asked Her Majesty's Government:

What proportion of the money directed towards cancer care has ultimately been used for that purpose.

My Lords, we are currently reviewing the outturn position for the financial year 2001–02 and the progress made in that year. New cancer funding for 2002–03 was earmarked within NHS allocations and an assessment of the position of earmarked funds forms an important part of the process for agreeing strategic health authority plans.

My Lords, I thank the Minister for his reply. I certainly welcome the high priority that the Government supposedly have given to cancer care. But as Professor Gordon McVie of Cancer Research UK said, the cheques appear to have been lost in the post. The department does not appear to know what has happened to the money; the Commons Select Committee on Science and Technology does not appear to know what has happened to the money; and people in west London, who were expecting to receive £12 million, do not know what has happened to the money. Flow can there be long-term planning for cancer care if there is no record of into which black hole the money has gone? Can the department publish figures showing how much has been spent by health authorities on cancer care and does it have plans to monitor what happens in the future? Does the Minister agree with Joanna Rule of the cancer charity, Bacup, that cancer care money should be spent on patients and not on balancing hospital books?

My Lords, I believe that I answered that question in my first response. Currently, we are reviewing the outturn position for the previous financial year and the progress made. We know that we are making considerable progress in implementing the NHS Cancer Plan. We have seen a huge expansion of treatments; an increase in the number of consultants working in the cancer area; more women screened for breast cancer with the extension of the programme from 66 to 70 years of age; and 95 per cent of patients referred urgently with suspected cancer between January and March of this year being seen within two weeks. We are making considerable progress towards delivering the Cancer Plan.

My Lords, I confess an interest. My wife, who died of cancer, benefited from the hospice organisation. It appears that hospices do not receive the money. Can the Minister assure the House that the money is going to hospices which are an enormous help to people who face terminal cancer?

My Lords, I reinforce the point made by the noble Lord, that the voluntary palliative care movement in this country is a magnificent example of voluntary effort. I testify to the high quality of the services provided. Figures from the voluntary organisation, Help the Hospices, show that statutory funding for hospices has increased by about 14 per cent over the past two years. We have asked our local cancer networks to draw up service delivery plans on palliative care, including a review of the level of services offered. We have said that we shall increase NHS investment in palliative care—the cancer plan committed us to this—both in the NHS and in hospices by £50 million by 2004.

My Lords, in pressing the Minister on the outturn figures for 2000–01, I declare an interest as chairman of Cancer Research UK. When the figures are available, will my noble friend ensure that they are as transparent as possible. Perhaps he can look at the record of the Scottish Executive in that respect. A great deal of care has been taken to show on what money has been spent. As the noble Baroness, Lady Northover, said, there is concern that the money has seeped into the system or has been rebadged. If that is so, will the Minister undertake that the Government will make good the shortfall and see that money allocated to a subject is spent on that subject?

My Lords, I can assure my noble friend that we are looking at the figures with great interest. When we see the final outturn, we shall study it with great care. If there are examples of health communities which have not spent the sufficient amount of resource, we shall take up that matter with the relevant strategic health authority. I reiterate that we have seen considerable progress over the past year or two. I believe that overall the NHS is highly committed to implement the plan.

My Lords, in connection with cancer research, will the Minister indicate whether he considers that the funds made available for that purpose are adequate, whether there are objectives for cancer research in relation to the main forms of cancer, and how quickly those objectives can be achieved?

Yes, my Lords, we have a strategy for investment of research into cancer. I am happy to provide more details to the noble Lord. On the matter of resources that are spent, my understanding is that the total UK government investment, including the devolved administrations, in the year 2000–01 was £190 million and that has to be set aside charity funding of around £180 million.

My Lords, is the Minister aware that the Scottish medicine consortium has recommended that Glyvec, a drug for chronic myeloid leukaemia, is to be made available to all Scottish sufferers, whereas the recommendation from the National Institute for Clinical Excellence is that its use should be limited to patients only in an advanced stage of leukaemia? Is that a case of postcode prescribing? If so, what will the Government do about it?

My Lords, we have to accept that as health is a devolved function of the Scottish Parliament, inevitably that parliament will arrive at some different decisions. On the NICE guidance, my understanding is that the consultation period, in relation to its final guidance only, ends on the 13th of this month. Presently an appeal period will begin and it would not be appropriate for me to comment on the specifics of the NICE judgment until the full process has been completed.

My Lords, can the Minister tell the House what cancer information is available to the public and, in particular, to members of ethnic minority communities?

My Lords, as part of the NHS Cancer Plan there was widespread recognition that we needed to improve the amount of information available to members of the public. Information is available through the NHS website and NHS Direct. In addition, we are developing a new set of information about screening for prostate cancer. In the summer we shall launch an officially informed choice project which will enable men to make informed choices about such screening.

asked Her Majesty's Government:

Which of their policies contribute to the health of children and young people.

My Lords, the Department of Health's Children's Taskforce is overseeing the development of a national service framework for children. That will set standards and a programme for action to improve children's health and social care services.

My Lords, I thank the Minister for that reply. I recognise that this is a wide-ranging subject covering many departments. Can he be more precise and outline the proposed timetable for the completion, development and publication of the national service framework for children?

My Lords, there are six strands to the work of the national service framework, covering acute care, maternity, mental health, children in special circumstances, disabled children and the healthy child and young person. The first strand of that work is around acute care. We aim to publish standards later in 2002. We shall follow those up with further standards. The acute standard, which is really being produced in response to the Bristol Royal Infirmary inquiry report, will be very important in forming the future development of acute services for children in the NHS.

My Lords, is the Minister aware that new diagnoses of HIV infection across the whole age range and new cases of gonorrhoea among teenagers have doubled over the last six years for which information is available; and that the incidence of chlamydia in teenage girls doubled, in only one year, between 1999 and 2000? Can the Minister explain what the Government are doing to address the ignorance of young people about sexually transmitted diseases which present a serious threat to their health? And why do so many teenagers think that chlamydia is a Brazilian footballer?

Well, my Lords, I am not sure about Brazil. As regards the question that the noble Baroness raises, she is absolutely right to point out that there have been disturbing rises in sexually transmitted infections. No one can be complacent about that trend. We are committed to reversing it. We are developing, as the noble Baroness will know, a national sexual health and HIV strategy. Later this year we shall launch a new national campaign to raise awareness which we are very hopeful will have an impact on this disturbing trend.

My Lords, I want to ask the Minister about the other end of the spectrum—children's teeth and oral health. Can he tell me whether there has been any progress? Even in the days when school inspections were routine, not all children had an inspection for dental health. Can he tell us what proportion of children have an assessment of dental health?

My Lords, I do not have the figures with me. I shall certainly find them and let the noble Baroness know. Dental health is very important for young people. As the noble Baroness will know, in the dental strategy that we published a year ago, some emphasis was given to the role of the community dental service in relation to young people. We are sponsoring preventive programmes. We encourage local primary care trusts to take an active role in engaging with young people. We are very keen to involve the dentistry profession in those programmes.

My Lords—

My Lords—

My Lords—

My Lords, perhaps we could hear from the Cross Benches first and then from the Labour Benches.

My Lords, bearing in mind that 98 per cent of looked-after children in residential care have mental health problems, 66 per cent of looked-after children in foster care have mental health problems, according to the children's mental health charity Young Minds, and 90 per cent of young offenders have mental health problems, according to the Office for National Statistics, can the Minister confirm that there is a serious shortfall in the number of child and adolescent psychiatrist consultants? Can he say what is being done to address that, particularly with regard to the training of medical students?

My Lords, for many years the health service has had a problem with recruitment of psychiatrists and consultants across the whole mental health field. Partly as a result of the national service framework in relation to mental health and the work of the department as regards medical workforce planning for the future, we are tackling the issues, one of which is to attract young medical students into this particularly important field. I am not sure whether we agree entirely with all the figures quoted by the noble Lord, but there is no doubt that if we take looked-alter children as an example, many suffer from mental health problems. While it is absolutely right that the NHS needs to improve those services and is beginning to do so, we also need to improve our efforts generally for looked-after children. I think that the fairly recent Act dealing with looked-after children is one of the foundations for improving the support given to such children.

My Lords, can my noble friend say what further measures the Government will take to prevent children under the age of 16 starting to smoke? Further, can he say whether there are any plans to strengthen the law to ensure that sales of cigarettes to children under the age of 16 are more successfully prevented?

My Lords, this is a worrying problem. The latest figure for regular smokers between the ages of 11 to 15 is 10 per cent. That shows an improvement on the figures in 1996 of 13 per cent and in 1998 of 11 per cent. We are of course taking measures to tackle young people smoking. The passing of the Tobacco Advertising and Promotion Bill through both Houses will be very helpful in banning advertising. We are taking tough enforcement measures on under-age sales. On 13th September 2000 we launched an enforcement protocol with local authorities. We also support proof-of-age card schemes which protect shopkeepers and children alike.

My Lords, did the Minister see the rather shocking statement made by David Wood, professor of cardiovascular medicine at Charing Cross Hospital? He said that, by the age of 20, atherosclerosis may be present in as many as one in three young people. Sir Alexander Macara, chairman of the National Heart Foundation, said that,

"public health initiatives aimed at the young lack the priority and resources given to adult interventions".

What are the Minister and the Government doing about public health initiatives aimed at young people so as to achieve a less piecemeal approach to the various problems that beset the young?

My Lords, a preventive programme for children, bearing in mind all the areas that it would have to cover, would be extremely wide. However, we have major cross-government programmes of work to ensure that, for instance, children have access to a healthy diet and, crucial to the noble Earl's point, opportunities to be physically active. That includes, for instance, the national school fruit scheme which encourages primary school children to eat one piece of fruit per day. We also have a Food in Schools programme.

We need to give more emphasis to encouraging young people to take exercise. We know that 10 per cent of children are obese at six years of age, rising to 17 per cent at 16. We must tackle that problem. Hence the importance of the funding for schools to encourage sport and physical activity. Local NHS trusts should engage in partnerships with schools to encourage children towards a more healthy and, if I may say so, a more enjoyable lifestyle.

My Lords, on behalf of my noble friend Lord Dixon-Smith, and at his request, I beg leave to ask the Question standing in his name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what criteria they use to determine the locations of their proposed accommodation centres for asylum seekers.

My Lords, the criteria are based on a number of factors. They include the availability of land, site capacity to cater for several hundred residents in either new build or converted accommodation and our policy to relieve the pressure on London and Kent.

My Lords, I thank the Minister for his reply. However, does he agree that if the normal planning procedures were followed in respect of those centres it is unlikely that planning permission would be granted? Can he tell us, therefore, what process of consultation is being undertaken with the relevant local authorities and, most importantly, with local people?

My Lords, as the House will know, the Crown, as the proposer of the applications for the centres, is not able to submit under the normal planning process. Instead it applies under the relevant circular, which follows a procedure similar to the normal planning process. Planning applications are lodged with the local authority, which has eight weeks in which to make its determination. In all cases we are holding discussions with the relevant local authorities to try to ensure that we have full, proper consultation with local residents and other local interests in respect of the applications.

My Lords, does the Minister think that such large numbers of people in such isolated communities is compatible with the Government's aim of integration and inclusion? Does he also accept that at least 30 per cent of people who appeal against the initial decisions are granted leave to remain in the United Kingdom? Is it not better, therefore, for people to be part of the mainstream education, healthcare and service provision—as happens in other European countries—rather than isolating them in remote areas?

My Lords, the Government believe that those who are accepted for asylum in this country should be offered full friendship and support from the nation to integrate into the community as early as possible. However, that is very different from saying that the 70,000 or 80,000 people who currently apply each year for asylum should be integrated into the community until such time as their cases have been heard. That is where accommodation centres come in. They provide good support and educational facilities to asylum claimants while their applications are processed. It is our intent that claims will be heard within two months or so of the applicant residing at the centre.

My Lords, does my noble friend accept that isolated centres make it difficult for refugee organisations—for example, the Refugee Legal Centre and the Immigration Advisory Service—to provide advice and support to newly-arrived asylum seekers? If the centres are to be isolated, can the Government do something to facilitate access for those groups, on whom many newly-arrived asylum seekers depend?

My Lords, the centres will not be too isolated. They will be positioned in rural areas. That is not the same as saying that they will be in the remote extremes of the United Kingdom. Nevertheless, I take my noble friend's point. The Government believe it is important that proper advice, including legal advice, is available to people in accommodation centres so that they understand the process and the timetables. We shall certainly look at the point to ensure that access is available for all relevant services.

My Lords, is one of the criteria that these centres should be located, if possible, near places where some of the claimants' fellow nationals are already residing? Or is the overriding consideration simply the availability of suitable accommodation?

My Lords, clearly suitable accommodation is something that the Government have to take into account when making the initial selection of the pilot schemes. On the other hand, proximity to other nationals is not necessarily a significant factor. At this point in time, I stress, these people are only applying for asylum and have not yet been accepted. If, as we hope and intend, we manage to continue the acceleration of processing that has been achieved over recent years, successful claimants will be integrated wherever they choose to live in the future, which could include being near to nationals of their former country of residence.

My Lords, does the Minister agree that it is not simply a matter of how quickly the Immigration and Nationality Directorate can deal with the first application, but how quickly the appeal authorities can hear the appeals that are subsequently made against refusal? How near are they to meeting the target of four months from the date of first decision for the subsequent hearings before the adjudicators? If they are nowhere near that, as I imagine is the case, will people be kept indefinitely in the accommodation centres awaiting those hearings?

My Lords, the noble Lord, Lord Avebury, is right. If people exercise their right of appeal, then the appeal process must be gone through. I shall write to the noble Lord with the latest figures on the current turn-around time for appeals. There has been a significant improvement in that this was an area of substantial increase in resources. Therefore the bottom line is that we still expect, even where a person chooses to exercise a right of appeal, to be able to deal with most applications within six months or so.

My Lords, would it not lessen the need for the accommodation centres if there could be agreement between the members of the European Union on the common treatment of asylum applications and a requirement that asylum applications are launched in the first safe country? Can my noble friend say how near we are to obtaining either or both of those desirable outcomes?

I agree with both points. The Government pressed both points at the Justice and Home Affairs Council of the European Union, which David Blunkett and I attended last week in Luxembourg.

asked Her Majesty's Government:

Whether the arrangements for the maintenance of the railway infrastructure are satisfactory.

My Lords, Railtrack has acknowledged that its approach to maintenance, following privatisation, has been mistaken. Too much decision-making responsibility was placed with contractors, and the company carried out too few inspections of contractors' work. Lord Cullen made clear recommendations to improve the management of contractors and the training of the workforce in the rail industry, and we have asked the Health and Safety Commission to ensure that they are implemented in full.

My Lords, I thank the Minister for that reply. Does he agree that a fundamental error was made at the time of privatisation, when management of the track was separated from management of the trains? Will the Minister also acknowledge that, although we have spent vast sums on the rail regulator, engineering efficiency has become worse? Vast sums have been spent on safety, on a health and safety inspectorate, but safety has become worse. Will the Government give a guarantee that they will turn their attention away from financial engineering to the engineering that really matters—civil engineering and signal engineering?

My Lords, questioners are supposed to ask for an absolute guarantee, not just a guarantee.

There are different views about the separation of operating companies from track management. Whatever view one takes, it is true that Railtrack started off on the wrong foot. There was no engineer on the board of Railtrack, and Railtrack took the view that safety and track maintenance were the responsibility of contractors and were not a central responsibility. That must be turned round.

My Lords, the Question was about maintenance and not about vertical integration. Will my noble friend the Minister confirm that the Health and Safety Commission reported last week that,

"The contractualisation of the railways was not a problem. It is successful in other interests. The real challenge is better management and control, whether it is with contractors or done by Railtrack'"?

My Lords, as someone who is relatively new to these matters, I can confirm that the Health and Safety Commission report, published last week, was a shattering report. In many industries, work is, of course, done successfully by contractors, but what must happen here is that responsibility must rest with Railtrack. Right up until recent times, Railtrack continued to challenge the judgment of the House's Judicial Committee, which said that, in the end, responsibility for contractors, subcontractors and even casual workers lay with Railtrack.

My Lords, is the Minister aware that what he says about responsibility and the deficiencies of contractors in that respect are welcome? Will he bear in mind that there has been no engineer in the Treasury or any other branch of any British Government for a long time?

My Lords, my criticism of Railtrack for having no engineers on its board need not apply also to the Treasury. There should be more engineers in senior positions in all walks of lift.

My Lords, the Minister will be aware that, last year, the Office of the Rail Regulator recommended that Railtrack should establish and maintain an asset register and that that should be one of the conditions of its licence. The issue was also raised in the recent report of the Health and Safety Commission, to which the noble Lord referred. Does the Minister expect that the asset register will be completed in time for the transfer to Network Rail? If it is not completed in time, who will bear the extra risk of not knowing what condition the assets are in? Will it be the Government or Network Rail?

My Lords, the asset register is only one of several recommendations made by Lord Cullen that should have been carried out by March but were not. In that sense, the noble Viscount's point is valid; there are uncertainties that ought not to exist, as we struggle to get Railtrack out of administration and into the hands of Network Rail. I am, however, glad to say that good progress is being made.

My Lords, does my noble friend the Minister agree that there can never be absolute safety in any form of transport? If the railway industry had followed the recommendations made by the Uff and Cullen reports and implemented the European rail traffic management system, there would have been a serious reduction—perhaps as much as 15 per cent—in network capacity. That would have made it even more difficult to meet the targets set out in the 10-year plan.

My Lords, as so often is the case, the best can be the enemy of the good. There was a good deal of over-reaction, not so much after Ladbroke Grove, but after Hatfield. David Begg, the chairman of the Commission for Integrated Transport, estimated that, if the action referred to by my noble friend had been taken and there had been a reduction in capacity, we would have ended up with something like 20 extra deaths a year on the roads. That is not a good choice.

My Lords, in seeking to improve the maintenance of the track, have the Government reminded themselves of the arrangements made by British Rail? Would the experience of those years be valuable, as we seek a better solution today?

My Lords, the organisational responsibilities of British Rail are certainly to be looked at with favour. We ought to go back to increased central responsibility. I do not like looking back on the era of British Rail as a golden age. In fact—in some ways, I hate to say it—rail safety has improved since privatisation.

My Lords, I beg to move the Motion standing in the name of my noble and learned friend Lord Falconer of Thoroton on the Order Paper.

Moved, That the amendments for the Report stage be marshalled and considered in the following order:

• Clause 1,
• Schedule 1,
• Clauses 2 to 75,
• Schedule 2,
• Clauses 76 to 137,
• Schedule 3,
• Clauses 138 to 142,
• Schedule 4,
• Clauses 143 to 223,
• Schedule 5,
• Clauses 224 to 247
• Schedule 6,
• Clauses 248 to 265,
• Schedule 7,
• Clauses 266 to 320,
• Schedule 8,
• Clauses 321 to 325,
• Schedule 9,
• Clauses 326 to 442,
• Schedule 10,
• Clauses 443 to 450,
• Schedule 11,
• Clause 451,
• Schedule 12,
• Clauses 452 to 456.—(Lord Bassam of Brighton.)

On Question. Motion agreed to.

moved Amendment No. 1:

Before Clause 1, insert the following new clause—

My Lords, my name and that of my noble friend Lady Walmsley is attached to the amendment and I rise to speak in support of it. The Liberal Democrats have made no secret of the fact that we support the whole notion of innovation. We feel that all good schools should constantly be innovative. Therefore, in terms of the broad purpose of this chapter of the Bill, we are 100 per cent behind the Government. However, we are not 100 per cent behind them in the way they have sought to do it.

