Academies Bill [Lords]

Tim Loughton Excerpts

Thursday 22nd July 2010 Commons Chamber

[Mr Wright]

I begin by paying tribute to the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for South Holland and The Deepings (Mr Hayes). I class him as a good friend. He is a kind and courteous man and I am sure that my daughter Hattie will be very pleased that she has been mentioned in the House again. He is more than welcome to join us for “Toy Story 3”—indeed, I see him as the Buzz Lightyear of the coalition Government. To infinity and beyond!

May I clarify a point made by my hon. Friend the Member for Gateshead (Ian Mearns), who was in the Chamber assiduously this afternoon, until I got up, when he left? He mentioned that his area produces angels, and in many respects he is right—Gateshead is a fantastic place—but I think that he was referring to the angel of the north, which is a strong and proud icon of our region of the north-east, and I should point out to the Committee that the angel of the north was fabricated in Hartlepool. That is an important point.

I shall be brief, because there is not a lot of time left and there is a lot of work still to do. It was very important that we had considerable debates on Building Schools for the Future and on special educational needs. Clause 7 requires that where the Secretary of State approves a maintained school’s application to become an academy, the local authority must determine whether, immediately before the conversion date, the school has a surplus and, if so, the amount of the surplus. Once that is done, the local authority must pay the surplus over to the proprietor of the academy.

Subsection (4) states that regulations may be brought forward on how the payment of any identified surplus could be made and subsection (5) lists what those regulations can include. An important part of those regulations would be the manner in which the proprietor of the academy can apply to the Secretary of State for a review of the determinations. I argued in Committee last night that the nature of the Bill is to force schools to consider that their most important relationship is not with local parents or pupils but with the Secretary of State.

This is a centralising Bill that concentrates power and decisions into the office of the Secretary of State. The Opposition think that there should be more independence from Whitehall and more power for local people, which could include the proprietor of the academy. On that basis, amendment 61 would replace the idea of the proprietor going directly to the Secretary of State to ask for a review and allow the owner of the new academy to appeal to a local commissioner.

Amendment 64 would make it clear that the term “local commissioner” has the same meaning as that given by section 23 of the Local Government Act 1974, which essentially means the local government ombudsman. That is a well-recognised route for conducting investigations into local matters and gives a degree of impartiality and independence because the local commissioners are appointed by the Secretary of State for Communities and Local Government. We think that the Secretary of State for Education, under the provisions in the Bill, is responsible for a number of things, namely entering into an academy arrangement, making an academy order and reviewing the transfer of school circumstances among other things. There does not seem to be any effective challenge to the single authority of the Secretary of State, which is one reason why we have tabled the amendments.

The inclusion of the word “review” is also somewhat vague and does not give reassurance and confidence to the proprietor of the academy, or to anybody else for that matter, that a proper procedure will be followed. Amendments 62 and 63 would strengthen the wording of the Bill by leaving out the word “review” and inserting the word “appeal”, which gives a sense, in our opinion, that a proper and transparent process must be adhered to. The amendments would not increase any bureaucratic burden on any interested party, but they would provide a degree of certainty and reassurance for stakeholders, particularly the proprietor of the new academy. For that reason, I am interested to hear what the Minister has to say about the amendments, and I commend them to the Committee.

[The Parliamentary Under-Secretary of State for Education (Tim Loughton)]

It is a pleasure to participate in this debate. These four amendments have been grouped together because they concern the appeal procedure. It is our policy that a maintained school that converts to academy status should take with it any funds that it has accumulated in previous years. I do not think that that is news to the shadow Minister. Schools might have earmarked such funds for particular purposes and we would not want them to be prevented from carrying out their plans as a consequence of their conversion to academy status. The Bill therefore makes provision for that and for an academy to appeal to the Secretary of State, as we see fit, where it believes that the local authority has wrongly calculated the appropriate amount.

The Opposition’s amendments would change the whole appeal process so that the academy would appeal to the local government ombudsman rather than the Secretary of State. I think the shadow Minister characterised the measure as being centralising rather than localising, but we do not believe that what the Opposition suggest is appropriate. We have published draft regulations to enable hon. Members to see the Government’s intentions in this regard. The draft regulations state that the local authority would have to determine, within three months of the conversion date, whether the school had a surplus immediately prior to the conversion date and, if so, the level of that surplus. That is consistent with the usual period for finalising local authority accounts at the end of the financial year and should give sufficient time to calculate accruals and commitments accurately. If the academy’s proprietor did not agree with the determination, they would have one month from being informed of the determination to apply to the Secretary of State for a review. On receiving such an application, the Secretary of State would have three months in which to determine whether the school had a surplus and, if so, the amount of that surplus, and to inform the academy’s proprietor and the local authority of those determinations.

