Academies Bill [HL]

Lord Adonis Excerpts

Wednesday 23rd June 2010 Lords Chamber

[Lord Adonis]

My Lords, I have two points about the funding of academies. I will speak particularly to Amendments 15 and 16, which were tabled by the noble Baroness, Lady Garden.

Reflecting on the experience of grant-maintained schools, the Minister will accept that the perception of unfair funding, as much as the debated reality of the funding position, did a huge amount to undermine the reputation of those schools in the wider education system. To be fair, they did a large amount to discredit the reform. If the extension of academy status more widely, which I support, is to carry public confidence and confidence in the education world, it is vital not only that the funding arrangements for schools transferring to academy status are fair but that they are seen to be fair. The only way they are likely to be seen to be fair is if there is an independent validation process of the overall financial scheme by which the academies are to be funded.

The amendments in the name of the noble Baroness, Lady Garden, are very interesting in that respect, in that she seeks to inject the National Audit Office into the validation of the arrangements for the funding of academies. I have considered very carefully her amendments. To require the National Audit Office to advise on each individual academy, given that we will be talking about a very large number, would be an extremely bureaucratic process that is not conducive to the public interest. However, it would be worth the Committee reflecting on—and the Minister giving us an initial reaction to considering further—whether the National Audit Office might play a role in validating the overall academy scheme in respect of funding. It could concern the principles of action by which the Government are allocating funds to academies, particularly when it comes to a number of the areas that the noble Baroness mentioned in respect of special educational needs funding, which, to be frank, will be contested by local authorities.

That view is given added force by the letter of 15 June 2010 which the noble Lord, Lord Hill, sent to Members of the Committee. He sets out in the annexe the arrangements for the allocation to academies of funding that otherwise, in respect of other schools, goes to local authorities for children with special educational needs. He states:

“Academies do receive a share of funding which is for: funding retained from the Schools Budget for centrally provided SEN support services; behaviour support services; licences and subscriptions …; therapies and other health related services; and education and welfare services”.

However, they currently,

“do not receive a share of local authorities funding in the following”—

very important—

“areas: educational psychology services; SEN administration, assessment and co-ordination; parent partnership services …; monitoring SEN provision; SEN transport”—

SEN transport is an extremely expensive item in local authority funding—

“support for inclusion between mainstream and special school; and pupil referral units, education out of schools and excluded pupils”.

Those also are very significant items of local authority spending, which have a huge impact on the budgets of individual schools.

It is not clear to me from the noble Lord’s letter what course the Government propose to take in respect of those important items of spending. Clearly, they will need to be considered case by case in some detail before a proper funding scheme can be put together in relation to the expanded number of academies that we are considering in this Bill.

The conclusion of that annexe has a wonderful sentence of the kind which I fear to say I signed off on so many times when I was a Minister, but to which the House should pay very great attention. It says:

“We want to work with local authorities on what these changes will mean for local authorities, and the important … role they have to play”.

Let us be clear—that means that we do not have the foggiest idea at the moment what the actual arrangements are that we are proposing, and a great deal of work will be needed before we will be in a position to give any detailed guidance on what that will mean. That further strengthens the case for having some independent process of assessment and reporting on the overall scheme for funding academies. Having the National Audit Office or some other independent body—although the National Audit Office is clearly eminently equipped for the work—giving independent validation to the overall scheme being used for academies, and advising Parliament that the scheme meets the commitments that the Government have given, that academies will be fairly funded in relation to other maintained schools, could be a very important element in ensuring that these arrangements command public confidence.

[Baroness Perry of Southwark]

My Lords, it is apparent that academies will have more money in their fist, so to speak, than community schools. As the noble Lord, Lord Adonis, has just made clear, an enormous amount of money can be withheld by the local authority, which will now come into the academies’ own purview for them to spend. The difficulty with having an outside agency to lay down frameworks or even to observe the frameworks is that there is enormous variety from one local authority to another in the amount that they hold back and the amount of these services—the noble Lord read them out—that they provide. Authorities such as the London Borough of Wandsworth, where I live, withhold less than 5 per cent from school budgets for their central services, whereas others withhold well over 20 per cent to provide centralised services. The inequality will be very apparent. I share the wish expressed by the noble Baroness, Lady Garden, and the noble Lord, Lord Adonis, to have some way in which to demonstrate that fairness is being exercised and is being seen to be exercised, but it would be difficult to do that, given the huge disparity at present. Of course, it will be possible for schools, once they become academies, as they do now, to contract back with the local authority for some of these services, which will return that money to the local authority. However, in many cases—it is the case in Hackney, for example—very few of the academies do that.