We believe that all schools should be allowed to innovate and that it should not be restricted to the few. Furthermore, the Secretary of State should not have the prime decision as to who should innovate. That is our main objection. So much power is put into the hands of the Secretary of State that any school contemplating an innovation that may require exemption from the current legislation must first submit such innovations for consideration. An important point to bear in mind is that not all innovation requires exemption from current legislation. Schools are innovating all the time and are doing so without the need to put the legislation aside.

That brings me to my next point. It is wrong that the main purpose of the first chapter of the Bill sets out the business of schools having to approach the Secretary of State and say, more or less, "Please, Miss, can we innovate?". That may be a rather crude translation, but essentially it is the case. Such a provision sends out the wrong message. Although almost everything that schools might want to do can be done within the current legal constraints, many schools would feel inhibited about trying anything new because, perhaps erroneously, they would believe that they must seek permission before the introduction of any innovation. Far from stimulating innovation, we feel that the message of the first chapter of the Bill will convey that permission will have to be sought before anything new can be done.

We believe that the Bill as presently drafted puts far too much power into the hands of the Secretary of State. In particular we are worried about Clause 2(1)(a), which will confer sweeping powers on the Secretary of State to put aside all education legislation. In addition, in this clause decisions are to be left to,

"the opinion of the Secretary of State".

I make that point in light of the fact that the spokesman for this legislation in the other place could not cite any examples of what schools might want to do which they are not already able to do. In the debate in Committee in the other place, Mr Stephen Timms, the then Minister for Schools, rather weakly defined innovation as, "doing something new". In Committee we cited probably the best example of what schools might like to do with the power to innovate; namely, changing the school day to continental hours. We were not convinced that even that was necessarily a good example because already schools can change the timing of the school day, provided that they allow for a break in the middle of that day.

The Minister went almost as far as to say that, because we were asking schools to think the unthinkable, by definition she could not think of any examples of what they might do. In contrast, the amendment before the House asks Ministers to define very clearly what schools cannot do. For example, in Committee it became clear that the power to innovate could not be used to allow schools to introduce fees, to introduce more selection or to put aside their provision for special educational needs.

We appreciate the broad aims of this chapter of the Bill. Schools should be innovating and trying out new approaches. Indeed, from these Benches we would argue that good schools already innovate; they have a great deal of leeway in which to do so. By and large, those schools do not need this legislation. The only area where currently schools feel thoroughly constrained is in the curriculum, which we shall come to later when we discuss earned autonomy. However, as I have already made clear, we fear that this heavy-handed legislation will inhibit rather than encourage innovation.

We appreciate, too, the degree to which the Minister herself has sought to meet our reservations expressed in Committee. We were worried about the sweeping away of the provision for special educational needs. Now specific mention is made on the face of the Bill of the need to provide for special educational needs, along with the fact that such provision will not be exempted. We were worried about the position of local education authorities because it is necessary that they should be consulted. Again, on the face of the Bill the right to consultation has been conferred on local education authorities. We are extremely grateful to the Minister for those concessions.

However, while those are real advances, what the Minister has not done is to confer what would be achieved if Amendment No. 1, which we share with the Conservatives, were to be accepted; that is, to introduce the key element of allowing all schools to innovate.

Again, the reasons why we are backing this Tory amendment are that, first, it offers an opportunity for all schools to innovate by offering them encouragement rather than seeking to inhibit them. Secondly, it reverses the onus of proof. It would he up to the Secretary of State to define those areas, such as fees, selection or SEN, where schools may not be exempted from education legislation.

Thirdly, through the mechanism of affirmative regulation, the system would become open and transparent. Schools, local education authorities and other qualifying bodies will know where they stand. Lastly, the amendment would allow the Secretary of State a good deal of flexibility. We have argued that perhaps it would not be appropriate for schools in special measures or those showing serious weaknesses to have wide-open powers to innovate. Again, that point is of particular relevance when we discuss earned autonomy.

In Committee the noble Lord, Lord Dearing, made much of the fact that it is precisely those schools with difficulties that need to be able to think the unthinkable. I agreed strongly with his comments. The amendment would give such schools the power to do so, but it would be for the Secretary of State to decide those areas where schools would not be allowed to trespass beyond the current legislation. Having said that, we have always argued that perhaps some schools should be encouraged to "stick to the knitting" rather than to seek to experiment. Equally, however, we would be happy to see a degree of flexibility written into the provisions.

I conclude by saying that, so far as concerns these Benches, the Minister has in effect failed to meet our key demand that all schools should have the power to innovate. We believe that the Government's ideas remain innately muddled and inoperable. While we are grateful for the concessions that have been made, in essence they are only cosmetic concessions, putting on to the face of the Bill what was already included in regulations. For those reasons, we support the amendment.

My Lords, after two such powerful introductory speeches in support of the amendment, I rise with a fair amount of trepidation. Perhaps I may say first that we all support innovation in our schools, wherever that is possible. Furthermore, we all pay tribute to the Minister for the kindly and gracious way that she has discussed these matters with us. The noble Baronesses, Lady Blatch and Lady Sharp, have already indicated their appreciation.

However, I wonder whether this amendment would achieve its intention. It appears to put all innovative power, irrespective of merit, into the hands of individual schools. But schools with a head teacher keen on innovation already have powers to act in a maverick way. The amendment states that the LEA is to be informed, but what does that mean? What is the LEA to do with the information? Why, in the case of Church schools, would not the diocesan authority be included in such consultation?

Very properly, provision is made for consultation with neighbouring schools. Who is to define what are the "surrounding schools"? Furthermore, if those schools do not like the new proposals, what action could they take to prevent a particular innovation? On reading the amendment, it appears at first sight to be somewhat loosely drafted.

I turn now to the nitty-gritty of the matter. We are all concerned about striking the right balance and encouraging the right partnerships in the process of innovation. This amendment would create a kind of free-for-all which could possibly—even probably—undermine important statutes, perhaps even to the extent of undermining the religious character of a school. That would be a matter of great concern to these Benches.

But then the freedoms promised by the amendment may disappear, since the Secretary of State would be required to produce a list of statutory requirements or exemptions that would inhibit innovation. As a cautious person, I have to admit that if I were the Secretary of State, I would err on the side of caution, in particular with regard to the education of children with special educational needs and with regard to the sensitive issues of collective worship and RE—matters which could be affected by the wrong kind of innovative process. We need to give a great deal of thought to exactly what is being proposed in the amendment and whether it might, in the attempt to secure greater freedom for schools, in fact limit those schools.

Furthermore, should we not be concerned by the powers conferred by the amendment on this and subsequent Secretaries of State? It appears that she or he could exempt whatever she or he chooses. What would that mean for the future?

I agree with the noble Baroness, Lady Sharp, that we shall all know where we are, but I wonder whether, in a desire to ensure that innovation is positive and good, the Secretary of State may not err on the side of being cautious. That may not be beneficial. We must remember that when we are talking about children it needs only an innovation which lasts for six months or a year to do a whole lifetime's damage to a particular generation. Inspections of schools do not happen, all that frequently and parents can be swayed before they know the outcome of the innovations being proposed.

I have great reservations about the way in which the amendment is drafted. I prefer to stick with what the Government are proposing and I shall vote against the amendment if a Division is called.

My Lords., I, too, rise with some trepidation on this subject—but with less trepidation than in Committee. As your Lordships will know, I remarked then that I found the Bill largely incomprehensible—if we could do the whole thing again over the next year I believe we may get there—but bit by bit I am beginning to understand it. I think that I understand this part of the Bill and, therefore, I believe that this amendment is based on a misunderstanding and is misplaced.

If I may start by pouring oil on troubled waters, we all agree that we favour innovation and the raising of standards that takes place to a considerable extent—but not entirely—through innovation. Both the Government and the Opposition are committed to the view that standards in our schools have risen continuously over the past few years and therefore they must have at least some presumption in favour of the innovative status quo—otherwise they would have to explain how it is that they are committed to how well the schools were doing.

The central point is derived from the heading of Clause 2—that is, "Power to suspend statutory requirements etc". That is what this clause is about. It is not headed, "Innovation—what you must do to get permission to do it", or to do any of the things the noble Baronesses said. The clause seems to deal with schools which have certain innovative ideas but have discovered—or it has been drawn to their attention—that these potential innovations clash with existing statutory requirements and so on.

If that is the case, how should it be dealt with? My original view of the clause was that it looked bureaucratic and that we should find a way into this area without involving, at least to any great extent, the Secretary of State. But on reflection, as a result of what was said in Committee, it seems to me to be of the utmost fundamental importance that if we are discussing the power to suspend statutory requirements we could not possibly place that power in the hands of schools or even in the hands of the local education authorities. Although I entirely agree with the right reverend Prelate that we need to ensure that the local education authorities are involved in these matters, this power must rest with the Secretary of State. Therefore the Government are on the right track in that regard—not because of anything to do with education but because of matters to do with the power to suspend statutory requirements of any kind.

Having said that, we could ask whether the way the issue is set out in the Bill in any way inhibits innovation. The reply to that question will depend on what my noble friend the Minister says in response. It is possible to interpret the Bill by saying that the Secretary of State will be extremely negative, will mostly reject innovative projects and will not let people know what has been agreed in other schools, so that the whole subject then becomes the new "Secret garden". But I see no reason why that should be the case. It is at least as possible that schools will propose to the Secretary of State something that they want to do and say, "It looks as though this clashes with statutory requirements. What do you think?" The answer may be, "It does not clash and so I do not want to get involved". Alternatively, the Secretary of State may say, "I think that, prima facie, it does clash. Put up a case to me", and the Secretary of State will be bound to respond to that.

I am glad that the amendment has been tabled because it enables us to get a clearer view of what this is all about. It certainly enables my noble friend to say what she thinks on this matter. Neither the amendments nor the arguments—good though they always are—are right or convincing. In my judgment—it is, of course, for the noble Baronesses to decide what they want to do—it would be a great pity if the House divided on the amendment. One thing I know from all my years here is that once we start going down that road everyone digs their heels in and there is no room for compromise. We should at least wait until we have heard what my noble friend has to say. For once, there is a good case to be made on the Government's side. I know that my noble friend may collapse at that point, but she should wait until she hears what I have to say on one or two other amendments. We can then go on to one or two other matters without being too upset about where we have got to so far.

My Lords, as someone who stands in long grass, I am very glad to hear of the extent of the consultation between the Front Benches to try to find an agreed way forward. At least we are all of one mind as to the objective. I am only sorry that so far we do not have an agreed way forward.

As to the point made by the noble Baroness, Lady Sharp, I was very concerned that the power to innovate should extend to all schools. Indeed, I believe that the particular power in Clause 2 does so, as opposed to the curriculum power. I was concerned that schools in trouble, provided that they were well led, should be able to innovate. I believe that this is all right in terms of applying to all schools.

The fundamental question is: who takes the decision? I remember hearing in chats—not on the Floor of the House— expressions of some concern that even a Secretary of State should be able to set aside legislation. It is quite something to say, "Madam, you can do it". I have sat on two governing bodies—we were worthy folks—but I wonder about the wisdom of allowing a governing body to have the power to set aside main statutory legislation. If the one causes me to quiver, the other causes me to bolt.

I share the right reverend Prelate's fear if the Secretary of State has to set the boundaries. The reasons for individual items of legislation are sound—otherwise they would not have been enacted—and if the Secretary of State were to have on her back every interest group in the country, with very good arguments as to why a particular piece of legislation should not be within the field of innovation, I fear that that would too much circumscribe the possibility of ideas that we have not even thought of.

I understand the objective of the amendment, which is to reduce bureaucracy. I spoke out with concern that officials, with great respect to them—I was an official for a long time—would not have local knowledge, and I referred to the importance of the involvement of the LEA. I have read the amendments. One amendment seeks that there should be consultation with the LEA. I would want in addition to that an assurance that the views of parents and the LEA will be before the Secretary of State when she makes her decision. I would hope that the views of the LEA would carry great weight.

I do not believe that there will be an avalanche of proposals, for the reason adduced in the House when the noble Baroness, Lady Blatch, posed the question—she had a long list—"What would you want to do?", and there was a stony silence. I hope that a good number of proposals will come forward, but I do not think that there will be an avalanche. While I welcome the spirit behind the first amendment and want to encourage sensible innovation, we should be cautious. If I have to choose between the two approaches in a Division, as a cautious man, I shall go with the Government.

My Lords, I find myself somewhat baffled by the amendment. However, I have found the debate useful. Like the right reverend Prelate the Bishop of Blackburn, I wonder whether the amendment will achieve its intention. I also feel that it gives out a somewhat negative message.

For clarification, am I to understand that the Secretary of State would be able to draw up a list of areas in which schools cannot innovate? If so, how would that he done? Would it be proactive or reactive? This proposal sounds like an enormous, powerful centralisation. I am rather surprised that the Liberal Democrats are going along with it.

Are we to understand that there would no time-frame in terms of trying out ideas and evaluating their effectiveness? Surely that is an essential component of innovation, and one which seems to have got lost.

My Lords, I support the amendment. I thank the Minister for listening carefully to our debates in Committee and for giving a number of concessions addressing our concerns.

Nevertheless, the reason why we should support this amendment has been capably set out by my noble friend Lady Sharp of Guildford and by the noble Baroness, Lady Blatch. It may be helpful if I address some of the concerns raised.

The Minister may argue that the amendment would mean that 24,000 governing bodies would be free to change the law at will. She may argue that governing bodies 'would therefore need to be au fait with the panoply of education law. Yet, as the noble Lord, Lord McIntosh of Haringey, indicated in the debate on Clauses 10 to 12 in Committee, the Government expect governing bodies to know and understand every detail of the legislation relating both to companies and to education. The Government cannot have it both ways.

The amendment does not prevent schools seeking advice from LEAs about the innovations that they intend to make, or from other schools, or from the DfES. Indeed, the Government intend to set up an innovation unit. How novel it would be if, rather than simply acting as gatekeepers, civil servants could work in real partnership with schools, providing support and advice rather than bureaucratic control—that really would be innovative. Whether we leave the Bill in its present form, or whether we pass the amendment, one way or another the Secretary of State will have a say in the matter; and there will he considerable protection as regards the innovations that can be made.

The concern has been expressed that the amendment would leave open the possibility of fly-by-night or madcap schemes. But the proposed new clause has been revised to address issues of consultation and accountability. I urge noble Lords to read it carefully in that respect. Government Amendment No. 10 provides the further safeguard of annual parliamentary scrutiny. I very much welcome that particular amendment and I thank the Minister for it.

The Government have emphasised their intention that all schools will be free to innovate. However, without the amendment, some will halve less opportunity to do so than others. Proper innovation means risk-taking and a leap of faith by those involved. It means trusting the schools. The sad thing is that, given all the centralist pressures that they face, many schools find it difficult to take risks. More often, it is only schools which are already successful and innovative—those whose reputation is secure—that will try out innovative projects. The Bill as it stands is unlikely to change that—which is why we want to broaden the situation.

The amendment seeks to remove the need for every school wanting to innovate to apply separately to the DfES. By making the legislative parameters transparent to schools, and by removing the need for an overly bureaucratic and expensive bidding process, the amendment will mean that more schools will have more opportunity, freedom, time and money to think seriously and creatively about raising standards. It is simply because we agree with the Government's intention to allow schools to innovate that we have added our names to the amendment.

My Lords, I understand the intention behind the amendment. However, having heard the remarks of the right reverend Prelate and my noble friend Lord Dearing, I am concerned about its possible impact on vulnerable children, such as looked-after children or those with special educational needs. I should therefore appreciate some clarification from those who have tabled the amendment as regards the possible impact on these two groups.

My Lords, I wonder whether the, Minister can help me to understand the implications of the proposals in the Bill as drafted by stating when she thinks that this particular part of the Bill might come into force. How many applications does she anticipate being made in an average year once the provision is up and running? How many officials is it proposed will handle the flow of proposals, and what will be the grade of the senior official? What kind of time limit or target does she envisage setting officials for turning round an application from the moment it is received to the moment when it is either definitively approved or rejected? It would be a great help to me to know how the Government see the system working in practice.

My Lords, I, too, speak from the angle of special educational needs. The Special Educational Needs Consortium has concerns about the amendment. It is pleased that there is a provision for exemption from certain provisions, and it imagines that this has to do with special educational needs. The noble Baroness, Lady Sharp, said that they were already catered for. However, we have not heard that this would be sticking to the basic legal duties that were introduced under the 1981 Act. I should like to know more about that.

I shall not bore the House with the speech that I made on 2nd May, at Cols. 845 and 846, about the linkage in the chain from assessment, statementing, etc. It is important that all these are maintained. But the consortium says that there are no eligibility criteria; therefore, any school could vary whatever duties it chose. The consortium is also worried that there are no criteria to be met in deciding what contributes to the raising of educational standards in a school—merely the opinion of the governing body. The ramifications of changes made to any of the duties of a governing body may be many and unforeseen. They may impact disproportionately on the education of children with special educational needs. The consortium says that some innovative projects might benefit only one group of pupils, and that it is possible to envisage that other projects might benefit the education of some and not of others.

My Lords, I begin by thanking noble Lords for their kind and warm words. I have indeed tried to address all the issues raised in this House and, where possible, to meet the needs of the House. I shall pass on to David Miliband the congratulations of the noble Baroness, Lady Blatch, and I thank her.

On the point about a broad and balanced curriculum, Clauses 74 and 75 refer to earned autonomy. Later amendments that we have tabled in order to place such a provision on the face of the Bill are in direct response to those in this House who felt that it was important to do so. We shall discuss this matter later.

I agree with the remark of the noble Baroness, Lady Sharp about, "Please, Miss, can we innovate?". It is important to recognise that we are of one mind: we all want our schools to innovate. Sometimes, it is about making sure that they know that they can and feel that they can. I accept the comments of all noble Lords that we are seeking the way forward in this regard; we are arguing about how best to achieve it. It is in that spirit that I address the amendment.

I have thought very carefully about the amendment, and I have listened very carefully to the debate. I reiterate: the debate is not about the principle of innovation; we all want to see that happen. The debate is about whether this particular amendment should become law. Therefore, not surprisingly, I want to focus my remarks on the legal effect of the amendment as it stands.

First, the amendment would allow every school in the country unilaterally to vary the law. If everyone can vary the law, then it is no law at all.

Secondly, the variations are not limited. Noble Lords have rightly argued that there must be protection in the legislation for children with special educational needs. They have asked us to write explicitly into the legislation the protection of a broad and balanced curriculum. We have listened, but the amendment contains no such protection. There is nothing to ensure that schools must take into account the interests of children with special educational needs. There is also nothing to ensure an independent assessment of whether others might be disadvantaged. There is a requirement to consult other schools, but there is no provision for independent assessment of that consultation. Schools would do what they believed was in the interests of their children. If that meant bringing back some kind of selection or ceasing to admit children with special educational needs, theoretically there would be nothing to stop them.

Thirdly, there is no time limit to the amendment. This is no longer about pilot projects from which we can all learn. Noble Lords will remember that when we began this discussion it was about accepting that schools have much to teach us and finding ways of ensuring that we can learn. We felt that we should allow schools to alter the law where we felt that it might be in the way of innovation, perhaps particularly for the vulnerable groups referred to by the noble Earl, Lord Listowel, but in a time-limited way. The power under our clauses would disappear after four years. There is no time limit in the amendment. It is about permanent change. I do not believe that we as legislators should give schools the power to change the law. That is not their function.

Noble Lords opposite are relying entirely on the Secretary of State to exempt certain areas of the law from exemption. That is not the best way to encourage innovation. It is also an extraordinary power. If a section of an Act is in an order made under subsection (4), then it is the law, but if it is not in such an order, any school can vary it at any time. That would effectively give a future Secretary of State the right to repeal any law by making or varying such orders.

