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To address all the points made: yes, on direction to a type of college, and no to individual colleges. I commend Clause 73.

Lord Elton: What the noble Lord has said agrees exactly with what is in the Explanatory Notes, but it does not seem to agree precisely with what is in the Bill.

Lord Lucas: My Lords, at least we are closer to a starting point. The Minister says that classes of college can be allowed. As I said, if the class of college is sixth-form colleges in Winchester, that is a class of one, so the Secretary of State is thereby giving a direction concerning an individual college, an individual person. That is my difficulty: if we allow the direction to apply to classes, a class can consist of one, so he can get round the prohibition by defining a class of one. If we do not allow classes, an enormous area of discretion is off-limits to the Secretary of State. I do not require an answer now, but I would very much like an answer in writing.

Clause 73 agreed.

Clause 74 agreed.

Clause 75 : Academy arrangements

Amendments 162 to 168 not moved.

Amendment 169

Moved by Lord Young of Norwood Green

169: Clause 75, page 51, line 3, at end insert-

"( ) But Academy functions do not include functions of making, confirming or approving subordinate legislation.

( ) "Subordinate legislation" has the same meaning as in the Interpretation Act 1978 (c. 30) (see section 21(1) of that Act)."

Amendment 169 agreed.

Clause 75, as amended, agreed.

Clauses 76 to 78 agreed.

7 pm

Clause 79 : The Chief Executive of Skills Funding

Debate on whether Clause 79 should stand part of the Bill.

Lord De Mauley: My Lords, this is one in a series of probing amendments designed to elicit from the Minister the reason why the chief executive of skills funding has been enshrined in legislation, but the Skills Funding Agency as an organisation has not. We simply want to understand the Government's reasoning why, while

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the Learning and Skills Council was set up as an NDPB, and the YPLA is to be accorded that status, the Skills Funding Agency is not.

The 157 Group, for example, has expressed a desire to see the Skills Funding Agency established as an NDPB. It is worried that it is highly unusual for a funding agency not to have an independent board to oversee the progress and accountability of its work. Its concerns are that the body will be too closely tied to government and that any serious matters will have to be raised straight to the level of a government department. Therefore, instead of being an independent CEO, the chief executive will simply be a cog within, and subordinate to, the machinery of government. Does this not worry the Minister? Furthermore, as insufficient detail is included in the Bill, it would be useful if the Minister could explain what he envisages the structure of the SFA will be, what he considers to be its main functions and how it will carry them out.

We need to probe this area because it was discovered in another place that the Government had indeed considered giving the SFA this status. It would be useful to learn from the Minister the reasons why this approach was rejected. The constitution, legal status and board of the SFA are not included in the Bill. Is the Minister unconcerned that this means that the structure can be altered on the whim of a Minister without any reference to Parliament?

In addition, perhaps the Minister could inform your Lordships of the current practical position of the SFA. Is the senior management team in place? Could he give us details of any shadow running of the SFA, which is currently happening with the YPLA? We are concerned that the closing date for applications to head the SFA has long since passed. Can he confirm that no appointment has yet been announced? If that is correct, can he explain why, especially in view of the fact that there is already a chief executive of the YPLA? It seems that operations are perhaps running rather behind schedule. Does the Minister have any details of the timetable that he can share with your Lordships? Can he at least tell us how many months behind schedule the SFA is running at the moment?

The Lord Speaker (Baroness Hayman): Because this is a clause stand part debate, we have no Motion to move and it is for any noble Lord to speak.

Baroness Sharp of Guildford: My Lords, our names are not attached to these amendments or to the clause stand part, but we have a great deal of sympathy with them. Although the Skills Funding Agency's budget is smaller than that of the YPLA-it is roughly £3.5 billion, whereas the YPLA has a budget of about £7 billion-it is still a very substantial budget. The situation is very odd. For 16 to 19 education, and probably 14 to 19 education, we are setting up the YPLA, which is to be an NDPB, have its own separate board and report directly to Parliament. Higher education is also run by an NDPB-HEFCE-which has a separate board and reports directly to Parliament. The Skills Funding Agency will deal with adult education and will run four separate agencies of substantial importance: the Train to Gain service, the Adult Advancement and

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Careers Service, the National Apprenticeship Service and the National Employer Service. They are not mentioned in the Bill, which picks up the point made by the noble Lord, Lord De Mauley, that we know remarkably little about the running of the SFA.

