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23 Jun 2010 : Column 1329

However, they currently,

very important-

SEN transport is an extremely expensive item in local authority funding-

Those also are very significant items of local authority spending, which have a huge impact on the budgets of individual schools.

It is not clear to me from the noble Lord's letter what course the Government propose to take in respect of those important items of spending. Clearly, they will need to be considered case by case in some detail before a proper funding scheme can be put together in relation to the expanded number of academies that we are considering in this Bill.

The conclusion of that annexe has a wonderful sentence of the kind which I fear to say I signed off on so many times when I was a Minister, but to which the House should pay very great attention. It says:

"We want to work with local authorities on what these changes will mean for local authorities, and the important ... role they have to play".

Let us be clear-that means that we do not have the foggiest idea at the moment what the actual arrangements are that we are proposing, and a great deal of work will be needed before we will be in a position to give any detailed guidance on what that will mean. That further strengthens the case for having some independent process of assessment and reporting on the overall scheme for funding academies. Having the National Audit Office or some other independent body-although the National Audit Office is clearly eminently equipped for the work-giving independent validation to the overall scheme being used for academies, and advising Parliament that the scheme meets the commitments that the Government have given, that academies will be fairly funded in relation to other maintained schools, could be a very important element in ensuring that these arrangements command public confidence.

Baroness Perry of Southwark: My Lords, it is apparent that academies will have more money in their fist, so to speak, than community schools. As the noble Lord, Lord Adonis, has just made clear, an enormous amount of money can be withheld by the local authority, which will now come into the academies' own purview for them to spend. The difficulty with having an outside agency to lay down frameworks or even to observe the frameworks is that there is enormous variety from one local authority to another in the amount that they hold back and the amount of these services-the noble Lord read them out-that they provide. Authorities such as the London Borough of Wandsworth, where I live, withhold less than 5 per cent from school budgets for their central services, whereas others withhold well over 20 per cent to provide centralised services. The inequality will be very apparent. I share the wish expressed by the noble Baroness, Lady Garden, and the noble Lord, Lord Adonis, to have some way in which to demonstrate

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that fairness is being exercised and is being seen to be exercised, but it would be difficult to do that, given the huge disparity at present. Of course, it will be possible for schools, once they become academies, as they do now, to contract back with the local authority for some of these services, which will return that money to the local authority. However, in many cases-it is the case in Hackney, for example-very few of the academies do that.

Lord Desai: My Lords, I rise to support my noble friend Lord Hunt. I apologise to the Committee that I did not speak at Second Reading, so I shall keep my intervention short. There is a great desire on the part of the new coalition Government and the Secretary of State to free lots of schools, but there is a paradox in that that requires his dictatorial powers to free everybody-he will lay down what freedom means to everybody. Our task is to ensure that the Secretary of State makes it clear to us in the legislation in what sense he is not taking away powers from your Lordships and another place. We need to scrutinise that, because there are a lot of anxieties about the scale and ambition of this project and the haste with which it is being implemented. There is also a worry that there might be some unintended unfairness to schools left outside the academies field or to local authorities. It would be good if the Minister could make it clear that considerations of fairness and equity and not taking powers away from the legislature arbitrarily will be adhered to.

The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford): My Lords, I am grateful for the contributions-

Lord Phillips of Sudbury: My Lords, would it help the Minister and the Committee if I were to say that the score is England 1, Slovenia 0?

The Earl of Listowel: I apologise if this has already been covered but the noble Baroness, Lady Perry of Southwark, pointed out that the academy schools will have considerable additional funds. I am sure that we will have discussed this; it is something that I should have given more attention to sooner. Could the Minister, in replying or in correspondence, give as much detail as possible on exactly how much academies can expect to be given? That would be helpful. I thank the Minister.

Lord Hill of Oareford: My Lords, I should probably speak now while England is ahead in the football; on past form that may not persist. I thank the noble Lord, Lord Adonis, for his insight into ministerial life. I know that many will recognise what he says, as I have discovered over the last three days. I also thank the noble Lord, Lord Hunt, for his kind welcome. I am sorry that the noble Baroness, Lady Morgan, is not here, but I am grateful for the noble Lord's words.