Noble Lords from various parts of the House have pointed out that Secretaries of State change. Are they sure that every future Secretary of State would produce a list of provisions that could not be varied with which they would be comfortable? It would be possible for a future Secretary of State to introduce a process of academic selection as part of raising standards. There is a legitimate argument and debate, which we have had in your Lordships' House and which I have had in many other places, about the role of academic selection in raising standards for all children. It would be possible for the Secretary of State to take that view under this power. It would simply be a case of allowing schools to be exempt from that part of legislation.

The amendment would give the Secretary of State a power more sweeping than any that this Government have proposed to exempt schools from any law, not for a pilot period, but permanently. I hope that noble Lords opposite will think carefully about this. The noble Baroness, Lady Walmsley, said that she believed that, one way or another, the Secretary of State would have a say. I shall spend a moment pointing out the differences between the two approaches. We want schools on the front line to consider whether there is anything that they can do innovatively. If, in doing so, they feel that certain legislation is in the way, they can tell us what they want to do and ask us to think about varying the law. We can give them the ability to do that for three years, plus an extension of three years. That will be monitored and evaluated. As the noble Baroness, Lady Walmsley, said, now laid before Parliament is the power that we will have. The purpose of that is to put it in the hands of schools to think of the ideas. I do not want to exempt special educational needs, because I do not believe that any noble Lord would say that the current system is perfect for children with special educational needs. I do not want to exempt looked-after children. They are the most vulnerable children whose academic standards are very low. I want them to have the opportunity to have their standards raised by an innovative approach by a school.

We will let schools come to us. We will make sure that the local education authority will write them in if consulted by the school. We will look at the proposal, evaluate it, see whether it would make sense for more schools to be part of it and then come to your Lordships' House and another place to do that.

The alternative approach is to say that schools can do what they wish, but to give a list—I do not mean that derogatorily, but I cannot think of another way of describing the process—of what they cannot touch. The right reverend prelate is right that we should err on the side of caution, but that would mean protecting all kinds of legislation and preventing schools coming forward in a way that might lead to greater focus on more vulnerable children. That is the difference between the two approaches.

The noble Lord, Lord Lucas, referred to bureaucracy. He wants to ensure that schools will not be tied up for two and a half years in a bureaucratic process. He asked some interesting questions about that. We do not expect lots of applications. I imagine that schools will come forward in small handfuls over time with individual ideas. The department is looking at the promotion of innovation more generally to address the issues that noble Lords have put forward. I cannot give exact figures, but I do not expect the numbers to be great. We do not intend them to be. This is about those schools that are able to think of innovative ideas where the law is in the way.

I expect a high grade senior official to be involved. The noble Lord may know that, even a year in, I sometimes find it difficult to get the gradings right. I know that the Secretary of State would want the issue to be handled at a senior level by the right number of officials, because this is very important. Part of the purpose of laying the annual report before Parliament—we have accepted the amendment of the noble Baroness, Lady Walmsley, on that— is to make sure that we give that information and that there will be a speedy turnaround, partly because we hope that, as ideas come forward and local education authorities are consulted, there will be a partnership approach. We want to work with schools from the moment they begin to think the issue through. I cannot be specific, but we will consider that we have failed totally if the issue is not given the weight that I know that the Secretary of State wants. I know that she will ensure that that is done.

I accept in principle that we are all searching for the best way to innovate. I do not say in other than a humble way that we believe that our approach is right. We recognise that noble Lords are concerned about the centralisation of power. That is why the Secretary of State is not in a position to do anything other than respond to schools. We hope that we have addressed that. We have sought to ensure that the safeguards that noble Lords have wanted are clear. This is a debate about the way forward, not about the principle. In that spirit, I hope that the noble Baroness will feel able to withdraw her amendment.

My Lords, before the Minister sits down, does she intend to address the issue of transparency? Can she assure us that any agreement or disagreement by the Secretary of State within the context of these provisions will become publicly known and that the Secretary of State will accept responsibility for making sure that other schools know about any decision taken for or against any application?

My Lords, I am very sorry that I did not address that point. The Secretary of State is keen to ensure that the relevant people are consulted and that we have the opportunity to ensure that the quality of the idea has been tested. We must make sure that schools in the neighbourhood know about it and that, through the local education authority, we have information about what we think will happen. We must also ensure that as the trial period goes on, we have the ability to ensure that other schools can learn from it. That is the point of the exercise: to ensure that we can learn from and develop these ideas and then come with delight to your Lordships' House and ask for support to help good, innovative projects that have been developed by schools to grow in the system and eventually become the norm.

My Lords, I thank everyone who has contributed to this important debate. We all support the notion that schools should be encouraged to innovate. I was mildly amused by the Minister's defence for the LEAs' part in the process. In response to the noble Lord, Lord Peston, she said that LEAs would provide the information that would help the Secretary of State. We have not dealt with the amendment yet, but LEAs were not originally to be statutory consultees in the process. Only after a great deal of pressure from both the Liberal Democrat Benches and our own were LEAs made consultees, but originally they were not even to be consultees. In responding to the point made by the noble Lord, Lord Peston, the noble Baroness said that all the schools in the area concerned would be informed of any proposal. However, that is not stated in the Bill.

The right reverend Prelate asked who should be consulted and about what. Subsection (2) of Clause 4 states that the qualifying body; that is, the applicant,

"shall consult such persons as appear to the body to be appropriate".

The applicant would consult with whom it decided to consult about what it wished. There is absolutely no difference between us as regards the need for consultation, but the appropriateness of the consultation would be very much a matter for the applicant.

The right reverend Prelate also said that no one would know the outcome of a project. The Secretary of State will not know that either. An applicant can do no more than say, "We have an idea that we believe will work. We believe that it will raise the standards in a school". It is then for the Secretary of State to make a judgment on that, just as parents and the school governors initially made a judgment on that. The matter is second guessed by the Secretary of State and the people within his department.

The right reverend Prelate was concerned about the power that we are discussing and the status of legislation with regard to faith schools, special needs schools and vulnerable children. However, under the Bill, the Secretary of State has an absolute power. At the moment none of us knows which requirements of legislation may or may not be set aside. Every time an applicant approaches the Secretary of State with a proposal a decision is made and, as a result of that decision, there is circumscription as regards which requirement of legislation shall be set aside. We do not know how the Secretary of State will respond to such proposals. Until a certain period of time has passed we shall not know whether there will be consistency either as regards decisions taken by one Secretary of State during his period of office or as regards decisions taken by successive Secretaries of State. They will see each proposal on its merits as judged by the people in the department at the time. It is not the case that somehow or other schools themselves will circumscribe the limits of legislation.

I take the following key point most seriously. Anyone who knows me will know that both in government and in opposition I have fought at the Dispatch Box for a fair deal for children with special educational needs. Special educational needs are not included in the amendment partly because the Minister considered all the arguments that we put at the previous stage of the Bill and decided that a provision would be included on the face of the Bill. Therefore, I did not consider it necessary to second guess that provision in the amendment. There are amendments on the subject in the names of Liberal Democrat Peers and an amendment in my name. Therefore, we have belt and braces, as it were, on that issue.

I refer to a related point; namely, that no school should engage in an innovative project that will adversely affect the education of vulnerable children, cared for children, children with special educational needs or, indeed, adversely affect faith schools or the category or the particular ethos of another school. For that reason subsection (4) is included in the proposed new clause in the amendment. It will be for the Secretary of State—he will have to do this as regards every decision that is taken on a proposal—to decide those areas that cannot be exempted by a particular project of a particular school. If, as has been the case since 1997, Secretaries of State decide that there will be no more selection, that will form part of the barrier to innovation. I accept that that would he the case, however I would regard that with regret.

No school should be allowed to interfere with, or adversely affect, the education of vulnerable children or to affect the ethos of other schools whether they are faith schools or other distinctive schools. Certainly there should be no right for the project proposed by a school to have an adverse effect on other children. I noticed that the Minister's amendment, which protects children with special educational needs, does not mention the words, "children with special educational needs" but refers to all children. Subsumed within that, of course, are children with special educational needs. My subsection (4) of the amendment sets the parameters.

A leader in The Times Educational Supplement of 24th May became rather excited about the proposition that schools should be free to innovate. The article was as cynical and sceptical as I am. It states:

"One of the key principles of English law is that anyone can do anything which is not explicitly prohibited.

When it comes to state education, however, this maxim is turned on its head. Since the late 1980s, central government has increasingly dictated what schools can and cannot do.

Now, at last, there are signs that the tide could be turning. Writing in the press this week. Tony Blair made much of his desire to 'promote national standards while also empowering front-line workers'. Mr Blair cites new powers, contained in the education Bill currently before Parliament, which would allow heads to opt out of existing education legislation.

But the fact that the majority of schools will have to go cap in hand to the Secretary of State if they want to 'innovate' undermines the Government's claims to be loosening its grip on schools".

What the article is actually saying is that no innovative project can go ahead unless it has the blessing of the Secretary of State. As I say, different parameters will apply as each decision is taken. The proposals will be time limited. If a school proposes a measure that will raise standards in that school and wants to introduce it on a permanent basis, it may not be able to do so because after three years have elapsed it may have to go through another bureaucratic process to get an extension of three years. After that it will have to wait for primary legislation on a school by school basis. One school's innovative project is not necessarily a one size fits all project. It may stand alone. The notion that we should have primary legislation in this House to allow an innovative project to continue at one or, say, half a dozen schools, but not all schools, seems to me to be bizarre.

As I say, amendments have been tabled which seek to protect children with special educational needs. We should do what we can to promote the well-being and education of those children. As I say, subsection (4) of the amendment sets parameters in the matter that we are discussing. I keep returning to the question: why should the matter be time limited? If it is a good idea and it works, why should one have to apply a second time to a Secretary of State, wait for secondary legislation and, ultimately, for primary legislation? The reply that we were given was not satisfactory. We want to trust teachers. We also want to trust the Secretary of State to set the overall parameters within which schools may be free to exercise their professional judgment in consultation with other schools and parents, their own school staff and, of course, the LEA.

The right reverend Prelate asked what is meant by informing an LEA. It is important that an LEA knows what is going on. If a school adopts an innovative project which it will evaluate, record and about which it will inform parents with regard to its results, given an obligation on LEAs under a previous statute to raise standards, it is right that they should know what is going on. That is what is meant by informing an LEA. I wish to test the opinion of the House.

4.9 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 116; Not-Contents, 141.

moved Amendment No. 1A:

Page 1, line 8, leave out from "State," to "children" in line 9 and insert "benefit the education of"

The noble Lord said: My Lords, the amendment arises from another helpful letter that I have received, in this case from the noble Lord, Lord Davies. I echo what my noble friend Lady Blatch said about how extremely prompt and helpful Ministers have been in dealing with matters that we raised in Committee. The letter responded to the question whether LEAs could advance innovative proposals in relation to school transport under the powers in Clause 2. The noble Lord said that he was happy to reassure me that his department would be happy to consider any proposals from an LEA or an individual school about the way in which the relevant part of the 1996 Act might be adapted to allow either body to produce an innovative scheme involving local transport. However, he said that he must be clear that the purpose of the powers in Clause 2 as set out in Chapter 1 of the Bill is to facilitate the innovative project that may raise educational standards. He also said that it will be important for an LEA coming forward with such a proposal to demonstrate how it contributes to raising the educational standards achieved by children in England or Wales.

I see that requirement as an obstacle. It effectively prohibits the sort of innovation that I should like to see in relation to school transport arrangements. I have therefore sought in the amendment to broaden the definition so that it allows school transport clearly to come within it. I do not know whether I have succeeded in that regard but that is the aim of the amendment.

I believe it is important that we allow innovation to reach the area of school transport. Several difficult problems have beset school transport over a long period. There is a distance cut-off of two or three miles, or whatever it may be. These days, that is much further than most parents would allow their children to walk routinely and unescorted to school. It results in many parents having to be available to drive their children to school or having to rely on the lottery of there being spare places in LEA transport. They obtain those by paying for them, but there is no right to such places and, therefore, many parents are left without them.

Secondly, the provision would operate against choice in schools. If a local education authority does not actively seek to promote choice, the type of situation arises as it does, for example, in my children's local town of Winchester. There, the three secondary schools are within a short distance of each other. However, if a parent chooses the secondary school for his child which is not his by right, there is no school transport provision. The parent must therefore drive his child to school, even though it would be possible for the school bus, which goes to the allocated school, to trundle on an extra few hundred yards to the other school down the road. That also seems to me to present a source of difficulty.

There is also the problem, which the Bill at least starts to tackle, of transport for post-16 year-olds. Whatever distance they have to travel, those children are left entirely to the mercy of public transport. This week I shall have the pleasure of having three work shadows from Greenhead College in Huddersfield. As the noble Baroness knows, it is one of the best sixth-form colleges in the country. The pupils all report that they and their fellow students have difficulty in arriving at their classes on time because they rely on buses. There is a diverse catchment area for a college such as Greenhead. Students travel considerable distances. If one relies on essentially rural and cross-country buses to make one's journey, one ends up missing, or being late for, classes rather more often than is desirable or acceptable to the school.

All those problems could be solved if a local education authority set out to solve them. But, crucially, first, it would have to be allowed to do so and, secondly, it would have to be allowed to charge. Charging is at the heart of being able to provide a service. One is asking parents—for example, those who choose a different school for their children—to pay for, in the case of Winchester, perhaps 30 miles of car journeys a day in order to get their children to school. But one is not allowed to charge a penny if the local authority allows the use of a bus. The local authority is not allowed to provide a service for those children.

I believe that this is an area where a little local innovation and good will could go a long way towards solving some very long-standing problems. Therefore, I should like that to be brought within the ambit of Clause 2 of the Bill, and that is what the amendment seeks to do. I beg to move.

My Lords, as was discussed earlier, I very much look forward to schools coming forward with proposals. Of course, as I said on a previous occasion in your Lordships' House, we want to see proposals from schools and from local education authorities which have a positive impact on children's education in the widest possible sense.

It is important that we do not lose our focus on raising standards in this part of the Bill. The noble Lord has concentrated specifically on transport. and in later debates on the Bill there will be opportunities to return to that issue. I am sure that we shall do so.

I do not believe that the test of raising standards is inconsistent with what the noble Lord, Lord Lucas, seeks to bring forward in his amendment. Higher standards are intrinsically linked to improving and benefiting the quality of children's education. It is my view that one cannot have one without the other.

Perhaps I may take another one or two examples. If proposals were put forward to improve attendance or reduce the number of exclusions, I believe that that would both benefit the quality of a child's education and drive up the educational standards achieved by the school, LEA and individual pupils.

Therefore, I very much hope that we shall see proposals which benefit the education of children in England—and Wales, for that matter, although Wales is not referred to specifically in the amendment. But we must not lose sight of why we have introduced the power. We have done so in order to give schools and LEAs the opportunity to drive up standards even higher. If, within that, a proposal were to be brought forward which included the issue of school transport, it would be within the ability of a school to propose that under the power to innovate and for us to consider the matter carefully in that context.

Therefore, I believe that we are taking the same position on this matter. If it would be of benefit, between now and Third Reading I should be very happy to discuss the issue of transport with the noble Lord, Lord Lucas, because that is what he has specifically raised today. On that basis, I hope that the noble Lord will withdraw his amendment.

My Lords, I am delighted by the noble Baroness's offer and I shall certainly take it up. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 2:

Page 1, line 11, at end insert—

"(1A) In forming an opinion as to whether a project may contribute to the raising of the educational standards achieved by children in England or Wales, the Secretary of State or the National Assembly for Wales shall—

(a) have regard to the need for the curriculum for any school affected by the project to be a balanced and broadly based curriculum which promotes the spiritual, moral, cultural, mental and physical development of children and of society, and

(b) consider the likely effect of the project on all the children who may be affected by it."

The noble Baroness said: My Lords, in moving Amendment No. 2, I shall speak also to Amendment No. 6 in this group. I have said previously in your Lordships House that it is important to ensure that all children continue to receive a broad and balanced curriculum that promotes the spiritual, moral, cultural, mental and physical development of children and society. I do not want anything in the Bill to change that.

I hope that I have also been absolutely clear that the power to innovate must not be used to benefit one group of pupils at the expense of another. We want proposals to be brought forward which, if successful, will benefit pupils in schools all over the country.

I hope that noble Lords will know that I take extremely seriously the educational welfare of children with disabilities and special educational needs. We have had much debate on this matter, and I am committed to ensuring that no part of the Bill has a detrimental effect on children with disabilities or special educational needs.

In Committee, I was able to offer the reassurance to noble Lords that the guidance covering applications for the power to innovate would state clearly that,

"in determining whether or not a proposal raises standards the Secretary of State will have regard to:

i) the need to raise standards for all children, including those with Special Educational Needs; and

ii) the need to promote the spiritual, moral, cultural, mental and physical development of children and society through a broad and balanced curriculum".

We have said here, in another place and in the draft of the guidance to be issued that we want to see higher standards for all children, including those with disabilities and special educational needs. Proposals which had a negative impact on education provision for special educational needs pupils would not be considered to raise standards. However, in answer to, and in sympathy with, the concerns expressed by noble Lords in this area, I want to create additional protection for this important group of children.

I am happy to respond to those concerns by writing safeguards into the legislation. That is why I have put forward Amendments Nos. 2 and 6. They make clear that no order can be made if it appears to the Secretary of State or National Assembly that the proposed order would be likely to have a detrimental effect on the education of children with special educational needs. They also make clear that, in reviewing a proposal, the Secretary of State or National Assembly will be considering the likely effect on all children who may be affected by it.

In moving Amendment No. 6, I hope that I can offer further reassurance to noble Lords about the way in which the proposals under the power to innovate will work. Guidance will make clear to applicants that they should take explicit account of the interests of children with special educational needs in relation to all projects. That must mean promoting their interests, as well as protecting them. We have already made clear that any proposal should be the subject of consultation with all parents, which should certainly include, as always, the parents of children with special educational needs whose children might be affected either beneficially or adversely. Again this should be an area where we consult children with SEN, as we learn how to do so more effectively.

Following that, we shall set out in guidance that we would expect the Secretary of State's attention to be drawn to any SEN issues in the proposal. Once flexibilities have been agreed, I can confirm that monitoring, including in relation to the annual report and when deciding whether to extend a project, will look at SEN issues. On that basis, I hope that noble Lords will feel able to support Amendments Nos. 2 and 6. I beg to move.

My Lords, I have attached my name to one amendment in this group which, in the light of the Minister's remarks, I shall not be pressing. I have one simple question. Where a school, or schools put together a committee of parents representing all parents—this would certainly apply under federations if they come into being—such a committee would not always specifically represent children with special educational needs. However, when speaking to the government amendments, the Minister said that consultation with parents would include consulting parents who specifically represented children with SEN. Therefore, for the sake of the record, perhaps the Minister will answer the following question. If there are children with special education needs in a school but the body of parents representing all children in a school do not have specific expertise in the subject or represent children with SEN, will it be possible for a parent representing those children to be included in the consultation process?

My Lords, my name is also attached to Amendment No. 4, which noble Lords on these Benches will not be pressing. That is partly because we are extremely grateful to the Minister for Amendment No. 6, which answers almost all that we required. However, it does not quite meet our concerns, and other noble Lords may wish to speak and express one or two reservations. The wording of Amendment No. 4 is slightly different in that it refers to such provision being made,

"except [in] legislation relating to the education of disabled children and children with special educational needs",

while the Minister's amendment makes it clear that such an order would be made where,

"it appears to the Secretary of State … that the proposed order would be likely to have a detrimental effect on the education of children with special educational needs".

I take the point made by the Minister that there could be cases where a proposed innovation that is affected by the legislation is, nevertheless, regarded as being a good way forward. We would not wish to exclude such an amendment. I take it that that is the spirit in which we have achieved slightly different wording.

I welcome Amendment No. 2, especially the little phrase at the end, which refers to the,

"likely effect of the project on all the children who may be affected by it".

