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moved Amendment No. 42:
Page 5, line 30, at end insert—
"( ) The Secretary of State or the National Assembly for Wales may not make an order under this section unless the following have been consulted, as appropriate, having regard to the content of the order—
(a) associations of local education authorities;
(b) local education authorities;
(c) bodies representing the interests of governing bodies of schools; and
(d) bodies representing the interests of teachers."
In moving this amendment, I shall speak also to Amendments Nos. 44, 46 and 47, which are about requiring consultation with appropriate groups before Clauses 6 and 7 are allowed to be put into operation.
The clauses exempt qualifying schools from pay and conditions and curriculum requirements, some of which are by right and some of which are at the discretion of the Secretary of State. Amendment No. 42 requires consultation with associations of education authorities, with LEAs and with bodies representing school governors and teachers, as well as with the Secretary of State or the National Assembly for Wales, before any order under Clause 6 is made.
Amendment No. 44 to Clause 7 requires the governing body to consult with parents, teachers, the LEA and bodies representing teachers before making changes to the pay and conditions of staff and curriculum changes. It is important that the governing body consults with relevant people before deciding whether and how to apply for these exemptions.
We on these Benches are concerned at the wide-ranging discretion that these clauses make available to schools. There is little evidence to date of schools wishing to have more flexibility in these areas. Indeed, it is one of the many matters in the Bill in regard to which my noble friend Lady Sharp might ask: is the Bill really necessary?
Provisions in the School Teachers' Pay and Conditions Act 1991 allowed grant-maintained schools to apply to the Secretary of State to be exempt from the statutory pay and conditions arrangements. The School Standards and Framework Act 1998 amended these provisions. However, only a very small number of schools took advantage of the flexibility provided by these statutory provisions. I cannot believe that schools are now crying out to be able to do more of this. However, if they do, we believe that it is appropriate for associations of local education authorities to be consulted. The detailed arrangements may well raise other concerns. In terms of the consultation arrangements for Clause 7, it is vital that, in addition to LEAs, teachers and parents should be consulted about variations to the curriculum.
Reliance on the discretionary provision set out in Clause 7(2)(c) is inadequate. The actions of individual schools will clearly have an impact on other schools within the local authority area. Therefore, changes to the curriculum and to pay and conditions should not be facilitated on an isolated case-by-case basis.
Amendment No. 46 specifies that the parents of disabled children and children with special needs should be consulted too in regard to how any curriculum changes might affect them. That is in the spirit of what was achieved by the Special Educational Needs and Disability Act last year. We and the Special Education Consortium are concerned that, unless this amendment is included in the Bill, it would be possible for a school to earn autonomy even though it might not be addressing adequately the educational needs of disabled children and those with special educational needs. As the Bill stands, such children might be further disadvantaged by the exemptions that the school earns—for example, a narrowing of the curriculum or reliance on classroom assistants to teach them, with the qualified teacher there only to consult.
It might also be possible for a school to proceed with exemptions even though parents of such children were very unhappy about the development. These provisions are for successful schools. Their success will qualify them for the exemptions. We therefore want to ensure that schools seeking earned autonomy should be expected to demonstrate that they have been successful in promoting the education of children with disabilities and special educational needs. They should also be required to show how the impact of any exemption or innovation on such pupils will be evaluated and to demonstrate that they have achieved the support of the parents of those children for the changes they propose. That is to ensure that the changes do not affect those children disproportionately.
Amendment No. 47 would require bodies representing teachers to be consulted on applications referring to pay and conditions. In the context of severe difficulties for recruitment and retention, the Government should exercise extreme caution before moving to deregulate pay and conditions and to introduce even more flexibility. Many schools are of the view that they already have quite enough flexibility, so it would be preferable to remove that provision completely from the Bill. In the event of the Government remaining committed to the provision, it is vital that full consultation takes place, given the implications for teachers. That should be done not just for teachers, but for all those who have the detailed knowledge and expertise to understand the implications of what is proposed. There is also doubt in some quarters as to whether the omission of the right to negotiate complies with the ILO convention. I beg to move.
Amendment No. 45, which is in this group, would include the parents of children with special educational needs. There are only two kinds of children: those with special educational needs and those without. That covers all children in our schools. Clause 7(2)(a) says that,
"where the application relates to a curriculum provision", the governing body shall,
"consult the parents of registered pupils at the school".
However, that could exclude parents representing the interests of children with special educational needs. That is why the amendment is important.
Any exemption from national pay and conditions arrangements would be best introduced with as much consensus at local level as possible, and certainly not against a hostile reception. Without going into the detail of every proposal included in the amendments tabled by the noble Baroness, Lady Walmsley, consultation with certain bodies is crucial as a matter of courtesy and of very real information, as well as in an attempt to achieve a basis of consensus at local level. The local education authority and parents should be informed. In particular, parents of children with special educational needs should be informed so that their specific needs can be taken into account in any arrangements subject to the exemption.
As the father of a daughter with a learning disability who was denied any schooling because she was born in 1951, many years before the Education (Handicapped Children) Act 1970, and as the grandfather of a one year-old boy with Down's syndrome, I am obviously extremely interested in the future of special educational needs provision. It is vital that parents are linked with the special educational needs process whenever it has consequences for their child. I hope that the Minister is minded to support the amendments, particularly Amendment No. 45, tabled by the noble Baroness, Lady Blatch, and Amendment No. 46, tabled by the noble Baroness, Lady Walmsley, because they underline the basic need for common sense and understanding in dealing effectively with many a distraught parent's hopes and wishes for their disabled son or daughter.
I support what my noble friend Lord Rix and the noble Baroness, Lady Blatch, have said about children with special needs. I worked with children with special needs for several years nearly 30 years ago, and my wife is a speech therapist in the National Health Service who works in schools with children with special needs.
I particularly endorse what my noble friend Lord Rix said about parents feeling dispirited if they do not consider that proper provision is being made for their children. There is already a patchwork quilt of provision in the UK. Anything that exacerbated the problem would be a retrograde step.
