Academies Bill [HL]

My Lords, I will speak to the other amendments in this group as well as to this one, which was tabled by my noble friend Lady Morgan of Drefelin. We discussed earlier our concerns about the impact of the Bill on local communities, and in particular on the local communities of schools. These concerns are particularly acute when it comes to finance. My noble friend Lord Adonis said in a previous debate that funding arrangements must be fair and be seen to be fair, and this was reiterated by the Minister. They are absolutely right. Unamended, the Bill runs the risk of causing great difficulties with the finances of schools in the area of an academy, to the detriment of the education of children in the maintained schools and to the detriment of the cohesion of the local community. Our amendments in this group seek to require academies to make good any financial deficits in existence at the time of conversion and prevent consequential financial loss to the other schools. The amendments also propose two alternative approaches to dealing with any surpluses held by a school converting to academy status. Under the first, schools would not be permitted to transfer balances when converting to academy status; under the second, schools would be prevented from retaining excessive balances which are in breach of government guidelines and which would otherwise be subject to reclamation by the local authority. Clause 6(5) already provides that regulations made under subsection (4) should deal with provisions requiring the repayment of sums by proprietors. Amendment 159 would insert a new clause to make provision for statutory payments to include the making good of deficits that have previously required financial support from the local authority. Where a school is in deficit, it receives financial assistance from its local authority to support that deficit, using funding which would otherwise be available to the authority to support schools generally. The local authority and school governing body are required to agree a financial recovery plan for returning the school to a balanced budget and repaying any financial assistance received. It would be inappropriate and unfair for a school to be able to avoid its obligations under such a recovery plan by conversion to academy status. If it did so, other local schools would lose access to that funding. The effect of this amendment would be to maintain the legal obligation to make good that deficit. In recent years, there has been consistent concern over schools holding excessive balances which are not retained for any planned or specific purpose but which should be used for the intended purpose of supporting young people’s educational achievement. The most recent government data for 2008-09 showed that schools held a total of £1.92 billion in surplus balances, of which £495 million were classed as excessive balances. Local authorities are required to take action to prevent the retention of balances for which schools have no planned use. These amendments are intended to stimulate a debate and to encourage the Government to explain how they propose to deal with the problem of surpluses. The amendments offer different approaches to the transfer of balances to academies. First, Amendments 158, 152 and 153, like Amendment 151 in the name of my noble friend Lord Whitty, seek to ensure that all surplus balances are retained by the local authority. It might be argued that this measure is a little too harsh, as from time to time some financial flexibility is necessary within any organisation. However, the amendments would have the merit of ensuring that any academy started life with a clean financial sheet—as it were, financial independence. The Government surely cannot complain about that, as independence for academies is one of the key stated objectives. Alternatively, Amendment 157 seeks to ensure that only excessive surpluses are transferred, and it sets out a formula to govern that. It is a laudable aim to ensure that money allocated for children’s education is used for that purpose, and it would run completely counter to that aim if schools were allowed to retain excessive balances and avoid action to reclaim them simply by taking on academy status. This approach would provide for the transfer of only those balances that fall outside the category of excessive. The definition of what would constitute "excessive" appears in current government guidelines to local authorities. This approach would ensure that academies were treated consistently with local authority maintained schools with regard to balances, as they are with regard to other aspects of funding. Like local authority maintained schools, they would be permitted to retain balances set aside for identified purposes and non-excessive balances. Amendment 142, tabled by my noble friend Lord Whitty, would ensure that a surplus held by a local authority could be transferred to an academy on conversion only with the permission of the local authority concerned. We support that amendment.