When schools propose to innovate, the Minister was right to point out that our amendment does not make it clear that there might be repercussions as regards other schools; and that, therefore, there should he discussions with other schools. I am pleased to see that we now have a recognition on the face of the Bill that an innovation pushed through by one school could have quite a detrimental effect upon other schools. Such considerations must be taken into account. Indeed, if the effect were too detrimental, I hope that the Secretary of State would not allow it to go ahead.

I very much welcome the two government amendments from the Secretary of State. I thank the Minister for the work that she has put in to ensure that such amendments were brought forward.

My Lords, as president of Mencap I am delighted—although, I am glad to say, not speechless—by the generous amendments that the Minister has just offered to the House, especially Amendment No. 6. Indeed, all that Mencap requested is contained in that amendment, coupled with the statement that the Minister made afterwards about the need for taking explicit account of the interests of children with special educational needs. The list that the noble Baroness was able to give is most welcome.

I am sure that noble Lords will be happy to hear that Mencap has asked me to move no further amendments on the Bill. I am sure that that means that your Lordships will be able to get to bed a little earlier than usual, and that I shall be able to switch off the light tonight, before I have my milk and honey, with an absolutely clear conscience. I am most grateful to the Government for listening so closely to our needs and desires.

My Lords, I should like to join my noble friend Lord Rix in commending the Government for the way in which they have gone about the consultation process in this part of the Bill. Indeed, as has already been said, the Minister's actions have been quite commendable: she has engaged with people from different parts of your Lordships' House in trying to find constructive ways forward. I believe that to be a good model for others to consider when they deal with legislation in the future.

I welcome both Amendments Nos. 2 and 6, and especially what the Minister said on the issue of monitoring. I raised that issue previously in Committee. Before we leave the question, can the Minister tell us a little more about how the monitoring will be conducted? For example, who will undertake that process; and, subsequently, after the information about the way in which people make provision in their schools for children with SEN has been collated, how will such information be made available at a public level?

From the earlier group of amendments that we debated, the Minister will know that the one issue that caused more concern than any other in this House was any question of the diluting, through innovation, of provision for children with special educational needs. These two amendments answer that problem adequately, and should leave no one in any fear about the implications of innovation.

My Lords, I, too, should like to welcome Amendments Nos. 2 and 6, but I wish also to speak in favour of Amendment No. 4. The noble Baroness, Lady Sharp, indicated that some of us would not he totally happy with the situation. I am hugely grateful to the Minister for the efforts that she has made; for the assurance that she gave today as regards guidance; and for the meeting that was arranged. At that meeting, I was more or less convinced that we had what we needed. However, I believe that I indicated through her office the fact that I would not be totally happy.

I am patron of IPSEA, which is a member of the Special Educational Consortium. It has volunteers on the ground who appear at tribunals, and who understand the whole statementing process. The panel would be very worried if any of the links in this chain—for example, the duty to identify children, to assess children, to make statements for children, to specify SEN provision, and to maintain the statement—were to be broken. IPSEA's volunteers, and the overwhelming majority of children's disability organisations, know from first-hand contact with parents and carers of children with SEN that a clearly written statement saying how much help is to be provided is fundamental to children's needs being met.

Although the Special Educational Consortium very much welcomes the Minister's amendments—and this applies particularly to the RNID and the National Autistic Society, which have advice lines, and so on—it believes that SEN legislation should be exempted from any power to vary legislation. If the Government are not willing to exempt such legislation, can we have a clear recognition that the variation of the duties on LEAs to identify, assess, and make provision for SEN would be detrimental to the education of disabled children, and those with special educational needs?

We also need a clear recognition that a variation of the duties on governing bodies to use their "best endeavours" as regards children with special educational needs would be detrimental to the education of disabled children, and those with SEN. Can the Minister assure the House that the Secretary of State would not believe that it was a good thing to get rid of the duty to assess in the innovative process? We need guarantees that all those links in the chain are not matters that could be disapplied when one is innovating.

My Lords, perhaps under the rules of the House I can ask a question as I am slightly unnerved by what the noble Baroness, Lady Darcy de Knayth, has just said. My question is an extension of the same point. Having read the government amendments, I made the assumption that it was almost inconceivable that a piece of legislation that related to special educational needs would be set aside for any single project. It would be helpful to have a guaranteed statement on the record that the intention would not be to set aside any legislation that afforded protection to children with special educational needs.

In my book, the consequence of that would be that some children somewhere would not enjoy the protection and, therefore, there would be an impact upon children with special educational needs. If I am reading too much into the statement of the noble Baroness it would be helpful to have that on the record. If that is not the case, I believe that we would want to plug that loophole at a later stage of the Bill.

My Lords, I am grateful for the comments made by noble Lords. On the first question posed by the noble Baroness, Lady Blatch, there is a requirement to consult all parents and we shall put in the guidance a requirement to ensure that parents of children with special educational needs are specifically included in that. Therefore, any proposal that did not do so, could not get through the process. I hope that that is clear.

The noble Baroness, Lady Sharp, in talking about our amendments and Amendment No. 4, is right. I shall deal with the points raised by the noble Baronesses, Lady Darcy de Knayth and Lady Blatch, in a moment. This matter concerns the opportunity within special educational needs to consider what can be done to further the education of children with special educational needs as part of the process. Therefore, does one rule it out or in? I want innovation on special educational needs to improve matters for such children for the reasons that I gave earlier. I do not believe that any noble Lord would say that the legislation could not be better and that there may not be things that we could do. I do not believe that we have got everything right in terms of support for children with special educational needs and I want schools to consider that.

I shall miss the noble Lord, Lord Rix. I shall not miss his amendments, but I shall miss him if he is not to speak in your Lordships' House in the next few days of this Bill. I am extremely grateful to him for meeting with me and for discussing the issues in detail. I hope that we have addressed his concerns.

The noble Lord, Lord Alton, spoke of the monitoring issue. We shall require schools to set out their plans for monitoring and evaluation as part of the proposals that they put forward. We shall ensure that that information is taken into consideration when we consider the project and its extension. We shall ensure that the initiative as a whole is evaluated and the results made widely available. This matter is partly about ensuring that other schools can learn.

I turn specifically to the points raised by the noble Baroness, Lady Darcy de Knayth. I understand her concern. IPSEA is an organisation that stands full square on wanting to ensure, as she puts it, that there is no apparent break in the chain. It is practically inconceivable—I say "practically" because there may be one in a million—that one could envisage a situation in which not assessing children could possibly raise standards for them or anybody else. We could not envisage that.

I shall give an example—I am often accused of not giving examples. I have been conducting work with special schools on how we can work more closely with them and how we can ensure that they are supported by local education authorities. Noble Lords have said in the House and elsewhere that we should have the right kind of provision in the right kind of areas. There are issues about low incident special educational needs and the provision that we can supply within a local education area or a national area.

One issue that I want to discuss on special schools—we have just begun a piece of work on this—is the idea of regional provision. Local education authorities could come together to provide regional provision that could be better for parents, particularly if support has to be residential. That would require us to consider the power to innovate with a group of local education authorities. Technically we could not do that now. I do not propose such a provision in this Bill as in relation to Wales there are differences in provision and I am not sure that we would want to do that. However, that is a specific example.

I hope I can allay the concerns of the noble Baroness, Lady Blatch. This is not about saying that we should not assess children; and this is not about providing support for children with special educational needs in school. It is about including all legislation and ensuring that if something creative could support our children with special educational needs it should come forward. But we shall not be interested in anything that is to their detriment. These children are far too important and far too special. They require the kind of support and concern that noble Lords have expressed, and which I share. I believe that this is the way forward.

My Lords, perhaps with the leave of the House I could ask one question that arises out of the Minister's reply to me. I do not believe that I am being stupid, but in the example that she gave I believe that one would need to assess. There would be no need not to do any of those things. I do not understand why she cites that example.

My Lords, I cite that example because in an amendment to remove all special educational needs legislation from the power to innovate, that would be removed as well.

On Question, amendment agreed to.

moved Amendment No. 3:

Page 2, line 23, after "applicant")" insert "and in consultation with the relevant local education authority where that body is not the applicant"

The noble Baroness said: My Lords, we tabled Amendments Nos. 3 and 7 before we knew what the Government were proposing, although in Committee the Minister gave us cause to be encouraged. Government Amendment No. 8 is welcome. By placing the requirement to consult with LEAs on the face of the Bill rather than simply leaving it under guidance, the Minister has gone further than the reassurance that she gave noble Lords in Committee. Therefore, we shall not press Amendments Nos. 3 and 7. I beg to move.

My Lords, I rise to speak to Amendment No. 8. In view of what the noble Baroness, Lady Walmsley, has said, I am not sure that the brief that I have is appropriate. As I have said before, local education authorities play a vital role. We know that they have a track record of successful innovation; for example, in working with education action zones, in developing literacy and numeracy strategies and in turning around schools in special measures.

I believe that local education authorities have demonstrated the potential to have a real impact and to make a real difference to standards in their schools. I want them to build on that experience and where they have new ideas for innovative ways of raising standards to be able to come forward with proposals. We believe that that will be particularly important for projects that involve collaboration between schools where the LEA will he best placed to make that work.

We have always said that where a school comes forward with a proposal, the local education authority should be consulted. As the noble Baroness, Lady Walmsley, has said, I am responding to the arguments raised in Committee that this could helpfully be added to the face of the Bill.

My Lords, I apologise for pressing this point because it is so obvious. Will the Minister give an assurance that when statutory consultation of this kind takes place the results will be in the hands of the Secretary of State when she takes her decision?

Yes, my Lords.

My Lords, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No.5:

Page 2, line 28, at end insert "except any requirement relating to religious education or collective worship"

The right reverend Prelate said: My Lords, Amendment No. 5 is specifically concerned with provisions affecting community schools rather than Church schools. I apologise to the House and the Minister for not raising this matter in Committee—possibly I was slow on the uptake—but it arises out of a number of anxieties expressed to me in the intervening period by a number of people and groups relating to the statutory requirements affecting religious education and collective worship in community schools.

In my view, in a pluralist society, religious education is of greater significance than once it was if the desire is to have a tolerant society in which religious hatred has no part, as I am sure all noble Lords would wish to be the case. Of course, I am ready to agree that opinion is divided on the matter of provision of collective worship. But that is surely a sensitive matter for Parliament to decide rather than either the Secretary of State or a school governing body.

Of course, that works both ways. The present statutory provision allows the withdrawal of pupils from RE and collective worship. So Amendment No. 5 would also serve to protect the rights of such parents from governors who felt that the withdrawal rights stood in the way of good or sound education, or innovations that they may want to make.

I do not want to labour this point. The Minister's amendment goes some way to meet the concerns expressed; but if I hear what I hope to hear from the noble Baroness, to which response I shall listen carefully, I may he persuaded to withdraw the amendment. I beg to move.

My Lords, when we spoke in Committee on admissions to schools with a religious dimension, I can recall shortening my speech by saying that, in following the right reverend Prelate in his speech, I would follow the example of the Back-Bencher who followed Edmund Burke in the 18th century and simply say, "Ditto to Mr Burke".

But I shall be marginally more expansive on this occasion with an exotic example from a 1944 Act and the parliamentary proceedings upon it. On that occasion the late Lord Eccles introduced an amendment that there should be equal pay for men and women as soon as the war was over. It was the only time in the whole of the war when the government were defeated, and they were defeated by 117 votes to 116. In addition to the late Lord Eccles, the late Lord Hailsham, Lord Thorneycroft and my late noble kinsman all voted against the government. The Prime Minister, threatened by that experience and determined that Dr Goebbels should not make any use of it, insisted on Report that there should be a massive three-line Whip and the amendment was reversed by 425 votes to 17.

The reason I mention this is because the Prime Minister then sent for the late Lord Eccles, who was in his first year in the House of Commons and said— shall put it in oratio recta—"Young man, I am not unsympathetic with what you are seeking to do. But to bring in a clause of this sort on this Bill in the midst of a major conflict in which this nation is engaged is, if I may say so, like putting an elephant in a perambulator". For exactly the same reason I share the views of the right reverend Prelate the Bishop of Blackburn that we should not run any risk that that should happen, by accident, as a consequence of this legislation.

My Lords, I do not claim to be able to follow the eloquence of my noble friend.

My Lords, if the noble Baroness will allow me to intervene, I am a little lost—as one always is—on our procedure. Can I ask the Minister, since her amendment is included in this group, whether she is proposing at some point to speak to her amendment, then sit down, and then reply to the whole debate? Is that how we are going to proceed? That will determine when I join in.

My Lords, my understanding is that the right reverend Prelate is taking Amendment No. 5 on its own.

My Lords, Amendment No. 5 is grouped with Amendments Nos. 10 and 11. I intended to deal with both at the same time; that is, speak once to my amendment and the other amendments. I thought that was the procedure.

My Lords, when does my noble friend expect the rest of us to speak?

My Lords, in the absence of anybody else rising, and without wishing to put an elephant in the perambulator as the noble Lord, Lord Brooke, suggested, I rise briefly to support the right reverend Prelate the Bishop of Blackburn and Amendment No. 5.

These debates tend to be cyclical. We have had debates both here and in another place over the past decade on whether or not it is desirable to have daily acts of worship, collective acts of worship and religious education in our state schools. The overwhelming decision in this place and in another place has been that that should continue to be the case. I therefore agree with the point the right reverend Prelate is making: if one wanted to change that, it should be changed as a result of new legislation, not merely by something in the gift of a Secretary of State.

I add one other point. At a time when there are enormous pressures on young people—we live in a very dysfunctional society—the quiet places we have in our lives are important. It is important that in the hurly-burly, the cacophony of life, with so much noise and so many pressures bearing down on young people, we should not squeeze out the opportunity for them to understand something of the spiritual in their lives. It may not necessarily be Christian beliefs. In most people there is some kind of spiritual impulse. Where daily acts of worship and religious education are conducted well, it can meet a real need in young people.

I do not see this as a Cinderella question or as being on the margins of our debate; it is central to the way we form young people for the future. I hope therefore that we receive a reply from the Minister today that will reassure us; and that if schools bring forward innovative proposals which remove religious education or the daily acts of worship in their schools, as she has already been able to say in special needs education, she will be able to state categorically that that is not to be the purpose of innovation.

My Lords, the whole process seems to be in a mess. I want to speak to Amendment No. 5. Equally, I should like to speak to Amendments Nos. 10 and 11. Normally I like to speak to amendments after the movers have made the case for them. However, I shall speak only to Amendment No. 5 at the moment and we ought to find a way whereby the noble Baronesses who favour Amendments Nos. 10 and 11 can put their case so that we can argue about them as well without breaking the rules of Report stage in your Lordships' House.

I want to say the reverse of what the right reverend Prelate said; namely, that I am totally opposed to Amendment No. 5. I have a simple logical question— nothing to do with quiet time or anything of that sort; namely, if it is the view under freedom of choice and related matters that parents ought to have the right to have religious schools, does it not follow logically that other parents ought to have the right to have purely secular schools? That right should not simply be met by opting-out procedures, but by not having the religious element in the school.

It is entirely right that the right reverend Prelate raises this matter. It enables us to try and obtain from the Government, at least on one occasion, a logical basis for the position they are taking on parental choice. My view is that if parents within a school wish that school to be wholly secular, then the whole spirit of the legislation before us is that they ought to be able to say, "This is an innovation we want. We have thought it through. We will put it to the Secretary of State as a suggestion we should like put in place."

I am not saying that the Secretary of State should necessarily agree. But if that is an innovation that parents want, they should not be denied the right to have it. I am extremely glad, therefore, that the right reverend Prelate moved Amendment No. 5. I hope that he will now seek to divide the House so that at least one person can vote against him; namely, me. That would solve many of my other problems in getting myself on the record as putting my money where my mouth is. There is a fundamental question here to which it is about time that we faced up. If noble Lords believe in freedom of choice, they must apply that to all parents, including parents like myself. In practice, of course, in schools to which parents such as myself sent their children, the religious bit was so derisory as not to bother us. But we ought to have the right to say that we want an innovation in a school to make it a secular school. That follows absolutely from the Government's position.

My Lords, I am grateful to the noble Lord for raising that point—I thought that he might. Is not Chapter 1 about raising educational standards achieved by children? I cannot see how removal of worship or removal of religious education contributes to raising the standards of education. It withdraws children's opportunities rather than adding to them, so I should have thought that it is outside the scope of the clauses.

My Lords, I wish that I could be as sanguine as is the noble Lord, Lord Dearing, about that. There are schools—in some numbers, I am afraid—that would regard not having to carry out daily worship or include compulsory religious education as leaving space in the curriculum to do other things that they would argue raised the school's standards. It is not inconceivable—it may even be reasonably probable—that such an application would be made. It would then be a matter for the Secretary of State.

I have received an Answer from the noble Baronesses on this matter, and it is unnerving. That Answer is the reason why I strongly support the amendment moved by the right reverend Prelate. My Question was:

"What would be the status of compulsory subjects such as the core curriculum, religious education and daily worship, and citizenship, if proposals were to come forward under Clause 2 of the Education Bill linking the dropping of subjects with the raising of standards"?

The reply from the noble Baroness was:

"Exemptions under clause 2 of the Education Bill may be conferred for a temporary period only, and only for the purposes set out in clause 1".

We know that the temporary period is for up to six years and could thereafter be extended for all time if legislation followed. The Answer continues:

"That is, exemptions may be conferred only 'to facilitate the implementation by qualifying bodies of innovative projects that may—(a) in the opinion of the Secretary of State contribute to the raising of the educational standards achieved by children in England, or (b) in the opinion of the National Assembly for Wales contribute to the raising of educational standards achieved by children in Wales.' The Secretary of State would have to approve any such proposals, and would do so only if she were convinced it would lead to higher educational standards".—[Official Report, 25/3/02; col. WA 25.]

So, as I said, it is conceivable that an application could be made that made a good case that good use could be made of the time freed up by removing daily worship and religious education from a school. Therefore, technically, if the Secretary of State decided that compulsory subjects could not be set aside—if so, that should he in the Bill—and took the view that that school would not be raising standards on the grounds that it would displace a compulsory subject, the applicant could go to judicial review and win. There is no protection in the Bill for that subject.

The Education Act 1944 enshrined the right of all children to receive religious education and enshrined the daily act of worship. The noble Lord, Lord Peston, reminds us at regular intervals that that is contentious. I have believed for a long time that education without a spiritual dimension is a pretty arid and clinical experience. Unless it is enshrined in law, many children will not receive religious education. That is a double jeopardy fate for them, because we know that many children do not receive religious education at home. For a large number of children, the only anchor in their life and the only way in which they will receive any kind of spiritual dimension to their lives will be through school. As a nation, we should at least protect for our children a spiritual dimension to their education through the promise made in the 1944 Act.

We have dealt with special educational needs. The Government were sufficiently moved to include protection for them in the Bill. We need some protection on this matter in the Bill, whether it is this amendment or something akin to it. Exhortation on the record at this stage will not work because I have a Written Answer to a publicly placed Question which is contrary to what the noble Baroness may say today.

My Lords, perhaps I may say a brief word about Amendment No. 11. I am grateful to the Minister for tabling her amendment, which achieves exactly the same effect as that tabled by the Liberal Democrats in Committee. It may be helpful to the Minister and the rest of the House to know that I do not intend to move Amendment No. 11 as a consequence.

My Lords, I shall now try to be helpful to the House with regard to procedure. I apologise to your Lordships, but it is my first ever day on Report. so I am trying to follow what I believe to be the correct procedure. It may be helpful to noble Lords if I suggest, having been advised that it is up to me, that from now on I shall speak to the amendment that I am moving and then wind-up at the end of the debate. That may make things slightly easier and I apologise to the House.

