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.
In a similar vein, amendment 66 attempts to remove the Secretary of State's ability in clause 8 to apportion liabilities when considering a property transfer to an academy company. To revert to the question of the hon. Member for Hartlepool, the guidance will be non-statutory.
Under clause 8, the Secretary of State has the power to make a scheme to transfer the property of a maintained school, about which an academy order has been made. The scheme may include any liabilities of the school. It may provide for their transfer to the proprietor of the academy that replaces the school, and that will be the legal entity—an academy trust—that enters into a funding agreement with the Secretary of State.
As with the agreement between academies and local authorities on the academies surplus, I expect that, in the majority of cases, property, rights and liabilities would transfer to the academy by mutual agreement, without any need for the Secretary of State's intervention, and there would not generally be any need to apportion liabilities between the school and the academy. However, that might be necessary in relation to contractual liabilities, where it would not be fair for the academy to take the burden of liabilities incurred when the school was a maintained school. A good example of that might be insurance contracts, when it would often be appropriate for the liability for personal injuries to remain with the local authority for the period before conversion, and for the academy to take them from the point of conversion, or other contracts, when it would not be fair for the academy to take responsibility for the actions of its predecessor. That is normal practice in other such arrangements.
That will depend, of course, on the circumstances of the transfer: it may be much fairer if the school is a converter by application of the governing body than if it is a new academy replacing one eligible for intervention. However, the provisions of the clause need to cater for all those situations. We think that they do.
It is important that the Secretary of State can transfer appropriate liabilities in any transfer scheme and share out existing and future liabilities in a fair way. On that basis, we do not think that the amendments are necessary.
The hon. Gentleman asked specifically about PFI. In a PFI scheme, a local authority typically enters into a contract with a PFI contractor, under which the latter agrees to build a school and keep it in good condition for 25 years, and often to provide additional services such as catering and maintenance during that period. During that 25-year period, the authority has several obligations, for example, making monthly payments to the PFI contractor and not wilfully impeding the contractor and its subcontractors in the performance of their obligations. If the authority does not comply with its obligations, the PFI contractor can claim damages and ultimately terminate the contract and receive compensation. The value of a PFI contract is typically tens or hundreds of millions of pounds. The worst case scenario, in the event of any breach of contract, is that the authority would have to compensate the PFI contractor for the full value of the contract.
How, therefore, are we handling PFI for converting schools? We will not attempt to buy schools out of a PFI contract—that could cost many millions of pounds for each school and would not represent good value for money. Instead, the school remains in the PFI contract and the Department indemnifies the local authority against any losses that it might incur as a result of any act or omission of the academy trust that now occupies the land and buildings. That indemnity is necessary because authorities do not have the power to ensure that the academy trusts will not act in such a way as places the authority in breach of the terms of the PFI contract.
Our approach ensures that local authorities are financially no better or worse off as a result of a conversion, and those arrangements are set out in legally binding agreements that need to be negotiated between the Department, the local authority and the academy trust. I hope that that gives some assurance on the hon. Gentleman's specific questions about PFI.
Academies Bill [Lords]
Proceeding contribution from
Tim Loughton
(Conservative)
in the House of Commons on Thursday, 22 July 2010.
It occurred during Debate on bills
and
Committee of the Whole House (HC) on Academies Bill [Lords].
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