn to Amendment No. 23. I should like to make it clear that the clause is purely about the possibility of the Secretary of State setting a minimum budget for the schools budget in an area where the LEA has made very seriously inadequate proposals. Noble Lords have been sceptical about the assurances that we have given to the effect that the reserve power will be used sparingly. When the clause was debated in Committee in another place, my honourable friend the Minister for School Standards gave two assurances that I wish to repeat at this point. The first was that the reserve power would definitely not be used where an authority passed on the increase in its school funding assessment to its schools budget. That is a very clear statement, and one that I am very happy to repeat. But the second assurance was also important: even if the increase in the school funding assessment was not passed on in full, it would not necessarily follow that the reserve

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power would be invoked. As we make clear in the Explanatory Notes to the Bill, an authority's spend relative to its funding assessment is another of the factors we would consider before exercising the reserve power. If a local education authority spent well above its funding assessment and failed to pass on only a small proportion of the increase, we would not exercise this power.

As I have previously explained, there will be a dialogue with a local education authority if we propose to set a minimum level of budget for an authority's schools: such an authority would of course be able to set out for us the full range of circumstances which led it to take a decision not to pass on the increase in school funding to its schools.

The reserve power is not about the vast majority of authorities who share the Government's desire to see schools funded properly. They will have the freedom to do that. It is about a situation we expect to arise only rarely, where an education authority has not passed on an increase to its schools and by so doing it causes those schools to spend time on managing budget cuts rather than improving standards for our school children.

I make no apology for wanting to avoid that situation. This year 18 education authorities failed to pass on the increase in education SSA to their education budgets. We would not take action against all of those authorities. Many achieved reasonable increases in their school budgets in spite of their failure to passport. But some did not: in one the increase in school budgets was only 2.4 per cent. That is not enough to meet the teachers' pay award, still less to increase school standards. It is that very specific sort of problem that we want to address with the reserve power. I urge noble Lords to withdraw this amendment; it would be a vote in these exceptional circumstances to lower school budgets.

With regard to schools forums, the consultation exercise which we launched in May has reached its end and we have been able to consider the results. There were just under 200 responses. One thing that was immediately apparent was general support for the concept behind schools forums—that of partnership and consultation on the management of the schools budget to be created under Clause 42. So we believe that we were right to put schools forums into the Bill and right to persist with them. In the words of one governing body,

    "the establishment of a schools forum on a statutory basis is absolutely necessary as a part of the new framework of school funding and it would be a major breach of faith if the proposal were to be dropped".

The debate on schools forums has centred around two main issues; that is, the functions of the forums and the way in which they have been constituted. Having considered the responses to the consultation exercise, we do not believe it is necessary to make any changes to the proposed functions of the forums. Though respondents naturally had different views on the details, there was a fair measure of agreement that the four main functions we envisage—consultation on

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the school funding formula; advising on specified issues in relation to the schoolsbudget; advising on contracts; and, finally, making decisions on the delegation of a very limited number of expenditure items—are the appropriate tasks for schools forums. It is the last of those which has perhaps aroused most anxiety.

I want to repeat that this is a very limited decision-taking role: there is no intention to extend it, and I emphasise that the forum will not—I repeat, will not—have any control over the amount of expenditure on specific items or the total size of the schools budget. Many LEAs expressed reservations about this power and we shall consider carefully the details of its operation.

In considering the results of the consultation exercise we have also looked at what has been said about the way in which forums are to be constituted and are to function. It is on this that a much greater divergence of opinion is evident. Although, as I said, nearly all respondents support the principle of schools forums, about half expressed doubts about their introduction in the form envisaged in the consultation paper, with a nationally determined framework for membership.

There was considerable concern that existing local arrangements which have worked well—a point put forward by the noble Baroness, Lady Blatch—and in some cases been commended by Ofsted, would be replaced by forums and local partnership would not be helped. In some areas there is the prospect of duplicated consultative arrangements. What is wanted by a lot of respondents, including most LEAs, is much more flexibility to order schools forums in a way which suits local circumstances and takes account of existing bodies. I acknowledge that that concern has been expressed in this House, and indeed in another place.

We do not propose any amendments to the Bill in consequence. Forums will still have schools members and non-schools members. However, I am able to announce some significant changes, which respond particularly to concerns raised in this Chamber, notably by the noble Baroness, Lady Blatch. We have taken a hard look at the regulations governing the way forums are to be constituted—circulated in draft—and we now intend that when they are made they should give much more discretion to authorities. They would have to include both governors and head teachers but the balance would be at LEA discretion and the election method locally determined. The minimum size would be raised but there would be no maximum; and there would be a requirement to ensure exact proportionality between school phases. The maximum percentage of non-schools members would be reduced to 20 per cent, and that could include elected members of the LEA. The LSC would only have observer status. The quorum requirement would be relaxed a little. Costs would be charged to the schools budget but other provisions on costs would be settled locally.

We would of course wish to give guidance on a range of issues but those changes would enable many LEAs to transmute local bodies into statutory forums; where

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there is no suitable body already, it could be created to suit local circumstances. I believe that that meets the concerns of the noble Baroness, Lady Blatch, that good existing local practice is not damaged by this provision.

Finally, many LEAs have said that they are concerned about timescale. We therefore intend that the date for implementation be put back to 15th January 2003. That would still leave scope for forums to be involved in discussion of budgets for 2003–04, and in any case the changes I have outlined above will make implementation easier.

I hope that from what I have said and the changes we are proposing, that we are demonstrating that we are ready to listen and make changes. Schools forums are still an integral part of our plans for the new funding system; we want them to work and so we are taking a pragmatic view of what is needed to make them work. I hope that in the light of what I have said the noble Baroness will feel able towithdraw her amendment.

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