I shall now speak to Amendment No. 10 and then wind up on Amendment No. 5. First, I am grateful to the noble Baroness, Lady Walmsley. As she knows, in Committee, I agreed with the noble Baronesses, Lady Sharp and Lady Walmsley, that it is important to keep a public record of the power to innovate. That is precisely why I have proposed the amendment. It will require the Secretary of State or the National Assembly to produce a report. As I said, it is important that the Secretary of State is involved. We want there to be a public record of exactly what legislation is to be disapplied; exactly who the disapplication applies to; and for how long it will last.

But I also felt—I believe that noble Lords shared this feeling—that it might be helpful to have in one place and on an annual basis, a summary of the orders that have been made during the course of the year and those orders that continue to apply from previous years. That would ensure that no school, LEA, parent or pupil was in any doubt about exactly what legislation had been disapplied and for how long that would continue. Amendment No. 10 achieves that.

I turn to Amendment No. 5. Noble Lords will be aware that Amendment No. 2 alters the Bill by inserting the requirement to have regard to the need to promote,

"the spiritual, moral, cultural"

—the list continues—education of children. I hope that noble Lords understand from that that we are as keen as the noble Baroness, Lady Blatch, whom I entirely support, to ensure that children receive the kind of spiritual education that they would want. That is precisely why I listened carefully to what noble Lords said in Committee and agreed that it is important that that is stated in the Bill.

I am grateful to the right reverend Prelate the Bishop of Blackburn for tabling his amendment. It gives me an opportunity to put on record that the Government cannot conceive of any situation in which exempting requirements to RE or collective worship would raise the educational standards of children in England or Wales, not least because of the protection already enshrined in the Bill for children's spiritual, moral and cultural education.

The Secretary of State can disapply legislation for the fixed time period only if it will raise standards for children—and in the context of the amendments that we have already made to the Bill. The amendment is therefore unnecessary. We have already ensured the protection that the right reverend Prelate seeks. I shall be clear again: we would not regard the requirements relating to RE or collective worship as suitable matters for disapplication. On that basis, I hope that the right reverend Prelate will feel able to withdraw his amendment.

My Lords, I am grateful to the Minister and to all other noble Lords who have taken part in this debate. I am also very grateful for the Minister's assurance. I shall want to reflect on both the comments of the noble Baroness, Lady Blatch, and the Minister's reply. I believe, however, that Amendment No. 2 provides the assurance I seek on spiritual, moral and cultural education, thereby, protecting both RE and collective worship. As I said, however, I shall very carefully read those comments. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 6:

Page 2, line 44, at end insert—

"(4A) The Secretary of State or the National Assembly for Wales shall refuse an application for an order under this section if it appears to the Secretary of State or the Assembly that the proposed order would be likely to have a detrimental effect on the education of children with special educational needs."

On Question, amendment agreed to.

moved Amendment No. 8:

Page 3, line 39, leave out "consult such persons as appear to the" and insert—

"(a) in the case of an Education Action Forum, consult each local education authority by whom any participating school, as defined by section I 0(6)(b) of the School Standards and Framework Act 1998 (c. 31), is maintained,

(b) in the case of the governing body of a school maintained by a local education authority, consult that authority, and

(c) in any case, consult such persons (or other persons) as appear to the qualifying"

On Question, amendment agreed to.

moved Amendment No. 10:

After Clause 4, insert the following new clause—

moved Amendment No. 12:

Before Clause 5, insert the following new clause—

My Lords, I support the noble Baroness, Lady Blatch, in her Amendment No. 12 but not in her Amendment No. 13. We on these Benches have long argued that, like the right to innovate, the right to experiment with the curriculum should be open to all schools and not limited to a few. The noble Baroness's words just now about letting go of the reins and trusting schools summarised very well our position.

The teachers with whom we have consulted on the issue of innovation have made it clear that the key innovation is the right to innovate on the curriculum. They were much less concerned about other issues. Although they would like to experiment, they still regard the national curriculum as something of a straitjacket. As for the national curriculum, the days of what were called "the secret garden" are very long gone. In those days there was no national curriculum and teachers taught what they wanted to teach. In the 1970s, when I was a campaigner on the issue, one simply did not touch on the curriculum and suggest that teachers might approach it more broadly.

Equally, I accept that the days of the highly prescriptive national curriculum, as it was when first introduced in the late 1980s and early 1990s, are now gone. I accept that the national curriculum as set out in Part 6, comprising Clauses 72 to 92, is a much more flexible instrument. However, it is still only relatively flexible, particularly if the objective is innovation and new ways of teaching. Teachers need to be encouraged to think more widely about the curriculum, across horizons, rather than be channelled too narrowly within it. In that regard, one would like to go back a little way back to "the secret garden" and trust the professionals whom we now train very hard and very well. We ensure in the teacher qualification process that teachers are not put in charge of a classroom until we are confident that they are able to take charge.

The national curriculum provides teachers with a broad framework, but let us give them the opportunity to vary it. In earned autonomy, the Government are saying, "We will give them the ability to vary it. But we will do that only for schools which we judge to be good". Schools will be judged by how well they do against performance indicators such as the key criterion of whether pupils at key stage 4 obtain five GCSE A to C grades. However, although schools are considered within free school meals bands and judgments are therefore made about schools in tougher and in easier areas, the fact is that earned autonomy will go quite disproportionately to schools that are already succeeding.

As the noble Baroness, Lady Blatch, mentioned, in the regulations and in our discussions in Committee and those in another place, it was envisaged that only 10 per cent of schools would be touched by those earned autonomy regulations. For us that is not enough. That is a key issue. We should like to see earned autonomy, in terms of curriculum experiment, rolled up much more widely to every school. The amendment that I tabled in Committee suggested every school except those in special measures or showing signs of serious weakness, which perhaps need to be excluded. As the noble Lord, Lord Dearing, mentioned, the power to innovate is there for those particular schools. Since that amendment was not agreed to, the power to innovate is still there. Therefore, they could use the power to innovate.

However, on the curriculum the provisions are much too narrow. If we want to try and inject a feeling of innovation and dynamism into schools, which is what this is supposed to do, it is too meritocratic. It is "jump a little higher doggy and we'll give you a bone". I do not like that attitude. I do not think that we want that in our legislation. Therefore, I support the amendment tabled by the noble Baroness, Lady Blatch.

My Lords, perhaps I may offer a view on the subject. During previous stages of the Bill I was critical of the Government's proposals in the clause because they were limited to the 10 per cent highest performers in various categories. I argued that schools struggling with the curriculum needed scope and opportunities for freedom.

As I have understood the Bill—I hope correctly—as it stands with the Government's amendments, we are no longer limited to those schools in the top 10 per cent. Instead of just the top performers, it extends to those that are well led or well managed. So my struggling school, which is well led and well managed, and there are many such schools, will be eligible. I hope that the Government can confirm my interpretation and that the clause goes much further than was originally intended. I welcome that.

I turn to the amendments before us. I start with two propositions. First, after the years of travail—the nightmare of the national curriculum, as it first was—we have something which is good, rather than something about which we should be saying "Alas, for good reasons we want to keep a bit but it should go as a statutory requirement". It is a protection for children in all schools—little ones, big ones, good and not so good. Our children need that protection.

On the other hand, I believe that there is benefit in allowing good teachers opportunities to be innovative. It enables them to respond to the particular children that they have and to the particular learning opportunity that may be available. For example, if I were teaching history in York, I should want to engage the excitement of the children in the Roman origins of the city, the Viking days and perhaps in the railway days. If I remember rightly, the National Railway Museum is there. There are great learning opportunities that I want to free up.

So it is a balance between the safeguards for children which are provided by the kind of sensible national curriculum that we have now and innovation. I think that there is considerable scope for innovation, but I should like to open the doors.

In saying that I want to open the doors I am cautious, particularly about the three core subjects. Those are the incrementally learned subjects. We live in a mobile society where kids move from school to school. We know about the awful problem of the migration from primary to secondary school and the regression that takes place there. Unless children follow a common curriculum in those incremental subjects, many of them will be disadvantaged. So I want the cupboard open more widely. I think that the amendment, which really says, "No, we believe that the time has come largely to say goodbye to the national curriculum", is too soon. I think it is taking too great a risk with the education of all children in all circumstances.

Therefore, I feel that—if I understand the Government's approach—they are opening the door more widely. That will let schools with different levels of attainment come through the door, but maintain as a core, as a reference point to all schools, the national curriculum. Therefore, I want to go with the Government rather than with the more ambitious proposals put forward in the amendment.

My Lords, later on—if we ever get there or live that long—there are amendments standing in my name and that of my noble friend Lady David on interpreting and adjusting the curriculum to take fully into account the needs of the individual child. That is a subject that I hope that we shall debate to some extent.

However, the amendments relate to something different. I am not entirely sure that I fully understand what the noble Baroness has in mind. I can see her point—and I shall argue it later anyway—that concentrating on what are called "the best schools" may entirely be wrong. It may well be that where one wants flexibility it might not be in connection with the best schools, however defined, one might just want them. I think that that is what the noble Lord, Lord Dearing, was saying; that they wanted something quite different.

That is my first worry. But my central question, which I put to the noble Baroness, Lady Blatch, and, presumably, the noble Baroness, Lady Sharp, is whether they mean all schools at all levels. Do they mean primary and secondary schools, for example, should have this freedom? If they could clarify that it would help me when we reflect on this matter in a few moments.

It would also help me if they told me—and I think that this also applies to my noble friend the Minister—what subjects they have in mind. Again the noble Lord, Lord Dearing, has essentially alluded to that aspect. I would regard it as—putting it not too strongly—catastrophic if these exemptions applied to the three core subjects. The three core subjects are rather different from the others. They are what one builds on. There is no way if one is not literate that one can read history, or anything else for that matter. There is no way if one is not numerate that one can do almost anything. One thing that I despair of is that—I allude to one of our earlier debates on citizenship and so on—our young people are supposed to be great experts on saving the planet, but most of them could not say what the law of conservation of energy was. To be perfectly honest, I would rather that they knew what the law of conservation of energy was and later on in life set about saving the planet rather than the current modish way of doing things.

Therefore, I again ask the noble Baronesses who have tabled the amendment whether they remotely have in mind that a school might be able to not follow the national curriculum on the three core subjects? Is that at all possible because that would worry me enormously?

Lastly, we should not be naive about what drives schools these days. It has nothing to do with education philosophy any more. That went years ago. It has little to do with the national curriculum. They are driven entirely by examinations and testing. What drives schools now is what gets the relevant number of grades at—I cannot remember whether it is 0-levels or GCSEs. It is very difficult for someone of my age group to catch up with all the different things. The examination and testing system drives everything. Again, therefore, even if one wanted to see flexibility in this area, how could that be remotely possible given the examination systems we have? I put that question to the noble Baronesses.

To summarise, I have intervened interrogatively. I should like the answers to my questions so that I can have a better understanding of what they have in mind.

My Lords, I support Amendment No. 12. Paragraph 5.1 of the document Policy Statements and Draft Regulations supplied to Standing Committee G, states:

"All schools need to ensure that the curriculum continues to develop, within the statutory framework, and responds to changes in society and the economy, and in the nature of schooling itself".

I agree wholeheartedly with the words "responds to changes". Yet, the current curriculum remains overcrowded with content and is strait-jacketed by a rigid system of testing and assessment. It allows little room for dynamic adaptability. There is a strong argument, therefore, in favour of greater flexibility for all schools with regard to the national curriculum. Such flexibility should apply to all schools, not just successful ones—particularly not to successful ones.

At a time when educationists and business leaders agree about the concept of the "creative age", it is salutary to find that those responsible for education policy are lagging behind. Technological advance, organisational change and globalisation have driven a shift from manual work to "thinking" jobs that demand a new range of skills, from problem solving and communication to self-organisation.

Two years ago, the think tank Demos stated that,

"while the underlying economic structures of society are undergoing a dramatic transformation, our educational structures are lagging behind. The dominant educational paradigm still focuses on what students know, rather than how they use that knowledge".

In Committee, the Minister said:

"It is our view that non-core foundation subjects need to be protected under earned autonomy. That means that no school will be able to suspend any subject, but will be given flexibility in relation to the programmes of study for non-core subjects, allowing far more freedom in teaching and greater scope in curriculum planning".—[Official Report, 2/5/02; col. 906.]

Given the safeguard described by the Minister at the Dispatch Box, it is hard to understand why she will not extend the exemption on the curriculum to all schools. That is why I support the amendment.

My Lords, I shall respond to the debate by saying that we are not far apart in our intentions. In Committee, I said that I would reflect further on the nature of the criteria for earned autonomy and on the number of schools that might qualify. I can now tell your Lordships' House the outcome of that reflection. Before I do, I must make it clear that the core subjects—English, mathematics and science—will not be touched by the proposal. As the noble Baroness, Lady Walmsley, said, we are discussing the programmes of study for non-core subjects.

We shall shortly discuss amendments that would bring the judgment of the chief inspector into the criteria for earned autonomy. The reason for that is straightforward. We have always said that we want the best led and best managed schools to qualify for earned autonomy. We now wish to align the criteria for earned autonomy with those for short inspections. That will mean that, if a school has qualified for a short inspection under the current inspection arrangement and has received a good inspection, it will be eligible for earned autonomy. However, if a school receives a good inspection of any sort, we should be prepared to consider whether it might be suitable to give it additional freedoms. It will be for the chief inspector to identify those schools, and that is why the amendments that we have tabled are needed.

I listened carefully to the comments made by the noble Baroness, Lady Blatch, in Committee and today, as, I hope, she will see. Initially, we said that 10 per cent of schools might qualify for earned autonomy. Under the criteria that we propose, we expect that 30 per cent of secondary schools and 60 per cent of primary schools will qualify. I hope that noble Lords will agree that that is a significant move.

It does not end there. We are not prepared to extend the freedom to schools that are not sufficiently well led to manage it properly. I hope that noble Lords will agree that only schools that manage their affairs properly should be able to change such fundamental matters as pay and conditions and programmes of study. However, we want to see all schools well led and managed and able to take on the additional freedom. Our goal is that, over time, all schools should be able to take on the freedoms. We will review the qualifying criteria, if necessary, to achieve that aim. In coming up with new ideas for helping schools to be innovative in all kinds of ways, government should do the job properly and ensure that we roll out programmes to the schools that can make best use of them. We must protect the education of our children. I hope that I have proved that I listened to what was said.

All of that can be achieved without the amendments that we are discussing. Indeed, Amendments Nos. 12 and 13 could also allow us to limit to 10 per cent the number of schools qualifying. Moreover, I should make it clear, particularly with regard to Amendment No. 13, that the legal position on teachers' pay and conditions must be clear for all schools. We should not allow a position in which the law governing teachers' fundamental entitlements is not clear to all current and future teachers. Whatever happens, eligible schools cannot simply decide to exempt themselves from legal pay orders and the schoolteachers' pay and conditions document. There must be a process whereby schools become legally exempt. The provisions proposed in the new clause would remove the safeguards in the Bill.

The Government's legislation will work, but Amendment No. 12 would create an insoluble conflict between this power and the powers in Parts 6 and 7. We cannot place a general presumption against compliance with a key component of the Bill in this new clause, while setting out in Parts 6 and 7 the detailed powers surrounding the curriculum. That is why Clause 6 is drafted as it is, presuming compliance with the general law re-enacted later in the Bill but allowing limited exemption from it in certain qualifying circumstances. With all humility, I must say that the Government's approach is preferable.

The Government's approach already ensures automatic exemption for schools qualifying. It already ensures that the requirements for a broad and balanced curriculum are met. It already ensures that high-performing schools that are well led and managed qualify. In addition—and of particular importance—it ensures that no one is left in any doubt as to the legal requirements for any school.

With regard to Amendment No. 18, I hope that noble Lords will recognise that we have been open about our intentions for the criteria for schools qualifying for earned autonomy. We set out those intentions in a policy statement that can be found in the Library of the House, and we made it clear that we intend to have a full public consultation. The Select Committee on Delegated Powers and Regulatory Reform considered our proposals for regulation-making powers in detail. It was content with the proposed procedures, and I hope that, as is the convention, the House will be guided by the committee's view.

I hope that, on that basis, noble Lords opposite will accept that we have moved considerably and given them what they asked for. The amendments do not help to further their aims. I hope that the amendment will, therefore, be withdrawn.

My Lords, I thank the Minister—as I have done several times this afternoon—for the work that has gone on between the last stage and this. I also thank all those who, in the earlier stages, fought hard for what we appear to have achieved today. It has been acknowledged that many more schools are well able to manage curricular flexibility and pay and conditions. I take the point that those are different issues. The management of pay and conditions must fall to schools that are able and well led; otherwise there will be tension among staff in schools in which management of questionable quality is left to manage pay and conditions. Teachers must have confidence in the quality of leadership and management in the school.

We have come a long way, but there are one or two questions that I must ask. The chief inspector will now be brought into the process, something that I argued for in Committee. Will it be on his say-so and on the basis of the inspections that a school will become able to exercise earned autonomy? Given that earned autonomy is permanent, unless it is revoked for one reason or another— maladministration or misadministration—by the Secretary of State, will the process allow the chief inspector to agree to it? When the Minister replied to the amendment which I tabled in Committee proposing that change to the Bill, she argued that the chief inspector will be involved in advising the Secretary of State. However, now that he is being placed on the face of the Bill, will he have powers to agree that a school should qualify to be an applicant for earned autonomy?

Finally, the Minister said that there would not be an automatic trigger point but that there would have to be a legal process in order to convey qualified status on an applicant. What will the process be because the Minister's comments today render redundant the chapter in the policy papers on earned autonomy? Who will ultimately be empowered to award earned autonomy status, other than the Secretary of State? We are talking about 60 per cent of primary schools and 30 per cent of secondary schools, which represents a great deal of work for the department. Where a school qualifies on criteria set out by the Secretary of State, if a trigger cannot be automatic it should be on the say-so of the chief inspector.

My Lords, the decision could potentially be taken by either or both and we are looking for the point at which we could allow a decision to be taken primarily on the advice of the chief inspector. I took the noble Baroness's amendment back after I had listened to what she said in Committee.

We intend to consult on the precise detail and to carry out public consultation on what the process will involve. I want to ensure that noble Lords recognise that we have moved considerably. In terms of the bureaucracy, we have deliberately started with the process of short inspection. That process is on-going and does not have extra bureaucracy. We would enable schools which were not in the process of the cycle of inspection to come forward and ask whether they qualified—that would be reasonable—for a cycle is involved. It means that when the chief inspector is satisfied that the school has qualified, it will be entitled to earned autonomy. That will be that.

If we want to expand the scheme beyond the 30/60 per cent of schools in order to deal with issues raised by the noble Baroness, Lady Walmsley, about being able to move quickly, we will not force Ofsted to review its procedures. We will look for new ways of being able to judge without adding to the bureaucracy. I hope that noble Lords will be pleased to hear that and that it answers the questions raised by the noble Baroness.

My Lords, that reply is helpful. I hope that there will not be a percentage target. The Minister said that the Government would expect about 30 per cent of secondary schools and 60 per cent of primary schools entering the scheme on the basis of "those who qualify qualify". If a school qualifies, it qualifies, and that should be the case. The scheme should not be subject to arbitrary percentages.

I want to speak briefly to my Amendment No. 18—

My Lords, perhaps I may pose a question to the Minister. Is the aim to start the programme at the 30/60 per cent mark but to roll it out to as many schools as possible?

My Lords, we are moving far away from Report stage procedure if those who do not have the ear of the House ask questions of the Minister.

My Lords, I believe that the Minister gave an affirmative nod in the direction of the noble Baroness, Lady Sharp. I hope that there will be no targets in that sense and that schools which qualify qualify. I am receiving an affirmative nod on that point.

