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Lord Rix: My Lords, one of the first things you learn if you ever perform in charity shows is that you have to stand at the side of the stage and listen to the performers go through the entire performance so that when it comes to your turn you do not tell exactly the same stories as they have already told. I suffered that many years ago, until three o'clock or four o'clock in the morning. Everything that I would wish to say about Amendment No. 121 has been said by the noble Lords, Lord Swinfen and Lord Addington. I would just put the question once more. How clear will schools have to be to the LEAs about how they have used their delegated budgets?

Baroness Blackstone: My Lords, it may be helpful if I take these amendments in turn. I recognise that the noble Baroness, Lady Blatch, has sought in Amendment No. 115A to take forward the debate that we had in Committee on a similar amendment which she tabled at that stage.

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We do take seriously the need to contain LEAs' strategic management costs. Our Fair Funding consultation paper suggests a three-pronged approach: setting the tightest possible working definition of strategic management; the possibility of setting quantitative limits on it in future years; and, in the meantime, where it appears that an LEA is diverting excessive resources away from schools to strategic management, the possibility of directing an inspection of the LEA by either Ofsted or the Audit Commission.

While we share the broad intention behind the amendment, there are nevertheless problems with its practical application. First, there is a difficulty in setting the amount required by the amendment at the time we would need to make the regulations. The reasons for this is that the current LEA budget and out-turn data in relation to management and administration is not categorised in a way which enables us to estimate accurately what LEAs are spending on "strategic management" as described in Fair Funding. Secondly, we are not convinced that setting a single limit applicable to all LEAs might necessarily be appropriate. To set a uniform financial cap might tackle inefficient LEAs, but it could penalise authorities--for example, very small LEAs--with a genuine need to spend larger than average amounts on these functions. We want to consider this on its merits once we know what LEAs are spending on the new definition. However, we are serious about constraints here.

As I think the noble Baroness recognises, the Bill already contains provisions--in Clause 46(3)(b)(i)--which would allow the Secretary of State to impose the kind of limit which she has in mind. We shall not hesitate to use this if need be. However, for the reasons I have indicated already, it would be premature and arbitrary to do so in the first year of operation of the new system.

Amendment No. 118A is, of course, identical to one which the noble Baroness tabled at Committee stage, and it may be as well to expand on the brief remarks which my noble friend made then. There are three main reasons why we think it would be wrong to go down the road marked out in Amendment No. 118A and impose an overall limit on LEA's centrally-retained expenditure.

First, the effect of such a limit is to put, for example, special educational needs in the same envelope as management and administration. I am sure that many noble Lords, including those who have spoken to a different amendment in this group, would be concerned at the possible implications. It is true that central support for pupils with statements falls within the present potential schools budget and is subject to the kind of overall ceiling which this amendment envisages. But the previous government's 1996 White Paper proposed to take that expenditure out of this category. I am a little confused because the noble Baroness seems to be going back on her own Government's proposals as well as opposing ours. For our part we remain convinced that quantitative limits should be targeted, and not indiscriminate.

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Secondly, there is a sense in which the amendment puts the cart before the horse. It would require LEAs to delegate 95 per cent. of the local schools' budget. But Clause 46 leaves the exact scope of the local schools' budget to be defined in secondary legislation. Our thoughts on this are set out in Fair Funding. We think the local schools' budget should include some items which fall outside the present general schools' budget. These include some expenditure on behaviour support and corporate administration. On the other hand, we are inclined to exclude some capital financing and premature retirement costs which at present fall within the general schools' budget. However, we wish to consider the responses to the consultation before deciding where exactly to draw the line. I think that is right and sensible. If the scope of both A and B are matters for secondary legislation, it is odd for the primary legislation to stipulate that A must not be less than a stated percentage of B.

Lastly, there is the question of whether the 95 per cent. requirement is realistic. Clearly, the effect of the figure will depend on the exact definition of the local schools' budget. Nevertheless, it is fair to note that central expenditure on special educational needs currently accounts for about 3 per cent. of the general schools' budget nationally, while a further 3 per cent. or so is attributable to expenditure supported by specific grants, which is ring-fenced and cannot readily be included in schools' delegated budgets for that reason. That takes us to over 5 per cent. already.