In terms of transparency and accountability, I find this a difficult issue. On the one hand, it can be argued that the Minister has to answer directly for the SFA. It is going to be set up as a next-steps agency run by a civil servant with a large number of people under him. It will have more people than the YPLA, which is going to have only 500 allocated to it from the LSC; the SFA will have 1,500 allocated to it. It is a substantial organisation being run by a civil servant, answerable directly to the Minister and with considerable powers, which are detailed in the Bill. It will run the whole of our adult education and training services and the adult apprenticeship service.

How is the SFA going to be made more accountable? We have done away with the Adult Learning Committee that was established under the LSC. One advantage of the SFA having NDPB status is that there would be a board behind the chief executive representing the many areas in the adult skills world. Local government, the sector skills councils, employers and regional initiatives could all be represented. The anomaly is that elsewhere in the education world there are NDPBs with advisory boards that are, to some extent, answerable directly. With the Higher Education Funding Council for England and the LSC, the tradition was that they were set up as NDPBs, but now we suddenly break with that tradition and have this organisation with substantial functions that is only answerable to Parliament through the Minister.

Our party's vision is very different from that of the Conservative Party. On the whole, we feel that with the adult world, and given the blurring of boundaries between higher education and further education, the sensible thing is to expand HEFCE to include all adult education. The name that we have given to it is the council for adult skills and higher education-abbreviated, that becomes CASH, which is perhaps appropriate since we are still advocating that there should be no tuition fees. However, we believe that there is a lot behind these amendments and we have a lot of sympathy with them.

Lord Young of Norwood Green: My Lords, many questions have been raised in today's debate. I have been struck by how much common ground there is between us on the need to reform our post-19 education and training system. There is general recognition that the current system of funding education and training requires refocusing, with employers playing a leading role in identifying what skills are needed locally, regionally and nationally and designing the necessary qualifications, and with funding following individual and employer choice. This requires a more demand-led approach, where funding is allocated to colleges and training providers based on the choices of individuals and employers and on wider local, regional and national skill needs.

The Skills Funding Agency will be one part of a new skills landscape in which the UK Commission for Employment and Skills, sector skills councils, RDAs,

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the sub-regional economic and skills boards and local authorities will all play their part in determining the skill needs of the nation. In making funding decisions, the chief executive of skills funding will be required to take account of advice from these bodies through guidance issued by the Secretary of State under Clause 115.

Colleges and other providers will also continue to have a central role in informing and shaping the policies that will drive skills forward. At a national level, colleges will continue to be represented on the ministerial standing group and the FE Reform and Performance Programme Board and will directly inform the development of the policies and programmes.

At a regional level, colleges and providers will be consulted by the RDAs on the development of the regional skills strategies, which will be integral to the single integrated regional strategies to be developed by RDAs with local authority leader boards, as proposed in the Local Democracy, Economic Development and Construction Bill.

At a local level, we will expect colleges and providers to engage with learners and employers in their local communities and to explore new and innovative ways to meet their skill needs. The best colleges are already doing this. The system that we are setting up will free colleges and providers from the constraints of rigid funding agreements, enabling them to provide the courses that students and employers want.

The core question in this debate is a narrow one: should the SFA be an NDPB or an agency? Amendment 171, in the name of the Conservative Front Bench, proposes an NDPB. Our overriding aim has been to ensure greater democratic accountability. In the case of the YPLA, NDPB status is appropriate because that body will exist to provide technical support to local authorities in the delivery of their new duties under the Bill. The key commissioning decisions will be made by local authorities, so democratic accountability is maintained.

In the case of the SFA, our preference is for a structure that places a premium on democratic accountability and ensures that Ministers deliver on their responsibilities through the department. Operating as an agency, the Skills Funding Agency will be closer to government, ensuring that it operates within the department's overall strategic framework. This will enable the chief executive to react much more quickly to changing strategic needs and to contribute to the decision-making process through practical experience of what works and why.

