Date updated:

Scope of this Briefing
 

This briefing deals with two specific developments of vital importance for Academy Trusts: the standards they will be expected to meet, and how the Department for Education may intervene if they are found to fall short of those standards. 

Stone King will be providing a more detailed briefing on all key aspects of this important and significant legislation in due course. 

We have assumed for current purposes that the Bill will pass into law as an Act without alteration, although amendments are expected to be made.


Summary
 

Legal obligations on Academy Trusts have to date been a mix of statutory obligations (legislation and regulation) and contractual obligations through funding agreements, with DfE intervention at academy level only in recent years. Although up to now the DfE could criticise Academy Trusts, they could only take immediate, practical action against them by removing their academies through termination (or threatened termination) of individual academy funding agreements.  

As we now move towards full academisation, the DfE is asserting increased regulatory power over Academy Trusts themselves, setting specific standards and also expanding the range of powers the DfE can use at both Trust wide and individual academy level.


Standards 
 

The Secretary of State will have the power to make regulations which set out the standards to which Academy Trusts must adhere.  

In essence, these standards will pull together and package up the plethora of requirements currently in place for Academy Trusts, which are currently strewn across funding agreements, legislation and the Academy Trust Handbook.  

The DfE states in an accompanying Policy Note to the Bill (NB. the Policy Note does not form part of the Bill) that by introducing such standards it intends “to provide a clear, consistent and transparent regulatory framework fit for a school system of strong trusts”. In theory, this is a welcome reform and should go some way to address the regulatory inconsistencies created by the many iterations of Funding Agreements which have been introduced over the years. The Policy Note also states that these standards will only “introduce a small number of additional requirements”. However, as currently drafted, the Secretary of State’s power to set standards is exceptionally broad. Section 1(2) sets out a remarkably long initial list of matters about which standards might be set, including items with very wide scope (e.g. the “governance structures and procedures…of Academies” and “spending of money by proprietors of Academies”). These are stated to be mere “examples” of the matters on which the Secretary of State may set standards. The overall intent appears therefore to subject Academy Trusts to comprehensive regulation, which is a different prospect to the relatively permissive “academy freedoms” that they have enjoyed to date.    
In addition to the examples given at Section 1(2), the Bill states that a standard may be set in relation to:

  • whether or not the Academy Trust has regard to guidance issued, or a document published by the Secretary of State; and
  • the suitability of proprietors of Academies (this would include a consideration as to whether the proprietor was a “fit and proper” person to be involved in the running of an academy).

Notably, standards may not be set in relation to matters covered by Section 1(6) of the Bill. Such matters can be summarised as follows; grammar school designation and admission arrangements, collective worship, the provision of religious education at an academy with religious character, and certain provisions within the articles of association of an Academy Trust with religious character.

Section 1(3) of the Bill confirms that compliance with the standards will be mandatory for Academy Trusts (save where the standard states that an alternative provision in an Academy Trust’s master funding agreement is to apply). It is unclear at this stage which body will monitor Academy Trusts’ compliance with the standards. One would assume that the monitoring function would fall within Ofsted’s remit, but this is not expressly confirmed in the Bill and under Section 1(7) the Secretary of State has wide powers to confer such functions.

The standards will take precedence over  funding agreements and simply “overwrite” them. Under Section 2(1) of the Bill, any requirement imposed on an Academy Trust by way of a funding agreement will be void in so far as that requirement is covered by the introduction of a new standard.


Intervention
 

To date intervention by the DfE has been largely restricted to threatened or actual termination of individual academy funding agreements through the Notice to Improve and Warning Notice procedures exercised by the ESFA and already referenced in the DfE’s Schools causing concern Guidance

This Bill sees an expansion of the range of interventions available to the DfE, to include intervention at Trust level, the latter including termination of master funding agreements (the Academy Trust losing all its academies) and IEB style replacement of Trustees.  

The first new type of intervention will be a Compliance Direction issued if the Secretary of State is “satisfied” that the Trust has “breached, or is likely to breach”, a duty under any specified law or any academy agreement or master agreement. As currently drafted, there is no express provision enabling Academy Trusts to make representations prior to a Compliance Direction being issued. This type of direction appears to be designed to remedy specific breaches of obligation rather than broader failures by the Trust. A Compliance Direction can be enforceable by a mandatory order obtained by the Secretary of State from a Court.

The second type of intervention is the more familiar Notice to Improve, now to be in statute, issued if the Secretary of State is satisfied either:

“(a) that the proprietor has breached a duty under any enactment or under an Academy agreement or master agreement, or 

(b) that there are significant weaknesses in the proprietor’s governance procedures or in the management of Academies in its care.”

The scope for such a Notice is therefore any “serious” weakness identified by the Secretary of State.  The Trust will have an opportunity, as it does now, to meet the requirements of the Notice within a set time frame to the Secretary of State’s “satisfaction”, but the Secretary of State can specify that the Trust obtains consent from them for certain transactions and decisions during the Notice Period.  In contrast to the Compliance Direction, there is an express provision enabling Academy Trusts to make representations before a Notice to Improve is issued.

