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Baroness Walmsley: My Lords, I, too, thank the Minister for outlining and explaining the regulations. We are not quite as enthusiastic as the noble Baroness, Lady Buscombe. My attitude might be described, in the words of WS Gilbert, as "modified rapture". I welcome the fact that these two sets of regulations are to be amalgamated and will cover two financial years, but that makes the regulations very complicated, as the noble Baroness, Lady Buscombe, outlined, with guidebooks, toolkits and all the rest of it. Complexity may be necessary, but it is the enemy of transparency. It also presents problems for the growing army of school bursars. There have been numerous changes to school budgets in recent years, which make my head spin. I feel sorry for the poor heads and bursars who have to deal with them daily. Is the Minister satisfied that they have had enough training?

We welcome the move towards multiple-year funding, since it brings more stability and allows schools and LEAs to plan services. However, it is worrying that more and more control from the centre is proposed in the regulations, cutting out the discretion of LEAs. A little local discretion remains, but the problem with ring-fencing is that LEAs that used to spend more on education than the Government were passporting may decide not to do so any more. According to the LGA, that is happening already.

We must not just think of education spending as money for schools. We on these Benches think of schools as part of a wider education service providing and supporting education for communities. If we leave it entirely to individual schools to decide which of those services to buy into, we might end up with a central service that is not viable. Look at what happened to music services when individual school budgeting first came in. It also takes financial levers away from the LEA, which democratically represents the local community. The Every Child Matters agenda pulls together services to ensure that the child, not institutions, is the centre of spending and policy, which is quite right, but one must not assume that only the school is in a position to know what services local parents and young residents want and need. If all the money is ring-fenced to the schools, the Government will undermine education in its widest sense, so there is a point beyond which it is not sensible to go. I think we are rapidly reaching it.

To some extent, I welcome the new powers given to schools forums, since at least they are local, unlike the Secretary of State. But if one looks at the membership of those forums, one realises that they are dominated by the schools' interests. It brings to mind the saying that "Turkeys don't vote for Christmas" when one realises that the LEA has to ask that body for
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permission to withhold money from schools for central services under Regulation 5(2). I note that if it can get the approval of its schools' forum, that should enable it to support the broader children's agenda to fund multi-agency activity in support of vulnerable children. I wonder whether that could be extended widely enough to include mental health and counselling services, such as the Place2Be initiative, about which I am very enthusiastic, as the Minister knows. I also wonder whether there is any limit on the amount of such funding that can be spent in the voluntary sector. What guidance will be given to schools about how to balance the purchase of maintained sector services with services from voluntary and for-profit providers who need a flourishing and predictable market or they will go to the wall? I do not think that can be done by individual schools. It has to be left to a body with a strategic overview and the financial levers to make things happen—in other words, a properly funded LEA.

Perhaps I may ask the Minister specifically about music services. I looked carefully at the regulations and notes to see where the funding for these services came from—perhaps the officials in the Box could help us. I looked at Regulation 7 and Schedule 2 and I could not see it mentioned. I came to the conclusion that it must be covered by paragraph 32 of Schedule 2, but perhaps the Minister can confirm that. If so, I am concerned about the upper limit of 0.1 per cent of the school's budget that can be allocated to this group of non-specified services. Does this really give enough flexibility? I use music services as only one example.

Another matter that causes me some concern is the new rule that pupil numbers must be determined at a single point in the year. What is the rationale for that, and is it for the benefit of schools or the LEA? I see that it takes away some of the discretion of local authorities, but, according to the notes, the stakeholder schools consulted thought that it would bring them a desirable element of funding stability. I note also that the regulations allow for changes resulting from staggered intake in primary schools from nurseries and pre-schools and for unusual and significant changes in the school populations to be funded by the LEA from central resources.

However, I doubt whether most hard-strapped authorities' central resources can stand much of that sort of demand. I read in the notes that 53 per cent of consultees were in favour of this change but 42 per cent were opposed. I wonder why, with such a large body of opposition, the Government have not decided to pilot this new arrangement in a few local authorities before rolling it out all over the country. It could well be advantageous to schools. Why have the Government decided not to try it first, just to make sure?

I echo some of the concerns expressed by the noble Baroness, Lady Buscombe, about alternative provision for excluded pupils. I am very concerned when any pupil is excluded from a school and does not go immediately, not after five or six days or whatever it is—I think it is more than that at the moment—into alternative provision. If you are to have that
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availability, you must have spare capacity. That means that you have to look very carefully at how that alternative provision is funded. It could well be that not enough is going into that alternative provision. I wonder how these regulations will affect that. I hope the Minister can help me with these questions.

