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Baroness Ashton of Upholland: My Lords, it could not contract the running of the school, which is the responsibility of the governing body. I am searching for an analogy which will make it clear to noble Lords. The governing body runs the school. In many cases, the governing body already contracts with other bodies that it wishes to bring in to provide services such as school meals, lunch-time supervision, cleaning services, ICT services and so on. It may decide to contract with other bodies but, ultimately, in law, it is responsible for the running of the school.

I have dealt with that point as adequately as I can.

Baroness Walmsley: My Lords, I thank the Minister for giving way. Does that explanation mean that the governing body could contract with another organisation to deliver the teaching in the school?

Baroness Ashton of Upholland: My Lords, the governing body could not bring in wholesale teaching. But, as the noble Baroness is aware, there are occasions when governing bodies have relationships with companies which provide supply teachers when teachers are off sick. That is a quite normal process, as noble Lords are aware. That may also be true in the context of some specialisms—I again use ICT as an example—where a governing body may contract to bring in that expertise.

I have dealt with the point as well as I can and I hope that I will be forgiven if I move on to address some of the other points made by noble Lords.

We have made it clear that the education authority is responsible for purchasing company debt only. I hope that that answers the point raised by the noble Lord, Lord Dearing. There is no scope for public sector money to be siphoned off and the education authority would not be required to provide venture capital under any circumstances.

The noble Baroness, Lady Sharp, referred to diversions from the main purposes. Her comments will stick to the knitting. It is very important that we recognise that there is nothing in the Bill to require schools to do this if they feel that it is not in their best interests. I could not agree more with the noble Baroness that we should recognise that the primary purpose of our schools is, of course, to educate our children. But our schools belong to a community—a community of schools and a wider community. As I have said, we want to release the kind of expertise that would be of use in other circumstances.

The noble Baroness referred, as did the noble Baroness, Lady Blatch, to the Observer story on companies. I shall not make the obvious gags about not believing newspaper headlines—some noble Lords will understand only too well what it is like to be on the receiving end of those—but I want to make it absolutely clear that the story has no implications whatever for allowing schools to set up companies.

23 Jul 2002 : Column 235

Our proposals will not allow schools to contract-out the responsibility for the conduct of a school to a company of any kind. We have said that before and I am happy to repeat it again.

The article referred to today's announcement of the Government launch of a social enterprise strategy. A Bank of England review of finance for social enterprises and a new social enterprise accreditation scheme are only two of the initiatives outlined today. Reference to super schools does not capture accurately what we are discussing and what the article is about. Schools will be able to form companies voluntarily. This is not about the responsibility for the running of schools.

The noble Lord, Lord Kingsland, asked about profits. The governing body will be able to protect its own interests in how the company distributes its profits because, as a member of the company, it will have a veto on the constitution of the company. It will, of course, agree with its fellow members of the company on how profits will be distributed according to the contribution of the members, whether it be in expertise or in capital.

The noble Lord, Lord Northbourne, raised a point about companies led by guarantee. It is correct that these are not equity rich companies. The risk to creditors and purchasing companies is not high, as schools are spending delegated budgets, and the local education authority is liable for the companies' debts in those circumstances. The risk to creditors and service delivery companies is the same as when dealing with private limited liability companies. Companies led by guarantee are not usually charitable, but in some circumstances that could be the case were it felt to be appropriate.

I reiterate that we are talking about another part of the road to freedom that schools wish to have in terms of developing their expertise. I believe that our schools make sensible decisions. They work hard to make sure that they educate their students well, and they have the kind of expertise that I would wish to see available across the broader spectrum.

Perhaps I may give an example which I hope will be relevant as your Lordships debate in the future the modern foreign languages strategy that the Government are seeking to develop. Noble Lords have frequently pointed out the need to consider making a range of modern foreign languages available, particularly for primary school children, and that it is not simply a matter of teaching one language: in debate, 11 or 12 languages were spoken of as being important for primary school children to learn.

Let us suppose that a group of schools decide to come together to develop some teaching aids to support our primary school children in learning languages. One might, for example, have a particular expertise in Mandarin, another in Urdu. They may decide that the best way to support the language teaching is by producing a CD-ROM—a common

23 Jul 2002 : Column 236

method. They may decide that they need to talk to a software producer in order to obtain the right kind of material. In considering how best to come together, they may want to consider the option of forming a company. They can be allowed to come together and to develop the material; the CD-ROM software designer can be part of that. They can be allowed to develop something of benefit to their own school but to many other schools as well.

In conclusion, I recognise that noble Lords have strong views on this subject. I understand the desire to make sure that the Government produce proposals that meet with your Lordships' approval. In the course of the many hours of debate on this subject in both Houses, we have done our best to answer all the individual questions that noble Lords have put. We are asking the House simply to agree to allow schools an option. I do not anticipate that many would want to take it up, but a few might wish to come together and would find this provision a useful vehicle. On that basis, I commend the Commons amendment to the House.

