Clause 10 - Powers of governing bodies to form or
Education Bill
4:15 pm
Mr Stephen O'Brien (Eddisbury, Conservative)
I beg to move amendment No. 21, in page 7, line 9, at beginning insert—
'Subject to due remuneration for services provided having first been satisfactorily negotiated and agreed, the'.
Mr Win Griffiths (Bridgend, Labour)
With this it will be convenient to take amendment No. 60, in page 7, line 11, at end insert
'and shall ensure that the headteacher of each such maintained school, or other members of the teaching staff as nominated by the headteacher from time to time, is a director of the company'.
Mr Stephen O'Brien (Eddisbury, Conservative)
I add my welcome to you to the Chair, Mr. Griffiths, and congratulate you on allowing us to be in an unlocked Room.
I hope that the Minister will not believe that we are spending too much time exploring chapter 3. He and I go back a long way, to sharing the same college at Cambridge but, although that firm friendship exists, it will not stand in the way of my duty to scrutinise and raise serious questions. Clauses 10, 11 and 12 sit together, and by virtue of the House's procedure, we are looking at amendments on a line-by-line basis. Some comments on each amendment may cut across other clauses, but I hope that that will avoid later repetition.
Chapter 3 provides governing bodies with the power to form companies and for the Secretary of State's powers on companies. The theme that runs through the clauses is one of a distinct lack of clarity. Do the Government want the companies to have genuine freedom as is provided by the Companies Act 1995, which relates to what we were discussing under chapter 2 on earned autonomy? Like the freedom of a company to direct its own affairs, will a school with earned autonomy have charge of its own affairs, or do the Government want to go down a more prescriptive route? Clause 11 suggests that, because there is only a discretionary power, regulations would specify that the company should be registered under the 1985 Act as a company limited by guarantee. We will deal with that on a later amendment.
Several hon. Members will have found themselves, perhaps for charitable purposes, directors or members of a company limited by guarantee and will understand the nature of such a company. In effect, it cannot afford to take any risk that could incur a liability, because the guarantee is normally minimal. That is the purpose of framing it as a company limited by guarantee unless—this is one of the matters that we want to probe—the Government intend to stand behind the companies as the guarantor. That would mean that, to operate as free companies, the schools could incur serious risks or debt, not least a cyclical cash flow problem, in order not to prejudice the interests of the children in those schools that have earned autonomy. No child can afford to have his educational progress interrupted by structural mistake or difficulty.
It was important for me to put matters in context, while recognising that I must be specific when speaking to amendments. Under chapter 3, local governing bodies can form companies to provide services or to own assets. It is difficult to determine whether such companies will have a genuine freedom that a normal company would enjoy under its board of directors, whereby they are accountable to their shareholders or whether the provision is intended to be a mechanism—a smokescreen, even—to allow the operation of a prescriptive and centralising regime. That is a fair question.
The Minister has been slightly méchant in wanting us to believe that the amendments do not point in the same direction. I am the first to admit that they do not. They go in several directions to probe the Government's mind. When we have explored matters, no doubt we shall find that they are not pointing in one direction, but are trying to have it all ways without accepting responsibility for so doing.
Amendment No. 21 refers to subsection (5) which covers a governing body of a maintained school that wants to exercise the power conferred on it under subsections (1) to (4) under which it forms a company to provide services or facilities
''to exercise the relevant local education authority functions''
or to make arrangements to provide such services or functions. Under the amendment, in advance of setting up that company, it would be critical—in understanding what is in the Government's mind in terms of the expectation and responsibility on the companies—for staff first to have their remuneration settled. Given our discussions on the amendments under part 2, without such a provision certain action could become an excuse.
Let us not pretend that all governing bodies will be completely on the side of the angels. One or two will no doubt look for a smart opportunity, which may not accord 100 per cent. with what we would like to believe are the Government's good intentions. It is possible that such services could be abused by those seeking to remove themselves from the restrictions, especially if the Government have not issued regulations whereby the Secretary of State has retained powers to prescribe.
I go back to the overall theme of whether the companies will be stand-alone companies that will be accountable and have genuine responsibilities. Later amendments will flush out what the companies are expected to do, either on their own or because they will be, in effect, a mouthpiece for the Secretary of State. The amendment would ensure that the remuneration of the staff of the company had first been negotiated satisfactorily and agreed. Those who would be subject to terms and conditions that had to be settled for staff of such a company might find themselves in a worse or, possibly, better position than under existing arrangements. That leads to genuine concern about the Government's intention.
