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New law on borrowing

Grant-maintained schools which want to borrow on the open market will need the written consent of Gillian Shephard, the Education and Employment Secretary.

Ministers have promised legislation at the earliest opportunity to allow opted-out schools to take out commercial loans. They claim it will give them greater financial freedom and make them less reliant on government funds.

Consultation papers released this week reveal, however, that opted-out schools will not only need written approval for any such loan, but that they will also be unable to borrow against land and buildings considered essential for delivery of the national curriculum.

So while the Government claims governors of grant-maintained schools will be able to borrow as much as they think fit, the school will have to determine what non-essential land and buildings it has.

It is not clear how many opted-out schools have spare land or buildings but a survey of GM heads by The TES last year disclosed that commercial loans were unpopular. Only a quarter of the 514 heads questioned said they were interested in borrowing money commercially; nearly half said they would not. Some spoke strongly against "selling off the family silver".

The Funding Agency for Schools, the quango which administers GM finance, will have responsibility for consenting to individual loans, under the guidance of Mrs Shephard, but it will not guarantee or underwrite any school borrowing.

Consultation closes on November 20.

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