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Baroness David: Although my Amendment No. 158C is in the group, it is slightly different from the others and I have chosen to speak to it separately. As soon as I tabled the amendment Fair Funding came out, but I am pleased to welcome the consultation paper as an innovative way of meeting the difficult problems left by the previous government. The desire to create competition between the schools by differentially funding them was wrong. It would be better for the noble Baroness, Lady Blatch, to admit that past funding policies were wrong--the policies she advocated as Minister for Education--and learn from the Government's courageous attempts to ensure that the education of all children is fairly funded and not left to accident and the school they attend.

It would be a miracle if the Government got everything right in the consultation paper. That is the function of consultation. We look forward to seeing the Conservative Party's response.

My Amendment No. 158C looks at the special case of the school library service. It is a pleasure to note that paragraph 44 of the DfEE consultation paper addresses the need to provide centrally a school library service. The Government should be congratulated on giving at long last the right place for schools library services. It is an invaluable service. If used and funded properly, it can be of enormous help to teachers and pupils. Sadly, it has declined in recent years. Out of 121 authorities, only 47 operate with delegated funding. Since the advent of LMS five services have completely closed. We do not want that decline to continue.

The consultation will tease out the nature of "significant majority" voting and it might have been better if the Government had not included a draft letter for head teachers to send to their LEA. I am sure that all head teachers know how to write letters. What sort of message are the Government trying to convey when the Chief Education Officer is called "Jeeves"? Is the Permanent Secretary a "Wooster"? Can my noble friend the Minister please state whether the Bill will have to be amended to take account of significant majority voting? Will this be a decision made by the head teacher or by the governing body? How can it be done to minimise bureaucracy? Will there be separate arrangements for primary and secondary schools? In a typical LEA only 20 per cent. of the schools will be secondary. Will primary schools be able to outvote secondary schools?

Further, will money for library services still be notionally delegated to schools if significant majority voting takes place? That is to say, will the service be based on an entitlement to schools rather than on the resources that end up in the school's budget? Will a school a long way from an urban centre be disadvantaged compared with a school situated next

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door to the school library service office? These are important matters that need to be resolved. I very much look forward to hearing my noble friend's response.

Baroness Byford: I should like to follow the comments made by the noble Baroness, Lady David. My contribution is merely a question for the Minister. Under the new arrangements that were announced last weekend, my understanding is that schools will be able to decide what they do and how they do it. In other words, they will have the freedom to decide whether they use the school library service, whether they use other libraries, buy in books, or whatever. I should like to have clarification in that respect from the Minister when she responds, because I am still a little unclear as to what their role will be in this new concept.

5.45 p.m.

Baroness Blackstone: I should point out to the Committee that I am speaking to Amendments Nos. 158A, 158B, 158C, 158H and 164A. I believe that Amendment No. 158D will not be moved. Between them, these amendments touch on most of the fundamental issues of school funding policy. These issues are of course explored in the consultation paper Fair Funding, which we issued last week. It may be helpful, therefore, if I begin with a few general observations before I move on to the more specific questions that have been raised.

I should like, first, to stress that this is a consultation paper and that we want to hear the views of LEAs and all schools which will be affected by its proposals. It is most important that we should take them seriously. I should say also that Fair Funding which was issued last week, will, I believe, be followed up with a similar consultation document to be issued by the Secretary of State for Wales next week. It is likely that the two papers will be very similar but, obviously, the latter will take account of circumstances which will be a little different in Wales. The consultation period in Wales will run until early August and my right honourable friend will announce his decisions after that time.

Of course I sympathise with what the noble Lord, Lord Dixon-Smith, said about the complexity of many of the matters that we are debating today. Indeed, I am grateful also for his sympathy because they are indeed complex. The expression "100 per cent. delegation" is simply designed to point up a contrast with the present LMS rule. As my noble friend Lord Peston said, the present rule is very complicated and requires each LEA to ensure that its aggregated schools budget--that is to say, the total amount delegated to the schools--amounts to at least 85 per cent. of something called the potential schools budget, or PSB. At any rate, that is the position in England: in Wales I understand that LEAs are required to delegate 90 per cent. of the PSB.

