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Noble Lords: Hear, hear.

Baroness Ashton of Upholland: My Lords, the noble Baroness, Lady Byford, mentioned capital. Capital has increased, since 1996–97, from 700 million to 3.8 billion this year. By 2005–06, it will be 5 billion. That is important. Noble Lords will know from their experience how necessary it is to ensure that our buildings are fit for purpose in a developing and changing world. I am proud that we have invested so much in capital expenditure and continue to do so.

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The noble Baroness raised specific issues about hygiene orders and fire risks. I apologise for not being able to answer those questions now, but I agree with her about the critical importance of the role of governors and the need to ensure that we have as many governors as possible. I ask any noble Lord here present who is not a governor to become one promptly. I shall write to the noble Baroness on the specific issues that she raised.

I share the noble Baroness's commitment to ICT in schools. I have a passion for broadband, and I recognise its value and importance, particularly to rural communities. On behalf of the department, I can say that we fully understand that we have an ongoing commitment that must be sustained. I am sure that noble Lords opposite will agree. We must ensure that that commitment to ICT in schools and to broadband continues.

The noble Lord, Lord Henley, raised the question of supply teachers. I struggled to get the figures for this year, but the latest figures that I have show that supply teacher numbers are falling, partly, as noble Lords will be aware from my comments last week, because teacher numbers are rising.

The noble Baroness, Lady Sharp of Guildford, and the noble Lord, Lord Henley, talked about performance-related pay and the commitment to the threshold. We must be clear about what the Government are doing in that area. We continue to fund 100 per cent of the cost of teachers passing through the threshold. We continue to fund those who have already gone through the threshold. We have said that we have a pot of money—210 million this year—that is available for teachers who will go through the threshold and go onwards and upwards through the spine. We anticipate that, as with any other performance-related pay, schools will make decisions and will, this year, reward teachers who, they feel, need to continue on that way. We do not anticipate that that will be 100 per cent of teachers. I mean no criticism of teachers: that is simply a recognition of the way in which performance-related pay works and the way in which we approached it. I hope that that answers that question.

I want to spend a few minutes—I hope that I am using time wisely, as the noble Baroness, Lady Blatch, put it—talking about the critical issue of the role of local government. The noble Baroness, Lady Blatch, said that she felt that there had been overt criticism of local government. That is not how I interpret what we have tried to do. It is not about criticising local government; it is about recognising that there is a partnership between central and local government aimed at ensuring that we have adequate funding in schools. To the noble Lord, Lord Henley, I say that it is the Section 52 statements that tell us about the situation in schools—the list was published on Friday—and not press reports, however eminent.

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I accept that, in many cases, there are good reasons for the way in which local authorities handle their expenditure. We do not say that there are not good reasons for some of the ways in which money is held back by local authorities.

Lord Hanningfield: My Lords, the Minister used the words "held back". I repeat what I said earlier: we get the money in monthly instalments over the year, and we agree with our head teachers a formula for distributing it over the year. It is particularly offensive to say that we were holding back 20 million. We have not got the 20 million, and we have agreed with our head teachers how it will go to them. It was a big mistake to publish that last week. I am sure that it is the same in Birmingham, Kent or any other authority that does it: we agree a formula with our head teachers, and the money comes to us monthly.

The use of the words "held back", when we have agreed a process, has misled the public. Many people have asked me, "What are you doing with that money?". We have not got it. Will the Minister comment on that and, perhaps, correct it?

Baroness Ashton of Upholland: My Lords, if I have offended the noble Lord, I apologise unreservedly. I meant that, when we got the Section 52 returns, it was interesting to see that, in the local authority structure, there was quite a variation in different parts of the expenditure and in the amount of money within the local authority. I meant no offence to the noble Lord, and I apologise if there was any.

For the noble Lord's benefit, I shall go through some of the interesting things that we found. I say that they are "interesting", not that they are wrong. That is important. Our purpose is to understand the issues so that, working with local authority partners, we can resolve them. Nineteen local education authorities appear not to be passporting the full increase in their schools formula funding share into their schools budget. Eight of those said that they would. That means that 23 million that we understood would go into schools has not yet done so.

Most local education authorities—125—are increasing funding for their centrally funded pupil provision faster than they increase the funding for individual schools. In total, schools are getting 235 million less than a proportionate share of the increased resources.

There are big variations in the increases that local education authorities are making in their central funding for special educational needs. Forty-five education authorities have increased funding in this area by more than 30 per cent while 33 LEAs have increased their spending by only 5 per cent or less. These increases may be justified by local circumstances but will have an impact on schools' budgets, and we need to understand that.

Half of local authorities have increased their spending on educating pupils outside school—for example, at pupil referral units—by 30 per cent or more. Again, that has an impact. I do not criticise it, I

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simply say that it has an impact. Forty per cent of authorities are planning to spend more than 1 million from revenue budgets on capital spending at a time—as I have explained to your Lordships' House already—when there is increasing funding from central government, and it continues to rise.

Over two-thirds of LEAs are holding back more than 100,000 for contingency purposes. This amounts to approximately 64 million across the country. Again, it is important that we understand what is happening. A total of 533 million which LEAs have specifically earmarked for individual school budgets had not been allocated at the point that we received their statutory statements. Again, we need to understand that.

Finally, within many LEAs there are big budget differences in what is happening for individual schools. This means that in some education authorities schools are getting funding increases of 10 percentage points more than other schools in the same authority.

Against that backdrop, the Government think that it is legitimate for the department to be asking LEAs questions about their spending decisions which reflect what I said within the eight issues I set out. We want to work with education authorities and asked them to point to the steps that they intend to take to avoid any needless redundancies of staff to cover funding issues. We expect replies by 12th May.

In the light of that information, the Government will consider what changes might be made regarding funding arrangements for 2004–05. It is essential that we get a full understanding with LEAs about the decisions they have made and the impact those decisions have had on schools. Then we can look for a way forward, taking full account—I repeat, full account—of the views of education authorities and schools.

I am very grateful for all the analyses that I shall take away from this debate. I recognise that I shall run over on time, but I should like to refer to two or three points on the Standards Fund raised by noble Lords. The purpose of what we have done with the Standards Fund is to increase the control that schools and local authorities have had over how they manage their budgets.

The noble Lord, Lord Hanningfield, raised specifically the matter of the 7 million for the ICT Standard Fund and I should like to speak to this point. I believe that we have already said, but I want to place it on record with the noble Lord, Lord Hanningfield, and other noble Lords, that we shall work with education authorities to help them get all the money allocated. If that requires changes to the rules of the Standards Fund we are very willing to look at that. I shall take away the particular point raised by the noble Lord, Lord Hanningfield, about ICT and I shall ask the department to look at it at once. I hope that the noble Lord will take some comfort from that.

I do not believe that we have had a rushed change; we have had a very significant change to a number of the ways in which we produce the formula. Noble Lords will know that the formula is designed to bring

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a fairer system of funding; to recognise the need to provide funding for every pupil in this country regardless of where they are; and to take into account the issues that confront our children who are greatly disadvantaged in our areas where, for example, transport costs are very high and to ensure that we have dealt with those issues.

I say to the noble Baroness, Lady Byford, that the reason why Tower Hamlets receives more funding than Leicestershire is that when we looked at the additional costs of funding for some of our most deprived pupils we recognised that we needed to put more money into Tower Hamlets where we have many deprived pupils but also, within the fairer funding formula, to recognise the needs of all local authorities.

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