The Academies Bill – The Finer Details

The publication of the Academies Bill, which sets out the government’s new plans for Academies, has already provoked much attention. A list of schools that have expressed an interest in converting to Academy status has been released, demonstrating that there is real interest in both the primary and secondary sectors for the conversion process. With the details of the proposed legislation in place, questions are beginning to arise about how the provisions of the Bill will work in practice. In the second of a two-part series, Graham Burns considers some of the issues posed by the new Bill.

The launch of the new Academies Bill sets out a framework by which schools can convert to Academy status. The Bill itself however, does not establish all the details of how such conversions will work on a practical level. To clarify this the Department for Education (DfE) has published a Guidance document for those schools wishing to convert, entitled Guidance for Schools Becoming Academies.

This Guidance, alongside updates on the DfE’s website, expands on some of the issues raised by the Bill, setting out some of the finer details that schools, trust bodies, dioceses and local authorities will need to consider. From the number of schools that have already expressed an interest in the conversion process, it is clearly evident that a substantial number of schools are likely to convert, some on a much-accelerated timescale, and therefore the practical implications of this will be most significant.

How will Academies be financed under the new provisions?

It is envisaged that funding be will based on a similar basis to local authority maintained schools, with supplements to cover services usually provided by the local authority and to cover VAT. Schools have been provided with a “ready reckoner” to assist them in the process of working out how much more they will get to compensate them for not taking central LEA services. The DfE has asserted that although schools that choose to convert will be given extra freedoms, those schools that choose to remain under local authority control will not be at a disadvantage.

What will happen to the converting school’s budget if there is a deficit when the school converts to Academy status?

Whilst the Bill makes clear that where the school has a surplus balance the local authority will be required to pay the outstanding surplus to the Academy Trust, there is no specific provision in the Bill for the transfer of deficits. The Guidance clears this point up, stating that where a deficit does exist, the local authority will be asked to notify the Secretary of State of the amount. When the amount is validated and agreed, the local authority will be paid a sum equivalent to this by the Secretary of State, and this will allow the local authority to write off the deficit in its own accounts.

The Guidance notes that an equivalent amount will then be abated by the Young People’s Learning Agency (YPLA) from the Academy’s General Annual Grant. The YPLA will determine the period for the abatement, taking into account the size of the deficit and the potential impact on pupil’s education.

Will new Academies receive extra capital funding?

The DfE has indicated that a conversion to Academy status does not mean that a school will receive a new build. Capital expenditure will be dependent on the government’s comprehensive spending review. This is expected to take account of the government’s desire to focus on improving school performance without incurring significant capital spending on new build solutions. The exact future method of capital funding for BSF in respect of Academies is not known at the moment.

The VAT implications of switching the land ownership to the academy trust will need to be carefully reviewed on conversions where there is expected to be capital spending, as this may lead to additional amounts having to be paid to offset irrecoverable VAT.

What will be the impact of the Bill on PFI Governing Body Agreements?

One concern raised by local authorities in response to the Bill has surrounded the impact of Academy conversions on local authority held PFI contracts. The Guidance indicates that it is not the intention of the DfE to buy converting schools out of existing local authority PFI contracts.

Instead, the DfE has prepared model legal agreements for use between the local authority, the Academy and the DfE when a PFI school converts. It is envisaged that these agreements will maintain any obligations contained within the PFI contract and will ensure that any risks are shared fairly between the parties.

The Guidance suggests that it may take longer for those schools that are part of an existing PFI contract to convert due to the extra legal documents required. There is no suggestion though that PFI schools should not be able to convert to Academy status. This Guidance will be a relief to authorities who were concerned that PFI schools might have otherwise sought to avoid their PFI liabilities by converting to Academy status.

What are the implications for local authorities regarding Academy land transfer?

The Guidance sets out that where land is publically funded, the land will usually transfer to the Academy Trust by way of a 125-year lease from the local authority, as on existing Academy set ups. Whilst this will be the principal means of transfer, the DfE’s website does suggest that other means of transfer may be applicable but only in “special circumstances in individual cases”.

