Clause 10 — Powers of governing bodies to form or invest in companies to provide services etc

Orders of the Day — Education – in the House of Commons at 5:40 pm on 24th July 2002.

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Lords Reason:

The Lords insist on their Amendment No. 12 and disagree to the Commons Amendment No 12A for the following Reason—

Because the provisions on the formation of companies are not good practice and have not been thought through.

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills 5:49 pm, 24th July 2002

I beg to move, That this House
insists on its disagreement to Lords Amendment No. 12 but proposes the following amendment (a) to the words restored to the Bill by that disagreement, in page 7, line 12, at end insert—

'(6A) In exercising the power conferred by subsection (5) the governing body of a maintained school shall have regard to any guidance given from time to time (in relation to England) by the Secretary of State or (in relation to Wales) by the National Assembly for Wales.'

I am delighted to welcome back the shadow Attorney-General, in his new roving brief, to his now frequent place on the Front Bench in an education debate.

I first wish to put on record our regret at the unfortunate incident yesterday when Mr. Brady heard an answer to a question to which he had not yet received a reply. That was an administrative slip by the Department and we are sorry about it. I assure the hon. Gentleman and the House that no discourtesy was intended.

I shall now focus on the substance. We shall be disagreeing here, in the next hour, on one simple issue: whether we turn agreement in principle to support innovation, into practice. The issue is whether maintained schools should have the same freedoms to form and participate in companies devoted to educational purposes as private individuals, the private sector, independent schools and city technology colleges already do. This is a matter of freedom and of fairness. We often talk about both those areas; now we can legislate for them.

These clauses will put at the disposal of schools a convenient legal form to buy services at keener prices or sell goods and services to spread best practice, and the gainers will be pupils. The question is not whether there are any activities for which it is essential for schools to form companies, but whether the company structure can make it easier for schools to do so. The clear answer is that it can.

Companies enable groups of schools to establish a single legal identity, overcoming the problem of multiple contracts that would otherwise exist. They provide a vehicle for schools to share expertise with other schools; to benefit from economies of scale; and, crucially, to limit their liability. They are a trusted means by which some of our best schools can spread good practice and good ideas around the education system.

Labour Members believe that if schools think that it will be useful for them to form companies, they should be free to do so, subject to some important safeguards. They must not be compelled to, but they can.

Photo of Phil Willis Phil Willis Shadow Spokesperson (Education)

Would the hon. Gentleman clarify for the House whether a company that is set up under the Government's proposals can trade outside the education world; in other words, can it sell services into the private sector?

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills

I am happy to answer that question. The matter was discussed at some length in the other place, where it was made absolutely clear that the purpose of setting up a schools company was to trade educational services if it was a service delivery company. If it was a purchasing company, obviously it would be purchasing services for the benefit of schools, but this is for educational purposes.

Photo of Phil Willis Phil Willis Shadow Spokesperson (Education)

I am grateful to the hon. Gentleman because it is an important point. Would he regard, for instance, a grounds maintenance contract as such, and if so, would the company set up to offer a grounds maintenance service to a group of schools also be able to offer it to the local hospital, or to private residents?

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills

The potential for private companies to offer ground maintenance contracts already exists. The measure that we are discussing now would allow schools to do that. It would not allow them to offer such services to hospitals or to other bodies, as the hon. Gentleman said; this is about schools coming together to offer services, of a widely varied nature, to other schools. That is the point that we are making. I think that that is a clear answer to the hon. Gentleman.

Let me consider the four objections that have been raised in the nearly 10 hours of debate on these issues. The first objection is that these clauses might be a means by which the private sector could take over schools, but that completely ignores a fundamental point: there are clear restrictions on the role of any company in schools. The fact that a school may be a member of a company does not loosen these restrictions in any way, and where schools contract with companies, they work under the orders of the governing body.

For a very long time, governing bodies have had the power to contract out many things, such as catering or teacher supply. What they cannot do is relieve themselves of their duty to "conduct the school". The fundamental duty to run the school always remains with the governing body, which retains the overall responsibility for who works at the school. The school company clauses do not change that a bit. School companies will be able to supply services to schools in the way that private sector companies currently do—neither more nor less. Schools run schools. Private sector companies can currently help them. In future, if this legislation is passed, school companies will also be able to do so.

The second objection that has been raised is that in some way the existence of companies will increase the liabilities that the public sector might face. But that ignores the fundamental point that one of the main advantages of companies is the limitation of liability. If a group of schools conducts an activity as an unincorporated association, they face unlimited liability. If they incorporate as a limited company, they can limit that liability.

In that context, it has been said that the LEA will be liable for a company's debts. Let me address that point. That is true only of purchasing companies. The key point is that that is no different from the current position. LEAs are already liable for the purchasing decisions of schools. There will be no change—LEAs will remain liable for purchasing debts of schools, whether the schools purchase individually, or through a company as an intermediary. The only difference is that in purchasing with other schools through a company, a school can benefit from economies of scale to get better prices.

