Clause 33
Education and Inspections Bill
4:00 pm
Nick Gibb (Shadow Minister (Schools), Education; Bognor Regis and Littlehampton, Conservative)
The clause relates to the alteration in the definition of capital funding for the purposes of voluntary aided schools. Its objective is to widen the definition of capital expenditure so that it is more in line with the definitions used in general accounting practice. It will enable voluntary aided schools in private finance initiative agreements to be funded in the same way as other schools. As a chartered accountant, I could not possibly let the clause go by without contributing to the debate.
Voluntary aided schools are required to contribute 10 per cent. of all capital expenditure. When it comes to PFI contracts, the question arises about whether10 per cent. of the revenue expenditure that relates to the capital of the project should be provided by the school and the foundation. It is usually the Church of England that supports them. According to the regulatory impact assessment,
“The aim of amending the legislation is to put VA schools on an equal footing with other maintained schools, and remove any doubt that PFI contracts can be met from revenue income without any statutory 10 per cent. contribution.”
We, of course, support the measure. However, I want to raise the issue of buildings insurance with the Minister. Insurance is an item of revenue expenditure. It is met by the LEA in the usual course of events. However, if there were a fire in a school, can she confirm either now or by letter whether insurance will cover the full cost of the new capital expenditure required to rebuild the school or will the voluntary aided school still be required to find 10 per cent. of the capital cost in those circumstances? If the school will need to contribute that 10 per cent. after a fire, presumably it will wish to insure itself for that potential liability. The question then arises that, if it does that, will the insurance premium be paid by the LEA under the provision?
Under the draft Education (Capital Expenditure in respect of Voluntary Aided Schools) (England) Regulations, a spending of £2,000 shall not constitute capital but, as an experienced chartered accountant, in the context of an average school’s expenditure that seems to be a reasonable figure to be regarded as revenue. I presume that there are practices that stop abuse of that by separating out items into smaller units to fall within that definition.