As regards my Amendment No. 18, I am grateful for what the Minister has done since the Committee stage. We have done what we set out to achieve; that where a school qualifies it should be free to do so. If that is so, the criteria will be critical. The framework which surrounds a school managing its own pay and conditions and the curriculum flexibility, with all the safeguards that will need to be put in place, should be considered by this House. The position has changed from what was contained in the original chapter of the policy document and we are grateful for that, but I may return to Amendment No. 18. In the meantime, with warmest thanks to the Minister for what she has done, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 14:

Page 4, line 6, leave out from "to" to end of line 7 and insert "one or more of the following—

(a) the performance of the school,

(b) the quality of the leadership in the school, and

(c) the quality of the management of the school."

The noble Baroness said: My Lords, in moving Amendment No. 14, I want to speak also to Amendments Nos. 15 and 19 in the group. Amendment No. 14 would allow for judgments on a school's management to be included in the criteria set out in regulations for earned autonomy.

We have made clear that it has always been our intention that the school's management should be included in the criteria. It is an intention that we set out in the policy statement placed in the Library of your Lordships' House. However, I have considered further the concerns expressed by my noble friend Lord Peston as to whether primary legislation would enable us to make judgments in this area. In addition, we have made clearer distinctions elsewhere in the Bill in Schedule 16 which makes minor amendments to the School Inspections Act, to distinguish between leadership and management. It has always been our intention that the two areas of leadership and management should be used together in making judgments in this area and I trust that this amendment will remove any doubt as to whether primary legislation will enable us to do so.

As regards Amendments Nos. 15 and 19, noble Lords will know that during the debate in Committee I agreed that we would give further consideration to the qualifying criteria by which schools can earn autonomy. We are of course also committed to a full consultation on these criteria after Royal Assent.

We have discussed the issue and I know that there is a feeling on all sides of the House that we need to do more to ensure that schools are able to qualify for earned autonomy and that there should not be an arbitrary figure—a concern expressed by the noble Baroness, Lady Blatch. As the noble Baroness said in our discussion of the previous amendment, those schools which qualify should qualify.

We have had useful discussions with Ofsted about the best approach to adopt in this area. As I have said, we are proposing to place greater emphasis on the judgments from Ofsted about the leadership and management of the school to decide whether a school is suitable for earned autonomy. As I have said, we expect at least 30 per cent of secondary schools and 60 per cent of primary schools to qualify over time.

Ofsted's judgment about whether a school qualifies for short or standard inspection will include factors related to a school's performance as well as judgments about leadership and management. That means that we will continue to rely on all three types of criteria; those related to a school's performance, management and leadership. I beg to move.

My Lords, I rise to speak to Amendments Nos. 16 and 17. Before doing so, I want to ask the Minister a couple of questions about Amendments Nos. 14 and 15. Am I correct in believing that the three criteria which appear under the words "one or more of the following" could be taken together but it is not necessary that all three should be judged? The Minister said that leadership and management could be taken together but one alone could be considered.

Secondly, in relation to the insertion of "the Chief Inspector" in subsection (2), "or" is the operative word. Is it to be the opinion of the chief inspector, or the Secretary of State, or, in the case of Wales, the National Assembly for Wales, as distinct from the Secretary of State and the chief inspector?

Amendments Nos. 16 and 17 again address the question of special educational needs and the needs of disabled pupils. A problem which arises in particular in relation to specialist schools and city technology colleges is that such schools—those with a special status—do not have a good record in regard to their provision for special educational needs. I know that some do, but some do not. The proportion of disabled children and those with special educational needs attending such schools is often rather low

The Minister has responded to our concerns with regard to innovation in the context of special educational needs, but I am not sure that we have had the same kind of response in this area. Among the criteria used to judge whether a school is performing well and thus would be eligible for a degree of earned autonomy should be that it can demonstrate high standards of achievement for its disabled and special educational needs pupils. The purport of these amendments is to ensure that that is the case.

My Lords, I wish to make two brief points. First, when in an earlier amendment my noble friend on the Front Bench referred to "all" children, I had assumed that that would include disabled children with those special educational needs, and that the term would carry over to every provision contained in the Bill. Perhaps my noble friend will confirm that that must be the correct interpretation.

My reading of Amendment No. 14, in particular the phrase,

"the performance of the school",

is that it cannot mean anything other than a reference to all the children in that school. The performance of' a school cannot be distinguished from that of all of its children. Again, perhaps my noble friend will confirm that because if one thing unites all noble Lords, it is the need to ensure that children with special educational needs are not forgotten.

Secondly, I had always assumed logically that "or" includes "and", therefore we do not need to change that. The word "nor" does not include "and"; you have to use the phrase, "or, but not and". My noble friend will be the expert in this area and will respond to the noble Baroness, Lady Sharp. However, I do not think that there is any problem about the word "or".

My Lords, I think that there is a problem here because the two words are different. If a thing is one thing or the other, it is one thing or another. But if it is one thing and the other, both criteria would have to be satisfied. That has always been my understanding of the wording in legislation.

My Lords, I thank the noble Baroness for allowing me to intervene. This is a point of theoretical logic. The logicians have been studying this subject for a great many years. I can assure the noble Baroness that the word "or" includes "and".

My Lords, we shall wait for the definitive response from the Minister.

I wish to put a different question. In the previous group of amendments and in the amendments now before us, the Minister referred to "short" inspections. I understand that Ofsted has proposed that by 2003, the majority of primary schools will be given "light touch" inspections. Will earned autonomy therefore apply to all primary schools that pass their short inspections? It would be helpful if the noble Baroness could clarify this point.

My Lords, I shall begin by addressing Amendments Nos. 16 and 17. I wish to express my total support for the sentiment that lies behind the two amendments; that is, a wish to see disabled children or those with special educational needs at the heart of decisions relating to earned autonomy.

However, I believe that the amendments are unnecessary and do not offer the best method of achieving those aims. Amendment No. 16 would introduce a considerable degree of uncertainty to the application process. It would mean that a school might not know if it was eligible until after it had applied and it had been determined whether the evaluation plan was acceptable. That would be the very opposite of the automatic process for which noble Lords have rightly pressed.

As I have pointed out many times before, safeguards are already in place to protect the interests of children with special educational needs, all of which are included in the inspection regime.

Similarly, with respect to Amendment No. 17, if there were a clear and unambiguous measure of attainment for these children that could be applied in appropriate cases, I should be happy to accept such an amendment. Unfortunately, that is not the case. It is notoriously difficult to develop a simple measure of attainment for children whose educational needs are so varied and where there are huge differences from school to school in the nature of their special needs and special needs provision.

The amendment would require us to specify such a measure in regulations, but there is a real danger that that would turn out to be unfair. It could deny schools earned autonomy because of a measure that was inappropriate to the nature of the special needs that they catered for. A further effect of the amendment—although I am sure that this was unintentional—would be to deny earned autonomy to any school without pupils with disabilities. It is impossible to demonstrate high standards of achievement for children with disabilities if there are no such children at the school in question.

However, I wish to give the following assurances which I hope will convince noble Lords of our commitment to children with disabilities and those with special educational needs. First, I do not believe that earned autonomy poses any threat to children with special educational needs, in particular given that the freedoms available relate only to teachers' pay and conditions and the national curriculum. Within the latter, we have said that no subjects will be dropped, so that only programmes of study will be available for disapplication or modification. In any case, these provisions cannot change any of the special educational needs legislation, so that schools will continue to be required to make the provision and meet the needs outlined in special educational needs statements.

In addition, we have strengthened our commitment to ensure that the needs of special educational pupils are met in schools by putting forward government Amendments Nos. 14 and 15. As I said earlier, we are proposing, as a basis for consultation, to grant schools earned autonomy if they have qualified for a "short" or "standard" inspection by Ofsted and have received a good report. I believe that the noble Baroness, Lady Blatch, used the term, a "light touch" inspection. While this will ensure that more schools qualify, I wish to make the important point that we shall also ask Ofsted to consider whether an assessment of special educational needs provision might be made during all inspections from autumn 2003 and thus be used in determining suitability for earned autonomy from that date.

Furthermore, Ofsted is committed to the use of value-added data as and when sufficient data become available, which will provide yet another means of holding schools accountable for the progress of all children. With regard to earned autonomy, I shall consider further whether it should be a requirement of a school's application to set out how its exemptions will impact on disabled children and those with special educational needs.

I turn now to the specific questions that have been put to me. My noble friend Lord Peston was right to point out that "all" means all children. The way in which we have looked at the issues of management, leadership and performance means that the new drafting allows us to use any combination of the three criteria in the regulations. It is proposed to use all three, but it would allow us to consider that again as we look more deeply into the school system. In this context, I am reliably informed that "or" does include "and", which I hope answers the questions put to me.

On Question, amendment agreed to.

moved Amendment No. 15:

Page 4, line 9, after first "of" insert "the Chief Inspector,"

On Question, amendment agreed to.

moved Amendment No. 19:

Page 4, line 14, at end insert—

""the Chief Inspector" has the meaning given by section 1(3);"

On Question, amendment agreed to.

moved Amendment No. 20:

Page 5, line 32, at end insert—

"( ) In so far as regulations made under this section relate to a curriculum provision, they shall, in addition to providing for an exemption or modification, require persons responsible for the delivery of the curriculum in any school to have regard to the need to deliver a broad and balanced curriculum in that school."

The noble Baroness said: My Lords, I wish to move Amendment No. 20 and speak at the same time to Amendments Nos. 21 and 23. Amendment No. 20 is designed to ensure that whatever curriculum exemptions a school may attract under this clause, overall the pupils will retain the right to receive a broad and balanced curriculum. That is clearly the intention of the Government since they have said so in the policy statement accompanying the Bill. The Minister also said that in a letter she sent to the noble Baroness, Lady Blatch, on 17th May. I would assume therefore that the Minister will have no objection to this point being inserted wherever relevant on to the face of the Bill, thus putting it into the public domain.

Noble Lords will by now be aware that we on these Benches are in favour of all schools having a reasonable amount of flexibility to adapt the curriculum to the needs of their pupils. However, pupils currently have under the national curriculum an entitlement to a broad and balanced curriculum and this must not be compromised. There is no reason why, by adapting the currently rather overcrowded programmes of study, a school cannot make the space to innovate while still providing pupils with maths, English, science, IT, a modern language, humanities, the arts and sport.

It would he helpful to have clarification about some slightly contradictory statements by the Government. Paragraph 5·2 on page 4 of the document, Policy Statements and Draft Regulations Supplied to Standing Committee G, states:

"Without removing the fundamental entitlement of all pupils to a broad and balanced curriculum",

and yet, in the same document, we are given the four options for increased curriculum flexibilities and freedoms for qualifying schools. The broad possibilities are: first, suspending some programmes for study outside the core so that schools are required to cover, for example, two of the four programmes of study; secondly, total suspension of all programmes of study but still a requirement on schools to cover all non-core foundation subjects; thirdly, suspending all programmes of study outside the core but requiring schools to teach at least one humanities subject, one art subject and so on; and, finally, total suspension of all programmes of study and each school to determine subject coverage through defining what is meant by "broad and balanced curriculum".

If, as I understand, the Government appear to favour the last one, each successful school allowed earned autonomy could decide for itself what is meant by a "broad and balanced curriculum", in which case, what safeguards are in place for pupils' entitlements? Do not these two parts of the paper contradict each other? The Government are happy for there to be a safeguard on the face of the Bill in relation to innovation, so why not for earned autonomy as well?

Amendment No. 21 requires the Secretary of State or the National Assembly for Wales to consult with a range of bodies, as appropriate, when making an order to exempt from educational legislation. LEAs, governors and teachers all have a role to play in decisions serious enough to require the law on education to be waived and it is entirely appropriate that they are consulted.

In Committee, the Minister said that such consultation would be difficult to operate. She also said that some of the bodies listed may not have a direct interest in the orders, nor have the time or resources to comment. The amendment includes the words "as appropriate" to take care of' that objection.

During the Committee stage, the Minister said:

"The amendments do not appear to take account of the key point that under employment law, any changes to teachers' contracts that could follow on from pay and conditions exemptions orders cannot be imposed unilaterally on teachers but can take effect only following appropriate negotiation, which may, of course, involve teaching unions".

She continued:

"I therefore do not believe that it is necessary to require consultation on every change, no matter how small, to involve all teacher unions. If teachers at the school were in favour of the application and the unions at local and national level were not, it is hard to know what the governing body would be expected to do with responses. Surely what matters is what teachers at the school concerned think of the application. Any teacher in such a position would be fully entitled to seek advice from his or her union".—[Official Report, 7/5/02: col. 1047.]

The problem with this argument is as follows. The Minister is fully aware that in negotiations at a school level, teacher representatives aim to act in the best interest of the teachers in that school, as they try to do at local and national level. For instance, it is not unusual for one union representative to act on behalf of a classroom teacher while another representative from the same union will be negotiating on behalf of a head teacher member. Both representatives will seek the best solution whatever conflicts of interest there may be. I should therefore like to press the Minister on Amendment No. 21.

Consultation with parents and teachers in the way provided for in Clause 7 is not really enough. Amendment No. 23 requires governing bodies to have regard to any guidance issued by the Secretary of State or National Assembly for Wales and to consult parents, teachers and the LEA. In her welcome Amendment No. 22 the Minister inserts only consultation with the local education authority. While we greatly welcome her positive response to the amendment when it was tabled by the Liberal Democrats in Committee, we must press her to go further and to include consultations with the other stakeholder groups as well. I look forward to a positive response from her. I beg to move.

My Lords, Amendment No. 22 would ensure that the local education authority would be consulted on the exemptions or modifications that the governing body chooses to apply for under earned autonomy. The amendment responds positively to the discussion we had in Committee on 7th May about the need to ensure effective consultation under these provisions.

I made clear in Committee that there were provisions in the Bill for the key stakeholders who may be directly affected by the application to be consulted by the governing body before an application was made. Clause 7 makes clear that the governing body will need to consult with the appropriate parties, including teachers in relation to pay and conditions, parents in relation to curriculum, and other appropriate persons, before making an application. Similarly, the Secretary of State or National Assembly for Wales will not be able to make orders unless proper consultation has taken place.

We also gave assurance that the guidance under Clause 7(2)(c) will make clear that the LEA which maintains the school should be consulted before any application is made. However, there was some uncertainty among noble Lords about the status of the local education authority in the application process. The amendment clarifies the position. I trust that it will address in full the concerns raised in Committee.

My Lords, I recollect previously questioning my noble friend the Minister about local education authorities. It seems to me that she has come forward with a positive amendment, which should be welcomed. It will certainly reassure the LEAs and the industry, if I may call it that, as one sometimes does in a cynical moment or two.

As to Amendment No. 21 and the National Assembly for Wales, I suspect that already teachers in Wales have excellent lines of communication into the National Assembly. My guess is that Assembly Members and Cabinet Ministers therein feel that teachers and their representatives in the various unions have well-established means and rights already. It may be that my noble friend will be able to tell the House what is the situation in Wales in regard to consultations with the teacher unions. That may be helpful during the course of the debate.

My Lords, I shall begin by speaking to Amendment No. 20. I agree with noble Lords opposite that every school should deliver a broad and balanced curriculum. In Committee I said that even under earned autonomy this was already a requirement of the Bill. I clearly did not persuade the noble Baroness, Lady Walmsley, of that, and so I shall try once again to convince your Lordships.

Our proposals for earned autonomy will only give schools freedom from aspects of the national curriculum, not freedom from either the basic curriculum as set out in Clause 76, nor the general requirements associated with the curriculum as set out in Clauses 74 and 75. So while earned autonomy will enable schools to tailor elements of the programmes of study to the needs of their pupils, it will not provide them with any relief from the duty to provide a broad and balanced curriculum.

Clause 6 of the Bill contains the phrase "any curriculum provision"—for example, at line 29 on page 4. The term "curriculum provision" is defined on page 4, line 15, in Clause 5(4). It states that "curriculum provision" means any provision of the national curriculum in England or in Wales, as the case may be. I hope that all noble Lords will agree with that. If noble Lords will turn to page 51 of the Bill, they will find, three-quarters of the way down the page, before Clause 77, the heading "The National Curriculum for England". The next heading appears on page 57, after Clause 85. So the phrase "the National Curriculum for England" means Clauses 77 to 85. So the clauses from which exemption may be given under earned autonomy in England are Clauses 77 to 85.

Perhaps I may finally refer noble Lords to page 50. They will see that the general requirements in relation to the curriculum are set out in clause 74 and the duties to implement them are set out in Clause 75. Clause 74(1) sets out the "broad and balanced" definition. Clause 75 means that the Secretary of State, the local education authority and the governing body are required to implement a broad and balanced curriculum. Clauses 74 and 75 are not affected by earned autonomy.

I hope that on that basis noble Lords will agree that the Bill puts in place a duty to provide a broad and balanced curriculum on the Secretary of State, on the LEA and on the governing body even where earned autonomy applies. I hope that the noble Baroness, Lady Walmsley, will therefore agree that her concern has been met in full.

Turning to Amendment No. 21, as we have said previously, we want the process by which schools will earn autonomy to be as simple, efficient and unbureaucratic as possible. Unfortunately, the amendment would require a wide range of representative bodies to be consulted, in addition to those individuals and bodies who will have to be consulted by governing bodies under Clause 7.

It cannot be right that the Secretary of State should be required to consult the Local Government Association, the National Association of Governors and Managers, the teacher unions and so on, on a proposal from a single school to take on earned autonomy. If the staff of a school and the relevant local education authorities have been consulted, that should be the end of the matter. In the light of Amendment No. 22, I hope that the noble Baroness, Lady Walmsley will accept that her main concerns have been addressed.

Turning finally to Amendment No. 23, I hope that noble Lords will appreciate that I believe that consultation is an important part of the process by which schools can qualify for earned autonomy. That is why Clause 7 provides that the governing body will need to consult with the appropriate parties, including teachers (in relation to pay and conditions) and parents (in relation to curriculum) and other appropriate persons before making an application.

We also gave the assurance that guidance under Clause 7(2)(c) will make clear that the local education authority which maintains the school should be consulted before any application is made. I have now brought forward Amendment No. 22, which ensures that there is a statutory duty for the local education authority to be consulted. The amendment responds positively to the discussion that we had in Committee on 7th May about the need to ensure effective consultation under these provisions.

In the light of this, I do not believe that Amendment No. 23 is necessary; nor am I convinced that it will always be appropriate for parents to be consulted on changes to teachers' pay and conditions, as this could be a breach of their privacy. Given these assurances, I hope that the noble Baroness will feel able to withdraw the amendment and that the other amendments will not be pressed.

My Lords, before the Minister sits down, and with the leave of the House, perhaps I may ask one question which has puzzled me from the outset. The Minister constantly tells us that Clauses 74, 75 and 76 are inviolate clauses and that, whatever happens under either innovation or earned autonomy, they will prevail.

Where are the cross-references to those clauses in the early part of the Bill? Clause 6, for example, states that the Secretary of State may,

"designate any curriculum provision or pay and conditions provision as attracting exemption".

He may:

"designate modifications of any curriculum provision ֵ as being available on a discretionary basis".

Clause 2 states that the Secretary of State may make provision,

"conferring on the applicant exemption from any requirement imposed by education legislation".

There is no cross-reference whatever in this part of the Bill to those later clauses. So is this a matter of any legislation other than Clauses 74 and 75 of the Bill?

My Lords, my specific reference was to earned autonomy and not to Clause 1. Indeed, that is why we have included in Clause I the reference to the broad and balanced curriculum which noble Lords have sought.

I have clearly not answered the noble Baroness's question properly. Perhaps I may write to her and give a specific answer to ensure that I have covered her point well.

I should say to my noble friend that I am not at this point able to give him details of what happened in Wales in terms of consultation with the teacher unions. I shall ensure that either I write to him or an appropriate Minister writes to him to provide that information.