Photo of Bill Cash Bill Cash Shadow Attorney General

The Minister is talking at some length, and I have no doubt that he will develop this point, with regard to the statutory liabilities of a local education authority. In fact, in his answer to my hon. Friend Mr. Brady, he says:

"It would not . . . be possible for a company or . . . other body to 'take over the running of the school', because the governing body cannot contract out the duty to conduct the school."

Moreover, he seems to avoid the fact that this provision in clause 2 clearly enables the Secretary of State by order—by statutory instrument—to confer on the applicant "exemption from any requirement", including statutory duties imposed by education legislation, or to relax any such requirement. I am sure that the Minister would appreciate that in fact this provision, in this Bill, is new and novel, and is not dealt with under clause 20, and that therefore there will be a significant difference, once this Bill has passed, in relation to the statutory liabilities of education authorities. The Government have it in their own Bill and there it is in the proposed statutory instrument.

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills

The first thing that I should point out is that I was criticised on the last occasion for not speaking for long enough, so I hope that the hon. Gentleman is not chiding me for detaining him for too long.

Secondly, the running of a school does remain the responsibility of the governing body—that is an important point—whatever contracts a governing body enters into. That is the situation now and that will be the situation in the future. In relation to the liabilities—

Photo of Bill Cash Bill Cash Shadow Attorney General

The Minister really cannot get away with that. He talked about "in the future", but in the future, under the provisions of clause 2, it is quite explicit that there is the capacity for the Secretary of State to make provision exempting applicants—which includes local education authorities or qualifying schools—

"from any requirement imposed by education legislation;" or

"relaxing any such requirement" and it applies also to statutory instruments and all subordinate legislation. It cannot apply in future because we do not know, unlike the Minister, how the Government are proposing to apply the legislation.

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills

Unquestionably, now and in the future, governing bodies are the people who will remain responsible for running schools. There is no disagreement about that. As we discussed last week, the issues in relation to clause 2 refer to exemptions that relate to education law. The situation—[Interruption.] Will the hon. Gentleman let me finish my point? The situation in relation to governing bodies remains. The statutes governing the role of the governing bodies are laid out and they will continue to be in force. So I do not think that the hon. Gentleman—[Interruption.] If the hon. Gentleman is unhappy with the detail that I have given him, I would invite him in his speech to develop his point at some length; I will certainly come back in my winding-up speech to any new issue that he raises.

I was explaining about the issue of liability. Any company wishing to borrow money will need the LEA's consent—we discussed that point at some length on a previous occasion—so the prospect of any company getting into debt is minimised by the sensible provisions in the Bill.

Let me deal with the third objection that has been raised by hon. Members. It is argued that these clauses provide new ways for profit to be taken from the education system—a point that has been raised by Mr. Willis. In fact, the purpose of these clauses is to do the opposite—to allow any profit that is gained from selling services to remain in the education system, rather than going out of that system into the private sector.

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills

If the hon. Gentleman will forgive me, we have only an hour to debate this and I shall be criticised later for taking too much time if I am not extremely careful. Will the hon. Gentleman let me make my point? I promise him that I shall return to it once he has made his speech.

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills

No; the hon. Gentleman has already had one bite at the cherry. I shall see whether I can answer his point later.

What the clauses do allow for the first time is that where a school has a valuable idea that could benefit other schools, it can get a proper return for its idea. For example, if a school develops some curriculum materials and wants to market them, it can do so. It can go into partnership with others and sell a CD-ROM, and can make a profit. There is nothing new about companies selling CD-ROMs to schools to make a profit. What is new is that the school can share in that profit. These clauses introduce new ways to make a profit.

Finally, it is said that in some way these clauses will increase the work load of governors or head teachers. But I simply say that whether or not to get involved is entirely at the discretion of the schools themselves. We trust them to make the right judgment about whether getting involved in such ventures is an intolerable imposition on them. If a school decides that getting involved will be beneficial, it is taking the decision that any work involved will be worth while given the return on the investment. 6 pm

Against all that we have heard no substantive objections in principle. In fact, we have heard protestations of support for those clauses. A number of detailed points have been made to us. They are mainly utterly spurious, but I should just run through them. It has been said that the Government have a hidden agenda to have companies take over the operation of schools—wrong. It has been suggested that those proposals will, in some way, increase the exposure of schools to liability for sports injuries—completely wrong. It has been suggested that these proposals might create liabilities in relation to school trips abroad—wrong.

It has been said that school companies might be able to start trading with the public—wrong. It has been suggested that disreputable persons, in the words of Mr. Cash, might somehow get their clutches on schools—wrong. I do not know whether he was thinking of some of his Opposition colleagues when he was spoke of disreputable persons, but I promise him that there will be a proscribed list, and he can send a long series of suggestions to add to it.

Photo of Bill Cash Bill Cash Shadow Attorney General

The hon. Gentleman knows perfectly well that the Minister in the other place made it quite clear that, in fact, the Government would respond to the proposals that we made last week, and they have done so by proposing that there will be changes in those persons who can become members of companies. I think that we won that point, does not he agree?