I am glad to know, from what I have read in briefings, that the Minister is familiar with working in limited liability companies. He may have been a director, so he will be well aware of the responsibilities, fiduciary duties and ostensible authority that all directors must have in relation to their companies, and the ability to bind those companies in relation to all those services and functions. The critical requirement in relation to testing is whether the intention is to have a free and stand-alone company or whether the Secretary of State would have prescriptive control, which might mean very short take-up of the opportunity, because there would not be the normal corporate incentive to settle terms and conditions for staff.
On amendment No. 60, the wording ''may provide staff'' gives no indication whatever of whether it is intended that head teachers, or a teacher or member of the teaching staff nominated by the head teacher or governing body, from time to time, should be a director of the company. One need only look at the current equivalent, the learning and skills councils, on which, extraordinarily, teachers are primarily absent, although they would have some of the most important input. We therefore already have experience of a body that the Government regard as innovative, which does not involve teachers. The amendment is intended to flush out whether the Government intend teachers—who are the key to success in our children's learning environment—to have ownership of the process or whether teachers will simply regard it as the busy architecture around them, which is yet more fuss when they are trying to concentrate on raising standards and making sure that children have the best education. The Minister claims that the Government regard raising standards as the purpose behind the Bill. I am concerned, to say the least, that there is no presumption—or automatic right—that a head teacher or teacher nominated by a head teacher is expected to be a director of a company formed under the clause.
I am sure that parliamentary draftsmen would want to spend a great deal of time on accurate wording and, like all my colleagues, I am deeply grateful for the work that they do. However, the amendments are intended to raise genuine points of concern about the principles that lie behind the concept of companies, and to probe whether the Government are intent on genuinely hiving off responsibility, and whether head teachers and teaching staff will be allowed to be part of the ownership of the process so that they can help form judgments and ensure delivery of standards.
Mr Phil Willis (Harrogate and Knaresborough, Liberal Democrat)
The hon. Gentleman has engaged in an interesting exposé of the clause. In formulating the amendments, has he considered that, under the Companies Act, a company can be taken over by another company? A company may be set up by a school, which does not have the head or any directors on behalf of the school on its board, and which is subsequently taken over by another company. At the moment, education companies are seen as profitable—their stock market prices have not been affected by the perceived recession elsewhere. Will the hon. Gentleman comment on that? The matter does not seem to be dealt with in the Bill.
Mr Stephen O'Brien (Eddisbury, Conservative)
I am most grateful to the hon. Gentleman for making that point. He is right. Nothing in the Bill deals with that, other than a presumption that the Secretary of State may exercise powers in order to intervene, in an unspecified and unpredictable way, when dealing with companies that are properly capable—whether private limited companies not on the stock market or any other free market that can do a deal in the event of a transaction on the shares, or a public limited company that, in the event of either a consensual or a hostile bid, might be on the receiving end of interest from another.
If the hon. Gentleman would be patient enough to wait until we discuss amendments Nos. 61 and 62, which relate to proposed new paragraph (vii), he will find that I have tabled an amendment to flush out that aspect. In order not to try your patience, Mr. Griffiths, I should not leapfrog to that amendment before we deal with these amendments, which are linked. I am grateful to the hon. Gentleman for making that point, which previews what I hope will be a testing and rewarding challenge for the Government to come clean about the provisions.
Mr Chris Grayling (Epsom and Ewell, Conservative)
I should like to say a few words in support of the amendments tabled by my hon. Friend the Member for Eddisbury (Mr. O'Brien) and to make a few comments on this section of the Bill in general.
Mr Chris Grayling (Epsom and Ewell, Conservative)
I shall indeed.
The two amendments relate to two important points about the principles of bringing companies into contact with schools. The first relates to the issue of work load in schools. It will clearly be unsatisfactory for a governing body to impose on a school, within the confines of the existing structure of staffing and resources, a new venture that takes resources away from the education of pupils. It must be a supplement to the school, not an attempt to replace part of the school's activities which will create complications in the school.
Amendment No. 21 specifies a requirement for suitable remuneration for those who put their time into creating a company, and by definition to release resources so that they add value to the school rather than take resources away. It is enormously important. One of my anxieties about how the provisions could be implemented is that they may ultimately add to teachers' work load in the school, rather than taking away from it, and to governors' work load. We all know the pressures under which governing bodies operate and the limited amount of time that volunteer governors have to contribute. It is therefore tremendously important that a company set up by a school is set up on the basis of being a distinctive venture with significant potential that can resource the time and effort put into it and achieve success without detracting from performance in the educational arena of the school. It is therefore especially important that the sort of provision allowed for in amendment No. 21 is made. It sets out a clear dividing line between establishing a company off the back of the existing school and establishing a company that can reinforce the existing school.