Some interesting and important points have been made about transparency. It is important not just that everything should be fair. It is absolutely clear that our intention is that our approaches to funding should be fair. However, I take the point that they also need to be seen to be fair. Funding is a fiendishly complicated area, as I am discovering as I try to get my head around it. I recognise the need for greater clarity. I say

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at the beginning that I undertake to reflect on whether there are ways in which we can better demonstrate that, without going down some of the routes that have been suggested in a range of amendments, which, for various reasons, may be slightly overcomplicated and bureaucratic.

I start by summarising some of the main points that have been made and by responding to the opening points raised by the noble Lord, Lord Hunt. The Bill, as he said, would allow the Secretary of State to fund academies either by contractual agreement-as now-or, for the first time, through grants. The purpose of that is to give the Secretary of State greater flexibility. To respond to the point made by my noble friend Lady Garden, it is not intended to be a bit of both; it is a case of either/or. There would be no top-up from one to the other. As the noble Lord, Lord Hunt, set out, it is our view that the vast majority of academies will continue to be funded by the route with which we are familiar-the contractual funding agreement, which runs for seven years. The proposal for the grant, as the noble Lord summarised, is to give a greater degree of flexibility, probably in a small number of cases where having that-particularly in the case of a new school being set up under the academy model-might make more sense. The requirements on academies relating to admissions, exclusions and special educational needs will be the same, whether they are funded through a grant or a funding agreement. I hope that that provides some reassurance to the noble Lord, Lord Hunt of Kings Heath.

On Amendment 79, the Government have made it clear that they will apply a rigorous "fit and proper person" test in approving any sponsors of an academy or promoter of a free school. The Secretary of State will publish on the department's website the criteria for deciding applications from schools that are not outstanding. In some ways I recognise the point that there is a need for greater clarity on these issues. Part of the answer to the points that have been raised on both sides of the Committee is that, if we publish more information to make clear what the criteria are, we may be able to reduce some of the uncertainty.

We are keen that there should be flexibility in the criteria that the Secretary of State can use, so that he makes the best decision in each case. The Secretary of State expects to approve all applications from outstanding schools other than those where there are exceptional circumstances-for instance, if a school has a significant financial deficit. As the programme develops, it may be necessary to adjust those processes in the light of experience, particularly with regard to free schools. We are keen to ensure that we have the flexibility to do so.

Amendments 14, 79 and 80 all require that the conditions of academy arrangements should be set out as statutory instruments. The noble Lord made that point. Again, we are keen to try to maintain as much flexibility as possible. We will publish a revised model funding agreement, some elements of which I have circulated, although not as early as I would have liked. They are now in the Library. That will make clear the standard terms and conditions under which an academy will be funded.

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An academy agreement is a contract between the Secretary of State and an academy trust under which the academy trust agrees to establish and run an academy and in return the Secretary of State agrees to provide funding for the academy trust. Amendment 11 would mean that an academy agreement could put in place only one half of these arrangements, so the contract would not be properly made. Clause 1(3) has been drafted to ensure that future academy agreements will, as now, need to contain both those elements. Amendment 10 would allow the Secretary of State or the academy trust to amend the terms of the funding agreement at any time. That is already the case: the funding agreement can be amended by mutual consent of both parties, via a deed of variation.

Amendments 124 and 125 would require that academy orders be made by statutory instrument-in the case of Amendment 125, subject to the affirmative resolution procedure. The making of an academy order is an administrative process on the way to becoming an academy. While it is important for the school in question, there is not necessarily a wider public interest in an individual decision by an individual school that would make it necessary or appropriate to bring each and every one of these before Parliament.

4.30 pm

Baroness Williams of Crosby: The Minister has eloquently defended flexibility in relation to Amendments 124 and 125. As regards accountability, those amendments would create a statutory structure that could be questioned in Parliament. Will he say a little more about accountability, which for many of us is absolutely cardinal?

Lord Hill of Oareford: I was about to make a point that relates to the issue that the noble Baroness has raised. The Delegated Powers and Regulatory Reform Committee of this House, which has reported on the Bill, has made it clear that it does not consider it necessary or appropriate for these orders to be made by way of statutory instrument. It made that clear in its first report of this Session, published on 17 June.

