§ 11.43 a.m.
§ Lord Davies of Oldham
rose to move, That the draft order laid before the House on 11th July be approved [27th Report from the Joint Committee].
The noble Lord said: My Lords, on behalf of my noble friend Lady Andrews, I beg to move that the order be approved. The order is made under provisions in the Deregulation and Contracting Out Act 1994. The order amends the Contracting Out Order 2002 which noble Lords will remember debating on 28th March last year. It was the last item of business on Maundy Thursday, but that did not prevent the House having a full debate on the issues. This order is a minor extension of that.
Before the 2002 order was enacted, LEAs were restricted from contracting with any other body to deliver services that required the exercise of discretion in individual cases; for example, duties to secure school attendance for pupils not receiving suitable education. Such contracting was possible under a direction from the Secretary of State only when an LEA was not delivering on its statutory functions. LEAs did not have the option of contracting to obtain access to a wider pool of expertise or to obtain better value for money. That is why we consulted on, and then made, the 2002 order, which listed the 103 functions that an LEA may voluntarily contract out to improve its services.
It is important to note that although contractors may carry out functions on behalf of LEAs, the LEAs remain ultimately responsible and accountable for all the contracted out functions. They continue to set direction and strategy, the implementation of which must be 556 reflected in their contracts. Contractors may take on functions such as consulting on and implementing local authority strategies and policies.
In consultation last year on the draft first order, most respondents welcomed the freedom and flexibilities offered by contracting out. The main order came into force on 1st April 2002 and several LEAs have since been considering exploiting the opportunities it provides. Mindful of the anxieties often expressed from the Opposition Front Bench of the untold burdens on local authorities and schools of excessive bureaucracy, we have not undertaken surveys or used other bureaucratic means to find the number of LEAs using the order. It is early days: contracting out takes time for local consultation, member agreement, and tendering and drawing up a contract which ensures the LEA's accountability is as clearly set out as the contractors’ remit.
However, several LEAs have contracted out the provision of support services to schools. Many LEAs, particularly smaller ones, face problems of insufficient capacity to deliver some of their administrative functions. One LEA in particular is soon to enter into a partnership with a private provider to create a joint venture company to deliver the full range of LEA services to schools. We will be interested to see how the additional capacity to be released by the engagement of the private provider will improve services to schools.
The option of contracting out the delivery of these services allows authorities to source the best provision from a competitive market. In addition to achieving best value through partnership working, the LEA will free up resources that can be used for its core functions of strategic management and planning. We have provided guidance to LEAs on voluntary contracting out and are updating this in response to the feedback received.
This order has a simple purpose: to update the 2002 order with three new functions created or amended by the Education Act 2002. First, the order enables a local education authority to authorise a contractor to co-ordinate school admission arrangements in its area between itself and those maintained schools which are responsible for their own admissions. LEAs already have the right to contract out the administration of admissions functions if they so wish. Giving LEAs the opportunity to contract out arrangements for co-ordinated admission is a logical extension of that. The processes are similar. Only the administration may be contracted out. Decision-making will remain with the LEA. As much of the admissions process is purely administrative—for instance, sending out consultation letters and collating responses, and administering a database of applications and potential offers—we can se no reason why LEAs should not be given the opportunity to contract out these administrative functions.
Secondly, the order allows LEAs to contract out the review of the sufficiency of childcare provisions for their area and the provision of a childcare information service. Contractors could entirely run the local children's information service and carry out early years and childcare audits. We have recently published comprehensive Sure Start guidance for authorities to 557 follow on their strategy and delivery of childcare. We are also providing funding of some .31 million for childcare information services.
Thirdly, the order allows an LEA to engage a contractor to gather and provide copies of the consistent financial reporting returns of maintained schools to the Secretary of State. The LEA may contract out only the administrative function, and the responsibility for the accuracy and submission on time of those returns remains with the LEA. The duties imposed by Section 44 of the Education Act 2002, and the subsequent consistent financial reporting regulations, fall on the governing bodies of maintained schools. They must submit their CFR returns to their LEA on the date it has set. The LEA then checks the returns and sends them to the Secretary of State.