I doubt if it would be helpful to take up the Committee's time with a detailed, blow-by-blow exposition of which central budgets fall within the PSB and which fall outside it. What matters is the effect of the rule. What it means in practice is that LEAs are able to retain central budgets not only for the essential core functions which they have to carry out in order to do

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their own job as LEAs, but also for a range of purposes which relate, in one way or the other, to the operation of the schools rather than the operation of the LEA. That is what we wish to change.

In doing so, the schools and the LEAs have to keep on the right side of the 85 per cent. line. But this still leaves a good deal of leeway. I am afraid that it leads to a situation in which some LEAs, although not all, are holding large central budgets for services which schools could, in principle, obtain from other sources and for which funding has been delegated by many other LEAs. What the "100 per cent. delegation" model seeks to do is to get rid of what one might call this twilight zone, and replace it by a rule requiring full delegation of funding for all services and activities which fall beyond the core responsibilities of the LEA.

I fear that the noble Baroness, Lady Blatch, was just a mite too sceptical about the Government's intentions in that respect. I certainly dispute with her that there has been a confidence trick. I believe that the proof will be in the pudding. We shall demonstrate next year, when they are given their new budgets, that schools will in fact have--and I address this to the noble Lord, Lord Dixon-Smith--rather more control over their expenditure than has been the case than in the past.

As many noble Lords will know, our consultation paper envisages that LEAs will need to retain four main blocks of expenditure so that they can function properly as LEAs. Of course, it is vital that they should be able to do so. Indeed, to suggest that that kind of expenditure should be removed from them--and I am sure that the noble Baroness, Lady Blatch, does not intend that that should happen--would be patently absurd and would damage our education service right across the country.

Those core areas relate to what the paper describes as "strategic management", which means the management of the LEA itself as distinct from administrative and management services provided by the LEA for its schools. I hope that I have made that distinction clear. They also relate to "access" which means, essentially, the various functions of the LEA which are bound up in one way or another with ensuring that school places are available and that pupils can and do attend. Again, that is an absolutely central function which has to be carried out by the LEA. Further, they relate to "school improvement", which we envisage as meaning the cost of preparing and implementing the programmes set out in LEAs' EDPs. The noble Baroness, Lady Blatch, drew attention to that, but EDPs are the key mechanism that the Government wish to use to ensure that standards are raised in all of our schools. Finally, they relate to "special educational expenditure", which in this context should be understood to include expenditure on behaviour support. Again, I believe that Members of the Committee will agree that that must, for the most part, be provided centrally by the local authority.

I am sure that Members of the Committee will appreciate that this is the start of a process which will lead, in the end, to the making of regulations under Clause 45. These regulations will be debated in this Chamber and will, among other things, define the kinds of expenditure which LEAs may retain centrally. I refer

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here to subsection (3)(a) of Clause 45. While I understand the concerns behind some of the amendments which have been tabled, it would be unfortunate if this Chamber were to try to start writing the regulations at this stage by taking detailed decisions as to what should be in and what should be out of them, especially when we are at the beginning of what should be a very important consultation process. I am sure that we shall receive a great many responses that both the Government and other noble Lords who have spoken in the debate will wish to consider carefully.

The other main issue on which a general comment may be helpful is whether quantitative limits should be imposed on the funding which LEAs are authorised to hold back. I should stress that a good deal of this funding is likely to relate to items which are not subject to any upper limit now. Moreover, some of these items--school transport is a very obvious example--would be very difficult to restrict fairly.

Nevertheless Clause 45(3)(b) enables us to introduce these limits. We do not believe that that is a power to be used indiscriminately. In our view if it is to be used, it is best used on a selective basis, in terms of the kinds of expenditure to be subject to limit. Nor is it a power to be used hastily. However, the consultation paper makes it clear--here I refer in particular to paragraph 69--that we shall be prepared to invoke this power if experience shows that there is a need for restraint which cannot be achieved in any other way.