The general thrust of the Government's attempts to create diversity, flexibility and autonomy in schools as far as possible is extremely worthy and I support it, but the noble Lord, Lord Rix, has put his finger on an important issue. If children with special needs are involved, there must be uniformity of provision. We must not go back to the days when the chances of someone with special needs receiving a proper education were extremely remote. Many of us have heard from parents over the years about how their children have been stigmatised or removed from the normal ambit of educational provision because of a disability. During my days as a constituency Member of Parliament, I often listened to agonised stories of people who not only suffered grievously as a result of being rejected by friends, neighbours and relatives because of someone being different and having some special need or requirement, but who also hit the same set of buffers when they had to deal with authority, which should have known better.
Great progress has been made over the past 20 years under successive governments. We should be pleased that we have been able to take enlightened action and we should not put the clock back in any way. I am sure that the Minister will be able to give the Committee those reassurances.
I thank noble Lords for their contributions. I shall deal first with Amendments Nos. 42, 44 and 47. I said earlier that we want the process by which schools earn autonomy to be as simple, effective and unbureaucratic as possible. Amendment No. 42 would require a wide range of representative bodies to be consulted in addition to those bodies and individuals who will have to be consulted by governing bodies under Clause 7. A requirement to consult with those representative bodies on the content of even a selected number of orders relating to exemptions from the national curriculum or the pay and conditions provisions is unnecessary and would be difficult to operate. First, it presumes that the bodies outlined in the amendment have a direct interest in all such orders and will both want and have the time and resources to comment on them. Secondly, provision is made for the key stakeholders who may be directly affected by the application to be consulted by the governing body before an application is made.
For example, Clause 7 makes it clear that before making an application, the governing body will need to consult with the appropriate parties, including every teacher employed in the school, in relation to pay and conditions, and parents, in relation to curriculum matters, as well as other appropriate persons. Similarly, the Secretary of State or the National Assembly for Wales will not be able to make orders unless proper consultation has taken place.
The amendments do not appear to take account of the key point that under employment law, any changes to teachers' contracts that could follow on from pay and conditions exemptions orders cannot be imposed unilaterally on teachers but can take effect only following appropriate negotiation, which may, of course, involve teaching unions. At the final stage, when changes are applied to contracts in respect of pay and conditions orders, negotiating machinery would not be needed in every case. Of course, if a school secured extensive exemptions from national pay and conditions, to the extent that the annual national pay award did not apply, some local determination machinery, which could well involve unions, if appropriate, would be needed to replace the national machinery. But these earned autonomy provisions allow the possibility of quite minor modification and exemptions to suit local circumstances.
I therefore do not believe that it is necessary to require consultation on every change, no matter how small, to involve all teacher unions. If teachers at the school were in favour of the application and the unions at local or national level were not, it is hard to know what the governing body would be expected to do with responses. Surely what matters is what teachers at the school concerned think of the application. Any teacher in such a position would be fully entitled to seek advice from his or her union. I should reiterate that no governing body will seek to disadvantage any of its teachers through the terms of an earned autonomy application.
An additional point is that adding such consultees adds to the bureaucracy and burden on schools. Even if the application were to enable a small change—for example, to pay bonuses to staff—the unions would need to be consulted directly. This is not good use of time or resources. Governing bodies have a relationship with and a responsibility to the teachers at their school, and the teachers are therefore the ones to be consulted. I should add that the Government have never had any formal indication from the International Labour Organisation that we are in breach of regulations.
I therefore believe that the wording of the Bill as it stands is quite appropriate. This wording requires governing bodies to take account of any guidance, which the Secretary of State or the National Assembly for Wales may issue, when they are considering whom to consult, but the final decision is with the governing body. This gives the appropriate level of flexibility for the school and, we believe, confidence for everyone involved.
Amendment No. 44 would effectively require a school to consult all parents on what may be a minor modification relating to teachers' pay and conditions, which would restrict the working of the clause as it stands at present.
It would also require governing bodies to consult teacher unions before making any application for national curriculum as well as pay and conditions exemption or modification. They would need to take account of any guidance, but the amendment is worded so as to ensure that the guidance does not allow for any exceptions. I do not agree that any requirement for consultation with unions, prior to every single application, is a helpful way forward.
I should further point out that the amendment would replace the existing paragraph (c) in Clause 7. This paragraph is of wide effect and will require the governing body to take account of any guidance which the Secretary of State or the National Assembly for Wales may issue when considering whom it is appropriate to consult. This guidance might, for example, cover the diocese, in the case of church schools, if changes proposed are very significant, or local or national teacher unions, perhaps in cases where major exemptions from or modifications to pay and conditions provisions are being proposed.
It will still be for the governing body to determine whom it is appropriate to consult, but the guidance will be helpful in that process of consideration, and they will need to take it into account. Amendment No. 44, however, would entirely remove subsection(2) and require consultation with parents, teachers, LEAs and teacher unions in all circumstances, while at the same time removing all discretion from the governing body in terms of the consultation process and potentially limiting the range of consultees.
My view, therefore, is that we should not accept Amendment No. 44. Governing bodies need discretion to make their own decisions, taking account of guidance. I do not believe that they should be required in all cases, irrespective of the nature of the application, to do so. I therefore hope that the noble Baronesses, Lady Sharp and Lady Walmsley, will not press the amendment.
I turn to Amendments Nos. 45 and 46. I take this opportunity to reaffirm to the Committee the Government's commitment to ensure that all schools provide for their children with special educational needs and children with disabilities. These proposals on earned autonomy do not alter that commitment in any way. I entirely agree with other noble Lords who have spoken that it is important that parents of children with special educational needs have a voice in the decision-making process.
In Clause 7, we make it clear that the governing body must consult the parents of pupils at the school where that governing body is applying for earned autonomy in respect of any curriculum provision. It is absolutely clear that this will include, and must include, parents of children with special educational needs. It is a requirement that the parents of those children—statemented or not, wherever they are on the spectrum of special educational needs—are consulted. Where parents are opposed to the change being proposed, they will make their views known. The governing body will consider those views, and I do not believe that the governing body of a successful school would disregard the views of the parent population. Successful schools are schools that address the needs of all their pupils. That must include children who have special educational needs and children with disabilities.