The DfE has stated that the terms of the land transfer will be done by means of negotiations with the LEA and the relevant Academy Trust rather than by statutory order. However, should those negotiations be unsuccessful, the Academies Bill does allow the Secretary of State to direct the transfer of the land by granting a relevant order.

The transfer of the leasehold rather than the freehold may be reassuring for local authorities, as the retention of the freehold can allow the authority to have some residual control over the use and upkeep of the Academy land.

It should also be noted that where the converting school has either a mixture of public and private land, or has private land that has been publicly enhanced, the Guidance suggests that the terms for the transfer of the private land should be done by agreement between the private owner, the local authority and the Academy Trust. This is likely to be the case where the land is owned by a separate Trust or Foundation. The Guidance indicates that a possible arrangement is for the private land owner to lease the land to the local authority, who will then sub-lease the land to the Academy Trust. Another possible arrangement suggested by the DfE, is for the landowner to directly lease the land to the Academy Trust.

As a relatively large number of outstanding schools are either voluntary or foundation schools, it is expected that the first tranche of Academy conversions will have to deal with these difficult land ownership issues. It is anticipated that many current landowners may not be happy to transfer their land interests to the LEA.

What obligations will there be on local authorities in relation to staff transfer?

The Guidance recognises that any school converting to Academy status will need to consider the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). For community and voluntary controlled schools the existing employer will be the local authority and therefore there will be TUPE obligations that the authority will need to consider.

The Guidance states that if the local authority is the existing employer of staff, the converting school will need to formally notify the authority that the school has applied to convert to become an Academy. The converting school’s DfE contact will also formally write to the local authority to confirm the application. For those schools seeking to convert to Academy status for September 2010, the local authority will need to be notified as soon as possible. The Guidance suggests that for such schools the TUPE process will need to commence in late June/early July to allow meetings to take place before the end of term.

For community and voluntary controlled schools, the Academy Trust will be obliged to write to the local authority as the existing employer, to inform the authority of any measures in relation to staff that the Trust proposes taking after the transfer has occurred. The Guidance highlights that any changes to be made by the Academy Trust will require consultation with unions and affected staff.

If the local authority is the existing employer, it will be necessary for the authority to carry out appropriate due diligence for all the transferring staff, this will include information on staff contracts, terms and conditions, pensions etc. The Guidance states that particular care will be needed for staff not exclusively based at the school and any staff on fixed term contracts.

What rights will local authorities have in relation to property transfer schemes? Which contractual liabilities will transfer, and which won't?

The Guidance sets out that those schools which choose to convert will need to make decisions about any contracts existing between the local authority and external suppliers. The Academy Trust will need to consider whether such contracts are to be transferred by the local authority to the Academy Trust. If this is the case, an asset/property transfer agreement will need to be negotiated. Whilst the Academies Bill does allow the Secretary of State to make a scheme for the transfer of property, it is expected that matters will usually be agreed between the local authority and the Academy Trust.

Questions left unanswered

Whilst the new Guidance has given some further indication of how the Academies Bill will work in practice, there remain some unanswered questions. It is not clear what the future is for the Building School for the Future programme and what impact this will have on converting schools.

It is also unclear what the Governance arrangements for the new academies will be. Although the DfE has stated that the new academies will be run by Academy Trusts as under the existing system, the suggested composition of Academy Trusts has yet to be highlighted.

It is also evident given the announcements of the Catholic Education Service (CES) and the National Grammar Schools Association that Catholic and Grammar schools heed “caution” in relation to conversion, that there are other issues that may need to be considered further. As the Bill continues to be debated and more information is released, it is hoped that such unresolved questions will be clarified.

Graham Burns is a Director and Solicitor at TPP Law Limited (www.tpplaw.co.uk). He is a legal adviser currently working on a number of Academy conversion projects and can be contacted via This email address is being protected from spambots. You need JavaScript enabled to view it..

Part one of this series can be read here.