The second point relates to amendment No. 60. We must ensure that the creation of a company or business venture in the school or by the governing body does not conflict with the educational efforts of the school at an operational level. An environment in which the school was running a commercial operation in which the head teacher had no direct involvement would be unacceptable. At the very least, the head must be a non-executive director on the board who can say, for example, ''Hey, guys, if you do that we won't be able to offer games on Thursday afternoons or I will have a problem with staff resourcing.'' It would be most undesirable if a commercial decision taken by the governing body had an adverse impact on the educational operations of the school. The caveat is necessary because the head is running the school primarily and fundamentally for the benefit of the pupils.
Mr Phil Willis (Harrogate and Knaresborough, Liberal Democrat)
I follow what the hon. Gentleman says, and I agree with him that any activity that takes away from the core activity of educating young people is unacceptable. Does the hon. Gentleman think there will be a conflict if, to follow the scenario, a company is set up and taken over by a plc, which has a duty to its shareholders and not to the students of the school? That is a distinct possibility as major companies in the marketplace are trading on the stock market.
Mr Chris Grayling (Epsom and Ewell, Conservative)
No, there would not necessarily be a conflict; it would depend entirely on the nature of the company involved. For example, let us suppose that a school with substantial grounds, and ground staff, developed expertise in that respect and skills that were in short supply at other schools in the area—I imagine that the Minister considers that such a scenario might result from the measure. The school might then decide to turn its grounds operations into a limited company and sell them to other schools; the shares in that company would be held by the school's governing body.
I cannot conceive of circumstances in which a plc would be able to walk into a school and take the company over without making a significant injection of cash in the school. The school would go through the same financial process to secure private finance initiative money. The school could raise PFI money to make a capital investment and would face a long-term contract with a commercial company as a result. Allowing the commercial company to take over the grounds operation and to provide a contracted service to the school over a period in return for a cash payment, which could then be invested in the school, may be a different legal mechanism, but it is not very different from what is happening under PFI.
My hon. Friend's probing amendments are extremely important. I would welcome the Minister's clarifying in exactly what form he expects the clause to be implemented. He gave a half nod to my ground staff analysis. Will the clauses provide for a total educational service? Could Manchester grammar school start selling educational services back to the LEA in Manchester or is it the intention that only limited supplementary services be provided on behalf of the school? It would help the Committee to reach a resolution on the clauses and the amendments if we understood exactly what form the Minister expects the companies to take. It would help if the hon. Gentleman could give us examples.
Mr Stephen Timms (Minister of State (School Standards), Department for Education and Skills; East Ham, Labour)
I am pleased that we have reached chapter 3 and can give some time to these important matters. I regret that we cannot continue discussing them into the evening, as Labour Members would like to have done. However, I do not begrudge the Committee the time spent on this part of the Bill.
The clause introduces enabling powers to allow governing bodies, including those of nursery schools, to form or join companies to undertake certain activities. Those three activities are set out in subsection (1): first, to provide traded services and facilities to any schools; secondly, to carry out functions on behalf of an LEA; and, thirdly, to purchase services and facilities on behalf of their member schools.
The third activity is intended to help schools benefit from economies of scale, and it enables governing bodies, in conjunction with others, to form joint venture companies. Our intention is to encourage co-operation between schools; that will help them to perform their core education role more effectively.
There are a growing number of examples of schools working together in a spirit of constructive collaboration. That is a welcome trend, and the provision provides a vehicle to make it easier for that to continue. Schools will save time and money if they work together to procure goods and services, and that will enable them to focus on their core education role.
Pilot schemes are operating in the London borough of Havering and in Surrey, where the LEA has been exploring the possibility of delegating some of its responsibilities to schools, under subsection (1)(b). That scheme might be of particular interest to the hon. Member for Epsom and Ewell.
Dr Ashok Kumar (Middlesbrough South and East Cleveland, Labour)
The measure might encourage various innovatory schemes. An advanced scientific laboratory could be built by several schools, working together, and a company might be established so that three or four schools could participate. Is that an example of what might happen?
Mr Stephen Timms (Minister of State (School Standards), Department for Education and Skills; East Ham, Labour)
That is a good example. We wish schools to collaborate in that way, and the measure provides a vehicle to facilitate their doing that.
Mr Stephen O'Brien (Eddisbury, Conservative)
That was a helpful example. The construction of such a laboratory might involve a degree of corporate risk, and it is important to be clear about where responsibility for that risk lies—particularly as the provisions appear to be discretionary, and a company might be limited by guarantee. That leads back to the points that I made earlier.
