Select Committee on Deregulation and Regulatory Reform Fourth Report


The Deregulation and Regulatory Reform Committee has agreed to the following Report:



  1. On 20 November 2001 the Government laid before Parliament the proposal for the Regulatory Reform (Voluntary Aided Schools Liabilities and Funding) (England) Order 2002 in the form of a draft of the Order, together with an explanatory statement from the Department for Education and Skills.[1] The proposed Regulatory Reform Order would simplify the arrangements for deciding liability for the cost of, and thus funding for, premises-related work at voluntary aided (VA) schools.

2. The House has instructed us to examine the proposal against the criteria specified in Standing Order No. 141(6) and then, in the light of that examination, to report whether the Government should proceed, whether amendments should be made, or whether the Order should not be made.[2]

3. We have concluded that the proposals should be amended before a draft Order is laid before the House. Apart from recommending that the drafting of the proposal be significantly improved before a draft Order is laid before Parliament, we recommend only one amendment to the proposal, relating to governing body capital expenditure under the new arrangements on certain buildings which they do not own. We did, however, find it necessary to extract a significant amount of information from the Department in addition to that contained in the explanatory document before we could be satisfied that the proposal could proceed. Our detailed comments on these and other matters arising from our consideration of the criteria specified in the Standing Order are contained in the remainder of this Report.[3]

Purpose of the proposed Order


  4. As noted above, the proposal is intended to simplify the arrangements for assigning liability for the costs of premises-related work at VA schools. Broadly speaking, the current arrangements, as provided for by the Schools Standards and Framework Act 1998 ("the 1998 Act") are:

  • VA governing bodies are liable for capital and revenue work to the exterior of school buildings;
  • LEAs are liable for capital and revenue work to the interior of school buildings, and for work relating to all of the other parts of the school premises, including playing fields and playgrounds;
  • LEAs are also entirely responsible for "excepted buildings" (buildings which form part of the school premises but which are excluded from the definition of "school buildings" in the Education Act 1996: they include buildings such as caretakers' dwellings, medical and dental inspection rooms, school kitchens/dining halls, and swimming pools).

As the explanatory statement notes, however, the detailed picture is more complicated than this. A long and prescriptive list, published by the Department, attempts to categorise all work which might be necessary on school premises as either capital or revenue, and assigns liability to the relevant party.[4]

5. The effect of the current arrangements is that much time has to be spent, often by headteachers and others whose time might better be spent on other work, determining the exact division of liabilities for any particular project between VA governing bodies and the relevant local education authority. They also give rise to absurd situations: we were told, for example, that the replacement of that part of a doorknob which is on the inside of an external door would be the responsibility of the LEA; but that part on the outside of such a door would be the responsibility of the governing body.


  6. Payment to cover these liabilities is made in a number of ways:

Capital liabilities

  • VA governing bodies receive grant from the Department for up to 85% of their capital liabilities, through either
    • New Deal for Schools Devolved Formula Capital (for small projects)
    • LEA Coordinated VA Programme (LCVAP) (for medium projects up to £250,000)
    • Major capital project allocations (mainly projects over £250,000)
  • Capital liabilities falling on LEAs are paid either:
    • directly from the Department, as a proportion of money paid out from New Deal for Schools Devolved Formula Capital or the LEA Coordinated VA Programme
    • where liability is part of a major capital project, by "credit approvals" (permission to borrow).

Revenue liabilities

  • VA governing bodies receive a formulaic allocation from the Department for their revenue liabilities, again limited to 85% of their liabilities. This is known as "Formula Repair grant"
  • LEA revenue liabilities are met from the funds which are delegated to schools for the everyday costs of running the school ("Fair Funding budgets")

Governing bodies must pay invoices before claiming the relevant grant from the Department.