My Lords, I thank the Minister for her patience. My intention in moving Amendment No. 20 was to persuade her to make at the Dispatch Box the very unambiguous statements that she has just made. It is now clear that if any school which had been given earned autonomy were to try to institute a curriculum that was not broad and balanced, it could be called to account. In view of the Minister's response, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 22:

Page 5, line 37, at end insert—

"(aa) consult the local education authority,"

On Question, amendment agreed to.

moved Amendment No. 24:

Leave out Clause 10.

The noble Baroness said: In moving this amendment, I shall speak also to Amendments Nos. 27 and 29.

Again, let me make it clear at the outset that I support commercial freedom for schools. I also accept that these are enabling clauses and that any exercise of the powers set out in Clauses 10, 11 and 12 would be voluntary.

I fully support the level of autonomy enjoyed by city technology colleges and academies, and I lament the passing of the freedoms enjoyed by grant-maintained schools. At the previous stage of the Bill, the Minister said that she hoped that there would be no more CTCs. I have bad news for her: the academies are CTCs by another name. They enjoy the same freedoms; they are set up in the same way; and the entrepreneurs come along with their cheque-book in exactly the same way. My noble friend Lord Harris—who is presently doing a splendid job setting up an academy in Peckham—already has two city technology colleges and knows that academies are the same beast under a different name.

There is freedom under existing law to develop, for example, educational software and to sell it. to exploit the use of buildings and facilities and to act collaboratively and corporately to improve buying power and so on. A few nights ago, I was with a school governing body and spoke to its headmaster. They have already formed companies and are involved in companies. So the freedom that can be exercised under the present law is considerable.

The noble Lord, Lord McIntosh, was kind enough to send me a very detailed letter replying to the points that I raised in Committee. I thank him warmly for taking so much trouble over all the detailed points, of which I gave him no notice. Perhaps I may refer to the letter in order to confess that my concerns have not been entirely set to rest.

The noble Lord suggested that I was concerned that schools may not have the time to form companies. He went on:

"We realise that this will require some work, but it will produce time saving benefits".

The noble Lord says that—but I am not sure what the evidence is and where the time will come from to set up committees, to bring people together, to meet with lawyers and accountants, and to set up the arrangements for companies.

Secondly, in part 1 of the letter, under the heading "Supervising authority", the noble Lord states:

"The supervising authority will provide light touch oversight of school companies".

There is no guarantee of that. There is nothing in the Bill about "light touch". It has supervising rights over authorities. I shall return to the exercise of supervising rights.

The statement does not allay my concerns. If a company is autonomous, it will be subject to all company law. To superimpose on companies the local education authorities and the Secretary of State is a recipe for disaster. The idea that LEAs have the time and the additional expertise to carry out such a requirement, or even the additional funding, is deeply suspect.

On the second page of the letter, the noble Lord says:

"When taking action, a supervising authority will need to have evidence for its decision, and will be bound by the general duties on LEAs to act reasonably".

That presupposes that in order to avoid problems arising it is dedicated to regular monitoring and collection of data, otherwise it cannot perform that function properly. If it has to collect evidence for any maladministration or for anything that may be going wrong in the company, it has to have fairly regular oversight of the day-to-day activities of the company. The same paragraph goes on:

"LEAs already have similar powers to suspend a school's delegated budget".

Overseeing schools' budgets is a far cry from overseeing a variety of commercial ventures, possibly involving non-education-related third parties, as the noble Lord said in a previous debate. He also said that costs would be minimal, but how can one tell? Nobody knows in advance of setting up a company what the costs will be or what the costs of failure will be. If a company goes belly-up, the local education authority will pick up the bill. How can one say in advance that the costs "will be"—not "are expected to be", but "will be"—minimal?

The Minister said:

"We expect purchasing companies to join together to buy only what their members would normally buy as individual schools within their own budgets".

The Bill does not make clear that that is what the companies are about. It says that they will act within their own budgets, but, as I said in Committee, joint purchasing, with all its advantages, can happen now. I was involved in joint purchasing arrangements in my own authority.

The second paragraph of the letter refers to bureaucracy. Local education authorities do not have spare financial capacity. They are being exhorted—and, if the Bill goes through, will be compelled—to pass on ever more funding to schools. We do not object to that. We believe that schools should have money that is due to them. The villains of the piece are not necessarily the local authorities, but the Government, in holding money back from schools. The letter says:

"Once schools have the permission of their LEA to form or join companies, there is no requirement for LEA involvement beyond the supervising authority".

As I said earlier, in order to supervise there has to be some involvement in the day-to-day activities of the company. Otherwise, how on earth can LEAs fulfil their legal obligations to supervise?

The noble Lord goes on:

"we do not expect any Secretary of State involvement in the company".

The Bill gives the Secretary of State an involvement in the company. Either that means something or it means nothing. If it means nothing it should not be in the Bill.

Governors become governors not to form companies, but to run schools. Where is this surfeit of skills? On the top of page three, the noble Lord says:

"this work will be spread throughout the members and supported by the appropriate skills of governors".

We know that some governing boards contain some very entrepreneurial people who are full of ideas. They can be very useful to the governing body, but there are many governing bodies that do not have such people. The noble Lord will retort that this is a voluntary activity. The result is that it will be available to schools that attract stockbroker-belt-type governors, whereas those that do not, perhaps in run-down inner-city areas, will not have the benefit of such expert advice. Nevertheless, the Government come riding in on their white charger with their answer to everything: they will produce guidance.

Paragraph three talks about the suspension of delegation. It is a very messy paragraph. I pointed out that a school could join a company only if it had a delegated budget. However, if a member school has its budget suspended, it is not immediately required to leave a company. It can stay with the company and even become a sleeping partner, as the noble Lord has suggested. A school not fit to hold its own budget being part of a company, with all the responsibilities and ownership that it has to take for the running of the company, seems to be a real problem.

Paragraph five says:

"A takeover could only happen if school company members holding the majority of the shares agreed to sell their shares to a third party".

I think that the noble Lord means that school companies will be private companies, not public limited companies, so shares in them will not be readily available. I raised a point about a school company being taken over by another private company. According to the noble Lord's letter, that can happen. If the company agrees to sell, it can do so. The letter continues:

"Any member selling all of their shares would then leave the company. The risk of private sector takeover is low for several reasons—school companies will be private companies, they are not likely to be asset rich"—

I am not sure that I necessarily agree with that—

"and only certain prescribed types of body will be able to join these companies as members".

It would be helpful to he given some examples, if the noble Lord has any.

Paragraph six, on permission to join companies, says:

"Schools wishing to join a school company will need permission from their LEA".

Why? Some LEAs are in special measures. Some LEAs do not perform as well as some of the schools over which they have jurisdiction. That could result in a go-ahead school having to seek permission from an LEA, which may have a philosophical objection or may not even be up to making a proper judgment on whether it should run a company.

Paragraph seven is about market scan. I asked what the reference to "carrying out a market scan of alternative broker/provider organisations" means. The noble Lord replied:

"It is one example of the activity undertaken by the North Romford School Improvement Consortium (Havering LEA) New Model".

I assume that that is already in place and happening under existing legislation, so I am not sure that the new proposals add very much.

In the first paragraph of the letter, the Minister refers to companies spending only within their budgetary limits. However, if a company fails owing large debts, the LEA will be responsible for debts that may well exceed the budget of the school.

Paragraph eight is about dedicated staffing resource. I questioned the meaning of, "staff would also benefit from a division of labour using a dedicated staffing resource so as to free teaching star. That is so jargon-ridden that I do not understand what it means. The noble Lord goes on to say that,

"A company may wish to employ a bursar to act on behalf of all".

A group of schools can employ a bursar now, so that is nothing new. Many schools come together because it is the only way in which they can afford to have a bursar.

In paragraph 10, the Minister argues both ways. He writes:

"The purpose of including this clause is to clarify the Secretary of State's powers in this area, rather than add any new ones. We believe there is a need to ensure that primary legislation clearly states the ability of the Secretary of State to be involved in the operation of companies".

If Clause 12 is only for clarification and adds no new powers, as the noble Lord claims, it is not necessary. Why is it in the Bill? We are always told that repeating statutes does not make for good legislation. If this is not a new power, the Secretary of State can already be involved in the operation of companies. Either it is a new power or it is not. If it is, it needs to be in the Bill. However, paragraph 10 of the letter reads both ways.

Later in paragraph 10, the Minister writes:

"During the debate, you asked why the National Society could not procure the expertise they require, or work with Partnerships UK (PUK), thus negating the need for the Secretary of State to invest. The answer is that there is nothing to prevent anyone from procuring such expertise. However, the costs would, in all likelihood, be very high and almost certainly not represent value for money. By establishing a joint venture, we hope to ensure that the advice is available as and when needed and is of a consistent quality that meets the needs of the National Society".

The right reverend Prelate would have art interest in this. This is the kind of issue on which one expects public authorities or local authorities to say it will not cost because it is being done by the local authority or the Government and not by highly paid expertise that would have to be bought in. However, if the Government are getting involved, there is the cost of the time of the expertise that is made available by the Government to the company. It is not cost-free. Therefore, if we are talking about company law, a value would have to be placed on that company and that would have to be shown in the accounts. After all, the Government make voluntary bodies do that. I sit on a number of voluntary bodies. We have to account for anything that is given to us in kind as it has a value to the charity. It has to be shown in the accounts.

I am concerned about many of the points in the noble Lord's letter. I am not convinced that most of what a school, or schools, would wish to do commercially can be done under present legislation. The clauses we are discussing represent a complex proposition for schools. I do not think that the answer to the matter is to say that not many schools are expected to exercise the power or that because it is voluntary we should not be over-concerned. Schools are desperate for staff. They are overburdened with non-teaching duties. Governors are in short supply. In recent years many additional responsibilities have been placed upon them. Schools do not readily have access to the kind of expertise, or the funds to buy in such expertise, to indulge in setting up companies subject to the full panoply of law. If governors are financially liable, we may find that they do not come forward in the same numbers as formerly.

As I said at the outset, schools enjoy considerable freedom now to act commercially in their own interests. I refer to city technology colleges and academies. As I said, only the other day I visited a maintained school which was itself a company and enjoyed the freedom that that status conferred. I do not believe that the clauses we are discussing are properly thought through, nor do I believe that the sky will fall in if they are removed. I beg to move.

My Lords, my name is attached to Amendments Nos. 24 and 27 which propose respectively that we should leave out Clauses 10 and 11. I wish to speak also to Amendments Nos. 25, 26 and 28.

We had a long debate on the matter in Committee. I have not received a copy of the letter that the noble Lord, Lord McIntosh, sent to the noble Baroness, Lady Blatch. Perhaps it arrived today and I must confess that I have not emptied my in-tray.

My Lords, the letter was dated 28th May. I cannot think what went wrong. The letter was addressed also to the noble Baroness, Lady Sharp.

My Lords, I have received many letters from the noble Baroness, Lady Ashton, and also from the noble Lord, Lord Davies of Oldham. However, the only letter I have received from the noble Lord, Lord McIntosh, concerned academies which I received over the weekend.

My Lords, I apologise.

My Lords, perhaps the letter went astray. I have not had the benefit of seeing it. However, the noble Baroness, Lady Blatch, discussed the letter in detail and raised many points. As we on these Benches said in Committee, with staff in schools and teachers so overloaded at present and with governors also complaining of overwork, we need this measure like we need a hole in the head. What we want our teachers to do is to teach and what we want our governing bodies to do is to concentrate on governing their schools and not to have to be involved in running companies.

From what the Minister said in Committee, it is clear that in any case schools can already set up companies in their own right as corporate bodies. They can run companies for the benefit of their own schools. The reason for including the clauses we are discussing is to enable them to establish companies jointly with other schools. Why would they want to do that? It is said that they would want to do that in order to gain economies of scale from purchasing on a bulk scale. However, these days, many schools co-operate with other schools and purchase on a bulk scale. In any case, one does not need a company to set that up. LEAs have done that for a long time. Some schools opt out of LEA purchasing schemes but others still opt into them. The benefits to be derived from economies of scale can be gained through that process.

The measure would also enable schools to set up providing companies to gain economies of scale. In Committee reference was made to software in that regard. However, it is clear that in any case a school can do that in its own right. Two teachers who have developed a software package can set up a company in their own right. They do not have to set it up through the school. There are few occasions when the measure that we are discussing is likely to be necessary. It appears to be a case of taking a sledgehammer to crack a nut. In Committee I was not convinced by the Minister's arguments. I have reread the Committee proceedings on a couple of occasions and I did not find the Minister's arguments at all satisfactory.

It is also highly unsatisfactory that if a purchasing company runs into trouble, the LEA is liable for that company's debts as it is using LEA money. If things go wrong, the LEA, which is supposed to vet the company, is landed with having to pay out. The whole provision does not hold water. For those reasons, we have little sympathy with either Clause 10 or Clause 11.

Clause 12 is a slightly different matter as it concerns the Secretary of State setting up a company. We are told that the measure is necessary to enable the Secretary of State to form companies, for example with the Church of England, in order to promote a PFI. I believe that the Government are anxious to get something back for the amount of money that they have already invested in developing Curriculum online. Therefore, they are interested in setting up a company in that regard. That is fine although I am not convinced that Secretaries of State ought to be doing that. I do not see why a voluntary-aided school cannot set up a company jointly with the LEA rather than the Secretary of State doing that. A perfectly good joint company could be set up with the LEA as regards a PFI. I am not by any means convinced that PFIs necessarily give good value for money. There are a great many examples of PFIs going wrong. I am not sure that we should not try to eliminate the clause to prevent the Church of England making mistakes. I do not have much sympathy with that clause either.

I wish to discuss the amendments that we have tabled. We have tabled two to Clause 11. Amendment No. 25 seeks to eliminate the words, "if regulations so provide" in subsection (3) of Clause 11. We had a long discussion on that matter in Committee. We said that the matter would be rather awkward if there were no regulations. The Minister said that there would be regulations. We asked why, in that case, the phrase "if regulations so provide" should be included in the Bill. It is, as my noble friend Lady Blatch would say, otiose. It is unnecessary. It does not serve any purpose so why is it included? Let us get rid of it.

I now wish to discuss Amendment No. 26. I refer to the whole question of a company limited by guarantee and of any profits that are made being invested back into the participating schools. In that sense it would be a not-for-profit company. In Committee the Minister said that that would not necessarily be the case and that it could constitute a great disincentive to setting up a company. We pointed out that people, particularly governors, involve themselves in many activities in relation to schools to which they devote a great deal of their time and attention. They happily plough the profits from those activities back into the schools and therefore we do not see that to do so poses a major disincentive.

I turn to Amendment No. 29. Where the Secretary of State wants to set up a company, that company should be subject to the same limitations as any company set up by a school, as set out in subsections (3) and (4) of Clause 11. We argued, once again, that there was much to be said for that proposal—if the Secretary of State wanted to set up a company, it should be limited by guarantee and it should be a non-profit company. We feel that, in view of the way in which the clauses are drafted, the amendments are still valid and we hope that they will be agreed to.

My Lords, this is a big and challenging clause, and to remove it would severely mutilate the Bill. What new additional guidance will Her Majesty's Government give to our schools in relation to the making and running of companies and in aiming for the profitability of companies? In a few words, from whence cometh their guidance? Where is the school company practice, so to speak, that the head and governing body will reach for? Will there be, for example, company doctors?

I believe that the clause is worth while. It is, perhaps, a clause of its time. However, we need an assurance from the Minister that the Government have thought the clause through. Have they, for example, looked to the other side of the hill? What will the consequences be? Our schools need careful and detailed guidance if we are to go forward in this regard.

My Lords, I begin by declaring an interest as chairman of the national society to which the noble Baroness, Lady Sharp, referred. I am always prepared to accept guidance from her, particularly in relation to such an issue. I am quite out of my depth. I shall therefore read my brief much more closely than I normally do.

The view of the advisers of the national society on financial advice is different from that which the noble Baroness has just given us. I hope that I can persuade the noble Baroness not to press the amendments. We believe that they would have a significant effect on the replacement—or the non-replacement—of buildings of many voluntary-aided schools. The clauses that the amendments would remove are designed to enable the department to work in partnership through the PFI to extend the school building and replacement programme, which is well in hand. Since the introduction of that programme, as a replacement programme, there have been some high profile successes, but mainly one-off rebuilds of large secondary schools or LEA projects to replace school buildings and to run services.

The PFI has not worked anything like so well in relation to primary and other small schools, especially in rural areas, outside LEA projects because they do not provide potential for a large enough return for the private-sector investor. Many small school buildings that need replacing are not attended to through that method. Delivering the curriculum for the 21st century is made much more difficult by poor-quality accommodation. Pupils are being denied equality of educational opportunity by poor learning environments, which serve to stifle teachers' morale and the efforts to raise standards. Such school buildings can no longer provide value for money for the governors because they are a constant drain on the school's budget, needing constant "patch and mend" maintenance.

As the Minister, the noble Lord, Lord McIntosh, explained in Committee, the Church of England, through the national society, has been working with the department and Partnerships UK to create a national model, through a jointly owned charitable company, for replacing smaller time-expired schools. That will operate by clustering schools in regional PFI projects, and it aims to make the legal processes easier and quicker for the governing bodies concerned. The arrangement is quite advanced now in terms of consultation and negotiation. There will be great disappointment around the nation if the programme cannot go ahead.

The DIES indicated that the very lowest estimate of PFI credits that are available for voluntary-aided Church of England schools alone are worth some £40 million. That amounts to 20 new primary schools. Potentially, the figure could be more than double that sum. The national model of PFI will not undermine the conventional means of procurement for small Church of England schools. That pioneering model would eventually be available to all maintained schools — community, VA, VC and foundation— and would benefit schools in urban and rural areas. The power to form companies is key, as we see it, to enabling the PFI to work for clusters of small schools.

I believe that it was the noble Baroness, Lady Blatch, who charged that we have the powers already. However, my advisers are not convinced of that. The amendments would prevent the great majority of small schools accessing PFI credits and replacing time-expired buildings. It is for those technical reasons—they are, however, fundamental, not least in relation to the education of children in our smaller schools, particularly rural schools—that I hope that the amendment will be withdrawn.

My Lords, I wonder whether the right reverend Prelate can help me. I genuinely want to understand what he said. My understanding is that the Church of England, through the national society and working with the Government, is putting together an arrangement, if I can put it that way, or forming a company that will allow for procurement in relation to many Church primary schools. I refer to building, capital and refurbishment. Given that that is already being done, what is the brick wall up against which that body has come, which makes it impossible to proceed without the provisions in the Bill?

My Lords, this is a highly technical and legal matter and, as I said, I was speaking from a brief. I understand that bringing together a series of school governing bodies into such an arrangement is prevented or that there is some doubt about whether that can be achieved. Perhaps the Minister, who spoke so cogently about this matter in Committee, will be able to help the noble Baroness. I assure her that I should not take up the time of the House if our people did not believe that that approach was necessary.

My Lords, I and my friends in education would not cry ourselves to sleep tonight if these provisions were not in the Bill. I know—or, rather, I knew—of no one who wanted these provisions, other than the Government; I now discover that the Churches want them. We shall have a word on that in a moment.

When I first saw the Bill, it had not occurred to me that the provisions had anything to do with the replacement of schools. When reading Clause 10(1), it does not immediately leap to mind that it relates to school buildings and similar matters; it refers to "services", "facilities" and so on.

I read very carefully the remarks of my noble friend. I am not an expert on these technical economic matters but I do not see where the value added—the extra output—comes from in the PFI initiative. I have never understood that; and in this case I do not understand at all how resources can be there via the PFI that are not there via some other arrangement. Perhaps my noble friend can explain that.

