It is a great pleasure to have this opportunity to address Westminster Hall and the Minister for Schools on an issue of such importance to my constituents. I am going to talk about the state of education in the East Riding of Yorkshire and the funding of that education system. I shall then discuss the F40 model, which is a mechanism by which the Government can better target funding towards those most in need. Finally, I shall touch on the school early years and 14-to-16 funding consultation that the Department for Education and Skills is currently conducting.

The structure of my remarks will be remarkably similar to that of a speech that I gave on a similar subject in March 2006. As the Minister knows from personal experience in his constituency, however, the problems do not go away easily. I am delighted to see a Minister here who led a delegation to meet the Secretary of State for Education and Skills in 2002, precisely to challenge what he described as the unfair distribution of funding among education authorities throughout the country. Although he has been the Minister now for a year, we have high hopes that he will eventually lead the transformation of the system and bring about the greater fairness that we want.

The East Riding of Yorkshire is an improving education authority. It is above the national average at key stage 2 and key stage 3. At GCSE, 62.2 per cent. of pupils gained five or more A to C grades, as compared with a national average of just 59.2 per cent. I want to highlight the performance of two schools in my constituency. First, Longcroft school and performing arts college in Beverley had serious weaknesses just three years ago, but it is now ranked as the country’s fifth most improved school, with more than 60 per cent. of its pupils achieving five or more A to C grades, including in maths and English. Secondly, Beverley high school for girls is, once again, the top performing comprehensive in the East Riding at GCSE, with 78 per cent. of pupils achieving five A to C grades. Even with the inclusion of English and maths, 71 per cent. of its pupils achieved five good GCSE grades.

I pay tribute to the pupils, staff and head teachers in the East Riding, as well as to the local authority, which does an exceptional job in challenging circumstances. When I met the Minister to discuss the issue last year, he accepted that low-funded authorities had made Olympian strides to improve standards in some cases. However, that does not change the unfairness of the funding formula, which he rightly identified back in 2002.

East Riding schools receive funding well below the national average. Last year, the East Riding received a guaranteed unit of funding per pupil of £3,322, through the dedicated schools grant, and it will receive £3,535 this year. That compares with nearby Hull, which will receive £3,999 per pupil, and with Tower Hamlets, which will receive £6,028. The national average, meanwhile, stands at £3,888—I do not know what a numerologist would make of the repetition.

If the East Riding were to receive the same amount of funding as Hull, an additional £21 million would be available to share among the schools. How does that affect schools in my constituency? In 2005-06, Bilton primary school in Holderness received £2,458 per pupil, whereas Wansbeck primary school received £2,922 per pupil, yet those schools are less than a mile apart. Despite its rurality and areas of deprivation, the East Riding is the fourth-worst funded education authority in the country.

The East Riding’s allocation for this year represents an increase of 6.4 per cent. That sounds generous, and I am sure that the Minister will rehearse comments about increases in funding over the years—regardless of any pleas not to. However, that increase is below the national and regional average, as he knows. The national increase in 2007-08 will be 6.7 per cent., while the increase in Hull will be 7 per cent.

The cash gap between the highest and lowest funded authorities is therefore widening. Since 1997, although there has been a substantial increase in education funding, that gap has increased by more than £600. Even over the comparatively short period of the new funding arrangements, from the base year of 2005-06 to 2007-08, which the Under-Secretary of State for Education and Skills, the hon. Member for Corby (Phil Hope) mentioned last year, the gap between the funding per pupil in the East Riding and the national average has increased by a further £59 per pupil. That gap equates to £2.84 million missing from my constituents’ schools.

The Conservative-led local education authority has worked hard to make up for central Government’s inequitable distributions. It has maximised spending on schools, largely by reducing central costs, particularly on strategic management. Last year, for example, the proportion of the dedicated schools grant delegated to school budgets was more than £2.7 million above the average for similar-sized authorities. That was achieved by reducing spending on strategic management to £61 per pupil, as compared with the national average of £87 per pupil, which represents a saving of £1.3 million.

Using its excellence fund, the authority put £1 million extra into schools above the Government’s spending guidance.

The authority has managed to find the extra money to put into schools and demonstrated that it can be converted into improvement and genuine delivery for pupils throughout the area. However, there is no getting away from the shortages in funding, which are having a devastating impact on the ground. I have spoken to many head teachers in the East Riding, almost all of whom have told me that they will be forced to make substantial cutbacks in the near future.

Beverley grammar school, which I have visited, is currently £160,000 in the red. It has been hit with increased costs of £420,000, including a £51,000 rise in exam fees and a £28,000 increase in energy costs. The head teacher, Chris Goodwin, recently said:

“I will make cuts. They will have a big impact. Hull schools are swilling with money compared with us. We are in a funding crisis and morale and energy are being sapped. I despair because I can’t see how it is possible to raise standards in such circumstances.”