I shall offer another example, to ensure that we focus on what happens on the ground, rather than on theoretical matters. I wish to know whether what the Minister has said would also apply to the following situation. Six local schools—primary or secondary—might get together to provide common transport provision on a number of routes. Those schools would, therefore, become the hub of a transport network, and they might wish to add the spokes, as it were, so that they could exploit economies of scale. The company that would be formed by the governing bodies of those schools would be responsible for contracting the drivers and for any supervisory staff that might be needed. Would it also be able to own the buses that serviced its routes? In other words, could it be an asset-based company, as well as a company that relied on revenue?
Mr Stephen Timms (Minister of State (School Standards), Department for Education and Skills; East Ham, Labour)
Several schools could come together to provide transport services, thereby benefiting from economies of scale. That is the kind of development that might be encouraged.
To respond to an earlier point that was made by the hon. Member for Eddisbury, subject to basic safeguards we want companies to be as free as possible to manage themselves. In our view, companies should have the flexibility to decide the most suitable management arrangements that are free from bureaucracy. The amendments would undermine that objective.
Any member of staff of a school who became involved with a company's activities would have to agree to do that. There is a variety of ways in which the member of staff could work for the company. For example, they could be on a temporary secondment, or part of the working week could be spent on company rather than school business. Different remuneration arrangements would be needed in different circumstances. Amendment No. 21 would introduce unnecessary formality to the procedure. In reality, arrangements would be best left to local discussion and agreement.
Mr David Laws (Yeovil, Liberal Democrat)
Will the Minister clarify whether any schools will not be able to form companies in the way envisaged in the Bill? Would failing schools be allowed to set up companies? How would he compare the number of schools that will be entitled to set up companies with the percentage of schools that will be allowed autonomy, which he quoted this morning?
Mr Stephen Timms (Minister of State (School Standards), Department for Education and Skills; East Ham, Labour)
I refer the hon. Gentleman to clause 11(1). I am grateful to him for giving me the opportunity to underline this point, because it follows on from our previous discussion.
A governing body would require the consent of the local education authority in order to join a company. If consent were withheld, the school would not be able to join the company. Paragraph (b) is relevant to the hon. Gentleman's point because if the school did not have a delegated budget, it would not be able to join a company.
We will not set thresholds, and the measure is different from that which we have discussed previously. We can only wait and see the number of schools that will take up the opportunity. Schools have a substantial and growing interest in working together, and the provision will make that easier and more effective.
Mr Chris Grayling (Epsom and Ewell, Conservative)
While the Minister is clarifying these points, will he tell us the degree to which the provision for the companies involves the delivery of educational services? Is it conceivable that a governing body would have the right to sack its head teacher and staff, and bring in a company established by a more successful school to run the school? In theory, could a governing body subcontract out the entire management and educational management of its school to a more successful school?
Mr Stephen Timms (Minister of State (School Standards), Department for Education and Skills; East Ham, Labour)
That does not sound like a likely scenario. The governing body has clear responsibilities in this area, which it will exercise normally. The scenario is possible—subsection (1)(a) makes this clear—because we are considering services provided to schools by other schools. We want more examples of that. The hon. Member for Epsom and Ewell, or one of his colleagues, suggested that strong schools could support weak schools. There will be many examples of that. The new provision will make that easier.
Amendment No. 60 specifies the people from each school who should be on the board of directors. We would not want the Bill to specify that the representative should necessarily be the head teacher or a teacher, which the amendment would do. That would preclude administrative staff or bursars from sitting on the board. Such people may have the experience and time that are best suited to the day-to-day role of running the company. Given the concerns expressed by members of the Committee about the work load of teachers and heads, it would be inappropriate to insist that only members of the teaching staff could undertake these duties.
Mr Stephen O'Brien (Eddisbury, Conservative)
I fully accept that none of us, particularly those who have paid numerous visits to their constituents and local schools, wants to add to the burden of teachers. The Minister makes a fair point. However, he knows that it would be otiose to use the phrase ''non-executive'' or ''advisory'' in an amendment. A director can be part of the day-to-day management and be entitled to attend board meetings, whatever their frequency.
If an organisation that is responsible for those functions and services is to serve the interests of raising educational standards for children, board members must have teaching skills, or there will not be the required expertise. A bursar must have financial ability, which is critical to any board. After all, the Government criticised Railtrack for having no engineer as a board member.