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[Baroness Morgan of Huyton]

I wish to speak against the amendments proposed by my noble friend Lord Whitty, as they would take us completely in the wrong direction. It is in everybody’s interests that schools should be encouraged to run and manage healthy budgets and to build up sensible surpluses if they are planning for developments perhaps two or three years ahead. I have always felt strongly that head teachers of whatever school—an academy or a normal community school—have to be able to manage their own budgets for several years ahead. If you are moving towards the provision of single sciences when you have been doing a joint science course, for example, it will inevitably take real investment, particularly in teaching but probably in facilities too. The amendments would be a retrograde step. My concern about the package in general is that in some way I would like the freedoms that are being talked about regarding budgets to go across the piece for all schools, whether they are academies or not. I should declare an interest as normal as working for ARK and city academies.

[Lord Adonis]

I support what my noble friend Lady Morgan has just said, with particular reference to Amendment 11A. We need to distinguish sharply between deficits and surpluses. At the moment, unless the policy has changed in the past 18 months since I was in the department, schools with deficits are not allowed to transfer to academy status. The deficit must be written off before the school can transfer. I remember many long and very difficult negotiations with local authorities about how deficits would be dealt with.

The issue of deficits then becomes very important if not clarified. Schools with deficits, particularly those with difficult relationships with their local authority because it quite rightly is seeking to get to grips with the deficit, might regard the opportunity to transfer to academy status as a way of evading their responsibilities to deal with the deficit. It can be in no one’s interests that that should happen. If a school is being poorly managed, its budget may be suspended under Section 66 of the Education and Inspections Act 2006. It is not clear under the current Bill what will happen to schools whose budgets are suspended. I should welcome clarification from the Minister on that point, perhaps in writing. There is a statutory procedure for a school’s budget to be suspended, which has to do with very poor management, so will such a school be allowed to transfer to academy status? I imagine that it would be allowed to apply but would not be allowed to transfer. I think that the general principle should be that schools with appreciable, non-trivial deficits should not be enabled to transfer to academy status until the deficit is dealt with. In the early phases of the expansion of academies I find it inconceivable that a school with a large deficit would be able to transfer in any event, as I cannot see how it could be rated as outstanding if it has a non-trivial deficit. That is an important point in terms of taking the policy forward. Will the Minister confirm that it is not the Government’s policy to allow schools to transfer to academy status as a way of evading responsibility to manage their budgets properly if they are currently in deficit?

On the issue of surpluses I take the view entirely of my noble friend Lady Morgan. I do not believe it right that schools should be penalised for being well managed and accumulating surpluses. I can see no reason whatever for a school that has a surplus to have that surplus seized by the local authority if the school chooses to become an academy.

That raises the issue of excessive surpluses. As I know only too well, an excessive surplus is a much debated concept. It may seem excessive to the local authority but, generally, it does not seem excessive to the school, which regards the fact of the surplus as a testament to its excellent management of its own affairs. I am sure that if you ask a school about the purpose for which it has maintained that surplus, it will give you 100 good reasons why it needs the surplus and 100 good reasons why it should not be seized by the local authority.

Therefore, I do not have much sympathy with the notion that schools with surpluses should not be able to transfer to academy status, but I believe that there is an issue about deficits which the Government need to address.

[Lord Hill of Oareford]

My Lords, before I respond to the detailed points on the amendments and pick up directly on deficits, perhaps I may draw noble Lords’ attention to the published policy statement setting out our intention regarding deficits. In a nutshell, it makes clear that no school with a substantial deficit, which is defined at around £100,000, will be able to convert. However, I will go on to explain what we will do about deficits, because the purpose of the policy is absolutely to prevent any school evading its financial responsibility by converting to academy status and thereby writing off any kind of deficit.

Basically, it would work as follows. If a school had a deficit of less than £100,000 and the Secretary of State therefore decided it was able to convert, the Department for Education would compensate the local authority for the sum of the deficit. The academy would not get a financial advantage out of it as it would have to pay the amount of the deficit back through reduced levels of grant. That is how we would deal with the deficit problem.

Overall, the aim of all these arrangements is to try to ensure that they are fair and reasonable to both the converting school and the local authority. Amendment 11A would mean that the Secretary of State would not be able to enter into academy arrangements with a person with an excessive surplus or deficit. We do not believe that that is necessary because we would put in place arrangements for dealing with surpluses and deficits.

