Separate proposals, also covered in a consultation paper, will enable grant-maintained schools to retain all the proceeds from the disposal of surplus school premises from 1 April 1996.
Announcing the publication of the consultation paper which sets out the proposals, schools minister Robin Squire said:
'We plan, at the earliest legislative opportunity, to enable grant-maintained schools to borrow commercially. They currently rely almost entirely on government funds for capital works and demand for funding exceeds supply. This new freedom will enable them to fund projects which would not otherwise receive support.
Under the proposals grant-maintained schools will be allowed to borrow such sums as the governing body thinks fit. They will also be able to grant any mortgage, charge or other security over any land or other property of the governing body.
The Funding Agency for Schools will have responsibility for consenting to individual loans, under guidance from the secretary of state. It will not guarantee or underwrite any school borrowing.
To protect publicly-funded assets, grant-maintained schools will not be able to borrow against assets that are essential to the school's educational provision - 'core' assets.
Separate proposals, also covered in the consultation paper, will enable grant-maintained schools to retain all the proceeds from the disposal of surplus school premises from 1 April 1996. At the moment 50% of the net proceeds is returned to a school's former local education authority for debt redemption.
They will be allowed to charge the full value of these assets - if they are 'non-core' - in any borrowing arrangement.
Mr Squire said:
'These are both practical ways of giving grant-maintained schools greater freedom to provide new facilities. At the same time, vital school assets must be protected. It is important that we get the details right, and I therefore welcome views from all interested parties.'