That explains the three main functions in the order. It is an enabling measure and therefore does not force LEAs to contract out if they do not wish to do so. It allows local education authorities to secure better-value services for their schools and the local community. LEAs may not voluntarily contract out their most important strategic functions, and they retain responsibility and accountability for the functions that they may contract out. The order promotes partnerships between the public, private and voluntary sectors in trying out new and better ways of delivering services. It has been welcomed by the LEA sector and places no new requirements on it. We believe that it is an efficient way to proceed. The order makes three minor additions to the 103 functions already in the first order. Therefore, I commend it to the House.
Moved, That the draft order laid before the House on 11th July be approved [27th Report from the Joint Committee].—(Lord Davies of Oldham.)
§ Baroness Seccombe
My Lords, I thank the Minister for his description of the order and for the explanation of what it is designed to achieve. As I understand it, this is the continuation of a process initiated in 2002, when 103 activities that could be contracted out by local education authorities were identified. Now we are adding to those a further three.
As a principle, we on these Benches appreciate that contracting out can be a highly beneficial process because it improves efficiency. In the case of LEAs, contracting out can also achieve great cost savings, and for that reason we shall not resist the order. However, there are a few matters on which I would like reassurance from the Minister.
What has prompted the Minister to single out these three areas as candidates for contracting out? What take-up by LEAs is anticipated and at what cost saving? Is the Minister confident that the costs saved will not be outweighed by the inconvenience of providing a contractor with all the information that he requires?
In addition, I am concerned about whether safeguards are in place to ensure that that delicate line between policy and administration is not violated. The Minister says that the former remains the responsibility of the LEA and that the latter can be contracted out. But how 558 can that demarcation be sustained and guaranteed? Surely the issue is not as black and white as that, with contractors across the country accepting greater and lesser degrees of responsibility and some sailing closer to the policy boundary than others.
It seems that the direction in which we are heading— I should be interested in the Minister's opinion—is that, wherever savings can be made, the entirety of the LEA's administrative role will be able to be contracted out. That will leave local education authorities with only a narrow policy role. Can the Minister tell me how far down this road we are already and how much further he plans to go?
§ Baroness Sharp of Guildford
My Lords, I, too, thank the Minister for having explained the order to us. We shall not oppose it on these Benches. However, I also want to raise a number of questions about the order.
First, I echo the words of the noble Baroness, Lady Seccombe, in saying that we wonder what use will be made of the three additional functions. To date, in the debate that took place in the House of Commons, the Minister was able to talk about three authorities which had made use of the contracting-out procedures in relation to the 103 separate functions that we gave them last year. The Minister explained that the process obviously takes time.
Equally, we gave the authorities a vast range of functions that they could contract out and only three have taken that up. One, as the Minister will know as it is his beacon authority, is my own authority of Surrey County Council. I point out that the other two authorities are Conservative. Surrey County Council has been a beacon authority for the Government and a Conservative authority in leading this contracting-out procedure.
Because the Minister spoke about general contracting out, he will know that Surrey is now proposing to contract out a whole range of services. That business is going to a leading defence contractor—namely, Vosper Thornycroft. Some people in Surrey County Council have wondered what competence a defence contractor such as Vosper Thornycroft might have in relation to the provision of education services. However, the company is getting round that issue by employing a great many people who were previously employed by the local education authority in Surrey County Council. That is all well and good because it means that they will continue in employment and receive higher salaries, which is also extremely nice for them. Vosper Thornycroft is employing them back into the services of Surrey County Council at—with a profit on top—considerably greater expense. Therefore, one wonders what the cost-benefit analysis of the whole procedure might ultimately be. Perhaps the Minister will comment on that.
We also question how many authorities will go through with these procedures in future. I want to take up the question raised by the noble Baroness, Lady Seccombe, concerning the boundary between the decision-making issue, which clearly still lies with the local education authority, and the whole question of contracting-out procedures.