As regards schools applying to convert to academy status—particularly the first wave of outstanding schools, which tend to be pretty good at running their financial affairs, as the noble Lord, Lord Adonis, said—they are retaining their same leadership and management. It is not like the original model for academy conversion whereby one is starting a new school. Therefore, we think it only fair that what is essentially the same school keeps the same money it has put aside as part of its long-term financial planning, the point made by the noble Lord, Lord Adonis, and the noble Baroness, Lady Morgan. However, to underline the point, we think it also right that if a school converts when it has a deficit, it should deal with that deficit.

Amendments 140 and 141 would require the local authority to determine whether a school had a deficit, as well as whether it had a surplus. In our view, those amendments are not necessary because if the local authority is making a calculation to determine whether a school has a surplus, by definition it will have determined whether it has a deficit.

Amendment 142 seeks to maintain the current position when a school closes and becomes an academy. That approach had considerable logic when original academies replaced predecessor schools and gained new management and governance. In effect, in that case an institution was closing and a new one was opening. But in this case, the school is continuing, and if it has put money aside as part of its long-term financial planning it should be able to keep it.

Amendment 143 would prevent the academy from retaining a surplus, and the same argument applies. The local authority will not be losing out from the approach as the money is already accounted for in current surpluses. Therefore, it is not an additional charge on local authorities from which other schools will suffer.

Amendments 144 to 149 would treat a converting school's surplus as a loan from the local authority which the academy would have to pay back over time. Again, we do not want schools to be disadvantaged financially. Maintained schools can carry forward their surpluses from year to year; we think that the same principle should apply to academies. To pay back a loan over a long period would set up a whole new bureaucratic process, which we do not think would help.

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[Lord Hill of Oareford]

These are difficult and complicated matters and I do not have a simple and straightforward answer for the noble Lord now. I have said that it is an important matter that we can debate further outside this House. Let us do that by all means.

As I was saying, we think it important to ensure that local children of all faiths or none—I take the point that has just been made—have access to new academies. We will ensure that there is the balance that I discussed between community and faith places. All academies will have to have admission arrangements.

[Lord Adonis]

The noble Lord has just made an incredibly important statement of policy in respect of new schools. After this debate, will he clarify whether the 50 per cent provision that he mentioned in respect of new academies covers existing independent schools that transfer into the state system by means of academy status? That would be the principal means by which schools that are exclusively of one faith in terms of admissions could seek to come into the state system.

[Lord Hill of Oareford]

That is an extremely good question, which I will need to follow up separately with the noble Lord either orally or in writing, in which case I will circulate the letter. The principle of independent schools coming in is that academically they should be not selective but open in their admissions. I will need to follow up that precise point and come back to him.

We expect that in most cases the relevant religious body would be represented on the governing body of the school that converted. I am talking about existing religious schools converting. Therefore, those people would be informed of the Secretary of State’s decision not to issue an order. The relevant religious foundation or trustees would obviously be closely involved in the process and could veto any academy application. In many cases, they would be the people signing the funding agreement as the academy trust. They would be closely involved in all stages of the application process and fully informed of all decisions.

Where there is currently an existing foundation or a trust associated with the predecessor school, we expect those bodies or their representatives, if they wish to, to become members of the new academy trust. That academy trust, once established, would appoint the majority of academy governors. That mirrors the current arrangements for both academy sponsor appointees and the appointment of governors to voluntary aided schools. As members of the trust and as signatories to the academy’s memorandum of association, they would be fully involved in the process of a school becoming an academy. The governance arrangements will be agreed between the Secretary of State and the academy trust and set out in the articles of association. As I explained earlier, the articles cannot be changed unilaterally by either the Secretary of State or the academy trust.

The Bill does not change the required processes in respect of consultation, objection and adjudication on admission agreements for religiously designated academies. A school will continue to be required to consult its religious authority on any changes. Neither will it be affected by our policy on the provision of new non-faith places that a new academy is required to provide at least half of available places to the broader community. The Government’s intention overall is to maintain the current relationship between religious bodies and their schools. My letter to the churches set out that commitment.

If the right reverend Prelate the Bishop of Lincoln would like to discuss this further, I shall be happy to do so. More generally, as I have said on those other important points that have come up, I will do my best to provide further clarification. I hope that I have dealt with the broad issues of what has been a long and interesting debate and I ask the right reverend Prelate to withdraw his amendment.

