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Lord Smith of Leigh: I rise to speak to the amendments standing in my name in this group. Before doing so, I declare my interest as leader of a local authority and as being married to someone who has been a teacher for many years.

I apologise to Members of the Committee for not being present at the Second Reading. My excuse is that, under the provisions of the 2002 Act, we had to produce the schools budget by 31 December. I had arranged a meeting on 13 December thinking that the Second Reading would be on the 20th, but the date of the Second Reading was changed and I was unable to be present.

However, I read the debate with interest and found that there was little mention of Schedule 16 or, indeed, of Clause 98. As the noble Lord, Lord Hanningfield, implied, those parts of the Bill move a great deal of responsibility away from local authorities. At present, through local authorities some £24 billion is spent on schools. These provisions would bring about a huge change and they deserve some consideration by this House. Therefore, the purpose of my amendments is simply to retain the status quo.

I shall try to argue in three general areas: first, I shall refer to the strategic role of local authorities; secondly, I shall talk about raising school standards; and, thirdly, I shall echo some of the practical issues raised by the noble Lord, Lord Hanningfield, although I shall try not to repeat too much of what he said.

During the Second Reading debate, my noble friend made great play of the strategic role that local authorities should play in education, and I agree with him. I do not see a contradiction between a strategic role and a funding role. Indeed, in my experience, if you want to have a strategic role, having a little money to play with usually allows greater influence. That is certainly the way in which I tried to proceed in health matters in my own authority because we got greatest reward from the areas where we had funding influence.
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I can see no requirement in the Bill to make schools participate either in the general children's agenda or in the wider strategic agenda for local authorities. I think that that is a great omission and perhaps I may give an example to illustrate it. If, as the Government wish, a local authority wanted to pursue a public health agenda, raising fitness levels, and it wanted to get schools to co-operate in raising standards of fitness among their pupils and also perhaps in making their facilities available for the wider community, that participation would depend on the views of individual head teachers and governors. I do not think that that is a really strategic way to manage affairs.

I think that everyone in your Lordships' House agrees with the aim of the Bill—to ensure that we raise school standards. Certainly there is evidence that that has happened. Schools have done a great job with the support of government and, if I may say so, with the support of local authorities as well. But there now seems to be an indication that we have reached a plateau: we have raised standards to a certain point but the rate of increase has stopped. That is because we no longer need to pay so much attention to what is going on in schools—it is what is going on outside schools that is important. Again, perhaps I may use two illustrations to show the importance of providing a broader education and the importance of those social issues.

My own authority operates an outdoor pursuit centre in the Lake District. It gives children the opportunity to visit the Lake District which, despite its proximity, many of them would never do of their own volition. It gives those urban children a chance to see a different lifestyle and it gives them practical experience of subjects such as geography. It also helps them to develop social skills among themselves. As it is down to all schools to participate, rather than it being a local authority activity, we believe that under the new funding arrangements, the future of such activities is certainly under a big question mark.

I am concerned that the social side of education is not taken into account. Perhaps I can use an illustration that may be extreme, but it is real. To understand the way in which drugs affect communities, my authority carried out a study of a small housing area. The most shocking case that we came across was of a single mother—a chaotic drug-user—who was injecting drugs. The only person she could trust to inject her with drugs was her 14 year-old son. That young man did not have a perfect attendance at school, not that one would expect him to, and when he attended his mind was probably not always on the subject being taught.

If we are trying to achieve change for such individuals, we cannot leave the matter to schools. Schools will have to work with wider social partners. The recently published statistics, the tables set out by authority and by school, show very convincingly that social factors affect performance. I believe that the Bill is moving in the wrong direction.

On practical matters, I shall try not to repeat what the noble Lord, Lord Hanningfield, said, although I agree with him. Potentially, there is a £400 million
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problem for the Government: the £300 million odd that the noble Lord mentioned of overspending and the £100 million of underspending that takes place at the moment. Where will that money come from? Can we be assured that it will not come from raising the council tax or, as in my authority, continuing to subsidise schools through the council tax? What about the requirement on schools to operate the principle of best value? There has been great progress in achieving efficiency in local authorities, but where is that requirement on schools?

In conclusion, I shall repeat the questions raised by the noble Lord, Lord Hanningfield. What has changed to require this? Why is it different in England and Wales? Perhaps I may quote from the then Minister of State for School Standards,

he was talking about the 2002 Act—

It has not remained in place for very long. I believe that local authorities, unlike some advisers to government, are part of the solution for education and not part of the problem. The Government should act only where they have evidence that local authorities are not performing properly and should not break up strong, important relationships between local authorities and schools.

Baroness David: I want to speak in support of my noble friend Lord Smith of Leigh. First, I congratulate the Government on the excellent way in which funding has increased over the past seven years—over 30 per cent in real terms. I am confident that the money is worth investing for our future in that it will provide better education for children.

The increase has been managed by local government and almost without question local government has delivered the additional resources to schools. As I understand it, Amendment No. 141C, moved by my noble friend, would remove the Secretary of State's power to direct finance into schools and enable the money to continue to be routed through the local government finance settlement. I think it was in the late 1950s that the former Ministry of Education stopped funding local authority education services directly and the vote was transferred to local government. The reason, I recall, was that that would give more responsibility to the local authorities which would be able to decide better between the competing demands for local funding than central government could. It would promote joint working and the integration of services.

The Bill appears to unravel nearly 50 years of practice in this area which is a trifle ironic given that in the previous Session of Parliament we passed a Children Act which has, as one of its objectives, support for joint working between education and other local services, as the noble Lord, Lord
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Hanningfield, said. I understand that one of the Bill's proposals is to provide a three-year budget for schools. Perhaps the Minister could say in his summing up why that could not have been achieved by guaranteeing a three-year budget to local government.

I am sure that the Minister has read the recent report of the House of Commons Education and Skills Select Committee on Public Expenditure on Education and Skills (First Report of Session 2004-05, HC 168). For example, the report concludes in paragraph 25:

In paragraph 34 it states:

That is worrying. The expert Commons committee believes that DfES has brought forward this provision in the Bill, not because of actual problems, but because of perceptions and there is no evidence that the solution which the Bill is proposing will work anyhow.

The committee went on to record, in paragraph 30, that the change will lead to,

I am concerned about the effect of withdrawing upwards of £20 billion from local government finance and the effect on other local government services. Although the money will be channelled through local authorities, there must be a massive upheaval as local authorities will no longer be able to take an overview of the funding of all local services. What are the implications for other local government services such as transport, housing, planning, social services for the elderly and children?

I hope that the Minister will be able to give answers. I am a great local government sympathiser. Having served in local government in the 1960s and 1970s, I know how good and how helpful local authorities can be. I very much hope that the Minister will have some good answers to those points.

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