Lessons from the Academies Act

The Academies Bill became law at the end of July. Sarah Morley looks at the how the debate influenced the final shape of the Act.

The Academies Bill became law on Tuesday 27 July when it received Royal Assent in the House of Lords.  The Bill had been heavily debated during Committee stage but all the proposed amendments put forward by the opposition were knocked back.  The Act is therefore identical to the Bill as it left the House of Lords on 13 July, save that one "privilege amendment" put forward by the Lords was deleted.

The Academies Act 2010 (Commencement and Transitional Provisions) Order 2010 (the Order) was passed on 28 July.  This brought the majority of the Act into force on 29 July, with the provisions relating to funding for pupils with low incidence special needs and the transfer of budget surpluses on conversion coming into force on 1 September.

Main Provisions of the Act

It is worth summarising just what the Act contains (and what it doesn't). When considering the Act from a legal standpoint it is important to note that the Act is essentially a framework and much of the detail of the actual implementation is only apparent from studying the model funding agreement, articles of association and transfer agreement. The model agreements for ‘outstanding’ schools are now available on the Department for Education website at www.education.gov.uk.  Academies will also be required to have regard to the Secretary of State’s guidance.

Academy Arrangements

Section 1 deals with what an 'Academy' is.  It is an independent school in England (note the Act is therefore only relevant to English schools) which was a maintained school – this includes primary schools, secondary schools and special schools, but not pupil referral units. The school must have characteristics that include the following:

• A balanced and broadly based curriculum
• Emphasis on a particular subject area or areas (if a secondary school)
• Provides education for pupils of different abilities (but not if the school is already a selective school)
• Provides education for pupils wholly or mainly drawn from the local area.

Academies that are not special schools must also provide for pupils with special educational needs (SEN). Academies are to be subject to Chapter 1 of Part IV of the Education Act 1996. This requires that they should ensure that SEN is identified, parents are informed and that the education provision meets those needs, in the same way as schools that are maintained by the local authority.  Many other obligations which would formerly be imposed by statute are dealt with within the funding agreement – for example a duty to have regard to the Admissions Code and in dealing with exclusions are set out in annexes to the funding agreement. Academies are to set up their own independent admissions and exclusion panels, appeal from which would be by judicial review.

Sponsors

The Act does not provide for continued sponsorship of academies. However we understand that the Secretary of State will continue to require sponsors for schools which are not adjudged ‘outstanding’ in their most recent Ofsted, or are being converted to academy status because the school is eligible for intervention as a failing school.

Funding

The Act does not go into great detail about the funding arrangements.  It provides that there are two sources of funding: pursuant to the funding agreement and also by use of the general power to provide financial assistance under section 14 of the Education Act 2000.  Essentially an academy will receive a General Annual Grant, to cover the school running costs, including staff salaries and pensions, repairs and maintenance, administration and school meals. This will be made up of (a) Formula Funding on the basis of the local authority formula applied to the a school with the academy's characteristics, (b) Local Authority Central Spend Equivalent, representing the proportion of the money that the local authority would have retained for central schools services and (c) Specialist Schools Allowance, payment applicable to support the academy's specialism. A separate Capital Grant can be paid for expenditure pre-approved by the Secretary of State. Interestingly, the funding agreement makes provision for continued payment to local authorities for refurbishment or new buildings which are to be procured under Buildings Schools for the Future or the BSF National Construction Contractors Framework. It appears possible that local authorities may be further required to continue in this procurement role for academies.

Converting to an Academy

The governing body of a maintained school can apply for an Academy order (an order which enables the school to be converted into an Academy); or the Secretary of State can make an Academy order for a failing school.
Foundation or voluntary schools with a foundation need to consult the foundation and obtain the trustees' consent before applying for an Academy order.

The process to convert to an Academy is not as clear as it was in the original Bill, as the Act now has a requirement on the governing body of the school to consult "such persons as they think appropriate". There is no requirement to consult the relevant local authority.  This would run counter to the Government’s stated aim of removing mainstream schools from local authority control.  Nor is there any requirement to consult staff, unions or parents on whether such a change should be made, although transferring staff will be consulted as employees, in accordance with existing statutory requirements for consultation in respect of TUPE and pensions prior to transfer.

Controversially, consultation can take place before or after an Academy order has been made, but the governing body must consult "before a maintained school in England is converted into an Academy".  Presumably this means an order could be made but it will not have effect until a consultation has taken place.  If the consultation shows that the majority are not in favour of the school becoming an Academy, it would seem that the school can still go ahead as the requirement is simply to consult, not to have regard to the results of the consultation.  This is an area that was heavily debated in the Commons.  The Department for Education is to produce guidance on consultations and it will be interesting to see what this contains.