If Parliament had agreed to abolish the LSC, we could have established a Skills Funding Agency by purely administrative means using existing powers; we would not have needed Part 4 of the Bill at all. However, we took the view that it was essential to have a robust legislative underpinning for the functions, powers and duties in respect of post-19 education and training, including the responsibility for some £4 billion in funding. These are therefore set out clearly in the Bill, vested in the chief executive of skills funding. We also wanted to put the entitlement to an apprenticeship into legislation.

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This approach also enabled us to include a clear statutory requirement for the chief executive to report to Parliament through an annual report-I thought that that would be welcomed-which will set out how the chief executive has performed the functions of the office for the financial year, and for his accounts to be laid before Parliament and subject to certification by the Comptroller and Auditor-General. Select Committees will also be able to require the chief executive of skills funding to give evidence and respond to recommendations made by the committee.

I understand the concerns of colleges and the 157 Group about the status of the new body. There are two main worries. The first is that agency status may somehow lead to the politicisation of funding decisions. However, I think that that is to misunderstand the nature of the day-to-day funding decisions that the SFA will take. In a demand-led system, it will matter less where the money sits, because funding will follow the choices of learners and employers.

It will be the role of the SFA to ensure that this new system operates effectively so that it really does enable individual learners and employers to access courses of their choice and so that the skills needs identified by the UKCES, sector skills councils, RDAs and local authorities are met. It is therefore demand-led. Indeed, such a system is inherently less vulnerable to the sort of political influence about which the colleges have expressed concern. As an additional safeguard, however, we are creating the SFA as an agency and naming in legislation the chief executive on whom the powers and duties rest. We are also making it explicit, through Clause 117(4), that the Secretary of State cannot intervene in individual funding decisions.

The second concern is that the voice of colleges and other providers will somehow be lost. However, as I have already made clear, colleges will continue to have a central and influential role to play in the new arrangements and will have a much freer hand to do so. The changes that we are making will mean that, rather than being lost, their voices will be heard louder and more clearly at an earlier stage of policy development. By making the SFA an agency that is part of the Department for Business, Innovation and Skills, there will be a clear line between the department and the chief executive of skills funding-an area about which colleges and providers have raised concerns in the past.

7.15 pm

The power in Clause 80 for the Secretary of State to direct the chief executive on the performance of apprenticeship functions, which Amendment 172 seeks to remove, is a further measure to enhance the accountability framework. This provision ensures that the chief executive of the National Apprenticeship Service is directly accountable to the Secretary of State. It reflects the central importance that we attach to the apprenticeships programme as part of the Government's response to the economic downturn and their wider post-16 education and training strategy. It will mean that the apprenticeships programme has a directly accountable national head who will be able to give evidence to parliamentary committees.

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The noble Lord, Lord De Mauley, asked when the chief executive of skills funding would be appointed. The SFA will be established incrementally in shadow form from November and will be fully operational by April 2010.

Another question was whether the structure can be altered without further reference to Parliament. The answer is yes, but the focus is on delivering services, and we do not expect any changes. A framework document will set out for Ministers what is expected of the Skills Funding Agency and how it is accountable.

On the structure of the SFA, it will, as I have said, have a customer focus, offering a set of services that I have described already: the National Apprenticeship Service, the Employer Skills Service, the Learner Support Service, and a college and learner provider service. It will also be overseen by a small executive board.

I apologise for the length of that statement. However, this is a very important issue and I wanted to set out quite clearly why we decided to make the Skills Funding Agency an agency. I therefore hope in the light of those assurances that noble Lords will not oppose the clause.

Baroness Sharp of Guildford: I have two further questions. The Minister mentioned just now that the SFA was going to be overseen by a small executive board. One of the issues that I raised was the whole question of the absence of what in the LSC was called the adult learning committee: an absence, in a sense, of those who would advise the chief executive and who come from the community and represent the community-in so far as a small executive board will be on that small executive board.