559 Consultation among parents in relation to admissions procedures is contracted out. Perhaps I may point out that admissions is a highly sensitive area within local authorities, as the Minister well knows. The process of consultation is also obviously highly sensitive. When one reports back on the consultation, who draws up the report? I believe that the procedure is sometimes quite difficult. The officers draw up the reports, but is there really virtue or advantage in having a completely separate organisation to send out all those pieces of paper and collate the returns? Whoever collates the returns also needs that information if they are to advise the authority on the decisions that it should be taking. If, in this extraordinarily sensitive issue, an officer is to write a report on the process of consultation and on the views expressed, he will want to see the whole range of returns that have been submitted and feel—I believe the term is "internalise"—the information contained in the consultation process. Therefore, I wonder how far one can draw boundaries between these matters.
I also noticed that responsibility for the accuracy and submission on time of the accounts remains with the LEAs. If the LEAs must check their accuracy and timely submission, what virtue is there in contracting out? Therefore, I return to the central question: is there any purpose in these regulations?
§ Lord Davies of Oldham
My Lords, I am grateful for the contributions from noble Lords opposite. It will be recognised that this order is a minor addition to the order of last year. Last year we identified 103 functions that could suitably be put into the voluntary framework—I stress the word "voluntary"—of which the local authorities would have the right to avail themselves if they so wished.
We have added three areas to those contained in the 2002 provisions that, after consultation, we consider can usefully help with the ability to develop contracts—the main point made in both contributions from the Opposition Benches. They are areas related to establishing clearly in a contract the boundaries of policy and decision taking—responsibilities of the LEA—and the bureaucratic and administrative processes. The requirement is that the contract has to specify those matters with the utmost clarity.
At this early stage I am open to the challenge of what benefits can be established from the process thus far. I shall make the obvious point that it is still early days and it takes time for contracts to be established so we do not have a track record to which to refer. But it will be recognised that there are bound to be start-up costs. At this stage it is difficult, on the basis of experience already accumulated, to establish value for money.
However, the point is obvious and relates to a whole range of other areas where such contracts have been established. Specialist organisations can bring to a function on which a local authority's ability may be limited a level of expertise acquired from operating in other areas. That would enable both parties to draw 560 down wider resources and experience and, if necessary, they can see that their own administrators are closely involved in the exercise.
I appreciate the point in regard to Vosper Thornycroft. We all know of its reputation in the area of defence, but it will be recognised that the aspects of its expertise which are being drawn down with regard to these particular contracts will be, of course, administrative expertise and bureaucratic expertise.
§ Baroness Sharp of Guildford
My Lords, perhaps I may point out to the Minister that in some senses its organisation and its management expertise was not always regarded as being necessarily of the highest calibre. It is having to buy in the educational administration expertise to cope with the task.
§ Lord Davies of Oldham
My Lords, I would be more than a little surprised if an organisation that is so remote from the world of education did not have to buy in a certain degree of educational expertise to fulfil such a function.
There is a gain to be made from bringing in organisational and administrative expertise. Local authorities have an ultimate responsibility to their electorates. A failure with regard to such a contract inevitably would rebound upon a local authority which has to take ultimate responsibility for everything that is done in its name. As a consequence, it is clear that a concept of these permissive functions is faith in the local authority to be able to make a judgment about best value. One may say that a number of local authorities or the majority of local authorities will not see gains from this permissive legislation, but it is quite clear that local authorities and the education world are proceeding with great care and caution. We have not had rapid development against the 2002 order for all the reasons that have been rightly identified in the contributions made by the noble Baronesses, Lady Seccombe and Lady Sharp.
I recognise that this is an area in which we are still testing the waters. That is not to say that the issue of public/private partnerships has not brought significant rewards elsewhere in the public service. But in an area that is as significant as those that we are debating today, and particularly in the area that relates to education activities by local authorities, we recognise that, first, local authorities are rightly jealous of their records in the past. Secondly, local authorities will be mightily concerned that the clear issues of the policy for which they are responsible, and for which they are answerable, are absolutely central to the contract. That is why the contracts are being drawn up with great care. It is also why we are moving slowly in this area against a background, as rightly identified today, of educational objectives of crucial importance to our nation. Such educational objectives can be arrived at only by responsible authorities who, when they subcontract, must ensure that the contracts adequately fulfil their obligation.
§ On Question, Motion agreed to.