Technical and Further Education Bill

Lord Hunt of Kings Heath Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Wednesday 1st March 2017 Grand Committee

Moved by

[Lord Hunt of Kings Heath]

64: Before Clause 39, insert the following new Clause—
“Constitution of further education corporations
(1) Section 20 of the Further and Higher Education Act 1992 is amended as follows.(2) After subsection (4) insert—“(5) An instrument must provide for the role of the Clerk to include providing advice to the corporation with regard to matters including—(a) the operation of its powers,(b) the conduct of its business,(c) matters of governance practice, and(d) general procedural matters.””

[Lord Hunt of Kings Heath (Lab)]

My Lords, I remind the House of my interest in that my wife is a consultant at the Education and Training Foundation.

The very fact that we have been debating insolvency measures in the Bill underpins the responsibility of the boards of FE institutions. I know that the noble Baroness, Lady Buscombe, referred to the issue of financial competence and the initiatives being taken on governance, which are welcome. We should certainly pay tribute to the public-spirited citizens who undertake these roles, which have become ever more onerous in the past few years.

The noble Lord, Lord Nash, will know that my main experience is in the National Health Service. Between 2011 and 2014, I chaired the board of an NHS foundation trust. In many ways, the way that FE colleges and NHS foundation trusts have developed is similar. They are very similar institutions: they both provide a public service and are almost entirely dependent on public funding, although the routes by which it reaches the institutions are a little different, but increasingly they have to stand on their own two feet and, if you like, the buck stops with the board. That is very different from the way that FE used to be, with institutions that were owned by the local authority. It is the same for NHS foundation trusts.

However, there is a difference in governance. In the NHS there is essentially a two-tier structure. As chairman of the board of directors, I was appointed by the governing body, which was elected by the members of the foundation trust—in my case, 100,000 of them—who were essentially patients, members of the community and staff. As chairman of the board of directors, I had regularly to account to the governors in public meetings every other month and meet them individually as well, as did the chief executive—whose appointment had to be ratified by the governing body—the executive directors and the other non-executive directors. I and the non-executive directors had a term of office that was subject to reappointment, but only at the pleasure of the governing body.

We also had a senior independent director, a non-executive director to whom any member of the board could go if they were concerned about anything to do with the running of the board, the performance of the chairman or indeed the performance of the chief executive. When outside regulators came to review the performance of the organisation, they would be able to talk directly to the senior independent director. In addition, we had a highly qualified and experienced company secretary who was charged with ensuring that the trust acted within the law and exercised good governance, and acted as an adviser to the chairman on difficult issues, including the performance of the chief executive and the executive directors. This was not an issue in my case but if, for instance, I as chairman had decided along with my non-executive colleagues that we wished to remove the chief executive, it is to the company secretary that we would have gone, and he would have advised us on the way to do it. He would have done so without informing the chief executive, except where due process would at some point be required.

Looking at governance in further education, I just do not get the sense that there is that robustness. In too many colleges, the members of the governing body tend to be self-perpetuating—it was interesting to hear from the noble Baroness, Lady Buscombe, about financial literacy among those governors—the principals often play too much of a role in deciding who the members of the governing body will be, and the board’s members are of course accountable to no one but themselves and do not meet in public. So there is very little transparency about the performance of the boards of FE institutions, and there has to be some suspicion that, at least at some colleges, they do not exercise challenge and scrutiny as much as they should.

This therefore makes the role of the clerk to the governing body very important. However, there is a problem, to which I referred at Second Reading. The Minister will know that one of the reasons we are having these insolvency provisions is that some institutions have got themselves into trouble financially. We also know that in some cases that is because principals have decided to undertake ventures that, if they were subject to proper scrutiny, I do not think they would have been allowed to. There is an instance in Birmingham where basically a principal was going on foreign adventures—there was a fashion in FE for colleges to try to open up and do deals abroad—without the kind of expertise and scrutiny that we are talking about, and almost all those adventures ended up in trouble. There is evidence that the college’s board of governors did not exercise due scrutiny and diligence when it came to those issues.