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills

If the hon. Gentleman consults the record, he will see that I answered him very fully, and I look forward to his list of proscribed persons, or that of any hon. Member, when the time comes.

To pick up the hon. Gentleman's last point, we have listened carefully as these debates have gone on over nine and a half hours—nine hours and 31 minutes, in fact—and important changes have been made, as a result of points made in the House and in the other place. We believe that we have met the concerns that have been raised.

I believe that this now boils down to a question of trust. The Opposition may think it a question of trust between them and us; it is actually a question of trust between central Government and schools—whether or not we trust our schools to do sensible things with the freedom that we propose to give them.

It is impossible and undesirable to legislate for every possible eventuality. It is much better to put in place a sensible framework to manage risks and to leave our schools and LEAs to the task of making the proposals work. [Interruption.] I am glad that Mr. Green has now joined us. We have not had the pleasure of his contributions so far during this debate, but he arrives at a very opportune moment.

Although the Opposition talk about free schools, they argue against this perfectly sensible freedom. They talk about enterprise, but they vote to deny opportunity to enterprising schools. They say that they want less bureaucracy, but they oppose a simple option for schools that want to work together. They say they want innovation, but they deny schools the chance to develop and share new ideas.

When we decide the question of school companies today, we decide also whether schools and the public sector should have the same ability to gain from good ideas as the private sector already has. It cannot be right that, while the private sector can profit from its ideas, schools are not even allowed to compete. These proposals put that right. So the dividing line today is trust. Do we trust our schools? During a Committee sitting that I remember well, the hon. Member for Altrincham and Sale, West described these proposals as "exciting", and he was absolutely right.

Photo of Graham Brady Graham Brady Shadow Minister (Education)

The Minister was not excited; he was signing his letters.

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills

I assure the hon. Gentleman that I was extremely excited when he said that in Committee.

Lord Baker of Dorking—a figure who should bring cheery smiles to the faces of Conservative Members—described these proposals as "a very welcome development", and he was right. I do not want to scare off too many of my hon. Friends by continuing that litany, but there has been cross-party and Cross Bench support for these proposals. The issue is: do we now trust our schools to make a reality of the freedoms that we wish to give them?

Do we allow them the opportunity to decide for themselves; or do we prevent them from doing so now, before we have even given them a chance? The Government say, yes, we should give them the freedom; the Opposition say no, even though they claim to say yes. I hope that the hon. Member for Altrincham and Sale, West and other hon. Members will join the House in voting to trust schools today.

Photo of Bill Cash Bill Cash Shadow Attorney General

I think that the Minister is perhaps in danger of misleading himself a little bit. For example, these proposals have been rejected twice by the House of Lords for extremely good reasons. I pay tribute again to the shadow Ministers in the House of Lords and, indeed, to my noble Friend Lord Kingsland, who came in and buttressed our arguments. This is not just a matter exclusively for the Conservative party because we have had significant support from the Liberal Democrats. Indeed, the arguments that have been developed have further endorsed those that we have put forward over a prolonged period.

I have to say that, yet again, I am disappointed by the Minister's response. He is not dealing with the mechanics; he generalises and says that this is what the Government would like to try to achieve. He talks about trust; but, in fact, the Government are not telling us why we should trust them. Why should we trust a Government who are clearly hiding behind the Bill, to which they have proposed to make changes without coming clean? For example, the Minister still has not answered the question that I asked with regard to clause 2.

It is absolutely crystal clear that, under clause 2, the Government propose to make exemptions and disallow the statutory liabilities that currently apply to schools, including all qualifying schools and local education authorities, and to enable them to be exempted by statutory instrument from their statutory requirements relating to education, and the Minister knows that. He has just referred to the question of what would happen in the future, but he also knows that he has given me no answer at all about whether the question of the application of those statutory instruments would apply to school companies.

Furthermore, the Minister may be aware of the article in The Observer. [Interruption.] This Minister is very extraordinary; when he comes up against something that he does not like, he either smiles disingenuously or he waves his hands in an extraordinary fashion. The fact is that in an article headlined, "Blairite blueprint to turn schools into companies", Gaby Hinsliff dealt with a very substantive issue. She said:

"The plans for a range of new non-profit-making companies across public services have been drawn up by Trade and Industry Secretary Patricia Hewitt with three other Cabinet Ministers."

I should like to ask the Minister whether he will deny that. The articles says that

"Hewitt is working with . . . the Education Secretary . . . and the Home Secretary on a consultation paper to be drawn up".

Photo of Bill Cash Bill Cash Shadow Attorney General

It is not a secret plan; it is out in the open now.

The Minister for School Standards knows perfectly well that such proposals apply not only to the Bill, but to Network Rail, the tube and hospital contracts as well. The bottom line is that the article says:

"It is seen in Downing Street as a 'third way' between part-privatisations that have infuriated trade unionists, and the old model of a public sector too closely run by Whitehall."

The fact is that the Bill is intended to try to allow people to dodge their educational liabilities, as laid down by statute up to and including the Bill, and to try to create what we regard as perfectly reasonable proposals if only they could be made to work.