Furthermore, Ofsted will of course continue to inspect schools exercising their earned autonomy, and will continue to be concerned with the education that the school provides for all of its children, including those with special needs. I hope that that assures the noble Baronesses, Lady Blatch, Lady Sharp and Lady Walmsley, and that they will not press their amendments.
Before the Minister sits down, and before the noble Baroness, Lady Walmsley, replies on Amendment No. 42, I should like to pose two questions. Where in the Bill is this obligation to consult with the various bodies specified in the amendments? Where in the Bill, for example, is the obligation to consult with the parents of children with special educational needs? I cannot find it.
Secondly, in speaking to Amendment No. 1, which is pertinent to this point, I pointed out a tension between the Bill and Section 5 of the School Standards and Framework Act 1998, which places on LEAs a legal obligation to raise standards in their schools. As I said, in this legislation, LEAs are not even statutory consultees. The Minister has not made it clear which part of the Bill imposes a legal obligation to consult with LEAs.
Clause 7 imposes the duty to consult with all parents, which includes parents of children with special educational needs. Those parents are encompassed within "all parents". We expect schools to consult with all their parents, and that includes the parents of children with special educational needs. I am very concerned that we ensure that the parents of those children are involved right across the spectrum in the decisions that schools make. It is very important that that is done. We believe that we have covered the point by saying that all parents must be consulted. As for the issue of LEAs, we intend to specify in guidance that LEAs should be consulted before any application is made.
I am very happy to tell the noble Baroness that I shall take away the matter and come back.
The Minister said that the Government intended to avoid unnecessary complexity in the legislation. However, what is more important is that we get it right. If that requires a little more bureaucracy, we should support such a proposal. The Minister's comments simply emphasised that the noble Lord, Lord Dearing, was right when he said that the last thing that schools want is to become involved in pay negotiations, and that there is therefore no need to extend schools' powers in that sphere.
As for who should be consulted on variations to teachers' pay and conditions, although every teacher may be consulted, not every teacher has the expertise of the teachers unions, for example. Neither do individual teachers represent the whole body of teachers; each teacher represents only herself and perhaps the teachers in her own school. There is therefore still a need for statutory consultation of the bodies representing teachers.
I thank the Minister for her reassurances on the parents of children with special educational needs. It is quite clear from our debate that we shall return to the issue on Report. Meanwhile, I beg leave to withdraw the amendment.
Resolved in the negative, and amendment disagreed to accordingly.
[Amendments Nos. 46 and 47 not moved.]
Clause 7 agreed to.
Clause 8 [Removal of exemptions]:
[Amendment No. 47A not moved.]
Clause 8 agreed to.
Clause 9 [Determination of pay and conditions during and after exemption]:
[Amendments Nos. 48 and 49 not moved.]
Clause 9 agreed to.
[Amendment No. 50 not moved.]
Clause 10 [Powers of governing bodies to form or invest in companies to provide services etc]:
In moving this amendment, I shall speak also to the other amendments that are grouped with it.
All of the amendments seek to leave out the word "company" or "companies" and insert the words "bodies corporate" or "body corporate" into the Bill. The amendment is intended to probe the Government on their proposals regarding companies. We on these Benches believe that it would be better to keep company law out of the education system in order to avoid placing additional bureaucratic burdens and responsibilities on head teachers and governing bodies.
School governing bodies already have a statutory status: they have been bodies corporate since 1998 under the School Standards and Framework Act, and even—perhaps—under the Education Act 1993. That status protects an individual governor's personal wealth and property from liabilities but it does not involve onerous levels of administration and other responsibilities, as company status does under the Companies Act 1985. Companies Act companies are legal entities in their own right and limited liability limits the liability of those setting up the company to their initial stake provided that they do not, by their own misconduct—whether fraud or malpractice—cause the immunities to be lifted by a court.
Those "benefits", so to speak, also involve responsibilities. There are a considerable number of checks written into the process of setting up and running a company, which help to filter out those vulnerable to malpractice. In addition, the requirements of the annual audit and report are considerable.
Governors, as last year's survey by the National Association of Governors and Managers indicated, already find their responsibilities as governors somewhat onerous. We on these Benches do not understand why any governing body should seek to add significantly to its burdens by agreeing to set up and run a company. What benefits are to be gained from doing so? Is not the existing legal status of the governing body as a body corporate sufficient to meet the needs of Clauses 25 and 26, which are about the provision of community facilities, and of Clause 29, which relates to the joint discharge of functions? Can the Minister please tell us why the Government believe that it is necessary for such enterprises to be undertaken by Companies Act companies, rather than under the powers that governing bodies already have as bodies corporate? I beg to move.
I want to give some support to what the Government are seeking to do in this part of the Bill. Although I understand why the noble Baroness, Lady Sharp, properly probed the Government on the details, we should not detach ourselves from the spirit of what this part of the Bill seeks to achieve. It is erroneous to suggest that there is currently no link between education and companies law. In higher education—certainly, within the universities system—many universities have spun off their own companies very successfully. Those companies have gone on to create job opportunities and to enhance the value of the local economy in their area. I refer the noble Baroness to the example of Merseyside in that respect. At the universities there, significant new enterprises have been created and spun off from universities. They have gone on to make a significant impact locally in terms of the numbers of people employed and the creation of material, via those departments, which has been recycled in the education system and the economy generally.
Although this proposal would not be done on the same scale, the precedent is clearly there. There has been no difficulty in operating those companies in terms of safeguarding the governors of the universities and the staff who get involved. I add that some of the staff have gone on to lead the universities. They have gone out into the wide world, having created those companies, and created some extremely viable and interesting new companies and endeavours. We can be encouraged by such efforts.
The noble Baroness said that the responsibilities may be onerous on governing bodies, which are already over-stretched and which may not feel the need to take on additional responsibilities. As I understand the clause—perhaps the Minister will confirm this—there is no requirement on governing bodies to create such companies. That is done when they feel that that would be useful to them. For example, a school may have developed software for computer programmes or come up with an innovative way of dealing with a history programme or a science project in the national curriculum, and it could offer that to other schools. If that school in turn receives some remuneration for doing so and is able to redirect that back into its school budget, that is clearly advantageous to the school.