There was a paper by the former Learning and Skills Improvement Service identifying a number of issues with governance. It stated that in FE there can be too much polite consensus to avoid conflict, with insufficient challenge, a business focus at the expense of core educational performance, a taking on of big risks but not managing them, with the clerk being undervalued in being able to stimulate and facilitate good governance. This is where I come to the role of the clerk. These days, I do not think the word “clerk” aptly describes what needs to be done. Unfortunately, some principals seem to have mistaken the role of clerk for that of secretary, and that is a big problem. At national level, I have no argument at all with the Minister’s department, the FE commissioner or Ofsted, all of which have on a number of occasions given their support to professionally qualified clerks at a high level.

On the ground, there is a suspicion that that has not always been reflected. There is some evidence that, when clerks leave, it is not unusual to see the role offered at a lesser salary with lesser hours and for it to be offered internally, to an administrator. Unbelievably, there have been reports of examples of the principal’s secretary being asked to undertake that role. That is completely unacceptable, and I am surprised that the national regulators have not ruled on that. It reflects the fact that governing bodies are poor and simply do not challenge principals when they make decisions that are totally unacceptable, such as that one.

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[Lord Nash]

My Lords, I recognise the very important role played by clerks as expert advisers to governing bodies of further education institutions, and I pay tribute to the contribution by clerks and governing bodies up and down the country. As the responsibilities of those bodies increase, we must also support the development of the capability and professionalism among clerks. As the Minister responsible for governors in schools, I can completely see the importance of this matter. That is why we support the Education and Training Foundation in the delivery of a new professional development programme for clerks to be rolled out this year. Sector representative bodies also deliver a range of activities to support clerks, including a very active clerks’ network and best-practice materials. The ETF is also supporting the increased professionalism of clerks through the improving clerk to company secretary programme to take account in changing college structures and clerks’ responsibilities, whereby clerks can attain company secretary qualifications. We are supporting chairs of boards of governors through the national leaders of governance programme, where experienced chairs mentor others who need support.

There is a well-established statutory requirement for the instrument of an FE institution to make provision for there to be a clerk, and for provision for the responsibilities of that role to be set out in the instrument. That is set out in Schedule 4 to the Further and Higher Education Act 1992. This means that the importance of the clerk’s role, which I know is recognised by members of this House, is also reflected in law.

While further statutory prescription in relation to duties and responsibilities of the clerk may appear attractive, I do not believe that it is the right approach in this case. I will elaborate. The amendment proposes a few high-level matters relating to advice that clerks should provide and, as proposed, overlooks certain features that would reasonably be expected to be an important part of any clerk’s role. These include, for example, independence from the senior management team at the institution and a duty to take appropriate action if the board, the chair or one of the committees appears to be at risk of acting outside their powers or to be proposing actions that may be unlawful.

The 1992 Act sets up high-level requirements for the instrument and articles, including a requirement for there to be a clerk and for the clerk’s responsibilities to be set out in the instrument. Since 2011, colleges have not required the consent of the Secretary of State to amend their instruments. The detailed content of the instrument, including the details of the responsibilities of the clerk, now largely rests with the governing body of the FE corporation rather than with Ministers.

In my view, the existing balance between the requirements set out in legislation and the responsibilities of the governing body is the right one. We should be very careful about removing from colleges the necessary flexibility that enables governing bodies to adapt and tailor their governance arrangements to fit the circumstances of their institution. That is particularly important in a sector as varied as further education. It is obviously important to guard against the possibility that greater prescription has the unintended effect of undermining the responsibility and thus the accountability of governing bodies. The careful balance set out in the current legislation in relation to matters of governance, including in respect of the role of the clerk, remains important going forward.

Principals do not appoint board members. Governors are appointed to the board by the board itself. A good principal will have a strong interest in having a capable body. When there is a material pre-existing relationship between the principal and a member of the board, it should be declared as part of the appointment process. The Association of Colleges’ model job description states that the clerk should be independent of the senior management team and should provide unbiased advice.

We do not think this amendment would add materially to the conduct of clerking or to governing bodies of FE colleges. We believe clerking is generally working well, and the quality of clerking has undoubtedly improved significantly in recent years. However, as I have spent part of the last four years attempting, I think with some success, to raise the importance and effectiveness of governance in schools, and in view of what noble Lords have said, I will go back and investigate their concerns and see what more we might be able to do in this regard, because it is important. Legislation may be a very blunt instrument, but I will go back to look at it further.

[Lord Hunt of Kings Heath]

I am very grateful to the Minister. I beg leave to withdraw the amendment.

Amendment 64 withdrawn.