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[Lord Adonis]

I shall speak to my amendments, Amendments 45, 48 and 49, which are in this group, although they raise issues distinct from those raised under the other amendments. They go to a point of overall principle in terms of the scope of academies, but I wish to raise two specific practical consequences of that principle. The overall principle is the wording of Clause 1(6)(d), which states that academies must be schools which provide,

“education for pupils who are wholly or mainly drawn from the area in which the school is situated”.

This is one of the few cases in which I think that the Bill may be genuinely over-regulating academies. I query whether that provision is necessary. As we said in the previous debate in respect of schools with a religious character, we do not anticipate that schools will change their character by taking on academy status, and of course schools are bound by the admissions code, unless there are specific reasons why not—and I shall come to one specific reason in a moment. Therefore, the huge generality of schools will provide for pupils who live wholly or mainly in the area which the school serves.

The reason why the formulation is here is that, unless you want to bring about a change of policy, statutes tend to replicate previous statutes. The phrase “wholly or mainly” goes back right to the beginning of academies. The Education Reform Act 1988 was the first legislation providing for city technology colleges, which were independent state schools—the name to which the noble Lord, Lord Greaves, takes such exception, but that is what they were called even then. Section 105(2)(b) stipulates that city technology colleges should be,

“for pupils of different abilities who have attained the age of eleven years but not the age of nineteen years and who are wholly or mainly drawn from the area in which the school is situated”.

The purpose behind that is that the noble Lord, Lord Baker, wanted to establish independent state schools with a strong technological focus which served the broad area in which the school was located.

The noble Lord, Lord Bates, who is not in his place, said in our debates on Monday that the catchment areas of some of the original CTCs had contracted. That is true, but it is important to understand that they have contracted by the consent of their governing bodies to changing their admission arrangements, not by the requirements of the law. It is perfectly possible for an academy to draw from a wide area around the school by, for example, the use of banding, or inner and outer catchment areas—there are a lot of established ways in which schools can do that—while abiding entirely by the provisions of statute.

However, I wish to raise two categories of school in this debate which are covered in my Amendments 48 and 49, which sit very uncomfortably with the notion of schools whose pupils must be admitted wholly or mainly from the area in which the school is located. The first is boarding schools, and the second is schools which provide for pupils with exceptional talent in music, dance and the arts.

Let me start with a statement of principle. It is very important for a genuinely comprehensive system of state education that it provides for pupils in those categories. Indeed, we should be expanding the provision of state boarding schools. I am glad that a number of academies are opening boarding houses. It is important that the state system provides for pupils who have a boarding need—those with family circumstances caused by family breakdown or by the nature of parental occupation, for example parents who are in the military—in a way that, let me be blunt, those who have the means can obtain by accessing private schools. It is also vital for a genuinely comprehensive system of education that it can provide for those with exceptional talents in the arts, music and dance. By the nature of those disciplines, that will require attendance, wholly or partly, at separate educational establishments.

The state recognises that at the moment. There are 35 state boarding schools which, for the most part, are excellent schools. Local authorities often pay for pupils to attend wholly private boarding schools. A local authority paid for me to attend a wholly private boarding school because I had a boarding need. I would like to see the number of such places expanded. Through the music and dance scheme funded by the Department for Education, the state also provides for 2,000 exceptionally talented children to attend private schools, including Chetham’s School of Music in Manchester, Elmhurst School for Dance in Birmingham, the Purcell School in Bushey, the Royal Ballet School, Wells Cathedral School and the Yehudi Menuhin School, because they have exceptional talent in music, the arts or dance.

Where do boarding schools and schools for those with exceptional talent in these areas sit in relation to academy status? I shall ask two questions and make a suggestion. If the Minister cannot answer my first question tonight, I would be grateful if he will write to me.

My first question is whether the 35 existing state boarding schools will be able to transfer to academy status. Is the advice of the department’s lawyers that they would satisfy the requirements in the Bill to serve pupils wholly or mainly drawn from the area in which they are located? Looking at the list—and I know a lot of them well—my sense is that some will meet that requirement, but some will not. It would be a good thing if they were all able to meet that requirement. I cannot see, in principle, why any existing state boarding school should not be able to take full advantage of the right to become an academy.