Commercial freedom for school companies would be proper only if they could overcome the obstacles that we have already described. I set out those obstacles in the debate last week, and they include the problems of over-regulation, the problems of companies having to employ accountants and lawyers and the problem of liquidation when a company goes bust. Neither the Minister nor anyone in the other House has yet addressed those questions.

I should be grateful to the Minister if he would address the points that I made last week with regard to what happens when a company goes bust. We have had no answers to those questions. No answer has been given by the Government to explain how LEAs will carry out their obligations to support any school that goes bust. There is no indication whatever about how the redundancy will be dealt with, about whether the creditors will be paid out or about the impact on small businesses.

We have asked the questions, but we have received no answers. The plan fact is that the Minister and the Government are incapable of answering those questions; otherwise, by now—this must be the third, fourth or fifth time that we have put them—they would have come to the House and attempted to explain them.

There has been no explanation. When the Minister talks about the meaning of the words in the Bill, he should be reminded of Lewis Carroll, whose character Humpty Dumpty said to Alice that words mean what we choose them to mean, and that the question is who is to be master, that is all. That is what lies at the root of this problem. The Government have a Bill, they have a majority, and they will, one might assume, get the Bill through this afternoon. It will then go back to the House of Lords, where they have been defeated twice. The schools company provisions go to the heart of the manner in which the Government intend to carry through this Education Bill. We accept that it applies to groups of schools, but the bottom line is that it is an inadequate way of dealing with the problems that have arisen, as expressed repeatedly in both Houses in previous months. The Government have not given us any answer whatsoever. No answers have been given to me, to my noble Friends Lord Kingsland and Baroness Blatch, or to the Liberal Democrat spokesperson in the House of Lords, Baroness Sharp.

In her answer to the proposal in another place that this matter should be considered again, Baroness Ashton of Upholland said:

"I shall make the positive case for allowing schools the freedom to join companies. The argument is simple and one in which another place sees considerable merit. It is that this is another way of giving schools more freedom, more opportunities for partnership and more room to share good practice."

That is what the Minister said just now. The problem is in relation to Baroness Ashton's comments that the general powers are already contained in the School Standards and Framework Act 1998, and that companies can already be created to facilitate the running of schools. What the Minister completely fails to understand is that the change that the Bill introduces does not simply allow groups of schools to join together. The combination of clause 2 and clause 20, which is prefaced by the words,

"Subject to any other statutory provisions", leaves a hole with which the Government are not prepared to deal. They cannot and will not tell us how in future—to use the Minister's words—they propose to use the powers to exempt local authorities from their current statutory liabilities. Were the Bill to go through with these clauses in it, a new regime, of course, would arise. The Minister has a responsibility, however, to explain to the House exactly how clause 2 will work, and to put that in the framework of these provisions.

Turning to the objections that were raised in debate in another place, Baroness Ashton said that

"there is nothing in the creation of a limited liability company that would increase the liability for the public sector—quite the opposite."

Again, the Minister referred to that in embryo. The problem is that it is not the creation of a limited liability that would increase the liability for the public sector necessarily but the consequences of going bust. That is our point. Baroness Ashton continued:

"Schools may not transfer assets to any other body or person without receiving proper consideration."

If a company has gone into liquidation, however, it will not, of course, transfer its assets. It will be dealt with by the consequences of liquidation. The Minister owes us an explanation on that account, too.

In relation to a school company failure, Baroness Ashton stated:

"If a school company fails, the liability of the company member is, in the case of a company limited by shares, limited to the unpaid amount on the shares—if any—or to the nominal amount of the guarantee, in the case of a company limited by guarantee."

She continued:

"During our debate, there seemed to be a sense that there was something surprising about that. There is nothing in any way unusual about it".

What she completely failed to appreciate, however—I shall ask the Minister to respond to this—is the impact on the schools. That is the real difficulty. She went on:

"Noble Lords will know that, to minimise the likelihood of a company's getting into difficulty, we said that the LEA would have a role as supervising authority for the companies."

Again, that does not deal with the fact that it is not a question of minimising the likelihood of a company getting into difficulty; it is a question of whether we can prevent the company from getting into difficulty by taking appropriate action at the right time.

I must now admit that some progress was made—the Baroness offered a further safeguard, to which the Minister did not refer, which greatly surprised me. She stated:

"We have decided that, under the regulations, companies will provide an interim financial report to the supervising authority as well as annually audited accounts."

I welcome that. It reflects to some extent, perhaps, my remark that we had to know before a company went bust what its financial position was. It is certainly true that an interim financial report and audited accounts would be a step in the right direction. That does not, however, alter the ultimate question: if a company goes bust, what will happen?

The question of profits, which the Minister raised with my hon. Friend the Member for Altrincham and Sale, West, was dealt with in the other place in previous debates. We have still not had a proper answer to the question—several contradictory answers were given—of where the profits would go. One Minister says that the profits will go back into the school, while the other says that the profits will be shared. Baroness Ashton stated:

"The profits will be shared, and school members of companies will receive their due amount."—[Hansard, House of Lords, 23 July 2002; Vol. 638, c. 220–23.]