I point out to the noble Lord that in such cases there is nothing stopping individuals from setting up companies. With universities, in most cases it is individuals who set up companies. Sometimes that is done with capital from the universities, which have become, in that regard, shareholders. They are set up outside the framework of the university. In this regard, we are concerned with governors who set up a company as a group of governors. That is a slightly different issue.
Again, I refer the noble Baroness to the example of Merseyside, in which the universities collaborated to set up what was called the "hothouse" from which various new companies were initiated using ideas that were then in circulation around the faculties. It was possible to create enterprises that have gone on to be supported externally—for example, with European Union funding, as part of the objective 1 programme for the regeneration of the area. They have become a catalyst for the growth of the economy and the creation of jobs.
Schools will not be in a position to take on major initiatives of that kind. However, it is not impossible to foresee circumstances in which, as I suggested, a good idea that a school has developed could be used in an innovative way. That will not be a regular pattern in our schools. The Government are not suggesting that. This is surely an enabling measure that will allow schools to do that if they so wish. That is in line with the spirit of the legislation, which is about freeing schools to try imaginative initiatives and to be innovative and enterprising. We should not place unnecessary constraints in their way. For example, a few months ago, my nine year-old was doing a project on the Aztecs. I was intrigued to look on the Internet to see what the best sites were. I thought that the best site was offered by a primary school that had developed its own programme, which was linked to the national curriculum. That is precisely the sort of software package that could be sold to other schools that will do the project in future. Similarly, where other intellectual capital has been created by a school, why should there not be a way of drawing back some sort of benefit to the school from which the idea originated?
My only concern is about safeguarding the governors, who become involved in authorising such a project. I want to hear a word from the Minister on that. My understanding of company law—his is much greater—is that the appropriate safeguards are in the legislation but that one would always be concerned about the liabilities that governors would enter into and the safeguarding of the individuals concerned.
I want to offer comment in the form of a question. I support enlarging rather than constricting the opportunities that are open to schools. If a body corporate comprehends also a company, I have no problem because that enlarges the specificity of a company. But if it does not, I should regret not opening up the possibility of a company—perhaps one limited by guarantee—because that is the type of instrument with which a commercial partner, which is a company, might feel comfortable in entering into a joint venture.
I can envisage such a situation, for example, in the provision of leisure. A school may have the land and a developer may be interested in providing the buildings and equipment. They could conceivably form a joint venture which would have to be a legal entity, and I suspect that that legal entity would be a company. In order to become involved in that, the school might need to set up a company limited by guarantee. Therefore, my concern is not with A or B being right but with avoiding confining the possibilities open to schools, especially as we are encouraging them to reach out into communities and to be centres of community.
I also express support for the sentiment echoed by the noble Lord, Lord Alton, and, to some extent, for that expressed by the noble Lord, Lord Dearing. I welcome these clauses in the Bill. Under the pre-1988 position in the education system, the only body to which schools could turn was the local education authority. That, apparently, was the fount of all wisdom and knowledge, not only in curricular development but in the whole organisation and running of schools.
The big breakthrough came with the introduction of delegated budgets. They had been experimented with in the early 1980s and were put into effect by the time of the Education Reform Act 1988. That legislation gave to schools a much greater degree of freedom and independence, and schools quickly realised that they could run a large part of their organisation which had previously been run by the LEA. That was a tremendous breakthrough. I believe that, in virtually all cases, schools which have had delegated budgets have welcomed them. More and more schools have received them.
Of course, this power will be extended only to schools with delegated budgets. Therefore, one is talking about schools which have had some experience of carrying out their own repairs and of moving into the provision of their own catering arrangements and going well beyond that. As I understand it, these clauses envisage that they will be able to form companies, if the governing body so recommends, and provide other services. I welcome that very strongly.
Some of the schools with delegated budgets have developed considerable expertise, perhaps in technical, legal and financial areas. I believe that it is absolutely right to allow them to capitalise upon that knowledge. As the noble Lord said, that is already happening. He quoted the example of software development. A great deal of very good software development is now taking place at school level throughout our education system. There is no reason why a school should not try to sell that to other schools not only in this country but in other countries as well.
Such developments are taking place because there is a great freeing-up of the old, monolithic education system. In one area, not only has the Telford City Technology College become one of the most, if not the most, successful school in the country, but it is now sponsoring another school with the help of a nurses' company. The setting up of another school—a state-maintained school at that—is, as it were, the extreme element of this proposal. Again, Telford and other city technology colleges have developed packages of one type or another which they make available to other schools.
Therefore, I look upon this as a very welcome development and a way in which an enterprising school can increase its financial resources in a sensible, measured way. I am sure that many questions about detail will be raised but, in general, I want to express my support for these clauses in the Bill.
It may come as a surprise to the noble Lord that, in principle, I, too, welcome more commercial freedom for schools. I agree with the noble Lord, Lord Alton, that these clauses need to be seen as enabling clauses. No one will be required to set up a company; they are simply enabling clauses. But there my concern starts rather than ends.
My concern is in relation to the detail. I say to my noble friend Lord Baker that the detail is worrying. My noble friend spoke in the context of Telford college, which is almost fully autonomous, and in the context of what were grant-maintained schools, which enjoyed a great deal of autonomy. We still have the Thomas Telfords of this world, the city technology colleges and, indeed, the city academies. But we have lost the wholesale autonomy enjoyed by the grant-maintained schools. Those schools are now back with their local authorities.
I am concerned about the detail of the way in which these companies are to be set up. They will be companies under the full panoply of company law, and that is very different from what I believe is being described. The noble Lord, Lord Alton, gave the university sector as a very good example. Of course, the universities are autonomous in that sense, and they are masters in their own house. But, as I said, schools are not.