  7. The proposals would have the following effects:

    (a)  Placing liability for all capital work on school premises with VA governing bodies. This includes capital work on "excepted buildings"; but excludes playing fields, which will remain the responsibility of LEAs. Governing bodies will be notified of an allocation of grant which they may claim from the Department in respect of up to 90% of the costs of meeting these liabilities (see (c) and (d) below);

    (b)  Placing liability for all revenue work with LEAs. LEAs will pay the money to meet this liability directly to schools through "Fair Funding" budgets[5];

The following table summarises the effect of a) and b) above:


Legal burden removed from

Legal burden transferred/added to

Internal revenue work

(no change)

(with LEAs)
Internal capital workLEAs Governing bodies
External revenue workGoverning bodies LEAs
External capital work(no change) (with governing bodies)
Excepted buildings (revenue items)(no change) LEAs
Excepted buildings (capital items)LEAs Governing bodies
Some additional capital items of furniture, fixtures and fittings LEAsGoverning bodies
Some additional capital itemsLEAs Governing bodies
Playing fields and buildings (capital and revenue) (no change)(with LEAs)

    (c)  Raising the rate of support for VA governing bodies for their liabilities from 85% to 90%. Provision is also made to pay 100% of liabilities arising from a backlog of work at the point of transfer of liability; and to pay up to 100% of liabilities in "exceptional circumstances".[6]

    (d)  Changing claims and payment arrangements so that grant can be paid in respect of expenditure which is to be incurred by VA governing bodies, rather than expenditure which has been incurred and paid for. This change will mean that schools can claim grant from the Department for work done before they have to pay for it, thereby improving cashflow.

    (e)  Providing a broad statutory definition of "capital" expenditure. This will reduce the need for the long and prescriptive list, referred to above, allocating responsibility for various types of premises-related work, and make it simpler for VA schools and their advisers to decide which funding stream to use for any given work. This definition would be a 'subordinate provision' and could be changed by order subject to the negative resolution procedure.

    (f)  Setting a de minimis level beneath which expenditure would not be considered to be capital, and could not therefore be met from capital budgets. This level is currently set administratively at £1000. Under the proposals, it would initially be set, by the Order, at £2000, but could be changed by subordinate provisions order subject to the negative resolution procedure.

8. It is intended that the Order take effect from 1 April 2002, the beginning of the next financial year. In addition to the provision to pay 100% of liabilities arising from a backlog of work at the point of transfer of liability (referred to above), the Order must also therefore make transitional provision for existing projects. Those transitional provisions are:

    (a)  to provide that the existing division of liability and rate of grant to governing bodies should continue to apply:

  (i)  in the case of projects under the LEA Coordinated VA Programme (LCVAP) begun before the beginning of financial year 2001­02; and

  (ii)  in the case of projects for which the school's entitlement to funding began before 1 April 1999;


    (b)  to provide that the existing division of liability should continue to apply, but that governing bodies should be entitled to apply for up to 90% grant in reimbursement for their share of the costs:

  (i)  in the case of projects under the LCVAP begun within financial year 2001­02, but which are not yet financially complete; and

  (ii)  in the case of projects (other than those referred to in para (a) (ii) above) for which the LEA has received either a Supplementary Credit Approval, or the appropriate funding through the Standards Fund, before 1 April 2002, but which are not yet financially complete.

9. The transitional provisions were not clearly explained in the explanatory memorandum, nor (perhaps as a result) were they properly translated into the proposed Order. We asked the Department for a fuller explanation of the transitional provisions, and this explanation, together with an explanation of the arrangements for unspent grant allocations, may be found in its supplementary memorandum.[7] We comment further on the drafting of the proposed Order below.[8]

1   Copies are available to Members from the Vote Office and to members of the public from the Department for Education and Skills. It is also available on the Cabinet Office website: www.cabinet­ proposals.htm. Back

2   Standing Order No. 141(2). Back

3   Where a criterion specified in the Standing Order does not appear in this Report, there are no matters which we wish to raise under that heading. Back

4   Explanatory statement, para 16. See also Annexes B and C of the consultation document which was issued prior to the laying of this proposal (Voluntary Aided (VA) Schools in England: Proposals for Governing Body and Local Education Authority Financial Liabilities and Funding for Premises, DfEE, May 2001; also available on the Cabinet Office website referred to above). Back

5   The term "Fair Funding budgets" refers to the funds which are delegated to schools by local education authorities for the everyday costs of running a school. Back

6   See paras 59-61 of the explanatory statement. See also para 31 below. Back

7   See Appendix 2 below, pp. 27-30. Back

8   Paras 56-57. Back

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