If there has been a review, the local authority must pay over any surplus within a month of being informed of the Secretary of State’s determination. If there is no review, the authority would have to pay over any surplus within one month of either the proprietor informing the authority that they agreed with the determination or at the end of the period in which the proprietor may apply for review—whichever is earlier. That is very clear.

[Mr Wright]

Will the Minister clarify something? If a decision is made by the Secretary of State following a review, would the proprietor of the academy have a right to appeal that decision?

[Tim Loughton]

If the hon. Gentleman bears with me, there is a further explanation that might satisfy him.

Decisions regarding financial disputes of this kind should rest with the Secretary of State, as they do currently. The Secretary of State is responsible for making a decision when the local authority and schools forum disagree about the operation of the minimum funding guarantee or about the level of central expenditure retained by the local authority in the schools budget. The Secretary of State is also able to approve additional arrangements when local authorities request to have school finance regulations disapplied and so is well used to evaluating these issues.

What is proposed would be an unnecessary extension of the role of the local government ombudsman, whose role is to deal with complaints from members of the public about local authorities rather than to deal with disputes between two publicly funded bodies about the detail of financial accounts. We do not think it appropriate for that role to lie with the ombudsman. Dealing with that sort of dispute is already an established part of the Secretary of State’s role. On that basis, we do not think that the amendments are necessary and I urge the hon. Gentleman to withdraw the amendment

[Mr Wright]

I thank the Minister for clarifying the situation, but I still am not entirely certain about the right to appeal. If a review had taken place and the proprietor was still unhappy with the situation, would they be able to appeal again to the Secretary of State or an independent body? We have suggested that they could appeal to the local government ombudsman, but there could be other routes; we are quite flexible about that. Will the Minister clarify that?

[Tim Loughton]

I thought I had made this clear, but obviously I have not. The Secretary of State’s decision is final, so the Secretary of State will be the final arbiter.

[Mr Wright]

I thank the Minister for confirming that. My fundamental concern about this aspect of the Bill remains the same, namely that it seems to be a very centralising Bill. It diverts the relationship away from a school thinking about local stakeholders, and having a good, constructive partnership and collaborative arrangement with local people, pupils, staff and so on, and towards having a direct relationship with the Secretary of State. I thought that was contrary to what the coalition Government would want to do with regard to empowering local people. In that respect, I remain unhappy.

[Mr Wright]

I certainly agree with my hon. Friend. The Secretary of State has made it clear that he is keen to expand academies as quickly as possible, so he has a vested interest in making sure that that happens. Then there is the decision on the transfer of surpluses; as my hon. Friend says, the Secretary of State is the final judge and jury on that issue. There is an inherent conflict of interest between various bodies, and I am concerned about that. There is a general concern about the complete lack of consultation with local stakeholders on the provisions, and I remain concerned about that.

[Tim Loughton]

To respond to the point made by the hon. Member for Islington North (Jeremy Corbyn), there are many areas of schools business where the final decision will remain with the Secretary of State, and that is proper, but remember that the Secretary of State needs to have regard not just to the future and the financial viability of academies, but to the sustainability of other schools, which will continue to be administered through local education authorities. The Secretary of State is interested not just in academies, but in all schools.

[Mr Wright]

I thank the Minister for his contribution. I am keen for him to intervene again, because I still think that the word “review” is very vague. It does not set out in any degree what the process would be, so that the proprietor of the academy could be reassured that appropriate processes had taken place. Our amendments 62 and 63 would tighten up the language of the Bill. They would ensure that there was not a review, to use that broad, somewhat ambiguous word, but an appeal. That would help to clarify certain matters in the Bill. I would be happy for the Minister to respond further on that point.

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[Mr Wright]

I am not suggesting that there would automatically be any sort of change or reduction in terms and conditions. However, the freedoms and flexibilities, and the movement away from national terms and conditions and pay scales, could provide a degree of anxiety for staff, particularly low-paid staff who may have given good and loyal service to the local education authority for many years. For example, staff might think that they have had insufficient time to consider what converting to an academy might mean, and therefore, in conjunction with the union, take their employer to a tribunal. Perhaps that should be considered as part of a contingent liability. We need to ensure that all possible scenarios have been considered when taking into account the transfer of surpluses.

Clause 8 allows for the transfer of other property, and amendment 66 would remove the word “liabilities” from subsection (5)(b), which refers to the apportionment of properties, rights and liabilities. In response to the point made by the hon. Member for North Cornwall (Dan Rogerson), the reasoning behind the amendment is similar to the point that I made earlier about contingent liabilities. I reiterate that there is a particular concern about arrangements such as those under the private finance initiative regarding the transfer of liabilities, and the potential for them to be apportioned between the local authority and a new academy. In a PFI arrangement with 25 years of payments still to go, we must ask how appropriate costs should be so apportioned, and the amendment is an attempt to resolve that question.