Will the Minister explain exactly what the Government's position is on the question of profits, and for what purpose those profits will be used? Will he also deal with the question of what would happen if there are losses? That is the other side of the equation.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight 6:15 pm, 24th July 2002

Does my hon. Friend accept that what the Minister seems to misunderstand in saying that schools should be able to make a profit is that the other side of a profit is the risk? People and private companies who make profits generally do so by risking some of their assets. If, for instance, a school company were to publish a CD-ROM, it would risk money in publishing that CD-ROM, which it may not recover. That loss—the company may even have borrowed money to pay for it—has not been explained by the Minister.

Photo of Bill Cash Bill Cash Shadow Attorney General

I am grateful to my hon. Friend for that point, which also relates to a point that was raised by the noble Lord Dearing. He asked what would happen in relation to the capital and the servicing of these companies. He asked a very important question, which has not been answered, and which I ask the Minister, again, to answer. What skills will be available to these companies? From where will they get advice? Do they have the kind of skill to be able to assess the risk to which my hon. Friend Mr. Turner refers, which, in certain cases, could be very considerable in terms of capital outlay? Are they capable of making the right decisions? Furthermore, will they be able to get access to the capital? I think that the noble Lord Dearing stated that he, or somebody that he knew, had come across circumstances in which someone who had engaged in CD-ROM activities tried hard to transfer the project into the private sector, but, unfortunately, had neither the capital nor the skill to be able to do so. My hon. Friend therefore asks an important question.

The Minister also referred to insurance liability in his opening remarks. We do not need to go into all the points that I placed on the record in the previous debate that we had on this issue. However, when a company overtrades or faces legal liabilities, he simply cannot say, "Oh, well, insurance and school trips do not come into this." The fact is that liabilities can accumulate from a variety of sources and a company could be afflicted by substantial liabilities. If it gets into difficulties, what will happen in practice?

The Minister also touched on the membership of the companies. We have made slight progress on this issue. Lord McIntosh was replaced by other Ministers after a long stint dealing with these issues.

Photo of Bill Cash Bill Cash Shadow Attorney General

There is no prospect of that. We are dealing with the issue extremely effectively, and the Minister may find that he is replaced if he does not do a bit better.

The bottom line is that Lord McIntosh referred to crooks, but the Minister seemed to dismiss that suggestion. He seems to think that there is no question of crooks taking over schools, but Lord McIntosh clearly thought that that was a possibility. I will not repeat what went on in another place, but it is clear that the Government have conceded that the individuals who will not be able to join companies will be those who are not currently permitted to be school governors or to teach. That is a step forward in response to our representations, and we are partially grateful. However, it took an intervention from me for the Minister to recall what was said in the other place. As we are now dealing with the same clauses, I presume that what was said in the other place will now be binding on him. I would be grateful for confirmation of that.

The Minister also has a responsibility to explain the manner in which governing bodies will operate. In exchanges with my hon. Friend the Member for Altrincham and Sale, West and in relation to the written reply that was held up, the question of whether the governing body can or cannot contract out of the duty to conduct the school raises an issue in relation to clause 2. The Minister therefore has an obligation to the House to explain it. In particular, how can anyone prevent a school from delegating functions to a company? If it did, what would happen? That also raises the question of who foots the bill. Is it intended that staff will be brought in—supply teachers and others—and, as a matter of principle, do the Government intend to dispense with existing staff when, for example, they find that the school does not operate in a way that they would like? Is it possible that the school would end up with locums and supply teachers? What do the unions think about that?

Throughout the entire proceedings on the Bill, Ministers have completely failed to answer the questions that I have put in this House or in relation to issues raised in another place. For example, Lord Northbourne asked the Minister in the other place

"whether the companies, if they are to be limited by guarantee, will be supervised by the Charity Commissioners".

We have not had an answer to that question because, as far as I can see, the Minister in the other place did not reply to it.

The question of whether the local education authority would be a fall guy if things went badly wrong was raised in the same debate. The Minister in the other place again did not answer that question except by reference to the simple statement that the Government keep on making. She said:

"It is important to understand that the Government do not seek to do anything that would force anyone to set up a company."

The bottom line is not whether anyone is forced to do that, but whether the powers are available. Presumably the Government intend that those powers will be implemented. If they are implemented, will the Minister be good enough to explain what will happen and on what scale? Is it intended—I would like him to give a straight answer—that companies at large would be created under the Bill's provisions? Is it intended to use the powers to deal with a problem that the Government believe already exists in education, or have they been introduced simply because the Government think that they might be a good idea but are not prepared to issue the guidelines or code of practice to ensure that they are implemented?