Lord Kingsland: My Lords, I thank the noble Baroness for her concluding remarks. I can be brief. What the noble Baroness thinks Clause 10(1) does and what it does are two entirely different things. Perhaps I may repeat the words of the clause:

"The governing body of a maintained school may form . . . companies . . . (a) to provide services or facilities for any schools . . . (b) to exercise relevant local education authority functions".

It is plain on the face of the Bill that the services that can be provided—"relevant local education authority functions"—are teaching services; and there is to limit on the scale on which this can be done. In those circumstances, the legislation will clearly not fulfil the Government's objectives. I think it only right that the opinion of the House should be tested.

5.45 p.m.

On Question, Whether the said amendment (No. 12B) shall be agreed to?

Their Lordships divided: Contents, 172; Not-Contents, 168.

Division No. 2

CONTENTS
Aberdare, L.
Addington, L.
Alderdice, L.
Allenby of Megiddo, V.
Anelay of St Johns, B.
Arran, E.
Astor, V.
Astor of Hever, L.
Attlee, E.
Avebury, L.
Barker, B.
Biffen, L.
Blaker, L.
Blatch, B.
Boardman, L.
Bowness, L.
Bridgeman, V.
Brigstocke, B.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Burnham, L.
Butterworth, L.
Byford, B.
Caithness, E.
Campbell of Alloway, L.
Carlisle of Bucklow, L.
Carnegy of Lour, B.
Carrington, L.
Clement-Jones, L.
Colwyn, L.
Cope of Berkeley, L. [Teller]
Cox, B.
Crathorne, L.
Crickhowell, L.
Cumberlege, B.
Dean of Harptree, L.
Denham, L.
Dholakia, L.
Dundee, E.
Elles, B.
Elliott of Morpeth, L.
Elton, L.
Falkland, V.
Fearn, L.
Feldman, L.
Ferrers, E.
Flather, B.
Fookes, B.
Forsyth of Drumlean, L.
Fowler, L.
Freeman, L.
Gardner of Parkes, B.
Geddes, L.
Gilmour of Craigmillar, L.
Glentoran, L.
Goodhart, L.
Goschen, V.
Gray of Contin, L.
Greaves, L.
Hamwee, B.
Hanham, B.
Harris of Richmond, B.
Haslam, L.
Hayhoe, L.
Henley, L.
Higgins, L.
Hodgson of Astley Abbotts, L.
Holderness, L.
Holme of Cheltenham, L.
Hooper, B.
Hooson, L.
Howe of Aberavon, L.
Howell of Guildford, L.
Hunt of Wirral, L.
Hurd of Westwell, L.
James of Holland Park, B.
Jellicoe, E.
Jopling, L.
Kilclooney, L.
King of Bridgwater, L.
Kingsland, L.
Knight of Collingtree, B.
Laing of Dunphail, L.
Laird, L.
Lamont of Lerwick, L.
Lane of Horsell, L.
Lang of Monkton, L.
Lindsay, E.
Linklater of Butterstone, B.
Liverpool, E.
Lucas, L.
Ludford, B.
Lyell, L.
McColl of Dulwich, L.
MacGregor of Pulham Market, L.
Mackay of Clashfern, L.
Mackie of Benshie, L.
McNally, L.
Maddock, B.
Mancroft, L.
Marlesford, L.
Mayhew of Twysden, L.
Miller of Hendon, B.
Montagu of Beaulieu, L.
Montrose, D.
Mowbray and Stourton, L.
Murton of Lindisfarne, L.
Naseby, L.
Newby, L.
Noakes, B.
Northover, B.
Norton of Louth, L.
O'Cathain, B.
Oakeshott of Seagrove Bay, L.
Onslow, E.
Oppenheim-Barnes, B.
Park of Monmouth, B.
Parkinson, L.
Pearson of Rannoch, L.
Perry of Southwark, B.
Phillips of Sudbury, L.
Pilkington of Oxenford, L.
Platt of Writtle, B.
Plumb, L.
Pym, L.
Rawlings, B.
Razzall, L.
Redesdale, L.
Rees, L.
Renfrew of Kaimsthorn, L.
Renton, L.
Roberts of Conwy, L.
Rodgers of Quarry Bank, L.
Roper, L.
Rotherwick, L.
Russell, E.
Russell-Johnston, L.
St John of Fawsley, L.
Saltoun of Abernethy, Ly.
Sandberg, L.
Scott of Needham Market, B.
Seccombe, B.
Selkirk of Douglas, L.
Sharman, L.
Sharp of Guildford, B. [Teller]
Sharples, B.
Shaw of Northstead, L.
Shutt of Greetland, L.
Skelmersdale, L.
Smith of Clifton, L.
Soulsby of Swaffham Prior, L.
Stewartby, L.
Stodart of Leaston, L.
Stoddart of Swindon, L.
Strathclyde, L.
Thomas of Gresford, L.
Thomas of Gwydir, L.
Thomas of Walliswood, B.
Thomson of Monifieth, L.
Tope, L.
Trumpington, B.
Vivian, L.
Waddington, L.
Wade of Chorlton, L.
Walmsley, B.
Watson of Richmond, L.
Wigoder, L.
Wilcox, B.
Williams of Crosby, B.
Willoughby de Broke, L.
Windlesham, L.
Wolfson, L.