Beverley high school is more than £100,000 in the red, despite making cutbacks. The head teacher, Ruth Vincent, whom I have also visited, has said:

“Beverley High School will be facing a £400,000 deficit in 2008-09. It is becoming increasingly difficult to maintain standards.”

Roy Cooke, the East Riding secondary heads convenor and head teacher of Wolfreton School, has said that he expects to cut five teaching posts by September. He added:

“We are having to look at making savings, which means spending less on teaching and learning.”

Overall, 24 of the East Riding’s 159 primary and secondary schools are in the red. That shows the impact on the ground of the Government’s current funding formula and the above-inflation increases in costs with which schools are having to contend. The rising cost of energy, for example, has had an adverse effect on the budgets of many schools. Energy costs increased by 54.72 per cent. in 2005-06, compared with the previous year. The cost of exam fees for East Riding schools, meanwhile, increased by 16.74 per cent. between 2004-05 and 2005-06. As overheads increase, the budget for other resources becomes increasingly squeezed. Coupled with falling rolls, resources, such as extra classroom support, are therefore often forfeited to balance the books. The East Riding’s low funding base restricts the opportunity to accommodate falling rolls.

The area’s rurality has also had an impact. The East Riding of Yorkshire is the largest unitary authority in the country, spread ever 930 square miles and with a population of 327,000. The 2001 census showed that 51 per cent. of the population lived in rural areas, compared with an average of 20 per cent. for the Yorkshire and Humber region as a whole. The East Riding has a number of small village schools, which have financial and rural isolation issues. A recent report by TeacherNet showed that primary schools with between 80 and 100 pupils cost 16 per cent. more per pupil to run. If the school has fewer than 50 pupils, the cost per pupil increases substantially. The Under-Secretary told me last year that the formula recognises rural circumstances. I am sure that the Minister knows that it does so, but insufficiently.

The allocation of funding according to where people live, rather than where they are educated, compounds the injustice. More than 2,000 pupils who live in other local authorities are currently at schools in the East Riding. As John Mager, the former director of education in the East Riding, has said:

“One secondary school in the East Riding of Yorkshire receives 30 per cent. of its intake from one of the most deprived and disadvantaged estates in Hull. They will be expected to provide the personalised learning which many of these children will require but the proposals for deprivation funding will not provide the East Riding with the funds to support the school.”

The East Riding does not discriminate against incoming pupils, but the cost of providing the additional support needed is met by pupils across the area. That is clearly inequitable, given that pupils in Hull receive £464 more in funding than those in the East Riding. It is not as though places such as Withernsea in my constituency do not have deprivation issues; the January 2004 Ofsted report on the local education authority stated:

“Pockets of social deprivation, the steadily rising inward migration from neighbouring urban districts, the remoteness of some parts of the region and relatively low funding levels all pose a challenge.”

As I told this Chamber last year, Bridlington South, Bridlington Old Town, Bridlington North, Goole and South-East Holderness are among the 33 per cent. most deprived wards in the country. Household income is below the national average. The effect of the Government’s funding model is that children who live in rural areas, some of whom are relatively poor, can receive absolutely nothing that recognises the deprivation that they suffer. The application of that aspect of schools funding is crude in the extreme.

The main result of the inequalities is that East Riding pupils are now being forced to make do. Activities involving off-site provision—trips, co-operative activities with other institutions or off-site course provision—are simply out of the question. The breadth of curriculum provision is increasingly limited to what can be provided on site. Specialist teachers of shortage subjects, such as physics and maths, are becoming more and more difficult to recruit, and they are easily persuaded to accept posts in better-funded areas. Moreover, the majority of East Riding secondary schools run some classes in which the week’s teaching is split between two or more teachers. In a worrying number of cases, non-specialist staff regularly carry a share of the teaching.

What can be done? It is great that the Minister is here today, because the current review into the school funding system for 2008-09 and beyond is timely. He will know all about the F40 group of poorly funded local education authorities, of which the East Riding is a member. Those authorities represent almost 16 million people and more than 200 parliamentary constituencies. Through East Riding council, the group devised the F40 pupil entitlement model, which is used to determine the needs of individual education authorities and schools, based on the needs of the individual pupil and what it costs to run a school.

The model shows that, by using an index of multiple-deprivation data and education data, it is possible, within the education management system, to attach a deprivation score to each child using a home postcode. That formula would better reflect the social and educational needs of every child in the country.

Under the “Every Child Matters” programme, the Government are obliged to provide young people, wherever they live, with the same life opportunities. All children, no matter where they live, should have the same level of access to well managed and serviced schools. They should also have access to inspirational teachers and up-to-date resources and equipment. That way, children of all ages will have the best opportunity to fulfil their potential—an aspiration that I know the Minister will share.

