Academies Bill [HL]

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. Amendments 150, 158 and 159 are all to do with deficits. I explained, and hope that I made clear, our approach to deficits. Amendments 151 to 153 would prevent regulations being used to define the arrangements for payments of surpluses to academies or to outline the process for determining and paying a surplus to a school converting to an academy. We think it appropriate to set out in regulations additional administrative detail about the process for the determination of payment of surpluses, and we have provided draft regulations to show how we intend to do that. They also set out how the academy will be informed by the local authority of the determination, the process by which any appeal can be made and the time limits for payments. Amendments 154 to 156 would change the process whereby an academy can ask the Secretary of State for a review of the local authority's determination, so that the academy can appeal to the local government ombudsman rather than to the Secretary of State. As I said, we have set up the draft regulations to demonstrate the Government's intentions. We think that those decisions should rest with the Secretary of State and that it would not make sense for there to be a new extension of the role of the local government ombudsman. Amendment 157 would limit the surplus which transfers to the level set out in the guidance on clawback of excess surplus balances issued to local authorities. Again, we are not convinced that that is necessary, because local authorities will still have power to claw back excess surplus balances until the date of conversion, in accordance with locally agreed arrangements. I hope that that provides greater clarity about the government's intentions, particularly on the important matter of deficits, in the light of which I urge the noble Baroness to withdraw her amendment.