I think it is fair to conclude that the proposed 95 per cent. requirement is a little unrealistic unless the local schools' budget turns out to be very different in size and shape from what we currently envisage. To contain central expenditure within the 5 per cent. limit that the amendment proposes within the current plans for the local schools' budget could place a great deal of pressure on essential central budgets, including that for special educational needs. I am sure the House would not want to do that.

Having said that, we could apply this kind of overall constraint through the powers under Clause 46(3)(b). But for the reasons I have given already, we do not consider it appropriate that the Government should be bound by the primary legislation to do so, and even less appropriate that the primary legislation should specify an actual figure.

Amendment No. 120A is a virtual re-run of one tabled at Committee stage by the noble Baroness. It was an amendment which caused us some confusion at the time because we assumed it was about the accountability of schools to LEAs for the stewardship of their delegated budgets. That is a misunderstanding which the revised wording clearly seeks to dispel.

As I understand it, the purpose of the amendment is to give any individual school the right to opt to receive an amount of money from the LEA as part of its delegated budget in lieu of any service which the LEA has chosen to fund centrally for the generality of its schools, in accordance with the regulations to be made under Clause 46. I am a little unclear about the intended scope of the amendment. The noble Baroness,

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Lady Blatch, appears to be particularly concerned with services which might be subject to the majority voting procedure suggested in Fair Funding, but the amendment does not appear to draw any distinction between one centrally-funded service and another.

On the broad interpretation, every school would have the right to receive something akin to the present central annual maintenance grant in respect of any central service or combination of central services, possibly including services for which GM schools have not been funded up to now.

I doubt whether the terms of the amendment would actually achieve that. It looks rather circular: it refers to a school's full share of the individual schools budget, but the individual school budget itself represents what is left after the deduction of funding for central services. However, we would still see a fundamental objection, even if the drafting worked. Our aim is to maximise the freedom of choice and manoeuvre available to individual schools, so far as this is compatible with the legitimate interests--not the selfish interests--of other schools and with the need for LEAs to be able to carry out their carefully defined role. I cannot stress this enough.

However, it is quite another matter to suggest that individual schools should be able to opt out of central service provision at will. If that is really what the amendment is after, I do not think it unfair to describe it as an attempt to preserve grant-maintained status by other means. On that basis, Amendment No. 120A seems to me to come very close to being a wrecking amendment and I am not sure that there is more to be said than that. If I have got this wrong and the amendment is supposed to relate only to services affected by the majority voting procedure, I apologise, but it is not altogether clear.

Nevertheless, the Government must still oppose the amendment. As I think my noble friend Lord Whitty was at pains to emphasise in Committee, no decisions have been taken about the range of services to which this procedure might apply at the end of the day. Nevertheless, the purpose of the procedure is to protect valuable services which might be excessively vulnerable if only a small proportion of schools chose not to subscribe to them. The Library Service is perhaps a good example. That objective plainly cannot be achieved if a small minority is free to go its own way anyway. As I have said, no decisions have been taken. We want to consider the issues on their merits in the light of all the responses we receive.

The Government's position can be summarised briefly. We want to maximise delegation. Our detailed proposals for this will be set out in regulations which will be subject to parliamentary scrutiny involving the affirmative resolution procedure in the case of the first regulations to be made under Clauses 46, 47 and 48(1). It is important that the proposals embodied in those regulations are carefully thought out in the light of the consultations which we have set in hand. In the Government's view it would be wrong to pre-empt these decisions through primary legislation, even if we were

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more enamoured of these specific amendments than we are. I hope therefore that the noble Baroness will withdraw them.

I turn now to the amendment moved by the noble Lord, Lord Swinfen, which is exactly the same as the one he tabled at Committee stage. The purpose of the regulations to be made under Clause 48 is to enable the Secretary of State to specify the content of schemes which will govern the financial relationship between local authorities and the schools which they will maintain. The content of the regulations will be subject to consultation in due course, and indeed debate in this House. But their basic coverage is set out in the non-exhaustive list in Clause 48(2). The purpose of that list is to make it clear that the regulations may address these matters.

The amendment would add a specific provision that the regulations could require schemes to specify information to be provided to the LEA about the use of a school's budget share. Already included in the list are conditions relating to the management of delegated budgets. We expect that this will be used to require schools to submit overall budgetary and expenditure plans to their LEA, which they will be drawing up in a new funding framework which, as explained in Committee, offers schools and LEAs a clearer view of their respective responsibilities.

