School Finance (England) Regulations 2006

My Lords, the noble Baroness gave these proposals a welcome—what she described as—““modified rapture””. From her, I take that to be the highest possible praise for measures being introduced by the Government. I take that compliment in the spirit in which it was intended. I am also very grateful to the noble Baroness, Lady Buscombe, for her remarks. I will not pretend that I can answer all these detailed questions. In particular, I am looking in vain for the note about music services and which regulation they come under, in terms of the ability to retain central funding. Rather than blather, I will give specific replies to a number of the specific points. On the major points raised, there is clearly a philosophical issue, on which I suspect the noble Baroness, Lady Walmsley, and I will not agree, which is whether having some degree of ring-fencing of local authority budgets in respect of schools is a desirable step. We believe that it is because it protects the interests of schools and ensures that the funding the Government have allocated to education—what they regard as their top priority—is spent in local authority budgets on that basis. I understand the argument against, which is that this restricts local authority discretion to some extent. I do not believe that, as it were, restricting local authorities’ discretion in terms of allowing them to spend less on education than we would like is a worthwhile freedom for local authorities. Naturally most local authorities do not either, which is why I do not detect a great deal of heat in that issue. The noble Baroness said that the fact that we stipulate a minimum that local authorities must now spend means that they will regard that as a maximum and not spend on top. The whole point of elected local authorities is that they are accountable to their voters. My sense is that local authorities in areas where education spending is felt to be inadequate will be under every bit as much pressure to increase that funding and ensure that their schools are properly supported after the minimum guarantee and the ring-fencing is in place as they were before. That is very much a matter between them and their voters. We have local democracy alive and flourishing and do not believe that simply stipulating the minimum that they must spend in any way disincentivises them from spending more. The noble Baroness, Lady Buscombe, raised two broad issues to do with balances and schools forums. I cannot answer why we have gone for one use of the plural rather than the other, so that is something else about which I shall have to write to the noble Baroness, but I imagine that that was the result of long and anguished deliberations by officials on the appropriate word, and that there is some rationale for it. First, on financial balances, of which a great deal of play was made in another place, we should get the matter in perspective. The figures given by the noble Baroness this afternoon, repeating those raised in another place, related to the 7 per cent of primary schools and 16 per cent of secondary schools which have deficit balances. That means that the overwhelming majority of schools are not operating in deficit. The noble Baroness asked me for the overall surpluses. The gross surplus at the end of the last financial year across all school budgets was £1.7 billion. When the deficits are included relating to the small minority of schools that are running deficits at the moment, the net surplus was £1.5 billion. That relates to a total spend on schools through local authorities of £27.7 billion, so that figure is not unreasonable, especially given that many schools, accumulate balances specifically because they want to fund priorities in the period ahead, including capital and other priorities, for which it is perfectly sensible for them to retain balances from one year to the next. But local authorities have the power to intervene if they believe that balances are excessive. In exceptional circumstances, they can require steps to be taken. In very exceptional circumstances, they can suspend the power of the school to run its delegated budget because they believe that it is not doing so with sufficient prudence. So if we consider the situation at large, we do not believe that the deficits are unreasonable or that we have a serious problem with excessive numbers of schools running deficit balances. In individual cases where school budgets are not being properly managed, local authorities have a legitimate and very important role to intervene to ensure that management is brought under control. The noble Baroness, Lady Walmsley, mentioned the important role of bursars. I simply note in passing that until recently, there were very few bursars in schools. We regard it as an immensely worthwhile step forward. After all, secondary schools are in many cases running budgets above £5 million a year and employing more than 100 staff. Because of the development of extended schools and new funding streams to meet the Every Child Matters agenda, which the noble Baroness so rightly emphasised, schools are receiving substantial additional funding from a variety of sources, including regeneration funding. They are managing an ever-expanding workforce and it is immensely important to have proper, professional support to do that. Through the National College for School Leadership, we are providing dedicated training for bursars. We provided the first ever training course in financial management for schools for the specific training of bursars. The number of bursars in secondary schools, in particular, is rising rapidly. We see that as a thoroughly welcome development. It shares the burden of school management more widely, so head teachers are not solely responsible, as they often were before, and it professionalises the operation enormously. Although I much regret to say that not many schools are lucky enough to have either bursars or governors with the financial expertise of the shadow Minister for schools in another place, to whom the noble Baroness, Lady Buscombe, referred, from many years reporting on the Financial Times, it is not my view that financial reporting and regulation in the private sector is somehow easy to understand, non-complex and that, in stark contrast, we have a morass of complicated guidance and regulations in the public sector.