Even so, if the noble Lord looks at the words in the Bill, he will see that schools must work in concert with the LEA and not, as my noble friend Lord Baker believes, separate from it. Schools cannot even take this step without the LEA being involved. The LEA forms the supervisory body. Therefore, another tier is involved, and the Secretary of State holds the power to intervene.
Therefore, we are not talking about an autonomous company but about an arrangement with layers of other people superimposed upon it. I believe that that is a recipe for disaster. We should look, for example, at the Government's record on individual learning accounts. The Government introduced a scheme in which they gave autonomy to a company to go away and involve itself in a government scheme commercially. It was widely open to fraud, and the National Audit Office's report of what went on there makes fairly horrific reading. Therefore, the Government's record on this matter is not good.
I shall have a great deal more to say about Clause l0 when it comes to the Question whether the clause stand part because I believe that some real concerns exist in relation to it.
Perhaps, in passing, I may refer to the example given by the noble Lord, Lord Alton. I believe that he was talking about his son working on an Aztec project. He spoke about a primary school which had the most marvellous technological software—the best to be found. At present there is nothing to stop any primary school from developing that software and making it available to other schools. In fact, a school can even charge for that service. The money is received by the school and used for the benefit of the school. That can occur in the same way as playing fields, for example, can be used with different scales of letting charges. Schools can charge one level of fee to the voluntary and charitable sectors; they can be generous in their lettings policy for other schools in the area; they can act in a commercial manner if a commercial organisation wishes to use the facilities; or, indeed, if weddings take place on the school premises, again, they can be very commercial.
Therefore, there is a great deal that schools can do in order to exploit the facilities that they have and the developments that they have made in education. However, as I said, I shall have much more to say when it comes to the Question whether clause stand part. My concern is about the detail and not about the principle of giving more commercial freedom to schools at a local level.
Before my noble friend replies, I have two factual questions to ask him. As I am trying to learn about education from the Bill, can he explain the existing legal position? What law prevents existing maintained schools from forming companies? In other words, what net is there in the Bill? Can he direct me to that? I assume that the answer to that is very clear and that I am simply ignorant.
My second question is: can he give me an example of what one can do by forming a company which one cannot do under the present situation? Can he give an absolute hard-and-fast example of something that schools can do once they become companies which they are prevented from doing now?
At the beginning I almost felt that my role in this Committee was not necessary because the noble Lord, Lord Alton, and others successfully answered most of the points raised by the noble Baroness, Lady Sharp. Because of the promise of further debate on the wider issues in Clause 10, I shall attempt to confine myself to this group of clauses and to the issues raised in connection with them, and I shall not stray on to the issues which we shall inevitably debate later.
The noble Baroness, Lady Sharp, opened by talking as though we were imposing burdens on governors and schools. The noble Lord, Lord Alton, responded to that point very effectively. There is no obligation on any school or any group of schools to make use of the powers provided for by Clauses 10 and 11. The use of those powers is purely voluntary.
If we take the amendments literally, the issue comes down to whether we have companies under the Companies Act 1985 or a statutory body whose rules would be set up under Amendment No. 58 by the Secretary of State. I am a little surprised at that because the thrust of much of the debate on the Bill has been the extent to which there has been delegation to the Secretary of State, particularly by regulation. To use the Companies Act, which is provided for in primary legislation and is well known, rather than to give additional regulation-making powers to the Secretary of State as Amendment No. 58 would do, is a little counter to the thrust of the argument that I have heard.
The reason for proposing to use the Companies Act 1985 is simple: it is there; it works; the rules are all set out and it is easy for anyone to use. One can buy a company off the shelf readily. There are no new legal or accounting procedures to be learnt. The constraints on and protections of limited liability are well known and have been so for many years.
In answer to the noble Lord, Lord Alton, the two kinds of company that we expect to be formed are first, mainly companies limited by guarantee but, secondly, possibly—I shall explain the circumstances, perhaps in response to later amendments—companies limited by shares. In the case of companies limited by guarantee, the responsibility of the members of that company is limited to £1 or £10 or whatever sum is the initial guarantee. In the case of a company limited by shares, the responsibility is limited to the amount of the shares subscribed for. Therefore, the financial protection of those who take part in these companies is clear.
It is necessary for me to say a word about the three kinds of activity of the companies, because that is significant in explaining why we have gone along the route of the Companies Act. We envisage that the companies should have three purposes. One would be collective purchasing where the purchasing power of a group of schools in one authority or, indeed, more than one authority, would be greater than that of a single school. In answer to the noble Lord, Lord Peston, a supplier to a school is more protected if he is supplying to a limited company than to a corporate body in the more vague sense that a governing body is a corporate body.
I thank my noble friend for giving way. Perhaps I may ask him whether he is certain of the answer he has just given as regards a supplier being more protected. Surely, if a school orders goods and writes a cheque, the supplier is fully protected. How can he be more protected? Unless things go on in schools about which I do not know and do not want to know, I do not see what problem could possibly arise.
Ultimately, the noble Lord, Lord Peston, is right in the sense that if a school defaults, the local education authority is ultimately responsible. If a company set up under Clause 10 defaults, the local education authority is ultimately responsible. In the end, the responsibility and the protection are the same; it is a question of the route taken to get there. This, again, is in answer to the noble Lord, Lord Dearing, who I believe would be happy with companies limited by guarantee, with the restrictions that there are.
I shall return to explaining the three purposes of the companies before I am diverted too far. The first is purchasing. The second is one of which examples have been given; that is, the common provision of services, of which software development is a good example. In the model runs carried out by the department, even without the powers existing, within Havering Borough Council education authority 12 schools are getting together for service delivery. There is the whole question of whether that vehicle is suitable for use for joint ventures. That is a matter which we can debate later if necessary. However, that has not been raised and I shall not raise it further.
Fundamentally, I want to respond to the point raised by the noble Baroness, Lady Blatch, about what she called the full panoply of company law. It is exactly because company law is so well established; because everyone knows what it is and because there are models to work from that the measure is proposed as the way into co-operation between schools. It may be said as regards purchasing that the local education authority may have greater purchasing power than a company of that kind. I anticipate that the noble Baroness, Lady Sharp, may make that point in reply. If that is the case and the schools are satisfied with the purchasing provision of the local education authority, there will be no temptation to form a company for that purpose. However, we understand that that is not always the case and that there may be some schools which want to make their own arrangements. That can, indeed, be done.
