§ 1.17 p.m.
§ Baroness Blatch rose to move, That the draft regulations laid before the House on 20th June be approved [22nd Report from the Joint Committee].
§ The noble Baroness said: My Lords, I beg to move that the draft Education (Inter-authority Recoupment) Regulations 1994 which were laid before the House on 20th June be approved.
§ I shall briefly explain the purpose of the regulations laid before the House under the affirmative resolution procedure. They concern the process of inter-authority recoupment whereby one local authority pays another for educating a child who crosses the authority's boundary to go to school.
§ The regulations apply to both England and Wales. They are made under Section 51 of the Education (No.2) Act 1986, as amended by Section 279 of the Education Act 1993. This provides that inter-authority recoupment should no longer be automatic and instead gives the Secretary of State power to specify in regulations the scope and nature of recoupment.
§ We made clear when the 1993 Act was before Parliament that we would not make any regulations until we had consulted extensively. These regulations represent the outcome of over a year of consultations with the local authorities, the Churches, the teacher associations and those with an interest in special education. We cannot fully please everyone, as is usually the case, but these final regulations reflect a broad consensus on the way forward.
§ Changes to the recoupment system are needed to ensure that more money goes directly to schools and other services without the present bureaucratic waste of resources. I can definitely confirm that the system at present is exceedingly bureaucratic and exceedingly wasteful of resources. The present system of authorities 507 billing each other not only wastes £2 million per annum in administrative costs, but also leads to delays and disputes, some of which have dragged on for years. Some £300 million is being shuffled around the present recoupment system, and the delays in getting such large sums to where they are actually needed are needlessly disruptive.
§ That problem is going to get worse as more parents choose to send their children to schools in neighbouring authorities. And the expansion of the grant-maintained school sector makes it anachronistic for money to pass between LEAs for pupils educated at schools for whom the LEAs are no longer responsible.
§ Under the new arrangements, from 1st April 1995 local authorities will get funds directly through their standard spending assessments for all the pupils being educated in their schools, regardless of residence. From the same date, recoupment will end for the vast majority of pupils.
§ But the regulations retain recoupment for special school pupils, statemented pupils in mainstream schools and children educated in hospital, because these categories of pupils can be expensive to educate and the pattern of provision is uneven. There is a broad consensus that recoupment should be retained for such pupils. The regulations also allow neighbouring authorities to operate recoupment for other categories of pupils if they consider that local circumstances make this appropriate.
§ There is nothing in these regulations which will prevent us from targeting extra resources for children who need relatively expensive education; its very flexibility is its strength. I cannot believe that your Lordships would want to retain the current inter-authority recoupment arrangements, which have become a wasteful game of pass the parcel. That parcel consists of millions of pounds which should be spent on our children's education. I therefore urge the House to support the Motion and approve these regulations.
§ Moved, That the draft regulations laid before the House on 20th June be approved [22nd Report from the Joint Committee].—(Baroness Blatch.)
§ Baroness David
My Lords, I thank the Minister again for explaining the regulations. I have to say that the majority of LEAs regretted the Government's late decision to table an amendment to the Education Bill in February 1993 to alter the legal framework within which inter-authority financial recoupment for extra-district pupils operates. Under the amendment the Secretary of State for Education was given power to make regulations under which most recoupment would end and a compensating adjustment would be made to the primary, secondary and 16-plus elements of the education component of the standard spending assessment so that they would be based on the number of pupils attending the LEA's schools, regardless of their LEA of residence.
The objections raised at the time remain valid. First, the Government's proposals represent a fundamental erosion of the constitutional principle that LEAs are responsible for their own residents. Secondly, recoupment, in principle and in practice, is more flexible 508 than the grant system and better able to cope with sudden and significant increases in the number of pupils to be provided for and with any significant demographic change. How will the Government know in advance how many children will move from one LEA area to another—and indeed in the course of the year? Thirdly, the Government's proposals are unlikely to create any significant administrative saving, especially as special education is to continue to be the subject of recoupment. Five thousand pupils educated in special schools outside their own area involve 100 education authorities. Therefore there may be a significantly larger number of LEAs involved if the present reorganisation goes ahead.
I know what the Minister said about bureaucracy; and I know what the Parliamentary Under-Secretary of State said in the Commons: he referred to the bureaucracy of the present system, claiming that removing 95 per cent of the pupils from the recoupment system will lead to a massive reduction in bureaucracy. But that is not the case, as recoupment will be maintained for the most difficult and time-consuming cases; namely, for children in special schools, for children with statements in mainstream schools, and for children in hospital schools.
In 1993, the 1986 Act was amended to allow for recoupment for children under statutory school age. Although it is a policy of the Council of Local Education Authorities to support under-fives recoupment, following consultation the majority of LEAs came out against it, although not a majority of AMA member authorities.
As LEAs receive SSA for the number of children under five in their area whether or not they are in attendance at school, there is no financial incentive to make nursery provision. That is important. Those LEAs that make nursery provision must accept pupils from other LEAs because of the Greenwich judgment, although they can expect no recompense from these pupils' LEAs.
Regulation 3 does provide for voluntary arrangements for under-fives recoupment, but that is not satisfactory. If nursery provision is to be improved, the regulation should be amended to remove this anomaly.
I have to say that these regulations represent further opportunity for the Government both to reduce local government discretion and accountability and to control spending levels because they accord yet greater significance to the revenue support grant. The Government have asserted that the expansion of the grant-maintained sector makes the operation of inter-authority recoupment increasingly cumbersome and anomalous. But it is still the case that in many LEAs there are either no grant-maintained schools or very few. GM schools do not in any event have to be funded through the LEA.