The Under-Secretary of State for Wales has picked up on my long intervention. However, he was educated in Wales and he will understand that I am given to a touch of prolixity.
Mr Stephen Timms (Minister of State (School Standards), Department for Education and Skills; East Ham, Labour)
It would depend on the nature of the company. If the company carried out procurement on behalf of a group of schools, it is likely that someone other than a teacher would be an appropriate board member. It is worth pointing out that a large number of schools might be members of one company—for example, an LEA. One would not want to insist that every school had its own representative on the board, as long as there was a process by which all the schools could agree on the directors. Amendment No. 60 would impede effective operation of the company.
I hope that members of the Committee agree that governing bodies will be able to make sensible decisions about such matters, and they do not need the extra bureaucracy that would be created by the amendments to operate effectively. I hope that the amendments will be withdrawn.
Mr Stephen O'Brien (Eddisbury, Conservative)
The Minister has not reassured me on that matter. In his response to the hon. Member for Harrogate and Knaresborough, he prayed in aid clause 11, thereby admitting that chapter 3 hangs together. It is difficult to understand the Government's mind, especially in the absence of reassurances from the Minister.
It is also becoming increasingly difficult simply to take the Government on trust when they maintain that the clauses are enabling powers. They are subject to the exercise of powers by the Secretary of State later, and subject to our further discussions on some of the clauses and amendments to be considered later in the debate on chapter 3. It is becoming increasingly unclear, if they are enabling, to what extent the regulations will play a major part in governing the companies, or whether those companies will be free.
The Minister's answers were not sufficient, and it would be helpful to have some pro forma regulations. In the absence of such regulations, there is a great deal of flexibility and freedom. I suggest to all Members who see the provision as a tool to help to raise standards that these are companies, and financial interests are at stake, so there may be some who are not entirely motivated to raise standards. The reassurances have not gone far enough to give confidence that those with financial interests, those who look for cheap takeovers or those who would decrease joint bus services, for example, will always act in the interests of children, staff and teachers. Under clause 60, we need to include on the board those whose primary concern is children's educational needs.
Mr Chris Grayling (Epsom and Ewell, Conservative)
My hon. Friend raises an interesting point. It is often difficult to find people who are willing to serve as school governors. If we introduce a commercial dimension to the governing body, and if the head is not given the statutory right to participate—at least as a non-executive—a governing body could be hijacked by those who saw it as a commercial opportunity and were enthusiastic about taking advantage of that.
Mr Stephen O'Brien (Eddisbury, Conservative)
My hon. Friend reinforces the point that, because of the lack of specificity and pro forma regulations in the clause, there is high corporate risk. There is also the potential for abuse by those who do not share hon. Members' motivation to improve education. Members of all parties who have experienced corporate life will know that, just as in any other walk of life, 98 per cent. of people are well motivated, but there are always rotten apples.
If it were not for the amendments, there would have been no acknowledgement of the risk that the governing body might be controlled in that way. In the absence of regulations, the debate cannot be conclusive. It would be inappropriate to press the two amendments to Divisions.
Mr Stephen O'Brien (Eddisbury, Conservative)
I am grateful to my hon. Friend for that impromptu prompting. Will the Minister assure me that he will publish pro forma regulations? The Committee would be better informed if the regulations were published by Tuesday.
I have been a Member for just two years—only in opposition, unfortunately. I should have thought that Labour Members would know better than me that it would be staggering if, when drafting regulations are included in a Bill, there was no document containing draft pro forma regulations swanning around the Department. It would cause the Minister no harm to cross out the word ''draft'' and publish those regulations.
If the regulations were published, we could be more certain whether our probing amendments are on to something, or whether the Minister's assurances are sufficient to give confidence to members of the public who are concerned that the Bill is going down paths that are not wholly desirable. I give the Minister the opportunity to say whether, in the spirit of future consensus, he will give that assurance.
Mr Stephen Timms (Minister of State (School Standards), Department for Education and Skills; East Ham, Labour)
I cannot promise the regulations by Tuesday, but I assure the Committee that we shall publish a statement of the policy underlying the regulations before the Bill leaves the House of Commons. That is in line with other commitments that I have made on points raised by the Committee.
Mr Stephen O'Brien (Eddisbury, Conservative)
I am grateful to the Minister. I accept that it would be difficult to produce the regulations by Tuesday at this increasingly seasonal time of year. That assurance will help us to clarify many of the uncertainties that have arisen. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Further consideration adjourned.—[Mr. Heppell.]
Adjourned accordingly at nine minutes past Five o'clock till Tuesday 18 December at half-past Ten o'clock.