The answer to all of those questions is, fundamentally, that this is a voluntary provision. Nobody is required to do this. The provision enables groups of schools, if they wish, to do things which they might not be able to do now; for example, to gain larger discounts when they are purchasing; to have a vehicle for selling on service developments which may be of a wider value than to their own schools, and ultimately, if necessary, for the purpose of joint ventures. I can go into more detail on that point if necessary. However, in any of those cases it is desirable for the schools to be companies and not bodies of the form proposed by the amendments.
I am grateful to the Minister for that reply. Before he sits down, perhaps I may ask one further question. For the purpose of people following our debate outside the Chamber, can he underline the fact that this is not about private gain; that if, indeed, any surplus was to accrue from the activities of a company inside a school, that that money would be ploughed back into education and the running of that school?
There are amendments tabled to that purpose, to which I propose to reply. However, I shall give a precise answer. When the company is being established for purchasing purposes, the benefits will go entirely to the school. The answer I have not yet given to the noble Lord, Lord Peston, is that a corporate body can purchase, but it cannot purchase on behalf of other schools, so it is a group of schools getting together to form a company.
When we come to a company limited by shares, for example software development, it may be necessary to bring into a company other bodies or individuals together with the schools in order to achieve the objective. It may be necessary, for example, for the company to have as participants printers, marketing people or further software developers. I am thinking on my feet because I do not know enough about the subject, but it may be necessary to bring in people who would be participating for profit. Those would be the circumstances in which there would be a company limited by shares rather than a company limited by guarantee. In those circumstances, shareholders in a company of that kind would be looking to it for profit. Although according to the rules that we shall set out they would have to be organisations with a significant involvement in education, I cannot give an absolute assurance that under those circumstances all the profits would go back to the school.
An individual school can form a company but it cannot form a company with other schools, which is the main purpose of this exercise.
I thank the Minister for his reply although he leaves me slightly more mystified than when I started. Perhaps he would like now to answer the two questions posed by the noble Lord, Lord Peston. Am I right that the current status of governing bodies is that of bodies corporate? I did not think that a body corporate could establish Companies Act companies. However, the Minister tells me that they can.
A single school could form a company for its own purposes. Our intention is that groups of schools should form companies for the purposes set out. They cannot do so now.
What can they do as companies which they cannot do now? The only answer given is that they can purchase jointly. The noble Lord rightly pre-empted my response to that. Is he rediscovering the local education authority? It does not seem a sufficient reason. If schools can already form companies, is the reason only that they should do so jointly? If they can already form themselves into Companies Act companies as governors, why do we need this legislation? It seems yet another example of an unnecessary piece of legislation.
Another issue worries me. It has been raised by others. If the company established—to which a governing body as governing body is party—goes bust, the local education authority has to pick up the tab. What is the purpose of establishing the companies? If at the end of the day the risk will have to be borne by the local education authority, we should leave the situation as it is. As has been indicated, schools can do a wide range of things. Without this legislation, many schools in Havering are getting together and promoting software. Telford City Technology College and the Birmingham 3E's are companies set up to exploit what the schools are doing. I cannot understand why we need this additional legislation.
It cannot form a company for the benefit of other schools. It can set up a company for the purpose of running its own school. I think that is what the noble Lord, Lord Baker, referred to. Paragraph 3 of Schedule 10 to the School Standards and Framework Act provides that power. It cannot set up a company jointly with other schools. It could not set up an Internet site or, under the School Standards and Framework Act, undertake software development with other schools.
That is not my question. What is to stop an individual school from setting up a company, selling its wares to another school, neighbouring or across the country, for profit which benefits the individual school which sets up the company?
If a school were to do so, it would be using the resources of more than one school and the resources of those schools would together be more powerful than the resources of an individual school. That is why under Schedule 10 a Companies Act company would have an advantage. But, of course, if it is only for the benefit of a single school the power already exists.
I tabled the amendment at a time when I thought that I understood Chapter 3 of the Bill. My noble friend has educated me in many matters over many years, but I have to say that I certainly know less than I did before we debated the previous amendments. I am sorry that we shall have debate on whether Clause 10 shall stand part. I believe that we should give the Minister a chance to think again about some of the answers he has given us and perhaps debate the matter on Report. However, that is up to the noble Baroness when she reflects on what will happen after dinner.
I have sought hard to get into the mindset of whichever lunatic dreamed up Chapter 3. We are supposed to be discussing an education Bill. I find it hard to connect education as I understand it to Chapter 3. The Government must have something in mind. I had assumed that it was to do with things schools could not do previously. The question of charging seemed central if one were setting up a company. A company set up without deep thought on charging would be a most peculiar company.
My noble friend Lady David and I tabled the amendment to see what was involved with regard to charging. I took it for granted that the answer to the simple question, "Could a fee-paying element be introduced into education as a result of this section of the Bill?" would be a categoric "No". I hoped to receive such an answer. However, the answer given to the question by the Minister in another place was, "We have no intention of doing that". The response to my question on Thursday on selection by ability was, "We have no intention". But "we have no intention" does not answer the question, "What does the Bill say and allow?" Does the Bill in any sense whatever allow the charging of fees for education? I hope that the answer is no; or, "Yes, it looks as though it does so, we had better change the Bill to ensure that that does not happen".
There clearly must be charging. If the company is set up and provides facilities and services, it must charge for them. The principles by which those charges will be levied is not clear to me. Will they simply be full cost charges with no profit element? Alternatively, will they include a profit element? My noble friend partly answered my next question. If there is a profit element, who does it belong to? Again, I had assumed that it would belong to the company rather than a specific school.
I had thought that the answer to the question of the noble Lord, Lord Alton, would be that all the money would then be confined to education. However, unless I misheard that was not quite my noble friend's answer. I hope that he might again reflect on that.
