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

Part of Orders of the Day — Education – in the House of Commons at 5:49 pm on 24 July 2002.

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

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.