I now turn to the amendments. Amendment No. 158A is not in fact concerned with delegation, but with an equally important issue; namely, the methods used by LEAs in calculating individual schools' budgets. This again will be a matter for the regulations under Clause 46. As the consultation paper makes clear, the Secretary of State is likely to adopt an evolutionary approach in making these regulations. Up to now LEAs have been allowed a fair amount of freedom to decide the detailed make-up of their funding formulae, so long as they comply with certain basic principles. They have had to distribute a certain proportion of the available funding on the basis of pupil numbers, and have been expected to distribute the rest on the basis of objectively-measurable criteria.

That leaves a good deal of local discretion which we want to preserve. The consultation paper states plainly that,


    "The Government believes that there is no one right way to allocate resources from LEA-level to individual schools. Different arrangements will be right for different parts of the country".

The paper also makes clear that pupil numbers can be expected to continue to play a prominent part. That is common sense.

Against this background, I turn to Amendment No. 158A. It is, I suppose, rather difficult to visualise a formula which does not seek in one way or another to take account of the factors which the amendment lists. But on closer inspection, the list looks more problematical. For example, it refers to "general educational needs". Is this intended to imply that LEAs

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should not take account of special educational needs? I suspect not, but the amendment might perhaps be understood in that way. It could be confusing. Formulations of this kind in primary legislation have a habit of meaning more than anyone suspected at the time of their enactment.

As the Bill stands, these matters would be dealt with entirely through regulations under Clause 46, and I hope that on further reflection the noble Baroness may agree that this is the wisest course, not least bearing in mind that the first regulations to be made under Clause 46 will require the approval of this Chamber following debate, when we shall have a chance to consider this matter in more detail. I hope that she will therefore see fit to withdraw her amendment.

Amendments Nos. 158B and 158H are concerned with the balance between funding held centrally by the LEA and funding delegated to schools, although they approach the matter in different ways. For our part, and as some Members of the Committee may have gathered from what has already been said, we want to break with the previous practice of regulating this balance by the use of overall percentage limits. This is not because we believe in delegation any less than the previous government, but because we want to bring it about in a different way: by establishing a budgetary framework in which funding follows function.

Amendment No. 158B is rather reminiscent of a proposal which we ourselves made when in opposition. As my noble friend Lord Peston has already said, it sought to restrict LEAs' central expenditure on management and administration to £50 per pupil. It was in no way intended to be a total hold back. This has now been overtaken by the proposals in Fair Funding. As currently recorded in LEAs' LMS financial statement, management and administration is a mix of core administration, which the LEA must undertake if it is to operate at all--I assume that the chief education officer has to be paid--and administrative and management support for schools. The first step, then, is to try to disentangle the strands and get the support services delegated, rather than impose a limit on the whole, and that is what we shall do. Once that has been done, the question may arise as to whether a limit should be imposed on those categories of administrative expenditure which are left with the LEA. But that, we think, must await the availability of much firmer evidence of LEAs' expenditure, based on satisfactory definitions.

Having said that, I note that the £50 limit envisaged by this amendment would apply to educational expenditure. If that is really intended, I ought to point out that LEAs currently retain more than this for SEN purposes alone. Construed literally, the amendment would make it impossible for LEAs to do their job. I am sure that is not what noble Lords opposite want. We see much greater difficulty with the idea of imposing a limit on LEAs' central expenditure as a whole, as envisaged by Amendment No. 158H. Many of the items which will quite properly be left with LEAs under the 100 per cent. model would be difficult to restrict fairly, as I have already indicated.

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It follows that Amendment No. 158H, which seeks to raise the figure to 95 per cent. is even more unrealistic. In this connection I note that the previous government's 1996 proposals would have required LEAs to delegate 95 per cent. of the much smaller potential schools budget. However, the individual schools budget corresponds not to the potential schools budget but to the general schools budget.

I repeat that we are committed to delegation, in spite of what I thought was undue scepticism on the part of the noble Baroness, Lady Blatch. We will be ready to make appropriate use of the powers in Clause 45 to bring this about. But this should be dealt with through the regulations, prepared after consultation and reviewable in the light of experience. The amendments before us would force us from the outset to make what we are convinced would be an inappropriate use of the powers. I hope therefore that the noble Baroness will agree on reflection to withdraw the amendments and leave these matters to secondary legislation.