I refer to one aspect of the clause which troubles me. In Clause 10(8) the words "company", "relevant local education authority functions", "facilities", "maintained school" and "participating school" are defined. However, the word "services" appears in Clause 10(1)(a) but is not defined. Therefore, can my noble friend say whether the reference to "services" merely mean educational services, or whether it means services in some broad sense? If it refers to educational services, does it mean that no fees can be levied for them? Alternatively, if it means services in a broad sense, can my noble friend say what fees can be levied in that regard?
Let us consider an example of the sort that my noble friend did not consider. Let us assume that someone sets up a company that decides that its expertise will be in the teaching of foreign languages—a topic raised last Thursday. The company decides that it will be the expert on the technology of teaching foreign languages, including websites, and so on, and that it will sell such services to other participants. As those services would be educational, we can see how very close that would get to charging for education. There is a slight distinction here between charging the buying school and the parents. At this point the school only is paying, not the parents, and the free education criteria would not have been broken. Is there any possibility that by, say, defining the services as "extra" and, therefore, not central to the school, the parents could be charged at a later stage?
We must not be nai ve about the situation. At present, there is a fairly arbitrary distinction between what schools can, or cannot, charge for; indeed, in my experience, schools are pretty reasonable and not stupid in the way they behave. They are not currently charging for education. However, I cannot see what stops them doing so. Perhaps we can take the obvious example of school trips, which, in many ways, are justified on educational grounds. As I understand existing law, for which many people in your Lordships' were responsible, you cannot charge for school trips. You can say only that people may voluntarily contribute to the cost. For those who know about pressure, the difference between not charging and contributing voluntarily is rather difficult to define, but I believe that you cannot charge under the law. Let us suppose that a company is formed specifically to organise school trips and that it levies charges for doing so. How would the voluntary principle apply in that situation?
I ask all those questions simply for elucidation. I cannot believe that this Government—here I go into "creep mode"—would ever do anything that was other than excellent when it comes to education. None the less, I still believe that we need some replies to those questions. We also need some assurance on what this legislation would permit when enacted, and on what the Government would do. I beg to move.
The noble Lord, Lord Peston, is talking about one form of charging, but there is another sort of charging involved. One relates to charging individual children for education; the other relates to whether or not one charges other schools for educational services. We are dealing with two different concepts. The noble Lord seeks to add the words set out in his amendment to subsection (5), which reads:
"The governing body of a maintained school may provide staff to any company in relation to which they have exercised a power conferred by any of subsections (1) to (4)".
The noble Lord rightly referred back to subsection (1)(a) of the clause.
I believe that I have some fairly disturbing news for the noble Lord, Lord Peston. Perhaps I may refer to Standing Committee G in another place on 13th December last when my honourable friend Mr Chris Grayling said:
"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 its 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 it school to a more successful school?"
The Minster replied:
"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"; in other words, it is possible. This Bill actually makes that a possibility. I repeat what the Minister said:
"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".—[Official Report, Commons Standing Committee G, 13/12/01; cols. l57-8.]
That was the Minister's response. The Government want more of that; they say that that scenario is possible. That is not charging individual pupils; it is actually selling educational services.
I return to my earlier question to the noble Lord, Lord McIntosh. As I understand his reply, it is possible for an individual school to set up a company, and for an individual school to sell its wares to another school. The latter could be computer software programmes, a particular educational project developed within the school, or it could be practical services like catering and/or cleaning, caretaking, and so on.
I wish to extend my question to the noble Lord. As I understand it, it would be possible under the Bill for a school to set up a company to sell, say, catering, cleaning or educational services for profit. That possibility was mentioned by the noble Lord, Lord Peston. So I believe I am right to assume that we are not talking about a "not-for-profit" operation. Unless it is for profit, the school will derive no benefit. Perhaps the noble Lord can confirm.
Finally, governing bodies setting up such companies can lend their staff; indeed, not actually lend their staff but allow their staff to become part-time, and so on. They can release them for part-time or full-time membership of these companies. I wish to put this point to the noble Lord, Lord McIntosh, who is speaking for the Government on the issue. We are discussing an educational Bill. Teachers and head teachers are there for one purpose only—namely, to educate the children. Against the background of a teacher shortage crisis, and—dare I say it?—a governor crisis, I do not believe that any school at present has the capacity to allow its staff to become part of a commercial proposition that is ostensibly making money to bring back into the school without risking some form of culpability or liability falling on the school.
I hope that it will not embarrass the Minister if I rise, again, to support what he is about to say in reply to this debate. It seems to me that his answers this evening have been quite lucid. They reflect the correct definition of educational law, and they are very clear. He specified what a school can do now; namely, set up a separate company if it does so by itself, as well as partaking in all the activities that are worrying noble Lords on both sides of the Committee. He also explained what these clauses allow schools to do in conjunction with other schools. He is absolutely right in his explanations.
I believe that the anxiety expressed by the noble Lord, Lord Peston, is somewhat exaggerated. He has really started another debate on the whole question of parental charges. I do not believe that the mechanism being established by the Government will allow that to happen; indeed, that is quite a separate matter. On the question of foreign languages, a company may be set up in conjunction with schools. As a result of several schools joining in the process, a range of foreign languages instruction could be provided that was much wider than any school could achieve on its own. There might even be, for example, a school with pupils who wished to learn Portuguese. As that school had no Portuguese teachers, it might approach the company to ask whether it could provide such teaching, and at what cost.
No doubt private companies, quite apart from the one in question, would also be able teach Portuguese, so there would be a competitive element involved as well as a constraint upon what the new company could charge for its services to that school. However, there would be an element of profit and there is no harm in that. The profit would remain in the company; the company would be owned by other schools; and it would remain within the school system, with the services being distributed to other schools. I see no worries in that respect. It is a very sensible step forward.I should also point out to the noble Lord, Lord Peston, that I do not believe that charging could be introduced as a result of that process. The school wanting the Portuguese teacher would have to provide that service from the delegated budget of the school. It would need to ask itself whether or not it could meet the charge. It will not charge the parents of the children who want to learn Portuguese for special services. So I think that some of these anxieties are somewhat exaggerated. I would say to the noble Lord, Lord Peston, that much of this happens already with schools as a result of the greater freedom that schools have been given. These clauses allow even greater freedom, which I completely welcome.