The debate has gone on between the two Houses for a long time and it has raised questions that the Government are not prepared to answer. That has been the prevailing characteristic of our debates from beginning to end. The Minister says that there is no hidden agenda, but he does not attempt to answer the questions. He hides behind provisions that are so wide that my noble Friend Lord Kingsland referred to the Government view in his concluding remarks to the debate in the other place. Referring to Baroness Ashton, he said:

"What the noble Baroness thinks Clause 10(1) does and what it does are two entirely different things."—[Hansard, House of Lords, 23 July 2002; Vol. 638, c. 230–36.]

He is completely right. Clause 10(1) states:

"The governing body of a maintained school may form . . . companies . . . (a) to provide services or facilities for any schools . . . (b) to exercise relevant local education authority functions."

As my noble Friend said, it is clear from the Bill that services can be provided because "relevant education authority functions" are teaching services. Indeed, there is no limit to the extent to which that can be done.

The plain fact is that the Government are not prepared to answer our questions or to explain the Bill properly. That is why we will persist in opposing these provisions. They are not in the interests of schools, governing bodies, teachers or children. They are our first priority. There may be something to be said for giving more freedom, but the manner in which that is being done, the mechanism that is being employed and the complete void that is left in the absence of the Government providing clear answers ensures our continued opposition to these provisions.

Photo of Phil Willis Phil Willis Shadow Spokesperson (Education)

I am grateful to Mr. Cash. He should abandon his European campaign and work full time on these issues. As ever, he made an incredibly valuable contribution. I shall not go over the issues that he raised, particularly that of liability, in respect of which we have still not had a satisfactory answer.

The Minister says that this is ultimately a matter of trust. Lord Dearing referred to that point in the debate in the other place yesterday. I accept that it is a question of whether we trust the Government, but the Liberal Democrats do not, simply because far too many questions remain unanswered.

I wish to raise the issue of individuals taking out profit—a subject on which the Minister would not allow me to intervene. He cannot have it both ways. In Committee, the Minister then responsible for the Bill—now the Minister for E-Commerce and Competitiveness—made it clear that it was possible for the individuals who had put capital into the company to take out profit. That is in direct contradiction to what the Minister has said in this debate. The Government cannot have it both ways. Such contradictions are totally unacceptable.

The Minister says that there is nothing new about this—that schools have been involved in such activities for as long as he can remember. I can remember a little further back than he can, and he is right. One has to ask why we need this huge sledgehammer to crack a relatively small nut. For example, charitable status is not covered anywhere in the Bill. Why is it possible for some of the largest independent schools in the country to be run on the basis of charitable status when it is not possible for a small company set up by a school or a group of schools to do the same?

As regards the governing body, Baroness Ashton of Upholland endeavoured to be helpful in another place yesterday, and genuinely tried to answer the questions, but in so doing she created more confusion. As the Minister said today, the governing body plays an important role. The hon. Member for Stone is right—clause 2 cannot disregard all educational legislation. I presume that would include provisions in the School Standards and Framework Act 1998, which sets up the current basis of governing bodies and, indeed, the provisions in the Bill that supersede them. The Minister should look at what has happened in Guildford in the case of King's college and 3E's Enterprises. That involves a private company running King's college with the responsibility of putting a majority of its people on to the governing body. Irrespective of whether we agree with that, that is the reality. The Government want to set up more academies that will be semi-independent schools with their own boards of governors, which can be run by a company, and the company can put its own shareholders on to that governing body. That is a huge contradiction with what the Minister said today.

On teaching, Baroness Ashton said yesterday:

"My Lords, the governing body could not bring in wholesale teaching."—[Hansard, House of Lords, 23 July 2002; Vol. 638, c. 234.]

But it can. There is nothing to prevent a school from saying to a teacher agency such as Select, "We want you to provide all the teachers for our school." So it was frankly dishonest to say that a company cannot do that. That is why we do not trust the Minister—we are not getting the right answers. [Interruption.] Well, perhaps it is that we cannot get the answers that we want.

Photo of Graham Brady Graham Brady Shadow Minister (Education) 6:30 pm, 24th July 2002

Before the hon. Gentleman moves on, the now famous written answer that I received today suggests that the Government are trying to hide behind a very precise interpretation or legalistic use of words. It says that

"the conduct of a maintained school must be under the direction of a school's governing body."

It is perfectly possible under the direction of a governing body for the services of the school—the provision of education in the school—to be provided by a company.

Photo of Phil Willis Phil Willis Shadow Spokesperson (Education)

With respect to the hon. Gentleman, that is exactly the point that we have been making for the past three and half months. The Government seem unable to grasp that simple point. Whether it is right or wrong, we simply want them to accept that it is the reality. We can debate the merits of it until the cows come home.

When we debated the amendments last Monday, we talked about a backstop and the responsibilities and duties of the local education authority. The Minister said categorically that if the LEA did not agree to one of these companies being set up, it would not be set up. I was reassured by that until I read page 9 of the guidance to the Lords, regarding clause 11. It says:

"Regulations will set out the basis on which an LEA may refuse consent."

