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Baroness Blackstone: My Lords, that question goes much wider than the amendment. Normally at Report stage a question should be closely directed to the amendment. However, I can say this to the noble Baroness. In putting together a consultation paper on fair funding, we set out a range of proposals on which we wished to consult and on which, until now, we have had a great deal of support from grant-maintained schools. They have accepted that we do not wish to constrain their financial autonomy. We wish to create a system in which all schools, not just grant-maintained schools, will have a higher degree of financial autonomy than in the past.

To respond to the noble Baroness's point, yes, we wish the position of other schools to be the same as that of grant-maintained schools.

Baroness Blatch: My Lords, I am grateful for that. My question was whether the schools will sustain the present level as they transfer to foundation school status. I shall read what the noble Baroness said. It will be important to schools.

I remind the noble Baroness that I put on record on behalf of grant-maintained schools a large number of concerns on funding which arise from the Fair Funding paper. Those came from the very people who said that they supported some of the Government's proposals. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 46 [Determination of LEA's general schools budget and aggregated schools budget]:

Lord McIntosh of Haringey moved Amendment No. 116:

Page 38, line 2, leave out (""general") and insert (""local").

The noble Lord said: My Lords, in moving the amendment, I wish to speak to Amendments Nos. 117, 118, 119, 120, 124, 203, 205 and 209. All but the last of those amendments discharge our undertaking in Committee to bring forward amendments to align the nomenclature used in the Bill with the nomenclature used in the consultation paper, Fair Funding, which was issued on 29th May. The first few were tabled by the

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noble Baroness, Lady Blatch. I am grateful to her for anticipating our purpose in this respect. I hope that it means that she will agree with them all. The wording in Fair Funding is clearer than the wording in the Bill as originally drafted.

The amendment to Clause 142, Amendment No. 209, is essentially technical. Subsection (5) seeks to bring some of the school funding provisions of the Bill into force on Royal Assent because we thought that that timing was necessary. However, it does not achieve that very satisfactorily as it stands. It brings the provisions into force only for the purposes of determining schools' funding for the financial year 1999-2000: so for 2000-2001 and beyond we would have to bring the provisions into force again by order. The simplest solution is to delete subsection (5) and bring all the school funding provisions into force by commencement order. We still intend that schools should receive their recurrent funding under the new arrangements with effect from April 1999. I beg to move.

Lord Tope: My Lords, for those of us who over the years have grown used to GSBs and ASBs, and have spent much time learning what they meant, the change of nomenclature will be a struggle. However, I am puzzled by the change of the aggregated schools' budget to an individual school's budget. It is not an individual school's budget but the total of the school's budget. Why it is now called an individual budget rather than an aggregated budget I do not know or understand. If I have got it wrong, the Minister will tell me. It is not the main point that I wish to raise.

I wish to express concern about the consultation period allowed. The Government allowed only two months' consultation on what is a significant proposal in their Fair Funding paper. Some weeks of that will be in the school holidays. I understand that schools were sent copies of the consultation document only when the Government came under pressure several weeks into the consultation period, therefore squeezing that period even more. Because of that, the local government association education committee agreed unanimously--it was agreed between all political parties and the independent group--on 17th June to ask the Secretary of State, first, that the closure of the consultation period be put back to 30th September this year to deal with the problem of limited time for schools; and, secondly, that devolved funding should commence in April 2000 unless a decision is made to change the funding year to match the academic year. In that case, it could commence in September 1999. I understood the Minister to say a moment ago that it was still intended that it should start in April of each year. The LGA asks that it should be April 2000.

The chair of the LGA wrote to the Secretary of State with both requests. I understand that only today at lunchtime the Minister, Mr. Stephen Byers, replied no to both requests. I do not know whether the Minister is able to confirm that that is the Government's final decision on the unanimous request of the Education Committee of the LGA. If my information is correct, as I believe it to be, once again we have a government

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who say they are listening but are not hearing. That is regrettable and will not be well received in the local government world in all parties and in no parties.

6.30 p.m.

Lord McIntosh of Haringey: My Lords, I deal first with the question of nomenclature. I must disagree with the noble Lord, Lord Tope. What we now call the individual schools budget is the budget to be distributed to individual schools. I believe that that is entirely clear. Certainly, "aggregated" for the same purpose was not clear. A local schools budget is the schools budget of the local education authority. I fail to see the difficulty that the noble Lord has described. I hope that he will not object to these amendments.

I do not know whether the noble Lord has spoken on behalf of the Education Committee of the LGA but he certainly represents its views. I am grateful to him for that. He complains about the short time available for consultation. It is not as if the formal consultation period was the first that the education community knew about the proposals. The higher delegation proposals had been on the agenda for a very long time. Having said that, the noble Lord is correct that Stephen Byers has responded to the Local Government Association in the terms that he has reported.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 116A:

Page 38, line 4, at end insert ("(which may include expenditure incurred otherwise than in respect of schools)").