We reason that if an academy is to operate as an independent school with full autonomy and freedom from the local authority, it should be responsible for full liability under any PFI arrangement in respect of the school. That seems balanced and fair, and I ask the Minister whether he is opposed to it.

We seek reassurance from the Minister that local authorities, which will face immense financial pressures over the next few years, with enormous potential cuts and pressures from changing social circumstances such as the ageing population, will not be liable for the debts of schools that have transferred as well as having to cover the costs of central services such as payroll, human resources and other infrastructure that they were, and will be, providing to maintained schools. I hope that he can provide that reassurance, and I commend the amendments to the Committee.

[Tim Loughton]

I seek to provide the shadow Minister with some reassurances on the various concerns that he has raised about surpluses. I support his objective that the whole system should be transparent and properly accountable. I think he is perhaps unduly concerned, but he is right to tease out some more information through what I believe are probing amendments. I shall address them in order and then turn to his points on the PFI.

Amendment 76 would widen the definition of the surplus to take account of all liabilities not being transferred to an academy, including any liabilities that a local authority incurred on behalf of a school. In calculating the surplus, local authorities will follow normal accounting procedures and take into account expenditure in respect of which work has been done or goods received but invoices have not yet been paid. As we see the new converters as continuing schools, we will seek to ensure that local authorities are not left to fund any remaining costs that would otherwise have been charged to the school’s budget—that is only fair. If a school has ongoing commitments such as an internal loan, we will expect it to continue those payments and the local authority to accept that.

For the same reason, it would not be appropriate to offset against the surplus any liabilities incurred by the local authority on behalf of the school that would not otherwise have been charged against the school’s budget. We understand that closing the old school’s accounts can be a lengthy process, and that authorities are concerned that they might pay over a final cash sum to the academy in accordance with the regulations, only to be left later with outstanding bills without any funding, which would not be fair.

We are drafting guidance on the calculation of surpluses, which I hope will give the hon. Gentleman the assurances he seeks. It will cover debtors and creditors, bank accounts and internal loans and is being developed with partners including the Chartered Institute of Public Finance and Accountancy. There is also a model commercial transfer agreement for adoption by the school’s governing body, the academy and the local authority, which will deal with possibilities such as he described.

[Mr Iain Wright]

I thank the Minister for his clarification and welcome the fact that guidance will be provided. Can he give us any reassurance about the status of that guidance? Will it be, say, in secondary legislation subject to a negative resolution of the House, or will it be simply a press release on the Department’s website?

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[Tim Loughton]

I do not know. It is right for the hon. Gentleman to ask—we will give him the information as soon as possible. It is a policy matter and, in the interests of transparency and accountability, we will ensure that we keep him informed of how the guidance is being worked up, unless I am told something while I am on my feet.

We expect all those matters to be agreed between the local authority and the governing body before conversion, and for the new academy to work within that agreement. The power to make a scheme under clause 8 is a reserve power for the Secretary of State to exercise in the absence of agreement, to ensure that liabilities are appropriately covered.

--- Later in debate ---

[Mr Iain Wright]

That sounds like a potential nightmare, and an awful lot of work needs to be done on it. The impact assessment mentions the negotiations between the DFE and DCLG only very briefly. What further information and clarity can the Minister give the Committee to ensure that good cross-departmental work is done so that local authorities are not penalised financially?

[Tim Loughton]

Such negotiations are not only between the DFE and DCLG; it is also a Treasury matter. We have had discussions involving those parties. I have heard what the hon. Gentleman has said and in ongoing discussions, we will take note of his point. However, I think he is unduly concerned. He quite rightly said that it is a complicated matter, but we have looked at the PFI scenario to ensure that there are no contingent liabilities that could queer the pitch for the authorities or academies involved. The Government believe that amendments 76 and 66 are unnecessary. It is appropriate that he has used them as probing amendments, but on the basis of those assurances, I invite him not press them to a Division.

[Mr Iain Wright]

The Minister has clarified many of my concerns, but some remain. This is another example and illustration of the Minister and his team legislating in haste. They may have to unravel much of the Bill in subsequent legislation in the next few months and years. I hope that he keeps the Opposition informed about discussions with his colleagues in DCLG, because I do not want local authorities to be liable for anything that could harm them financially in the next few years.

I hope that the guidance is slightly more than just that. It would have been a good idea to subject it to the negative resolution of the House. The Minister could have reflected over time and perhaps tabled a Government amendment on Report to that effect, but alas, that option is not available to us.

I am anxious to move proceedings on. I hope the Minister and his team will keep us informed. I understood him when he said that I was unduly concerned, on which basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 ordered to stand part of the Bill.



Clause 8

Transfer of other property