The other issue that I meant to raise but forgot to in my initial remarks relates to the role that the regions will play in the SFA. In the second paragraph of a letter sent to Jim Brathwaite at SEEDA on 31 July, the noble Lord, Lord Mandelson, says very clearly:

"I can confirm that I am considering the case for modifying the existing plans for the creation of the Skills Funding Agency ... to allow the existing skills landscape to be simplified by making the RDAs the single body with responsibility for producing the regional skills strategy and being the champion and advocate for skills at the regional level. Under this scenario, RDAs would be assigned the lead role in identifying, as part of their wider responsibilities for regional economic development, demand-side needs for skills in their regions. Those needs will be expressed in a regional skills strategy, led by the RDA, which will constitute an investment plan which would become binding on the Skills Funding Agency".

That is a somewhat different scenario from that presented in the Bill. It is a very substantial change. Can the Minister tell us something about it?

Lord Young of Norwood Green: My Lords, my apologies for speaking not to the noble Baroness's amendment but to the clause stand part. I think that there were two points. First, how will the FE sector be engaged in the new engagements? We have indicated that there will be a board. We will also continue to need the expert advice of the sector in informing and shaping the policies which will drive skills forward. That will be strengthened in the new system by ensuring that the source of that advice and the body which will implement it are both close to government.

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Colleges will continue to be represented on the ministerial standing group and the further education reform and performance programme board, as well as through other regular meetings with Ministers. Those discussions will directly inform the development of the policies and programmes which will be implemented by the chief executive, who is very much of that department. On the other question that the noble Baroness raised, I must admit that I need to ask her-

Baroness Sharp of Guildford: It was about the letter that the noble Lord, Lord Mandelson, sent to Jim Brathwaite at SEEDA, which sets out a very different view of how the SFA will operate from that which comes over in the Bill and the Explanatory Notes.

Lord Young of Norwood Green: I thank the noble Baroness for reminding me. We anticipate that the RDAs will lead in identifying demand-side need for skills in their regions. This will be reflected in their regional skills strategy, which will be part of the single integrated regional strategy developed with-and I stress this-the local authority leader boards.

We envisage that the RDAs will also take responsibility for skills advocacy-including championing and delivering initiatives to raise demand, such as the skills pledge-partnership building, and spearheading multi-agency action in support of employers to identify and resolve mismatches in the supply of skills to meet new employer demand. Responsibility for allocating funds to and managing the relationships with colleges and training providers will rest with the chief executive of skills funding. In doing that, he or she will take into account the national, regional and sub-regional strategies of the UK Commission for Employment and Skills, the RDAs and the sub-regional and city partnerships.

Lord De Mauley: My Lords, I am grateful to the noble Baroness, Lady Sharp, for her expression of sympathy for our central point in the debate. I think she said that she had not put her name to the clause stand-part Motion, but I am delighted to say that my version of the Marshalled List indicated her support. She helpfully added to what I had said with, among other things, the compelling financial point. The noble Baroness subsequently raised the introduction of the RDAs, and rightly said that this is a substantial change. I think we shall need to come back to it later in these debates.

I thank the Minister for his detailed response to this probing amendment. I am not entirely sure that I am convinced by his answer-I will need to read carefully what he has said-but I shall not press the point this evening.

Clause 79 agreed.

Amendments 169ZB to 169ZD not moved.

Schedule 4 : The Chief Executive of Skills Funding

Amendment 169A not moved.

Amendment 170

Moved by Viscount Eccles

170: Schedule 4, page 175, line 3, leave out "and other management of and administrative"

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Viscount Eccles: My Lords, this is another probing amendment which will raise questions for clarification. It is, as the Committee will see, about a paragraph in this schedule that contains directions. First, why is it necessary to include the power to direct,

as the schedule does? The chief executive is a civil servant, as we have heard, reporting to the Secretary of State and not to Parliament. He or she will follow departmental rules with which he or she will be familiar, which will cover administrative and management matters. If by some chance they were not being followed, the Secretary of State would have no trouble finding somebody else in the department to point out that this was how it should be done.

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