Lord Hunt of Kings Heath: My Lords, I am sure that many Ministers have read out the advice of the Delegated Powers and Regulatory Reform Committee when it suits the Government's case. However, you cannot look at the orders or the suggested regulations in isolation from the whole process, which takes local authorities and formal consultation out of the procedure. Essentially, the Secretary of State is taking to himself considerable powers. That is why there is considerable support round the Committee for ensuring that there is parliamentary scrutiny. I am happy to concede that the amendments before us may not fit the bill, but there is a principle here in relation to the Secretary of State taking to himself certain powers that are held by local authorities. A formal consultation process will not be allowed; it is certainly not in the legislation. Therefore, there has to be some form of additional scrutiny. As that scrutiny will no longer take place at local level, it can take place only in Parliament.

Lord Hill of Oareford: I am grateful to the noble Lord for making the point that these ways of dealing with the issue may not be the right ways forward. I

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also take the point on the core question of consultation, which we have debated already in Committee, and the question on accountability, which my noble friend Lady Williams raises. We recognised at an earlier stage in Committee that there is a tension when one is seeking to give greater responsibility at a very local level-to teachers or parents, which is a more local level than the local authority level. I recognise the tension between the very local level and what goes on in the centre and the force of the points made by the noble Lord and others. I will reflect and see whether there is any sensible way in which to take those points on board. I have, in passing, touched on the point that an academy would not need to receive funding through both routes.

Amendment 66 would remove exceptions to the prohibition on academies to charge for education provision. Academies would not be able to charge for and, in many cases, run after-school education such as extra-curricular music or drama lessons. I want to reassure the Committee that academies will not be permitted to charge for education provided during the usual timetabled school hours. In respect of charging for education, academies will have to do exactly what any maintained school would be expected to do.

In resisting Amendment 74, I do not mean to imply that insurance is unimportant for academies. Of course it is important and, under existing arrangements, academies are required to have insurance relevant to their responsibilities. However, that kind of matter does not need to be in the Bill. The same applies to Amendment 95, which would ensure that the Secretary of State's indemnity covered only reasonable expenditure. The Secretary of State is bound by a duty to act reasonably in all matters. He would therefore offer indemnities only in respect of expenditure that was reasonably incurred.

At the beginning of my remarks, I touched on the need for funding arrangements to be fair and to be seen to be fair. That issue was raised by my noble friend in talking about Amendments 15 and 16, on the National Audit Office. Our view, which the noble Lord, Lord Adonis, would share, is that the NAO would not necessarily be the right body. However, as I have said, I will certainly reflect on the underlying principle of making sure that there is transparency and trust in these arrangements.

On Amendment 96, we are not suggesting that the YPLA should be able to spend disproportionately on sixth-form provision in academies. However, there is no need for this vague duty to be in the Bill. Under the national commissioning framework, local authorities are responsible for commissioning sixth-form places in maintained schools. In addition, there is a consultation process in which academies should take part. Ideally, their sixth-form provision will be agreed with the authority. It may be that in some cases such an agreement is not reached. In that case, the YPLA will step in to make a decision. Its regional structure will enable it to reach these decisions on an informed basis. We are not convinced of the need for a general requirement.

Amendment 31, tabled by my noble friend Lord Lucas, would put in the Bill academies' freedom to innovate. I am sympathetic to his broad case on innovation, but it would seem slightly odd to specify one particular freedom-the freedom to innovate-when

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the whole purpose of the academy programme is to deliver freedom more generally. We believe that those freedoms are best delivered by an absence of regulation wherever possible. I know that my noble friend agrees that head teachers and staff know best how to run schools. We think that the Bill gives them those freedoms. The academies that I have seen are already full of innovation and they have done that without the specific legislative freedom to innovate.

Amendment 34 would make it an absolute requirement on all academies to work in partnership with other schools. I very much agree with my noble friend Lord Lucas about the excellent examples of partnership that we have already seen in academies. The Government have the strongest possible expectation that that should continue and that every outstanding school that acquires academy freedoms should partner with at least one weaker school. We hope that this will raise performance and support across the system, to mutual benefit. I agree that outstanding schools are in a strong position to do this. We are asking all prospective academies to provide details of their plans to support another school as part of their application process.