I believe the noble Baroness asked some questions about national insurance. That is not a matter of delegation but of central and local government negotiations about what the overall funding of local authorities should be in the light of changes that may have been made in an earlier budget. The noble Baroness also asked about reorganisation and about selective schools becoming non-selective. Over the past 30 years there have been many such reorganisations. The extra costs involved are always covered by local education authorities.

I turn now to Amendment No. 164A, which seeks to remove an item from the list of topics in subsection (2) of Clause 47. This subsection is concerned with the content of schemes which will govern the financial relationship between LEAs and the schools which they will maintain. Clause 47 empowers the Secretary of State to make regulations prescribing the topics which schemes must cover, and subsection (2) provides a non-exhaustive list of some of the main topics likely to be prescribed.

The item which the amendment seeks to delete is the,


    "terms on which services and facilities are provided by the authority for schools maintained by them".

I think this amendment is based on a misreading of the provision. Paragraph (e) is entirely neutral. It carries no implication whatsoever as to the nature or scale of the services to be provided. The purpose of prescribing this item in the regulations is simply to ensure that, if the LEA is in the business of selling services to its schools, that is done in accordance with the LEA's scheme. I agree with my noble friend Lord Peston that partnership is a key theme.

The reason for bringing these matters within the scope of the scheme is precisely to protect schools. Schemes will require the Secretary of State's approval, and they must be drawn up with due regard to his guidance. As I hope our consultation paper makes clear, we shall make it our business to ensure that LEAs cannot impose onerous requirements on schools--for example, by insisting on excessively lengthy service agreements, or agreements which require schools to buy a lot of

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services which they do not want in order to get the service which they do want. I am sure the noble Baroness would agree that that is not in the spirit of delegation and we shall certainly want to prevent that happening. I hope that LEAs would not in any case want to go down that road. I am sure that the noble Baroness, Lady Blatch, will see that as a desirable objective. In the light of my explanation, I hope that she will feel able to withdraw this amendment too.

I now turn to the amendment proposed by my noble friend Lady David. The Government understand, and are very sympathetic to, the concerns which have led my noble friend to table this amendment. However, we have some difficulties with it. First, and more generally, it tries to pre-judge a matter which really ought to be left to the regulations to be made under Clause 45. The clause itself would look strange if it were amended to single out this one service. The Bill will not have to be amended on majority voting; and there will be separate votes for primary and secondary schools.

It is worth noting that at least 40 LEAs showed their planned expenditure on library and museum services--I am sorry to say, as somebody who has long supported both types of service--as zero in their 1997-98 LMS budget statements. Either those LEAs have no central library service of the kind which my noble friend has in mind; or the funding has been delegated and the LEA provides the service on a buy-back or subscription basis. Even if it could be said that the range of learning materials in schools leaves something to be desired in some of those LEAs, I think it might be difficult to show that was true of all of them. I suspect that in some cases the schools will have very good library provision.

It is therefore difficult to accept the notion of requiring all LEAs to hold back funds centrally to support a school library service, if that is what my noble friend has in mind. But we readily acknowledge the important role played by centrally organised library services in many LEAs, and we are all too aware of fears that some of those services might be put at risk if funding were fully delegated to schools. The suggestion, as I understand it, is that the service's viability could be disproportionately affected if even a small number of schools ceased to subscribe to it. We are sympathetic to that worry.

Therefore, in Fair Funding we suggest that LEAs should be allowed to retain central funding for school library services where a sufficient majority of schools have voted for this. We have not arrived at any final conclusion in regard to the proportion; again, it is a matter upon which we wish to consult. The figure of 80 per cent. has been suggested; however, that does not have to be final. This is a consultation proposal, not a decision. But I hope my noble friend will be able to accept it as an important indication of our concern for the future of school library services, and that on that basis she will feel able to withdraw her amendment.

6 p.m.

Baroness David: Before the noble Baroness, Lady Blatch, replies to the whole group of amendments, I should like to thank my noble friend for what she has

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said. She obviously appreciates the good that the school library service can do. However, I must ask her whether she is not afraid that if these services are not kept with the LEA providing the money for them, they will decline further. They have declined. Would my noble friend not be very upset if that decline continued?


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