Lord Adonis: My Lords, the noble Baroness gave these proposals a welcome—what she described as—"modified rapture". From her, I take that to be the highest possible praise for measures being introduced by the Government. I take that compliment in the spirit in which it was intended. I am also very grateful to the noble Baroness, Lady Buscombe, for her remarks. I will not pretend that I can answer all these detailed questions. In particular, I am looking in vain for the note about music services and which regulation they come under, in terms of the ability to retain central funding. Rather than blather, I will give specific replies to a number of the specific points.

On the major points raised, there is clearly a philosophical issue, on which I suspect the noble Baroness, Lady Walmsley, and I will not agree, which is whether having some degree of ring-fencing of local authority budgets in respect of schools is a desirable step. We believe that it is because it protects the interests of schools and ensures that the funding the Government have allocated to education—what they regard as their top priority—is spent in local authority budgets on that basis.

I understand the argument against, which is that this restricts local authority discretion to some extent. I do not believe that, as it were, restricting local authorities' discretion in terms of allowing them to spend less on education than we would like is a worthwhile freedom for local authorities. Naturally most local authorities do not either, which is why I do not detect a great deal of heat in that issue.

The noble Baroness said that the fact that we stipulate a minimum that local authorities must now spend means that they will regard that as a maximum and not spend on top. The whole point of elected local authorities is that they are accountable to their voters. My sense is that local authorities in areas where education spending is felt to be inadequate will be under every bit as much pressure to increase that funding and ensure that their schools are properly supported after the minimum guarantee and the ring-fencing is in place as they were before. That is very much a matter between them and their voters. We have local democracy alive and flourishing and do not believe that simply stipulating the minimum that they must spend in any way disincentivises them from spending more.

The noble Baroness, Lady Buscombe, raised two broad issues to do with balances and schools forums. I cannot answer why we have gone for one use of the plural rather than the other, so that is something else about which I shall have to write to the noble Baroness, but I imagine that that was the result of long and anguished deliberations by officials on the appropriate word, and that there is some rationale for it.
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First, on financial balances, of which a great deal of play was made in another place, we should get the matter in perspective. The figures given by the noble Baroness this afternoon, repeating those raised in another place, related to the 7 per cent of primary schools and 16 per cent of secondary schools which have deficit balances. That means that the overwhelming majority of schools are not operating in deficit. The noble Baroness asked me for the overall surpluses. The gross surplus at the end of the last financial year across all school budgets was £1.7 billion. When the deficits are included relating to the small minority of schools that are running deficits at the moment, the net surplus was £1.5 billion. That relates to a total spend on schools through local authorities of £27.7 billion, so that figure is not unreasonable, especially given that many schools accumulate balances specifically because they want to fund priorities in the period ahead, including capital and other priorities, for which it is perfectly sensible for them to retain balances from one year to the next. But local authorities have the power to intervene if they believe that balances are excessive. In exceptional circumstances, they can require steps to be taken. In very exceptional circumstances, they can suspend the power of the school to run its delegated budget because they believe that it is not doing so with sufficient prudence.

So if we consider the situation at large, we do not believe that the deficits are unreasonable or that we have a serious problem with excessive numbers of schools running deficit balances. In individual cases where school budgets are not being properly managed, local authorities have a legitimate and very important role to intervene to ensure that management is brought under control.

The noble Baroness, Lady Walmsley, mentioned the important role of bursars. I simply note in passing that until recently, there were very few bursars in schools. We regard it as an immensely worthwhile step forward. After all, secondary schools are in many cases running budgets above £5 million a year and employing more than 100 staff. Because of the development of extended schools and new funding streams to meet the Every Child Matters agenda, which the noble Baroness so rightly emphasised, schools are receiving substantial additional funding from a variety of sources, including regeneration funding. They are managing an ever-expanding workforce and it is immensely important to have proper, professional support to do that.

Through the National College for School Leadership, we are providing dedicated training for bursars. We provided the first ever training course in financial management for schools for the specific training of bursars. The number of bursars in secondary schools, in particular, is rising rapidly. We see that as a thoroughly welcome development. It shares the burden of school management more widely, so head teachers are not solely responsible, as they often were before, and it professionalises the operation enormously. Although I much regret to say that not many schools are lucky enough to have either bursars
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or governors with the financial expertise of the shadow Minister for schools in another place, to whom the noble Baroness, Lady Buscombe, referred, from many years reporting on the Financial Times, it is not my view that financial reporting and regulation in the private sector is somehow easy to understand, non-complex and that, in stark contrast, we have a morass of complicated guidance and regulations in the public sector.

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