Staff, contracts, property and liabilities will transfer to the Academy.  Land will also be handed over, and the detail of how land transfers will work is in Schedule 1 of the Act. Generally, as would appear from the model documents, a local authority will grant the Academy a 125 year lease. This is in identical form to the lease already in use for conversion from schools to academies. There are interesting issues in relation to voluntary aided and foundation schools, where the local authority does not own the freehold.  Schedule 1 does provide for transfer orders to be made for such land back to the local authority, upon payment of compensation.  Foundations and Dioceses would be wise to negotiate all such issues prior to consenting to the application for the school to become an Academy.

If a school has a surplus budget, the Act provides that the local authority must work out what the amount is and then transfer it to the Academy. This may be an interesting issue as the model transfer agreement provides for indemnities in respect of employment liabilities for transferring and non-transferring staff and there may be issues as to what extent such expenditure should be met out of the school budget.

Academies must continue to offer staff access to the Teachers Pension Scheme and the Local Government Pensions Scheme (LGPS) (as appropriate). Admission agreements are not needed however as the Academy is in law an ‘employer’ under the Teachers Pension Scheme Regulations 1997 and a ‘scheme employer’ under the Local Government Pension Scheme (Administration) Regulations 2008. Interestingly the model transfer agreement provides that the Academy trust will be responsible for any unpaid pension contributions under LGPS prior to the transfer date.

The Order plugs a loophole relating to staff employed by schools with a religious character and provides that their right not to be discriminated against on religious grounds continues when such a school becomes an Academy.

What changes when a school becomes an Academy?

The essential character of the school should remain the same.  Selective schools can continue to be selective.  Schools with a religious character can continue this.   A major change is that Academies will not be required to teach the national curriculum as long as they have a balanced and broadly based curriculum. This will allow much greater freedom.
The other main change is independence from local authority control. Quite how this will work for the local authority's performance of its statutory education functions and in ensuring cohesion for schools within a local authority is yet to be seen. There is no direct requirement upon Academies within the Act to work with other schools within the area. Academies will also no longer receive services from local authorities and can choose to buy the services the school needs from a range of providers. This will give Academies greater freedom over service provision. However, each school is likely to have to enter into a greater number of contracts than previously and the services may not be as good or as economical as the previous local authority services. It is possible of course that Academies may choose to continue to buy in local authority services. How this will work in practice remains to be seen. If there is considerable opt out of local authority provision this will affect the quality and availability of  the services local authorities provide for schools which have not chosen the academies route.

Academy Proprietors

The Act does not actually define an 'Academy proprietor', nor clearly set out the role they will play, but effectively they are the people who will run the school as an Academy.  They must be set up as a company limited by guarantee, with a charitable purpose as its objects.  They will be a charity but not exempt from registration with the Charity Commission until 1 January 2011.  This means that new Academies set up before 1 January 2011 will need to be registered with, and regulated by, the Charity Commission.  The Department for Education has published a model Memorandum and Articles for schools wanting to convert to Academies to use.

Additional Schools

Sections 9 and 10 of the Act deal with setting up ‘additional’ schools as Academies. A school is an additional school if it is not replacing a maintained school that has been or will be discontinued and is not a school in respect of which an Academy order has been made.  These provisions are aimed at the new ‘free’ schools which the Department for Education wishes to introduce. It is expected that an Academy order will be made in respect of each new ‘free’ school.

Before granting an Academy order, the Secretary of State must take into account the impact on maintained schools, Academies and further education institutions in the area.  This was hotly debated in Parliament, with many keen to include a statutory requirement to  avoid a two-tier system developing which would have an effect on ‘social cohesion’ and a negative impact on remaining local authority funding for schools which remain within the local authority remit.

As for schools converting into Academies, there is a requirement to consult "such persons as the person [wishing to establish an Academy] thinks appropriate" before establishing an additional school as an Academy.  We do not know whether this will include the local authority and we will have to wait and see if any guidance is issued.

Other Points to Note

From 1 September 2010, the proprietor of an Academy which opens on or after 1 September will be subject to the Freedom of Information Act.  Note though that as from 1 January 2011 all Academy proprietors (i.e. including those Academies that are already open, such as city technology colleges and city colleges for the technology of the arts) will become subject to the Freedom of Information Act.  Proprietors of existing Academies therefore need to prepare for this and be ready to make as much information public as they can, in accordance with guidance.

There is nothing in the Act enabling schools that have converted into Academies to revert back to local authority control.

The Secretary of State must publish an annual report on Academy arrangements entered into and Academy performance during the year.

Sarah Morley is a solicitor at Walker Morris