In other words, the Government are going to introduce a set of regulations that will tell local authorities the grounds on which they can grant or deny a company permission. But clause 11 contains nothing relating to regulations being introduced afterwards. That is an example of the double standards to which we are referring. Whatever the rights and wrongs of these clauses—or at least the one we are debating—we have received unsatisfactory and conflicting explanations from the Minister, the former Minister, Mr. Timms, and the noble Baroness in another place. That has created confusion around what was perhaps a noble objective. It is now ignoble, and I hope that it will be resoundingly defeated in this House and in another place.

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills

The debate has been wide ranging, as always with debates about school companies. On the one hand Mr. Cash says that we have not covered any of the issues that he has raised, but on the other he wants to claim credit for all the improvements that have appeared in the Bill. Meanwhile, Mr. Willis gives us great credit for our attempts to cover the issues that have been raised, but believes that we have made the situation worse with every such attempt. I hope that that does not suggest that the new entente between the two Opposition parties is breaking down. Perhaps they are simply attacking from different points of view.

Photo of Bill Cash Bill Cash Shadow Attorney General

It is called a pincer movement.

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills

I hope that the hon. Gentleman is not going to engage me in a Gramscian endeavour concerning the difference between a war of position and a war of manoeuvre. Perhaps we can do that on another occasion.

In the course of the debates in this House it has been argued that although there is no objection in principle to schools having the freedom to set up companies, there are risks attached—that although schools may well make creative use of the freedom that we are giving them, they may make mistakes. On that basis, it is argued that schools should not be given the power in the first place. We believe that that is wrong. If we want innovation in our education system, we must give schools the freedom to make their own decisions about the best ways to raise standards, build partnerships and share their strengths with others.

I shall address yet again some of the issues that have been raised. A new element that has been put into the debate concerns the now notorious figure of Ms Gaby Hinsliff, who is traded across the Dispatch Box in a way that she has not had the privilege of enjoying before. I am pleased to say that her story in Sunday's edition of The Observer has absolutely nothing to do with our proposals to allow schools to set up companies. As my hon. Friend Baroness Ashton said yesterday, the proposals will not allow schools to contract out their responsibilities for the conduct of the school to a company of any sort. In fact, the article was about the announcement of the Government's strategy on social enterprise—an extremely worthy and important development. I am pleased that the official Opposition are embracing the third sector, as it is known. The two initiatives that were outlined yesterday were a Bank of England review of finance for social enterprises and a new social enterprise accreditation scheme. Far from it being a secret plan, it was launched yesterday.

I shall try to tackle some of the serious points that have been made. The hon. Member for Stone referred again to clause 2. The first point to make, which has been accepted on both sides of the House, is that clause 2 does not provide a blanket power to exempt schools from legislation for any purpose. It is important that hon. Members understand that it applies only to projects that raise standards. It is inconceivable that standards could be raised by voiding the responsibility of governing bodies.

In Committee, the Opposition's criticism was not that the clause is too wide ranging but that the power to decide whether exemptions should be granted, which will be held by the Secretary of State, advised by Ofsted, is part of a centralising tendency. In fact, a backstop is built in.

Photo of Bill Cash Bill Cash Shadow Attorney General

The Minister refers to the question of whether projects will raise educational standards. Under clause 1, that is determined by

"the opinion of the Secretary of State", but the question of whether schools companies will raise educational standards is implicit in the arguments that the Minister has been putting forward from the beginning. The two things obviously run together, and the hon. Gentleman is trying to pick and choose between different expressions in an attempt to get himself off a very difficult hook.

Photo of David Miliband David Miliband Minister of State (School Standards), Department for Education and Skills

I can assure the hon. Gentleman that I am not trying to pick and choose, as he puts it. Last week, we discussed the LEAs' role in deciding whether the plans for a school company should go ahead.

We have a second safeguard in clause 2, which is that the Secretary of State, advised by Ofsted, will be in a position to decide whether the proposed scheme will raise standards. Last week, hon. Members asked whether failing schools should be able to foist their failure on other schools, and I was able to provide reassurance. I have explained why clause 2 will not have the disastrous consequences to which the hon. Member for Stone referred.

I turn now to several points about liability which I was busy scribbling down as the hon. Gentleman spoke. If a company gets into significant debt, the supervising authority, which in most cases will be the LEA, will know about it through its receipt and assessment of the company's accounts. The supervising authority will then notify the school members and the LEAs of the member schools that, in its view, the school company had not properly managed its debt position.

It will be difficult for a company to get into debt through borrowing, which was also mentioned, and to be unable to repay its debts out of future income. We are building into the regulations a requirement for the company to seek the supervising authority's permission before it can borrow.

The hon. Gentleman also asked what will happen if a company goes bust. If a company becomes insolvent, its staff are likely to be laid off and its assets sold. However, there will be no risk to the school's assets or to the employment of staff at member schools, as the company does not own the member schools' assets or employ their staff.

Two hon. Members asked about profits. We believe that it is wrong that only private sector companies should be able to sell services to schools, and it is beneficial if other schools are able to do so. Where a company consists only of members that are education institutions, all its profits will be used for education purposes. Hon. Members asked whether a person—for example, a head teacher—could take a stake in a company and make a profit for himself. The answer is no, regulations will prevent that.

