Mr. Willis: The hon. Gentleman has engaged in an interesting exposé of the clause. In formulating the amendments, has he considered that, under the Companies Act, a company can be taken over by another company? A company may be set up by a school, which does not have the head or any directors on behalf of the school on its board, and which is subsequently taken over by another company. At the moment, education companies are seen as profitable—their stock market prices have not been affected by the perceived recession elsewhere. Will the hon. Gentleman comment on that? The matter does not seem to be dealt with in the Bill.
Mr. O'Brien: I am most grateful to the hon. Gentleman for making that point. He is right. Nothing in the Bill deals with that, other than a presumption that the Secretary of State may exercise powers in order to intervene, in an unspecified and unpredictable way, when dealing with companies that are properly capable—whether private limited companies not on the stock market or any other free market that can do a deal in the event of a transaction on the shares, or a public limited company that, in the event of either a consensual or a hostile bid, might be on the receiving end of interest from another.
If the hon. Gentleman would be patient enough to wait until we discuss amendments Nos. 61 and 62, which relate to proposed new paragraph (vii), he will find that I have tabled an amendment to flush out that aspect. In order not to try your patience, Mr. Griffiths, I should not leapfrog to that amendment before we deal with these amendments, which are linked. I am grateful to the hon. Gentleman for making that point, which previews what I hope will be a testing and rewarding challenge for the Government to come clean about the provisions.
Chris Grayling: I should like to say a few words in support of the amendments tabled by my hon. Friend the Member for Eddisbury (Mr. O'Brien) and to make a few comments on this section of the Bill in general.
The Chairman: Order. The hon. Gentleman should keep that bit short.
Chris Grayling: I shall indeed.
The two amendments relate to two important points about the principles of bringing companies into contact with schools. The first relates to the issue of work load in schools. It will clearly be unsatisfactory for a governing body to impose on a school, within the confines of the existing structure of staffing and resources, a new venture that takes resources away from the education of pupils. It must be a supplement to the school, not an attempt to replace part of the school's activities which will create complications in the school.
Amendment No. 21 specifies a requirement for suitable remuneration for those who put their time into creating a company, and by definition to release resources so that they add value to the school rather than take resources away. It is enormously important. One of my anxieties about how the provisions could be implemented is that they may ultimately add to teachers' work load in the school, rather than taking away from it, and to governors' work load. We all know the pressures under which governing bodies operate and the limited amount of time that volunteer governors have to contribute. It is therefore tremendously important that a company set up by a school is set up on the basis of being a distinctive venture with significant potential that can resource the time and effort put into it and achieve success without detracting from performance in the educational arena of the school. It is therefore especially important that the sort of provision allowed for in amendment No. 21 is made. It sets out a clear dividing line between establishing a company off the back of the existing school and establishing a company that can reinforce the existing school.
The second point relates to amendment No. 60. We must ensure that the creation of a company or business venture in the school or by the governing body does not conflict with the educational efforts of the school at an operational level. An environment in which the school was running a commercial operation in which the head teacher had no direct involvement would be unacceptable. At the very least, the head must be a non-executive director on the board who can say, for example, ''Hey, guys, if you do that we won't be able to offer games on Thursday afternoons or I will have a problem with staff resourcing.'' It would be most undesirable if a commercial decision taken by the governing body had an adverse impact on the educational operations of the school. The caveat is necessary because the head is running the school primarily and fundamentally for the benefit of the pupils.
Mr. Willis: I follow what the hon. Gentleman says, and I agree with him that any activity that takes away from the core activity of educating young people is unacceptable. Does the hon. Gentleman think there will be a conflict if, to follow the scenario, a company is set up and taken over by a plc, which has a duty to its shareholders and not to the students of the school? That is a distinct possibility as major companies in the marketplace are trading on the stock market.
Chris Grayling: No, there would not necessarily be a conflict; it would depend entirely on the nature of the company involved. For example, let us suppose that a school with substantial grounds, and ground staff, developed expertise in that respect and skills that were in short supply at other schools in the area—I imagine that the Minister considers that such a scenario might result from the measure. The school might then decide to turn its grounds operations into a limited company and sell them to other schools; the shares in that company would be held by the school's governing body.
I cannot conceive of circumstances in which a plc would be able to walk into a school and take the company over without making a significant injection of cash in the school. The school would go through the same financial process to secure private finance initiative money. The school could raise PFI money to make a capital investment and would face a long-term contract with a commercial company as a result. Allowing the commercial company to take over the grounds operation and to provide a contracted service to the school over a period in return for a cash payment, which could then be invested in the school, may be a different legal mechanism, but it is not very different from what is happening under PFI.
My hon. Friend's probing amendments are extremely important. I would welcome the Minister's clarifying in exactly what form he expects the clause to be implemented. He gave a half nod to my ground staff analysis. Will the clauses provide for a total educational service? Could Manchester grammar school start selling educational services back to the LEA in Manchester or is it the intention that only limited supplementary services be provided on behalf of the school? It would help the Committee to reach a resolution on the clauses and the amendments if we understood exactly what form the Minister expects the companies to take. It would help if the hon. Gentleman could give us examples.
Mr. Timms: I am pleased that we have reached chapter 3 and can give some time to these important matters. I regret that we cannot continue discussing them into the evening, as Labour Members would like to have done. However, I do not begrudge the Committee the time spent on this part of the Bill.
The clause introduces enabling powers to allow governing bodies, including those of nursery schools, to form or join companies to undertake certain activities. Those three activities are set out in subsection (1): first, to provide traded services and facilities to any schools; secondly, to carry out functions on behalf of an LEA; and, thirdly, to purchase services and facilities on behalf of their member schools.
The third activity is intended to help schools benefit from economies of scale, and it enables governing bodies, in conjunction with others, to form joint venture companies. Our intention is to encourage co-operation between schools; that will help them to perform their core education role more effectively.
There are a growing number of examples of schools working together in a spirit of constructive collaboration. That is a welcome trend, and the provision provides a vehicle to make it easier for that to continue. Schools will save time and money if they work together to procure goods and services, and that will enable them to focus on their core education role.
Pilot schemes are operating in the London borough of Havering and in Surrey, where the LEA has been exploring the possibility of delegating some of its responsibilities to schools, under subsection (1)(b). That scheme might be of particular interest to the hon. Member for Epsom and Ewell.
Dr. Ashok Kumar (Middlesbrough, South and Cleveland, East): The measure might encourage various innovatory schemes. An advanced scientific laboratory could be built by several schools, working together, and a company might be established so that three or four schools could participate. Is that an example of what might happen?
Mr. Timms: That is a good example. We wish schools to collaborate in that way, and the measure provides a vehicle to facilitate their doing that.
Mr. Stephen O'Brien: That was a helpful example. The construction of such a laboratory might involve a degree of corporate risk, and it is important to be clear about where responsibility for that risk lies—particularly as the provisions appear to be discretionary, and a company might be limited by guarantee. That leads back to the points that I made earlier.
I shall offer another example, to ensure that we focus on what happens on the ground, rather than on theoretical matters. I wish to know whether what the Minister has said would also apply to the following situation. Six local schools—primary or secondary—might get together to provide common transport provision on a number of routes. Those schools would, therefore, become the hub of a transport network, and they might wish to add the spokes, as it were, so that they could exploit economies of scale. The company that would be formed by the governing bodies of those schools would be responsible for contracting the drivers and for any supervisory staff that might be needed. Would it also be able to own the buses that serviced its routes? In other words, could it be an asset-based company, as well as a company that relied on revenue?
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