Secondly, will existing private schools that provide a substantial number of places for state-funded pupils through the music and dance scheme be able to join the state system by means of academy status? It would be a good thing if they were able to do so, if they wished, so that we strengthened the capacity of the state education system to be genuinely comprehensive in meeting the needs of pupils with exceptional talent in music, dance and the arts. I imagine the advice that the Minister will get from his lawyers is that schools that educate pupils under the Government’s music and dance scheme will not be eligible for academy status as a means of coming in to the state system because they do not educate pupils drawn wholly or mainly from the area in question. Chetham’s in Manchester is a phenomenal school. I am glad to say that one of the good things that the department has done in recent years is to provide a substantial grant for rebuilding. Pupils come from across the country, and rightly so.

My practical suggestion is that either Clause 1(6)(d) is removed entirely, or that special provisions are inserted into the Bill to enable certain categories of schools which do not provide for pupils who are drawn wholly or mainly from the area in which they are located to become academies. I specifically have in mind boarding schools and schools whose purpose is to educate pupils with exceptional talent in music, dance and the arts. If it is possible, I would be grateful for an opportunity to discuss this further with the Minister to see how we can resolve this issue.

[The Lord Bishop of Lincoln]

I am very glad to follow the noble Lord, Lord Adonis. I shall speak to Amendments 47 and 127. I agree that the clause to which the noble Lord referred needs to be freed up a bit. Amendment 47 would allow exceptions to pupils being drawn from the local community. At the moment, the clause is very prescriptive, and my amendment would allow a broader intake of pupils. It could also have an impact in other areas, and I declare an interest as it would be of interest to faith groups. On the other hand, I am trying to strengthen the argument for the local community being the main user of these schools by shifting the burden of proof from that they might or might not be community schools to the general rule being that they are. That is why the Church of England is committed to the academies programme. My amendment would secure its interest and would also allow what the noble Lord, Lord Adonis, wants, even though we want to press for something more specific. However, in general terms, we are making a similar point.

If the Minister were to be sympathetic, it would strengthen the arm of those of us in the Church of England who want to be able to say to our people that we are in this business to serve the community, not primarily to further a particular faith position. My amendment would strengthen that position, and I hope that not only would it be of benefit to the Government in implementing the Bill but will help us ensure that our people remain on side when it comes to why we are in the business.

Amendment 127 is rather different. I am fishing in the same waters as the noble Lord, Lord Lucas, in the debate on the previous group and the noble Baroness, Lady Morgan of Huyton, in this group. The amendment is to do with the relationship between academies and other schools. I want to strengthen the Government’s arm when it comes to ensuring—not just hoping for or expecting—that these schools will form partnerships with weaker schools in the vicinity. They will be required to do so, subject to certain exceptions because there will be exceptions. A school could be situated somewhere where there are no other schools close by that are practically able to partner in that way. That is acknowledged in my amendment. The fundamental principle is to beef this up and turn it from hope or expectation to a requirement, with the possibility of exceptions where they might arise in the judgment of the Secretary of State.

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[Lord Greaves]

My Lords, I thank everybody who has taken part in this long discussion on this group of amendments. The noble Baroness, Lady Perry, described it as disparate; I would call it a bumper bundle. It has been a quite extraordinary debate.

We had an extremely interesting debate on primary schools. I thank particularly my noble friends Lady Williams and Lady Sharp and the right reverend Prelate, who are all more expert in this matter than I am, for taking part. Whether or not the Bill needs changing in any way, it is clear that further discussion on primary schools, small schools and federations is required as it progresses through this Chamber and the Commons. We have sparked off that debate very usefully.

The noble Lord, Lord Adonis, talked about types of school which could become academies and which the Bill might restrict. I should like to put one pebble in the pond for the longer term, when more public finance might be available than there is now. I am one of those people who went to a direct-grant grammar school, which were quite extraordinary institutions. They were highly elitist academically, but many of them were not all that elitist socially. Approximately half the pupils at my school were fee-payers and the rest were, like me, scholarship pupils. They were paid for by the local authority to attend the school, which had a direct grant from central government. There was therefore quite a social mix. The school that I went to had an extraordinary social mix, because its intake ranged from children from coal-mining villages right through to the sons of the local professional middle classes.

In the 1960s, when there was a big drive towards comprehensive education, there was a general consensus that this system was not logical or sensible—that it was elitist and undermined the comprehensive principle. Direct-grant grammar schools were therefore abolished—I think by the Labour Government at the end of the 1960s.

[Lord Adonis]

The noble Lord does his noble friend Lady Williams a disservice. It was she who abolished them.

[Baroness Williams of Crosby]

That is also untrue. They were abolished by my predecessor, Mr Fred Mulley.