My noble friend's amendment concerns a core theme to which we keep returning: to what extent do you get the best out of people by trusting them and setting high expectations, or should you instead impose an absolute obligation on them? My instinct has been, and remains, that often one gets further by going down the route of trusting people. We believe that there is a potential problem of the unwilling conscript. One can see that there could be perfectly good reasons why in certain circumstances-perhaps for reasons of geography in a remote rural area-an absolute requirement would not be practical. This might also be the case with schools converting that are not outstanding. The case for a requirement for those schools would be even less convincing than the case for a requirement for outstanding schools. Schools that are currently good or satisfactory and that want to become academies may not be in the best place to form a partnership with a failing school.

Amendment 120A would make it impossible for an academy conversion to be taken forward in circumstances where, for example, it was intended that a single academy should replace more than one maintained school as part of sensible local reorganisation proposals. As noble Lords will appreciate, we want the conversion process to be sufficiently flexible to take account of, and allow for, such reorganisation.

I hope that I have picked up on the main points raised and provided some reassurance. I undertake to reflect further on one of the core themes of this set of amendments and urge noble Lords not to press them.

Lord Hunt of Kings Heath: My Lords, I thank the noble Lord for that response. Of course I will be happy to withdraw the amendment. Perhaps I may just say that the noble Lord has offered to reflect on the issue of parliamentary accountability relating to decisions made by the Secretary of State and I am very grateful to him for doing so.

Amendment 6A withdrawn.

Amendments 7 to 11 not moved.

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Amendment 11A

Moved by Baroness Royall of Blaisdon

11A: Clause 1, page 1, line 12, at end insert ", provided that the other party shall not be in financial deficit nor hold an excessive financial surplus"

Baroness Royall of Blaisdon: My Lords, I will speak to the other amendments in this group as well as to this one, which was tabled by my noble friend Lady Morgan of Drefelin.

We discussed earlier our concerns about the impact of the Bill on local communities, and in particular on the local communities of schools. These concerns are particularly acute when it comes to finance. My noble friend Lord Adonis said in a previous debate that funding arrangements must be fair and be seen to be fair, and this was reiterated by the Minister. They are absolutely right. Unamended, the Bill runs the risk of causing great difficulties with the finances of schools in the area of an academy, to the detriment of the education of children in the maintained schools and to the detriment of the cohesion of the local community. Our amendments in this group seek to require academies to make good any financial deficits in existence at the time of conversion and prevent consequential financial loss to the other schools.

4.45 pm

The amendments also propose two alternative approaches to dealing with any surpluses held by a school converting to academy status. Under the first, schools would not be permitted to transfer balances when converting to academy status; under the second, schools would be prevented from retaining excessive balances which are in breach of government guidelines and which would otherwise be subject to reclamation by the local authority.

Clause 6(5) already provides that regulations made under subsection (4) should deal with provisions requiring the repayment of sums by proprietors. Amendment 159 would insert a new clause to make provision for statutory payments to include the making good of deficits that have previously required financial support from the local authority. Where a school is in deficit, it receives financial assistance from its local authority to support that deficit, using funding which would otherwise be available to the authority to support schools generally. The local authority and school governing body are required to agree a financial recovery plan for returning the school to a balanced budget and repaying any financial assistance received. It would be inappropriate and unfair for a school to be able to avoid its obligations under such a recovery plan by conversion to academy status. If it did so, other local schools would lose access to that funding. The effect of this amendment would be to maintain the legal obligation to make good that deficit.

In recent years, there has been consistent concern over schools holding excessive balances which are not retained for any planned or specific purpose but which should be used for the intended purpose of supporting young people's educational achievement. The most recent government data for 2008-09 showed that schools held a total of £1.92 billion in surplus balances, of

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which £495 million were classed as excessive balances. Local authorities are required to take action to prevent the retention of balances for which schools have no planned use.

These amendments are intended to stimulate a debate and to encourage the Government to explain how they propose to deal with the problem of surpluses. The amendments offer different approaches to the transfer of balances to academies. First, Amendments 158, 152 and 153, like Amendment 151 in the name of my noble friend Lord Whitty, seek to ensure that all surplus balances are retained by the local authority. It might be argued that this measure is a little too harsh, as from time to time some financial flexibility is necessary within any organisation. However, the amendments would have the merit of ensuring that any academy started life with a clean financial sheet-as it were, financial independence. The Government surely cannot complain about that, as independence for academies is one of the key stated objectives. Alternatively, Amendment 157 seeks to ensure that only excessive surpluses are transferred, and it sets out a formula to govern that.

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