I start by acknowledging the noble Baroness’s last comments. I will endeavour to come back on the next day of Committee with more clarity on the points she raises.
I thank my noble friends Lord Agnew, Lord Baker and Lord Nash, who have so much experience in this area, for discussing their concerns in respect of Clauses 5 to 18 with me ahead of today’s Committee. As we know, the vast majority of academy trusts are well managed and meeting their obligations, but it is right that the Secretary of State should be able to step in where trusts fail to safeguard children’s education and public money.
These intervention powers form part of a toolbox of measures enabling the Secretary of State to intervene in trusts in a proportionate way. The powers enable the department to tackle failure at the multi-academy trust level. In response to my noble friends and the noble Lords, Lord Knight and Lord Addington, and the noble Baronesses, Lady Brinton and Lady Chapman, I shall attempt to explain why these powers are necessary, offer some assurance as to how they will be used proportionately, and summarise our plans for building confidence in the department’s decision-making processes.
The powers are necessary for two main reasons. First, they will provide a strong platform on which to build a fully trust-led system. Under the current framework the Secretary of State’s intervention powers are set out in individual funding agreements, as we have heard. These powers can vary, depending on when the agreement was signed. In the case of a multi-academy trust, there may be several funding agreements with different termination provisions. We believe it is the right time to create a more coherent trust framework under which the Secretary of State’s powers can be applied consistently and transparently.
Secondly, the powers will allow the Secretary of State to intervene, where necessary, in a more proportionate way. The current tools are limited and blunt, relying heavily on the power to terminate the funding agreement. For example, Clause 5 will give the Secretary of State a targeted power to act where a trust is failing to fulfil a specific legal duty. This could include, for example, not complying with the new attendance legislation under this Bill or a misuse of funding.
My noble friends have suggested that the Secretary of State could enforce such requirements under common law by taking legal action against the trust for breach
of contract. I fear that such an approach to enforcement would be costly and burdensome for both the department and trusts. Instead, the Bill provides for a straightforward remedy, while allowing for resolution through legal action as a last resort.
7.15 pm
Through Clause 6, the Bill incorporates into legislation the existing power for the Secretary of State to give a notice to improve to an academy proprietor. This power is currently set out in the Academy Trust Handbook, an annexe to the funding agreement. A notice might be issued, for example, where there was weak financial management. This could include where a trust had missed the deadline for approving the budget for the academy financial year or authorised staff compensation payments above delegated limits.
The noble Lord, Lord Knight, asked about representations relating to Clause 6. The existing funding agreement provisions relating to termination provide for trusts to make representations in specific circumstances. In practice, as the noble Lord said, these would be representations to the regional director. This power is intended for intervention at trust level where a trust is not meeting a legal obligation or there are serious weaknesses in governance. The regional directors would of course take account of trust representations before exercising their power.
Thanks to the work of my noble friend Lord Agnew and others, we have in place more robust oversight of financial management and governance in trusts. These measures will place such improvements on a stronger and clearer legal footing. They will also sit within a revised framework which allows for intervention to be escalated, where necessary, without requiring the funding agreement to be terminated, which is the sanction now where a trust fails to comply with a notice to improve.
In particular, Clause 7 allows the Secretary of State to direct a trust to appoint additional directors—for example, to remedy a specific weakness. It also allows the Secretary of State to replace an entire trust board with a board of interim trustees. We heard a number of noble Lords express concerns about this. The Bill also provides for trustees appointed in this way to be remunerated, although our general expectation is that academy trustees will continue to act on a voluntary basis.