I was not going to intervene in the debate but I have been stirred to do so by a number of contributions. One of the answers to the noble Lord, Lord Baker, is that for many years now—as he will know perfectly well—schools have co-operated with each other. For example, those that do not teach Portuguese have co-operated with those that do. That has happened on a co-operative basis without any necessity to set up a profit-making company. Profit-making companies take money out of already very thin education budgets. Why do we have to make extra profit out of this situation? There is already co-operation between schools without having to make a profit out of it.
The second issue is the setting up of companies to perform functions. Schools already have the power to set up companies. We have the example of the 3e's company which is running a school in my area—Guildford. It very satisfactorily runs Kings College in Guildford and is now running a number of other schools in Surrey. It is the local educational authority rather than the governors which has called in the company to run the school. It does not make a profit because it has pledged to put any profit it makes back into the system. But that is not true of companies such as Nord Anglia Education Plc which is making a profit out of running the schools and doing very nicely on the Stock Exchange, thank you very much.
So there are those—I am not someone who has to creep in any sense—who see the underlying purpose of this clause to encourage the takeover of schools by companies such as Nord Anglia. In other words, as someone on the far Left might say, "It is privatisation by the back door". Perhaps the Minister can assure us that that is not what is meant by these provisions.
When my noble friend Lord Peston started I had a nice simple answer, since when—as it says in the serials—"the issue has got muddied" both forwards and backwards in what should be the order of proceedings.
The answer to my noble friend Lord Peston is categorically "No". In other words, the Bill does not change what charges can be made. The law governing charges is contained in Sections 450 to 458 of the Education Act 1996 and specifically in Section 451 which prohibits any charge being made—by anyone—for education provided to a registered pupil at a maintained school during school hours. There are certain exceptions; for example, music lessons and—more dubious perhaps—school trips where I understand that there is pressure which is short of compulsory charges. There would be a change if the amendment were agreed to because the clause would say that,
"a maintained school may not impose charges in respect of education provided at the schools", which would not only make it impossible to charge for music lessons—my noble friend Lord Peston might be happy with that—but to charge adults for attending evening classes in the school. I suspect that he would be less happy about that. Let us leave it at the simple fact. The fact is that the Bill does not change the law regarding charging in a maintained school.
Now we turn to where the waters start to get muddied—charging for facilities and services and the definition of "facilities" and "services". In dealing with the previous group of amendments, I attempted to give examples of the kind of facilities and services about which we are talking. Those are broadly educational facilities and services. I do not know what Members of the Committee would call "purchasing"—for example, is the purchasing of materials for a school educational purposes, or educational when it is textbooks and not educational when it is material for cleaning the lavatories? We are into theology here. The important issue is that Clauses 10 to 12 give groups of schools an ability to do things that they cannot do at the moment but only if they want to. There is no threat in terms of charging parents. There is no threat in any of the other ways which were referred to, but which will have to be referred to in more detail when we come to the Clause 10 stand part debate.
Of course the noble Baroness, Lady Blatch, would never intentionally muddy the waters. But she was quoting the Minister of State for School Standards in the Standing Committee in December last year. The Committee was debating the power to innovate when he gave the clear commitment that in no circumstances would the Government ever allow charging for state school education. I think that that is as simple an answer as there can be. There are circumstances in which charging is possible, as we have said, for music lessons and between schools for services which they provide to each other. But nothing in the Bill—and this is the important point—increases the possibility of charging.
Before the Minister sits down, I certainly did not attribute to Mr Timms in another place that children could be charged for education. I agree with my noble friend and with the noble Lord, Lord McIntosh: I do not believe that under the Bill it is possible to charge children of statutory age in mainstream education other than what the law allows for in, for example, music.
I was saying that it is possible under the Companies Act—and the Minister in another place confirmed this—to dismiss all the staff of a school and to buy in management. Equally, it would be possible to sell management to run another school.
Not as a provision of this Bill, is the fundamental answer to that. Again, we shall debate this matter when the amendment is less restricted. But that is why we have provided, first, for a supervisory authority and, secondly for an LEA to give approval. There are two layers of control now. I know that the noble Baroness, Lady Blatch, does not like that, but it is the protection to which she refers. There is no greater possibility arising from this Bill for the kind of takeover that she is talking about.
I thank my noble friend. I feel a little more enlightened. I now understand that the whole clause is about jointness between schools. I shall certainly reflect on that matter. That is certainly something that I have learnt. He said categorically—prompted by the noble Lord, Lord Baker—that no new charges can be introduced. I am not convinced. The Portuguese example is a very good one. Let us assume that a company is very good at teaching Portuguese and the school wants Portuguese taught. The company says, "We shall charge you so much" and "the teaching of Portuguese involves a trip to Portugal plus access to a particular website that we own", and matters of that kind. The school would have to go back to the parents and say, "We are sorry but we cannot teach your child Portuguese" because of that charge.
Then we get into the music teaching business where the parents say, "Well, couldn't we pay for all this?" Let me add that I do not approve of children having to pay for music lessons. I could go on to give other examples of what they have to pay for.
We now get very close to pressure for charges. Although I am about to withdraw my amendment until we debate these matters on Report, I do not think that the matter is quite as simple as is set out in the earlier legislation about not charging, because we get very close to the difference between a charge and a voluntary payment under pressure. Parents might feel obliged to say, "Yes", particularly if they live in a part of south London where, I might add, there is a significant Portuguese community. They may feel that they should agree to pay so that their children can learn to speak Portuguese.
So I accept entirely what my noble friend has said at a formal level. But I do not think that the question of charges, including charges to pupils, when it involves the definition of educational services is quite as dead as my noble friend would suggest. It is certainly not dead enough for me not to want to consider it further before Report. But of course all my amendments have been tabled solely for clarification, so I beg leave to withdraw the amendment.
I beg to move that the House do now resume. In moving the Motion, perhaps I may suggest that the Committee stage begin again not before 8.41 p.m.