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The Parliamentary Under-Secretary of State for Education (Elizabeth Truss)
I congratulate my hon. Friend the Member for Fareham (Mr Hoban) on securing the debate. I completely agree with him about the need for diversity and choice in our school system and how they lead to a raising of standards. Certainly, that was the outcome of a programme for international student assessment study, which shows that schools with a high degree of autonomy and accountability generally succeed in raising standards throughout the system.
As a Government, we recognise the important contribution made by Church and faith schools to the education system. Around a third of schools are Church or faith schools, and an increasing number are converting to academy status to take advantage of the freedoms offered by the academies programme. Church and faith schools are popular with parents—many are oversubscribed—and they are some of the highest-performing schools in the country.
The free schools programme represents a new approach to how schools are established and it is offering new opportunities, to groups of all faiths and none, to set up new schools in the community; 37 of the 182 open free schools are faith schools. Faith free schools and new-provision academies must be open and welcoming to the communities around them. Unlike voluntary aided schools or converted faith academies, they may only prioritise a maximum of 50% of places by reference to faith when the school is oversubscribed. Of course, if the school is not oversubscribed, more children of that faith may be admitted.
Catholic schools in particular have a long and proud history of championing high standards and extending opportunities. They consistently outperform other kinds of state schools. As my hon. Friend the Member for Fareham is aware, the Education Act 1944 brought many Church schools into the state education system, including from the Catholic sector, and we continue to benefit from that settlement today. The education landscape, however, has changed since 1944. Academies and free schools represent a new approach to creating new schools, including faith schools, and new faith free schools and new faith academies, when oversubscribed, may admit only up to 50% of their pupils according to faith.
If the Government fund new faith-school provision, it is right that a proportion of the places be available to the whole community, including those of other faiths and none. That does not mean that other places must be allocated to pupils who are not of the faith; as I mentioned earlier, they must rather be allocated according to other oversubscription criteria.
I acknowledge, as my hon. Friend pointed out, that the Catholic sector has objections to our policy on admissions to faith free schools. I know that the Catholic Education Service has been in discussion with Department officials. We remain committed to continuing our engagement with the CES, although I point out that we have no intention of changing or removing the 50% limit.
Elizabeth Truss
The quota was set so that we are able to ensure that a broad range of the community may attend those community-based schools.
On the point made by my hon. Friend about voluntary aided schools, I should say that local councils have an option, where there is oversubscription or high demand for faith schools, to set up new voluntary aided schools. The academy route does not have to be looked at first; if there is demand for faith-based education in a local area, a diocese, for example, may propose a new school outside the academy route. High demand for faith places therefore provides a diocese with the opportunity to propose a non-academy route. On funding, we ensure that funding to all schools is fair within each local area. Funding is not biased towards academies or free schools, as my hon. Friend suggested.
The point of the new academies and free schools is that they should have a broad base in the community, hence the limit of 50% on children from a particular faith when there is oversubscription. When there is strong demand for a faith school in a local area, however, the diocese can propose a new school not through the academy route; there is that option for such schools.
The second point made by my hon. Friend was about borrowing by academies and free schools. He made a good case and I acknowledge his point about further education, for example, and other types of public institution being able to borrow, but academies are restricted from borrowing without the express prior permission of the Secretary of State. The restriction is set out in the funding agreements and in the academies financial handbook.
The Department’s general position is that commercial borrowing is rarely considered to be good value for money, as the interest and finance charges are normally higher than rates available to the Government. I acknowledge, however, my hon. Friend’s point about the autonomy of schools and about the degree of freedom given to make such decisions. The result of that presumption by the Department is that permission to borrow is given only exceptionally, in part because academies are classified by the Office for National Statistics as public sector bodies. That is different from the classification of further education colleges. Any borrowing undertaken by academies therefore is also counted in measures used to calculate public sector debt.
Mr Hoban
FE colleges’ debt used to be on the Government balance sheet; once the Secretary of State scrapped his controls over their borrowing, their debt moved away from the Government balance sheet and did not count towards Government debt and the deficit. The Department can make a simple change to remove the debt from the Government balance sheet and put it into the private sector.
Elizabeth Truss
The issue is the way in which the Office for National Statistics carries out the classification, rather than the Department for Education.
Mr Hoban
I am sorry to be persistent, but having looked at the note from the ONS on the reclassification of FE colleges, it appears that one of the things that changed its view on whether the colleges’ debt should sit on the public sector balance sheet or a non-government sector balance sheet was control. When control in the FE sector was scrapped under the Education Act 2011, the ONS changed the classification and took that debt off the Government’s balance sheet.
Elizabeth Truss
My hon. Friend makes a good point, but that would require a change in our policy on academies and free schools, not specifically on borrowing, but more generally on autonomy. As I discussed earlier and as the PISA study demonstrates, there is always a balance to be struck between autonomy and accountability in the school system. The ONS says that the balance between autonomy and accountability dictates that academies are classified as public sector bodies, so any change would require amendment to the Department for Education’s legislation on the structure of academies.
The Government are committed to the careful control of public spending to bring down the national deficit and retain economic confidence. Under the status quo, in the 12 months to October 2013 five formal requests were received from academies, all of which were approved. Formal requests tend to follow an informal discussion with academies, which is the point at which most proposals are terminated.
We want good schools to have the flexibility to expand, and have taken big strides to allow academies greater financial freedoms—for example, the ability to carry forward surpluses—but we understand that academies would like to have more, particularly on borrowing. As my hon. Friend pointed out, the Office for National Statistics determines the classification of all bodies, and all academies are currently classified as central Government public sector bodies. The ONS makes decisions independent of Government, subject to international accounting standards.
My hon. Friend made the case that we should change the regulations for academies to give them more financial freedom. That debate is about the level of freedom and autonomy that academies are given and is separate from the question whether academies should be able to borrow.
This has been an extremely helpful debate. There are routes by which new faith schools can be set up with 100% admission from faith-based communities. However, new academies and free schools have a cap of 50% in cases where there is over-subscription, and we do not have any plans to change that at the moment. I am interested in my hon. Friend’s points about borrowing, and I will ask officials to look at the details of that, to see what would be required for the ONS to change the classification.
Elizabeth Truss
Obviously, we do not have schools based on social class. The question of gender is interesting. The cap is a specific measure to make sure that, as widely as possible, members of all the community are represented in new schools. There are routes by which faith-based schools can expand and new faith-based schools can be established, but the 100% route is not part of the academies and free schools programme.