The hon. Member for Stone asked about the regulations proscribing what he called "disreputable persons" from participating in school companies, but we have not changed our plans on that—such proscription was the intention from the start.

The Charity Commissioners were mentioned, but they have absolutely nothing to do with these issues. They have no involvement in schools because most schools are not charities. It is worth adding, in parentheses, that schools would end up paying 20 per cent. of their rates if they were deemed to be a charity, so it is just as well they are not.

As a new Member of the House, I rather expected that at this stage of the proceedings we would be debating some important clash of principle between this House and the other place and that we would be fundamentally at odds over what we are trying to achieve. Instead, we are debating issues of detail which we have been over many times, and Ministers have provided answers many times.

If the House believes, as I do, that our best schools have remarkable expertise that deserves to be widely shared, it will support the concept of school companies. Companies will provide a means for our best schools to support and advise others in their areas of particular strength. We should not allow that potential to be lost. It simply does not make sense to argue that this idea has the potential to do good in a range of circumstances, but because it is conceivable, to use the hon. Gentleman's words, that there are circumstances in which it will not work, we should not allow it to be put into practice.

The House should decisively reject the Lords amendment. On this side of the House, we support innovation, more freedom for schools and decentralisation. We support the light touch bureaucracy that the official Opposition often claim to support but do not like when we put it into practice. They are stuck in what can only be described as "rejection mode". They reject without principle; they reject without reason; they reject simply for the sake of rejection. They are so busy saying no that they even say no to ideas that they claim to support.

I remember that a right hon. Lady once stood here and said "No, no, no". She may not be here, but her legacy lives on in the official Opposition, who insist on saying "No, no, no." On this side of the House we say yes, and I urge the House to support the Government.

Question put, That this House insists on its disagreement to Lords amendment No. 12 but proposes amendment (a) to the words restored to the Bill by that disagreement:—

The House divided: Ayes 260, Noes 160.

Division number 317

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Question accordingly agreed to.

It being more than one hour after commencement of proceedings, pursuant to Order [15 July], Mr. Deputy Speaker proceeded to put the Questions necessary to dispose of business.

Amendment (b) to the words restored to the Bill by motion to disagree to Lords amendment No. 12 agreed to.

Amendments (a) to (f) to the words restored to the Bill by motion to disagree to Lords amendment No. 13 agreed to.

Lords amendment in lieu—a new clause—

Page 23, line 44, at end insert the following new Clause—

"Control of regulation (No. 2)

(1) In considering whether to issue any guidance or other circular to the governing bodies or head teachers of maintained schools in the exercise of functions relating to education, the Secretary of State and the National Assembly for Wales shall have regard to—

(a) the desirability of providing information about good educational practice, while recognising the professional expertise of teachers,

(b) the benefits that are expected to result from the issue of the guidance or other circular, and

(c) the desirability of avoiding—

(i) the sending of excessive material to governing bodies or head teachers, and

(ii) the imposition of excessive administrative burdens on governing bodies or head teachers.

(2) In pursuance of the duty in subsection (1) the Secretary of State shall in respect of each academic year—

(a) prepare a report listing—

(i) documents sent by him during the year to all governing bodies of maintained schools in England or to all head teachers of such schools,

(ii) documents (not falling within sub-paragraph (i)) sent by him during the year to all governing bodies of maintained schools in England of a particular kind or to all head teachers of such schools of a particular kind, and

(b) lay a copy of the report before each House of Parliament, and include within it comparative statistics in respect of each of the two preceding academic years on documents falling within this subsection sent out by him.

(3) In pursuit of the duty in subsection (1) the National Assembly for Wales shall in respect of each academic year prepare and publish a report listing—

(a) documents sent by the Assembly during the year to all governing bodies of maintained schools in Wales or to all head teachers of such schools,

(b) documents (not falling within paragraph (a)) sent by the Assembly during the year to all governing bodies of maintained schools in Wales of a particular kind or to all head teachers of such schools of a particular kind.

(4) The documents referred to in subsections (2) and (3) do not include any document sent by the Secretary of State or the National Assembly for Wales—

(a) otherwise than in the exercise of functions relating to education, or

(b) at the request of the person to whom it is sent.

(5) Each document issued by the Secretary of State or the National Assembly for Wales and falling within subsection (2)(a)(i) or (ii) or (3)(a) or (b) shall list within it previous relevant documents issued by the Secretary of State or the National Assembly for Wales and shall state clearly those documents which are superseded by the current document.

(6) Each document issued by the Secretary of State or the National Assembly for Wales and falling within subsection (2)(a)(i) or (ii) or (3)(a) or (b) shall state clearly the persons for whom any advice and guidance is intended.

(7) In this section "academic year" means a period beginning with 1st August and ending with the next 31st July.""

Motion made and Question put, That this House agrees with the Lords in the said amendment in lieu:—

The House divided: Ayes 249, Noes 154.

Division number 318

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Question accordingly agreed to.