It is accepted that there is a problem in the Inner London area, where the dismemberment of ILEA created a large number of small LEAs. In some parts that has resulted in up to 60 per cent. of pupils crossing borders. The problem then is that recoupment rates effectively determine an authority's education budget. That is not changed by switching from recoupment to grant: an LEA is unlikely to increase its council tax to improve facilities in its schools if the benefit is to go to 509 the children of families who do not pay the tax in that authority, whether the other income towards costs comes from recoupment or from government grant. It would though have helped had the regulations required recoupment claims to be paid within 12 months of receipt. Unfortunately, the legal advice received by the DFE is that there is no power to impose such a deadline. I would like to ask whether that is really the case, or whether the department can do anything to encourage earlier payment.
Discussions are proceeding in the Environment Department's sub-group, which is considering reform of the SSA system to accommodate the change from recoupment in respect of mainstream education to incorporation in the SSA. Even at this late stage—late because the new SSA methodology has to be agreed by the autumn of this year for the new system to be in place from 1st April 1995—there are still important outstanding questions: for example, the extent to which decisions as to the responsibility for the provision of home to school transport and education welfare services should rest with the home as opposed to the educating LEA; and whether, if such obligations are to be borne by the educating LEA, the SSA as at present calculated would be adequate—I hope that the Minister will comment on that point.
In all these circumstances it would be prudent of the Government to give serious consideration to postponing the proposed date for the coming into force of the regulations for at least 12 months; that is, for the new regulations to come into force on 1st April 1996. Such a postponement would have the additional merit of giving any new LEAs time in which to come to terms with the new arrangement. Will the Minister say whether she or the department would be willing to give proper consideration to this postponement?
§ Lord Addington
My Lords, I rise to speak very briefly. In the situation in which we find ourselves after the government changes, these regulations are probably necessary. They provide for resources to follow pupils to make sure that they get the appropriate teaching. Although we on these Benches are not very keen on the reduction in the role of local authorities in planning, we are prepared to welcome these regulations because they appear to address a problem.
Perhaps I may also add my congratulations to the noble Baroness on her transfer to the Home Office. She will be missed in our debates on education. I hope that she will be able to join in again from time to time.
§ Baroness Seear
My Lords, I have a nasty suspicion that the unfortunate noble Baroness will once again be expected to deal with education on top of her new duties.
§ Baroness Blatch
My Lords, again, thank you for those kind remarks. I have a horrid suspicion that the noble Baroness may be right.
I say to the noble Baroness, Lady David, that to suggest that there is no saving is simply not true. Recoupment will end for 95 per cent. of pupils, and that really must produce a saving. To invite us to postpone 510 these regulations would be to delay the possibility of allowing much needed savings to be addressed to the children within the system and to allow local authorities to make better use of that money.
Since most of the recoupment exercise is unnecessary and bureaucratic, it is a role that local authorities can well afford to lose. If anything, LEAs would welcome the opportunity to stop spending money on administering recoupment and spend it on schools instead.
As to the link between local authorities and their local taxpayers, the income raised from local taxes now accounts for a relatively small proportion of local authority expenditure, and especially on education. Increasing numbers of parents are choosing to sever their links with the LEA by sending their children to schools outside their home authority areas as choice is extended to them.
There was a reference to delays in the present system. I have to say that the present system gives rise to many disputes about recoupment, especially in London, which I know has been singled out by the noble Baroness, where many pupils cross borough boundaries. Those disputes involve hundreds of thousands of pupils and hundreds of thousands of pounds. They drag on not for weeks but months, sometimes even years. Sometimes they become acrimonious. Some authorities are still in dispute about what happened back in 1989. That cannot be good for the relationships between local authorities and cannot be good for budgeting.
The price of all that is not just the £2 million that it now costs to administer the recoupment scheme. I daresay many schools would like a share of the extra resources that that represents. But I have to say that the sums involved in the recoupment system add up to over £300 million. Delays and unpredictability in the transfer of so much money can have a substantial impact on the delivery of education.
I was asked whether local authorities would be unlikely to increase their council tax to improve facilities in schools if the benefit were to go to the children of families who do not pay the tax. Income raised from the council tax now accounts for a small proportion and in a sense my answer to the previous point covers that matter.
A point was raised about the under-fives. After a good deal of thought and considering the differing views put forward by those who responded to the consultation paper, we took the view that recoupment for under-fives without statements of special needs or in hospital should be voluntary rather mandatory, for the time being at least. During the consultation exercise it became apparent that local authorities valued their freedom to adapt their own policies on provisions for under-fives. We concluded that in the absence of a clear consensus on the issue it would not be right to disturb the status quo.
As part of the annual consultations on the local government finance settlement, my officials are holding detailed discussions with the local authority associations on the best way to achieve agreement. Those discussions are still taking place and are making helpful and, we believe, constructive progress.
511 On that issue, as on the regulations themselves, we are at pains to proceed on the basis of consensus with local authorities because we feel that that will achieve the best way of implementing the policy. We shall continue to do that.
I was asked whether the SSA would cover transfer. The voluntary recoupment arrangements allow for flexible arrangements for the kind of issues referred to. It is our view that the flexibility within the system will be strengthened rather than constrained. I commend the regulations to the House.
§ On Question, Motion agreed to.