The third type of intervention is the familiar Termination Warning Notice, which under the terms of the Bill can be issued by the Secretary of State regarding a funding agreement for a broad range of reasons including the familiar “schools causing concern” reasons (one or more failure in leadership and management, pupil standards, pupil safety), breach of any provision of a funding agreement, and if an academy is coasting (re-introduced as an active regulatory tool).  

Furthermore a Notice of this type can be issued to a Trust regarding all its academies under a master funding agreement on all the grounds above except pupil standards and coasting. 

Again, Termination Warning Notices must give the Trust a period of opportunity to take specified actions in a specified time before termination of the specific funding agreement(s) takes place.

Both Compliance Directions and Notices to Improve can also result in the termination of an academy’s funding agreement or a master funding agreement (i.e. for all a Trust’s academies) if the Secretary of State’s concerns have not been met to their satisfaction.

The fourth and most important new type of intervention is the power that the Secretary of State will have through an “Interim Trustee Notice” to appoint or require appointment of Trustees (referred to as Directors in the Bill) in Academy Trusts if one of the following applies:

“(a) it has received a notice to improve and has failed to satisfy the notice by the time required, 

(b) the Secretary of State considers that there has been a serious breakdown in its governance procedures or in the management of Academies in its care, or 

(c) the Secretary of State considers that the safety of pupils or staff at an Academy in its care are threatened.”

This is a return to the Secretary of State’s power to “flood” Trust Boards that the DfE put into its model articles for a brief period some years ago but then withdrew. It also reflects what happens in practice where there has been a breakdown in governance and the RSC wishes to replace Trustees, often under the threat of withdrawing funding. An Interim Trust Board (analogous to an IEB imposed by a Local Authority on a maintained school) will be imposed by the DfE, who will pay for the Trustees it imposes on the Trust. All the provisions in a Trust’s articles relating to the constitution of the Members and Trustee groups will not apply during the period of the Interim Trustee Notice .

What is not covered expressly in the current Bill are provisions giving the Secretary of State power to impose any particular form of articles of association or any form of local governance (with the exception of academies with a religious character). Outside that specific context, local governance, especially the power hinted at in the White Paper for Local Governing Bodies to be able to request permission from Regional Directors for their academy to exit their current Trust, is nowhere to be seen in the Bill except somewhat obliquely in one of the example standards covering “governance structures and procedures (including the composition of boards of directors of, and the responsibilities of directors and members of, proprietors of Academies)”.  All we know from the DfE’s Policy Note at this stage is that the DfE’s “aim is for all schools to have a voice in governance through local governance arrangements…”.  We await to see how the tension plays out between local accountability and community engagement on the one hand, and freedom for Academy Trusts to operate governance oversight which reflects the reality of increasing central executive functions in growing Academy Trusts on the other.

Other less contentious and familiar provisions will now be in statute:

  • a)    the current option for either a Trust or the Secretary of State to terminate an academy agreement with 7 years notice;
  • b)    provisions for terminations by both Academy Trusts and the Secretary of State in circumstances of insolvency of the Trust; and
  • c)    the Secretary of State’s power to terminate the agreement regarding a school with a Grade 4 Ofsted rating.

In brief: other key provisions in the Bill exclusive to Academies
 

  • The Secretary of State can disapply or apply existing education statutes to academies (Section 3). For example, once this Bill is law, the Independent School Standards will no longer apply to academies. 
  • All contractual entitlements that an academy has through its funding agreements are void to the extent they are overwritten by this legislation when it comes into force. 
  • Local authorities will have the power to apply for an academy order in respect of any of its maintained schools (but only with the consent of Trustees of voluntary and foundation schools).  
  • There are extensive protections given to schools with a religious character and fully selective schools to ensure those characteristics remain unaltered. 
  • In the DfE’s Policy Note we are told that “…a shorter form of funding agreement will continue to be used to form the legal contract between an academy trust and the Secretary of State, retaining arrangements that are specific to an individual academy or trust”. We anticipate that will include factual matters such as capacity and any specialist provision.

Our overall comment
 

This Bill provides the Secretary of State with considerable new powers to enable the central regulation of every aspect of a fully academised system, if they choose to exercise them. The Bill itself is therefore predictably all stick and no carrot. The Policy Notes which accompany the Bill are at pains to stress that the full academisation of the sector will be done with Academy Trusts rather than to them, but the backstop powers introduced by this Bill are profound and introduced at a much quicker pace than we might have expected from the recent White Paper.  

As a result, the Secretary of State will obtain very broad powers, which will be exercised in practice through the Regional Directors, to replace the Boards of Trusts and/or terminate Academy Trust’s funding agreements if they fail to meet prescribed standards or any other specific legal obligation.  The power to replace Trust Boards with an IEB type of paid Trustee group is particularly bold in its scope, as is the power to terminate all the funding agreements a Trust holds for a single failure to address concerns raised by the Secretary of State under a Compliance Notice or a Notice to Improve.

Much then will depend on the capability and capacity of the Regional Directors and their Officers going forward. 

We await with interest how the Bill will progress through the various stages in Parliament, and further briefings will follow. 

If you need any advice regarding issues arising from this briefing please do contact the authors.