NOT-CONTENTS
Acton, L.
Ahmed, L.
Alli, L.
Amos, B.
Ampthill, L.
Andrews, B.
Archer of Sandwell, L.
Ashton of Upholland, B.
Barnett, L.
Bassam of Brighton, L.
Berkeley, L.
Bernstein of Craigweil, L.
Bhatia, L.
Billingham, B.
Blackstone, B.
Blood, B.
Boothroyd, B.
Borrie, L.
Boston of Faversham, L.
Bragg, L.
Brennan, L.
Brett, L.
Brooke of Alverthorpe, L.
Brookman, L.
Brooks of Tremorfa, L.
Burlison, L.
Campbell-Savours, L.
Carter, L.
Chan, L.
Christopher, L.
Clarke of Hampstead, L.
Clinton-Davis, L.
Cohen of Pimlico, B.
Corbett of Castle Vale, L.
Craig of Radley, L.
Crawley, B.
Croham, L.
Darcy de Knayth, B.
David, B.
Davies of Coity, L.
Davies of Oldham, L.
Dean of Thornton-le-Fylde, B.
Dearing, L.
Desai, L.
Dixon, L.
Donoughue, L.
Dormand of Easington, L.
Dubs, L.
Eatwell, L.
Elder, L.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Evans of Watford, L.
Falconer of Thoroton, L.
Falkender, B.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Filkin, L.
Fitt, L.
Fyfe of Fairfield, L.
Gale, B.
Gavron, L.
Gibson of Market Rasen, B.
Gladwin of Clee, L.
Golding, B.
Goldsmith, L.
Gordon of Strathblane, L.
Goudie, B.
Gould of Potternewton, B.
Graham of Edmonton, L.
Gregson, L.
Grenfell, L.
Grocott, L. [Teller]
Hardy of Wath, L.
Harris of Haringey, L.
Harrison, L.
Haskel, L.
Haskins, L.
Hayman, B.
Hilton of Eggardon, B.
Hogg of Cumbernauld, L.
Hollis of Heigham, B.
Howells of St. Davids, B.
Howie of Troon, L.
Hoyle, L.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Islwyn, L.
Jones, L.
Judd, L.
Kirkhill, L.
Laming, L.
Layard, L.
Lea of Crondall, L.
Lipsey, L.
Lockwood, B.
Lofthouse of Pontefract, L.
Macdonald of Tradeston, L.
McIntosh of Haringey, L. [Teller]
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
Maginnis of Drumglass, L.
Marsh, L.
Mason of Barnsley, L.
Massey of Darwen, B.
Merlyn-Rees, L.
Milner of Leeds, L.
Mishcon, L.
Mitchell, L.
Morgan, L.
Morris of Aberavon, L.
Morris of Manchester, L.
Moser, L.
Nicol, B.
Orme, L.
Ouseley, L.
Oxford, Bp.
Parekh, L.
Patel, L.
Patel of Blackburn, L.
Pendry, L.
Peston, L.
Pitkeathley, B.
Plant of Highfield, L.
Portsmouth, Bp.
Prys-Davies, L.
Puttnam, L.
Radice, L.
Ramsay of Cartvale, B.
Rea, L.
Rees-Mogg, L.
Rendell of Babergh, B.
Richard, L.
Rix, L.
Rochester, Bp.
Rogan, L.
Rooker, L.
Sainsbury of Turville, L.
Scotland of Asthal, B.
Serota, B.
Sheldon, L.
Simon, V.
Simon of Highbury, L.
Slim, V.
Smith of Gilmorehill, B.
Smith of Leigh, L.
Stone of Blackheath, L.
Strabolgi, L.
Strange, B.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Temple-Morris, L.
Tenby, V.
Thornton, B.
Tomlinson, L.
Turnberg, L.
Turner of Camden, B.
Walker of Doncaster, L.
Warnock, B.
Warwick of Undercliffe, B.
Weatherill, L.
Whitaker, B.
Whitty, L.
Williams of Elvel, L.
Williams of Mostyn, L. (Lord Privy Seal)
Williamson of Horton, L.
Winston, L.
Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.

23 Jul 2002 : Column 239

5.57 p.m.

LORDS AMENDMENT
13Clause 11, leave out Clause 11
The Commons disagreed to this Amendment but propose the following Amendments to the words so restored to the Bill—

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