On Amendment No. 26—the amendment of the noble Baronesses, Lady Sharp and Lady Walmsley—I stick to the view that schools exist to be schools. They exist to educate young people. Whatever else follows from that, if it cannot be demonstrated that the net gain is made available to the young people who are being educated, I have two questions. First, where does the net gain go if not to the young people who are being educated? Secondly, why are schools in that type of business if it is not for that purpose? I am completely at a loss in this regard; why is the answer to Amendment No. 26 that the provisions are already somewhere in the Bill because that is what schools exist for? If there is any doubt about that, it should be said very clearly that schools should not be engaged in any activities whatever that are not proper for schools. I regard schools as places that are to do with educating people, not with other matters.

This is no big deal. I was persuaded last time not to make a great song and dance about this matter. I do not believe that many people will get involved. However, if it turns out to be a big deal, I should at least like to be persuaded, first, how the net gain exists and, secondly, that the net gain is education.

My Lords, I rise to support my noble friend on the Front Bench on Amendments Nos. 24 and 27. The noble Lord, Lord McIntosh, will recall that this is the second occasion in three weeks on which we have discussed small business, of which we both have some experience.

When I looked at the earlier parts of the Bill, my mind went back to the remarkable series of films about St Trinian's and the cameo part played by Mr Richard Wattis as a civil servant in the Ministry of Education who had to deal with the school. I was reminded of the role that he played then when I thought of the innovation schemes coming into the department. Of course, in the St Trinian's films George Cole played a role of a spivvish nature which was a trailer for his later notable television series.

I was greatly relieved that in Committee the noble Lord, Lord McIntosh, said:

"It will not be permitted for them"—

by that he meant the companies—

"to have a general trading object".—[Official Report, 7/5/02: col. 1097.]

I looked for the explicit statement of that non-permission in the primary legislation and did not find it. But I acknowledge that it was implicit.

In these remarks I do not speak on what I would call the "defensive provisions" in these clauses—that is, the efforts of economic consolidation, about which the right reverend Prelate spoke. However, I say to the noble Lord. Lord Jones, who said that this clause was of its time, that simultaneously local authorities are being widely encouraged to become enablers rather than providers. The Bill seems to be going a little in the opposite direction.

I want to dwell on what I would call the "positive enterprise" aspects of the Bill, which I recognise to be a significant part. I echo what my noble friend said from the Front Bench about the amount of time involved. For more than a quarter of a century I was a trustee of a charity which had been going for more than 100 years. We had a very successful shop, as government are always encouraging that type of body—it was a museum—to do. But, due to carelessness within the engine room of the trust, arrangements were not made for the earning capacity of the trust in profit to be translated into a dividend back to the trust. One may say that that was a simple thing, but experienced trustees failed to realise that it was not occurring. We then had a profoundly long argument with the Inland Revenue, which proposed to tax us on all those profits rather than allowing them to be passed to the charity in an untaxed capacity as a dividend.

The amount of time that that renegotiation took is an ominous warning of what such a venture can lead people into. I certainly echo my noble friend—further allusion was made to it in the debate subsequently—in relation to the LEAs, which, in Clause 11, will need to have the skills to decide whether or not a school should be allowed to have such a company. It was said during the debate that they would not have the skill. However, if they have to acquire the skill, that will also require a heavy investment of time.

In summary, of course I understand that pressures are coming from different parts of the system for such companies to be allowed. However, I am not convinced that the upside potential from the companies which can do it, and which go ahead and do it, will exceed the downside potential cost if inexperienced schools are allowed to use such powers and then meet with unfortunate consequences, which, I fear, only too clearly might be the case.

My Lords, one cannot serve both God and Mammon, but it appears that the trick is to make Mammon serve God and then one can square that particular circle.

What worries me about this type of arrangement is the liabilities that the directors or shadow directors of the companies will land themselves with. Limited liability is not what it used to be. One can find oneself getting into all sorts of hot water if one does things which are outside the proper way of trading or if one does not take proper care of a company in which one is a director or shadow director. Very few governors of schools really have the time properly to exercise the duties of a director. Although they may well be considered to be shadow directors, they may suddenly find themselves banned from being a director of other companies. They may find themselves liable for the company's debts.

I believe that, at the very least, clear guidance will have to come from somewhere—I do not see a provision for it in these clauses—as to exactly what the liabilities are, how they should be handled, and how, if a company is to be set up, those who may be considered to be shadow directors, must conduct themselves. Layer upon layer of company law now presses down on company directors. We cannot allow ordinary people who become governors of, for example, a Church primary school to be laid open to that type of liability without first giving them a great deal of guidance. Although I have not been sent a copy of a letter as I did not participate in the debate in Committee, I have not yet heard anything in Committee or from the Government today which leads me to think that we are looking after such governors in the way that we should.

My Lords, I believe that in this debate one should recognise that a great deal of entrepreneurial activity is taking place in the education system at various colleges. It is occurring in city technology colleges and in some of the new specialist schools. And it is certainly part and parcel of the Government's intention that it should take place in the new city academies. Such activity is happening in a whole variety of ways— sometimes on an individual school basis, sometimes through a group of teachers coming together, and sometimes through a school taking an active interest in promoting a particular part of the curriculum and selling it to others. Therefore, as my noble friend Lady Blatch said from the Front Bench, a great deal of activity is already taking place.

I believe that we must he persuaded—I hope that we shall be—that this extra step is taken for other reasons because the present arrangements are inadequate. I was interested to hear the speech of the right reverend Prelate the Bishop of Blackburn. I considered that he made a very persuasive case for PFI—rather more persuasive that any Ministers are prepared to make. I believe that a little touch of capitalism from the Church is to be seriously welcomed.

In effect, the right reverend Prelate said that the advice that he has received from governing bodies on how the Church arranges such matters is that this arrangement is necessary to ensure that the benefit of PFIs is spread widely in a clutch of schools. Basically that is what he said. I dealt with advice bodies for several years when I had responsibility for this matter and I was always very impressed with their professionalism. I would expect, and hope that the Minister will confirm, that the provision is necessary. If that is the case, then I believe that these clauses should remain part of the Bill. I have nothing against them in principle.

The noble Lord, Lord Peston, is against them in principle, as he made very clear in Committee. I remember what he said. I treasure every word that the noble Lord says; he is one of the few remaining spokesmen of old Labour in this House. He does not like profits and dividends, which this type of arrangement is likely to throw up. I say to the noble Lord, Lord Peston, that profits and dividends are a rather good thing as they make the world go round. So long as the profits and dividends flow back into the educational world, that will be another reason for welcoming these changes.

I hope that, in replying, the Minister will be able to say that, in one way or another, the present arrangements are inadequate along the lines set out by the right reverend Prelate the Bishop of Blackburn. If that is the case, I believe that the clauses should remain part of the Bill.

My Lords, I shall introduce my remarks on this group of amendments by saying two things. First, although the noble Baronesses. Lady Blatch and Lady Sharp, have put their names to the same amendment, my recollection from the Committee stage is that they approached these clauses and proposals from very different points of view. The noble Baroness, Lady Blatch, as she confirmed today, was fundamentally in sympathy with the proposals for school companies and entrepreneurial activity, as the noble Lord, Lord Baker, called it. However, the noble Baroness, Lady Sharp, was deeply suspicious of the whole thing. She would not have called it a "capitalist plot", as my noble friend Lord Peston would have done, but she was getting close to it. Therefore, let us remember the different points of view which are coming together for the purpose of this group of amendments.

The second point that I must make at the outset is that this all arises because we have been extremely open in describing the proposals. After all, the speech which the noble Baroness, Lady Blatch, made in Committee arose because we had a 13-page policy statement on school companies. The noble Baroness made a very detailed criticism of that policy statement. I have no objection whatever to that. She subjected it to a fine-tooth comb textual analysis.

I then sent the noble Baroness a five-page letter, a copy of which—I am sorry to say—did not reach the noble Baroness, Lady Sharp. It was certainly intended to; indeed, my file copy was marked to the effect that a copy would be sent to the noble Baroness at the same time. Now the noble Baroness, Lady Blatch, has subjected my letter to a detailed textual analysis, which lasted 15 minutes. Well, that is what legislative scrutiny is for. I cannot have, I do not have, and, indeed, I shall never have, any criticism of the noble Baroness for doing so. It is because we have tried to be as helpful as we possibly can in our explanation of these proposals that this degree of detailed analysis has arisen.

Perhaps I may try to deal with as many of the points raised by the noble Baroness as I can. I was not able to deal with them on the first occasion, because, as she said, I did not have notice of them. However, at least I have the letter in front of me this evening, and I shall now try to interpret my own letter.

The noble Baroness started by saying that schools might not have the time to form companies, and questioned whether they would produce time-saving benefits. There are two points to consider here. The first is why we must have companies, and why they can do things that other organisations are unable to do. The fundamental answer to that became clear in Committee. Although individual schools can form companies, groups of schools cannot do so. There is no way in which they can commit each other to the kinds of activities that a company can undertake. It also became clear in Committee that the powers are simply a useful enabling device, which is not essential for all of these joint arrangements. Nevertheless, they can be helpful.

There are very few things in life for which a company is essential. Indeed, this could be achieved through a partnership rather than incorporation. The advantages of having incorporation in a company are, first, that it allows limitation of liability. I listened to the remarks made by the noble Lord, Lord Lucas, but the restrictions on the limitations of liability under the Companies Act mean that you have to go to very considerable neglect, or even fraud, to become personally liable under that legislation. Secondly, a company is simple, transparent, and every one knows what it does. The Companies Act applies, and there is an existing legislative framework—you do not have to invent it all from scratch. Forming a company may not be essential, but it can be most helpful for schools that want to do so. I cannot see why anyone should want to deny schools this freedom.

As regards the examples given of schools combining to purchase jointly without this power, that is perhaps a possibility. But what about those from whom they are purchasing? Surely the people from whom they are purchasing will want there to be someone against whom there is some come back, so to speak. We have already observed that the local education authority has to pick up the tab if things go wrong. The existing power to have a school that takes the lead or employs a bursar means that the school is acting as agent for other schools. That is not the framework for joint decision. It does not give an individual school the protection of limited liability that the company arrangement would provide. As I say, suppliers are likely to be reluctant to give savings on a bulk order where they have to be content with a contract with several individual schools rather than with one company that represents all of them.

The fundamental point about this part of the argument is that a company is the easiest way for several schools to act together because it is on a template that already exists, and which has existed for many years. It is applicable only where there is more than one school that wants to act jointly in this way. The costs referred to are the costs of setting up, but they are really quite minimal and will become even lighter at later stages when the company is established.

The noble Baroness, Lady Blatch, had a whole series of questions about the supervising authority and about what I described in my letter as the "light touch". However, she did not quote my comments on what a supervising authority might do:

"it may direct the company to provide it with information on the company's finances, management and contracts; it may direct a governing body which is a member of the company to reduce its involvement in the management of the company; and it may direct a governing body, which is a member of the company to resign as a member of the company".

The latter are not constant day-to-day interventions in a company, but they are the necessary protection for the local authority. That is why I stated in my letter that a supervising authority needs to have,

"evidence for its decision, and will be bound by the general duty on LEAs to act reasonably".

It will not be second-guessing every decision of the company, but it will have the powers to come in and act if anything appears to be going wrong—just as happens now with its powers to suspend a school's delegated budget. Incidentally, the noble Baroness, Lady Blatch, used the phrase "cost free". I never said that it was cost free; I said that the costs are minimal because of the existing template.

The noble Baroness queried the mention in my letter of purchasing companies joining together,

"to buy only what their members would normally buy".

Such restrictions will have to appear in regulation, and they will have to be imposed on local education authorities in their two roles: first, as approving the company in the first place; and, secondly, as acting as the supervising authority.

As regards the section in my letter headed "Bureaucracy", I said that there is no requirement for the LEA to be involved other than in the role of supervising authority, but I stated that that would apply once the schools have the permission of their local education authority to form or join companies. Those are the two significant roles. As to the role of the Secretary of State, I should remind the House that the Secretary of State only becomes involved when we reach Clause 12, which deals with the PFI on which the right reverend Prelate and the national society were so eloquent. I agree with every word that the right reverend Prelate said in that respect. But, to return to the question of whether or not it is a purchasing company, a "service providing company", or a PFI, I should point out that all of these things are voluntary; nothing is forced on any school.

The noble Baroness asked me about schools that are under suspension. In my letter, I said that,

"if a budget were only suspended for a short period, leaving the company may not be necessary … [but] if a budget were suspended for a long time it may be better for the school to withdraw from the company".

The issue of a possible take-over seemed to worry a number of noble Lords. We are talking about private companies. There is no market in their shares, and, therefore, no possibility of a hostile take-over. A takeover could take place only if a majority of the school company members agreed to sell their shares to a third party. Under what circumstances could that happen, unless it were to the benefit of the schools? Frankly, I cannot imagine it happening. However, under company law I suppose that we have to allow for the possibility that it might happen. But, fundamentally, if there is no market value for the shares, the opportunity for a takeover and for anything that gets away from the education system—which, I suspect, is the fear behind this—is minimal, if it exists.

The noble Baroness asked about the,

"market scan of alternative broker/provider organisations".

I too find that jargon horrible. Where that exists, it is felt that at present there are not the powers to complete plans, as the North Romford School Improvement Consortium feels. That is why that consortium supports this.

On the issue of dedicated staffing resources, I have to reiterate what I hope was made clear in Committee, that a company cannot employ a head teacher; he or she has to be employed by a governing body. No teacher can be obliged or even bullied into moving to work for a company. Only if the activities of a company are complementary to the activities of the schools, for example educational activities—I agree with my noble friend Lord Peston—would the transfer of staff arise. The idea of employing a bursar who may otherwise be called a manager of a company does not appear to me to be so extraordinary.

I believe I have answered the question that the noble Baroness, Lady Blatch, raised about the ability of the Secretary of State to be involved in the operation of companies. There is no provision for that in Clauses 10 and 11; only in relation to Clause 12, when we come to the PFI option for school companies, could the matter arise.

I turn to the specific amendments of the noble Baroness, Lady Sharp. On Amendment No. 25 she rightly described the different purposes of school companies to purchase goods and services together or to deliver services. I believe that she was worried about the idea of regulations providing for a company limited by shares and that that may go wider. I recognise the strength of those concerns, which have been expressed twice, so I am willing to return at Third Reading with amendments that will require companies to be limited either by shares or by guarantee, which would be the normal situation, and we shall bring forward an amendment requiring regulations to be made limiting who can join companies. I hope that we have made it clear what the regulations were to do, but we shall make it even clearer by putting that purpose on the face of the Bill.

Amendment No. 26 is a relatively limited issue. If, under the amendments that we shall bring forward and under regulations, outsiders are to join in—they may be printers or, horrors, marketing people—surely they would want to be involved on a profit-sharing basis. The profits would have to be shared fairly and the role of the schools would have to be protected in the way in which the profits were shared. But one may lose the opportunity to acquire willing and useful partners if there was not a possibility that they could take a share in the profit. However, the fundamental principle must be, as my noble friend Lord Peston rightly said, that there must be a net gain from such an activity to the young people in the schools concerned.

Amendment No. 28 has been dealt with. It concerns the role of the Secretary of State. The amendment would have some funny implications, like a requirement for the Secretary of State when she invests to seek external approval for any borrowing, and it is difficult to know what that external approval may be. I believe that through this debate it has become clear enough what is the role of the Secretary of State and that both the Government and the Churches believe that the existing powers are not suitable for those purposes.

I apologise for the time taken to reply but it was a long and complicated debate. I hope that the amendments will not be pressed.

My Lords, I am grateful for the detail with which the noble Lord has responded to the amendment. He may heave a sigh of relief when I tell him that this morning the amendments were to form three groups and I suggested that we have a portmanteau debate on the whole subject of companies so as to deal with them in one fell swoop. Taking that into account I believe that we have done well to achieve all that in an hour.

I want to read what the noble Lord has said. This subject is complicated and we have a number of concerns about it. I do not expect an answer immediately, but I would like to know about the case in point put by the right reverend Prelate. What is the company to which he referred? Who are the members? Given that the bodies will be national bodies, who will pick up the liability should the company fail? Clearly, it cannot be the local education authorities. Although the right reverend Prelate talked about small primary schools, he used the word "involving" and did not say that they would become company members. Is it intended that they should become part of the company in penny packages? Where a school has been refurbished or a capital programme has taken place, should that school for that purpose become a company member?

My Lords, perhaps I can write to the noble Baroness on behalf of the National Society to spell out the situation. I would like someone more knowledgeable than I am on this subject to respond.

My Lords, I am grateful for that. One cannot spirit £40 million plus out of the air. It has to be paid for. There will be a continuing liability to meet the cost of securing £40 million plus. I would like to know what is better, cheaper and easier under that arrangement than they would be under PFI arrangements or under the normal catalogue programme arrangements. 'The right reverend Prelate spoke of the likelihood of replacing 20 or more primary schools for £40 million. That cannot be done under the present arrangements, so given that we are still talking about large sums of money, most of which have to be funded in some way, what will make that happen?

I am interested in what the Minister has to say about limited guarantees. When companies go belly up somebody somewhere loses a lot—of money. Are we saying that the LEAs do not pay, that the schools do not pay, and that the company members are not liable, except perhaps for £10 liability? Who will go to the wall? Who will pick up that liability? I do not understand that, so it would be helpful to have an explanation of the involvement of the National Society. I do not want to be a party-pooper. If there is a solution to capital programmes I believe that we should support it, but I want to know precisely to what we are agreeing.

The Minister said that the difference is that groups of schools can become companies as opposed to single schools becoming companies. But so far all the examples that we have been given show that they can come together corporately. The Minister made the point about buying power and suppliers need a single point of contact to ensure that the bills are paid. It is simple. Groups of schools come together; they all look at the catalogues that the suppliers make available; they all give their corporate order, which goes in; the schools pay into the pot; and the goods are distributed around the schools. The savings will be enjoyed by all the schools because they will buy books, pencils, computers and so on at a cheaper rate. The suppliers are willing to work in that way. If there is a sale they will be happy to ensure that it is concluded.

I am very sceptical about what the Government say about the supervising authority. In this Bill the supervising authority has a number of obligations under the law which the Minister spelt out in detail. They cannot possibly exercise that supervising obligation without knowing what is going on. They can only know what is going on either by the information provided to them by the company or by going into the company. If something goes wrong, it is important not to find out too late. The supervising authority should provide a guiding hand to the company so it needs to be involved.

Perhaps I can take a moment in trying to be unequivocal. I can remember a governing body of which I was a member. A certain character came to that governing body. Whenever we were talking about, for instance, school uniforms, he would say, "You want school uniforms? I can get school uniforms". Then we would talk about something else and he would say, "You want that? I can get it", and that went on. He turned out to be a really bad lot and the school was well rid of him when he left. Perhaps as an after-dinner speech I will describe the manner of his going; it was very interesting.

But it was not amusing. Under these clauses, that sort of person could serve on a governing body and say, "Look, all we have to do is become a company. We can provide school uniforms. We can do this and that". I am in the business of making sure that whatever we do and whatever we agree to legislate for, the protection is there for some very innocent people whose job it is to see that the school is run well, that teachers teach and that children learn. At the end of the day it is right that we should be devil's advocate with some of the questions we pose.

There does not appear to be any requirement that the activities of the companies need necessarily be educational. We have talked about third parties who have no educational interest whatever being part of the company. Again, having been involved with charities over many years, I recognise that schools are also charities. These companies will not be charities. Laws govern how charities spend their money; they have to spend it for the benefit of the charity. But in company law there is no such requirement governing where a company's profit should be spent. I want to know what it is that legally obliges the company to spend its profits in the interests of education.

I am sorry I have taken up the time of the House. These are important questions. If, we are to legislate in this way, we should ensure that all the safeguards are in place so that the schools benefit and the education of our children is not disrupted. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.