The noble Lord said: My Lords, I beg to move Amendment No. 116A. This amendment has been grouped with Amendment No. 119A in the name of the noble Lord, Lord Tope. Perhaps I may deal with the two together. Amendment No. 116A is a technical amendment which--since we have been referring to the Local Government Association--has arisen in consultation between the LGA and the department. In the view of the Government, it does not alter the effect of subsection (1) in any way but merely makes explicit what we believe to be implicit in the terms of the subsection. But it seems to be worth doing it to preclude misunderstanding.

It may be asked why we should wish to be in a position to define the local schools budget in terms which range beyond "expenditure in respect of schools". I say at once that it is certainly not our intention to prescribe everything including the kitchen sink. Paragraph 17 of Fair Funding indicates a number of areas of expenditure such as adult education or the Youth Service, which we do not envisage including in the local schools budget. However, we want more flexibility in these matters than the present law allows us. Under current legislation, the general schools budget, which the LSB supersedes--we have a mutual understanding--is defined in terms of the LEA's expenditure in respect of schools covered by its Local Management of Schools scheme. This excludes a fair amount of pertinent expenditure. For example, it excludes pupil referral units and education provided

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otherwise than at school: home education. These forms of provision make a significant contribution to LEAs' efforts in the areas of behaviour support and SEN, and it is odd to split them off from the totality of the LEA's expenditure on primary and secondary education.

More seriously, there is a substantial tranche of corporate administrative expenditure known in current jargon as service strategy and regulation--I do not attempt to defend these words--which has been held to fall outside the general schools budget. We aim to bring all or most of this into the LSB under the head of strategic management so as to be able to ensure, as paragraph 20 of Fair Funding puts it, that it does not consume resources which would be better used at school level.

Against this background I turn to the amendment proposed by the noble Lord, Lord Tope. I point out to the noble Lord that we are at Report Stage.

Lord Tope: My Lords, the Minister provides the answer before I have spoken to the amendment.

Lord McIntosh of Haringey: My Lords, if the noble Lord prefers, I shall not say anything further until he has spoken. I shall respond to his amendment, as he can respond to mine.

Lord Tope: My Lords, I am grateful to the Minister. I suspect that what I say will not make a great deal of difference to what he says. However, I believe that I should at least speak to my amendment before the noble Lord tells me why he is not prepared to accept it; otherwise, we will be a little out of order in these matters.

I rise to speak to Amendment No. 119A in my name. In answer to a previous comment by the Minister, I do not speak on behalf of the Education Committee of the LGA. I am not a member of it and I doubt whether it would choose me to speak on its behalf--at least the majority probably would not. These days, who knows? The consultation document on the local management of schools, Fair Funding, allows for the possibility of the capping provisions in Clause 46 being applied to the strategic management costs of non-school education activities. My amendment would prevent that from happening. The Fair Funding consultation document is a welcome move to bridge the gap left by the previous administration's attempt to create two separate school funding systems, one being more generous than the other. The Government have confirmed that there is no body of research evidence to indicate that by putting more funds at the disposal of one school system better results are obtained.

We are now to have fair funding for all schools which will achieve the Government's manifesto commitment to ensure that,

    "the system of funding will not discriminate unfairly either between schools or between pupils and make the local authority responsible for funding all schools".
However, there are problems with the proposals in the Bill and the consultation document. Those of us in local government know only too well the iniquities of the

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capping regime and the problems that it introduces. Some look forward to the forthcoming local government White Paper. They will look with interest to see whether it proposes the abolition of capping. Others who are a little more realistic fear that perhaps that commitment will weaken still further. The paper Fair Funding explains in paragraph 69 the possible use of the wide capping provisions in Clause 45(3)(b) of the Bill. The Secretary of State may use reserve powers to cap expenditure on strategic management and access funds but only after information is available on the new pattern of expenditure. The strategic management function is defined in Fair Funding to include the strategic management of all education functions, not just those relating to schools; that is, lifelong learning and the Youth Service.

Clearly, the Government have a fear, which is perhaps irrational, that local authorities have an interest only in paying lots of money to officers who carry out strategic management functions across the whole range of education functions. If that is the case, it is nonsense. The desire of local authorities to keep down these costs is at least as great as that of central government. But the introduction of crude capping will not help. I recognise that the Government are committed to another capping regime, which I regret, at least in terms of putting the powers into law. This amendment will restrict those capping powers to schools and will prevent their extension into other local authority functions.

When the Minister replies--his brief may tell him this--will he tell us why the Government feel that those powers are needed? Will he say how the Bill can be used to cap non-school functions, given that the Bill's Long Title restricts its scope to making:

    "new provision with respect to school education ... and for connected purposes".

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