As he explained, the noble Lord, Lord Swinfen, wants greater transparency over the reporting of expenditure on special educational needs. It was pointed out in Committee that requirements on schools to do this are already in place. I hope that I can reassure him on that. These are in the Education (Special Educational Needs) (Information) Regulations 1994, which require schools' governing bodies to publish information about special educational needs, including resource allocation, and to send a copy to the LEA.

Moreover, the SEN Green Paper proposes a greater monitoring role for LEAs to help schools improve the quality of their provision for special educational needs. The consultation document Fair Funding: Improving Delegation to Schools explicitly envisages that LEAs would be able to retain central funds to fulfil this monitoring role.

So a provision for schools to report on SEN is already in place, and, while we have not yet decided our priority action in relation to SEN, we shall be considering, in the context of that plan, whether and how to strengthen LEAs' ability to monitor schools' provision for special educational needs. This general financial provision would, however, be an unsuitable context for what the noble Lord seeks to achieve. I hope I have reassured him and that he will seek to withdraw the amendment.

6.15 p.m.

Baroness Blatch: My Lords, I am grateful for the fullness of the Minister's reply. I have taken in much of what she said. But I do not believe that the DfEE will ever be in a position to make a judgment as to what should be held back by LEAs. All the arguments that the noble Baroness gave relating to this year will relate to any year. The needs of LEAs change and different

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LEAs have different needs. They fluctuate from year to year and from term to term. The words in the Fair Funding document about going down that road being prescriptive and using powers against LEAs if they are profligate in the way in which they hold back expenditure seem to be a forlorn hope that there ever will be a way to do that in a manner which is going to make sense to schools.

The noble Baroness misunderstood my amendment. I did not follow the argument about it being a wrecking amendment. That was not meant in any way whatsoever. My understanding is that once local authorities have subtracted from the local schools' budget the strategic management funding, funding for access, funding for LEA support in schools, improvement and funding for special educational expenditure, what is left from that goes to schools. That would include moneys for central services. The schools then make a decision as to whether or not they wish the services to be provided by the local authority.

Part of the thrust of my amendment is to give schools control over the money. It is an argument put strongly in the paper. If an insufficient number of schools vote to have central services provided, the services fall away and the schools are left to fund the services. However, if a requisite number of schools vote to have a specific service provided by the local education authority, those schools which do not vote for that should be left free to provide the service in their own way. If I have not secured that thrust to my amendment in its wording, I shall do some more homework between now and the next stage of the Bill.

There is no argument. If the Government believe in looking for ways to give schools more flexibility and freedom--I refer back to the speech by Mr. Byers last night--this is one way of doing so. Where an economic number has been reached for purchasing services from LEAs, let us leave the other schools to exercise their discretion as to whether they wish to opt in with the 80 per cent. or so, or prefer to find their own way to provide services.

The Minister has yet again proved that through the great flurry of presentational trappings around this 100 per cent. delegation to schools, the figure is almost impossible to work out. It is only 100 per cent. of what is left when the DfEE has had its cut and the LEAs have had their cut. Even under the present system, whatever is left goes to the LEAs, so one could call that sum 100 per cent. Grant-maintained schools are still asking what the 100 per cent. relates to. It is difficult to find out. I have had a written response from the Minister but it makes the position no clearer.

There remains one serious concern. I had hoped that some light might be thrown on it in the response. I refer to the degree of financial autonomy enjoyed by grant-maintained schools today. When those schools become foundation schools, will the degree of autonomy remain at that level? As the new system is phased in, will all other schools come up to at least the level of autonomy that GM schools enjoy, and perhaps even surpass it? That issue will be important to the grant-maintained schools. They wish to know in what

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way financial autonomy will change when they move from being grant maintained to foundation schools. The Minister has failed to answer that point. With the leave of the House, I wonder whether I may have a response to that question.

I apologise to my noble friend Lord Swinfen in that by concentrating on my amendment I did not refer to his amendment. I support it. I shall not do so at length. The noble Lord, Lord Addington, brought out the point that it increases transparency so that we all know what is being spent, how it is being spent, and to what effect. That would be helpful. My noble friend has my support on that point.

I shall not press my amendment, but, with the leave of the House, perhaps I may have an answer to my question about the financial autonomy of grant maintained-schools as they transfer to foundation school status.


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