Last year, the Secretary of State said:

“All we have to do is raise the bar and close the gap.”

If we could close the gap in the current funding formula, standards of teaching and learning would almost certainly improve and the five outcomes of “Every Child Matters” would become a reality. The Department’s consultation paper acknowledges that the basis for the current formula is inequitable, that it is not based on social and educational needs and that it generates a very large and increasing gap between the best and worst-funded councils. I hope that the Minister, having accepted that, will give a firm guarantee today that he will work with his colleagues to put that right for the betterment of children throughout the country—from my point of view, particularly those in East Riding.

I congratulate the hon. Member for Beverley and Holderness (Mr. Stuart) on securing this important and topical debate and welcome the opportunity to bring the issue of the current review of school funding to the House. However, as he is aware, the consultation does not close until the end of this month, and that constrains the extent to which I can comment on some of the specifics. I do not want to prejudge the consultation.

As the hon. Gentleman did, I congratulate the teachers and pupils in his constituency and the whole area of the East Riding of Yorkshire for their continuing hard work and achievements. Last year, 78 per cent. of East Riding pupils reached the required standard in science at key stage 2, three percentage points up on 2005, and six points above the national average. Meanwhile, the number of East Riding 15-year-olds achieving five good GCSE passes or the equivalent increased last year to 62 per cent.—again, above the national average. If English and maths are included in the calculation, young people in the East Riding achieved 4.4 percentage points above the national average at GCSE, and 9.5 points above the regional average. All were excellent achievements and all staff and pupils associated with those results should be warmly congratulated.

You will pleased to hear, Mrs. Dean, that I shall now turn to education funding, the subject of this debate. It is important to remember that all local authorities have seen substantial increases in funding under this Government; I should put that on the record even though the hon. Gentleman anticipated that I would. Total revenue funding per pupil in the East Riding went up by £1,090 in real terms between 1997 and 2005, an increase of almost 40 per cent. It puzzles me that that increase is more than ours in Dorset, where the real-terms increase was only—“only”, he says—£980, an increase of 34 per cent. The increase for the East Riding is virtually the national average increase, differing by 0.2 percentage points. From 2006, we introduced the dedicated schools grant and a two-year school funding settlement. As the hon. Gentleman said, that gave the East Riding increases in core funding for schools of 6.6 per cent. per pupil last year compared with their spending the year before, and a further 6.4 per cent. per pupil this year.

What has the increased investment bought? Obviously, talking only about money becomes fairly meaningless without a sense of what it can deliver. Since 1997, East Riding schools have been able to employ 360 more teachers, 610 more teaching assistants and 450 more other support staff. Spending on school buildings has also increased dramatically. Ten years ago, the allocation for East Riding was just £1.3 million. For the years 2005-06 to 2007-08, we plan to allocate £58 million to East Riding council and schools in its area. That includes more than £14 million of targeted capital funding; I congratulate the council on having successfully bid for that to support two major capital projects. I have already talked about the results that investment in people and buildings has produced. Looking ahead, investment in education will continue to build on the increases of the past decade. The most recent Budget contained the settlement for education, skills and children’s services until 2010. Overall investment will continue to increase by 2.7 per cent. per year in real terms.

In 1997—at the moment, it is fashionable to look back 10 years, Mrs. Dean—education spending was £29 billion per year. This year, it is £64 billion; by 2010, it will be £74 billion. With my colleagues in the Department for Education and Skills, I am now considering how that settlement can be most effectively spent. We hope to announce specific details before the summer break. I recognise the challenges that schools can face, particularly when the number of pupils on roll is falling, which is a particular problem in the part of the country that the hon. Gentleman represents. However, multi-year budgets help schools to plan ahead and manage their resources so that they are better placed to deal with such challenges. Local authorities should, of course, work with schools with particular difficulties to help them to restore a balanced budget; I know that that process is very active in the East Riding at the moment.

I have been speaking about the national picture, but, as we have heard, there are some concerns about funding for schools in the East Riding and in some other local authorities, particularly when compared with the funding that other areas receive.

The hon. Gentleman and the F40 group would like to see a higher basic entitlement in the distribution of school funding, with rather less emphasis on funding for deprivation. However, other local authorities in areas with high levels of deprivation might argue that the funding that they receive for deprivation is not enough. London receives more funding than anywhere else, but the hon. Gentleman will be delighted to know that his Conservative colleague who led the delegation on London funding continued to press his case for receiving what the hon. Gentleman would consider to be large sums for places such as Tower Hamlets and Kensington and Chelsea—where his colleague came from—as he thought that they were still not large enough. That is the balance that we have to weigh up.

We need to ensure that we have an appropriate balance between basic funding and funding that recognises the different needs of each area of the country. Some areas, particularly London and other inner-city areas, receive additional funding in recognition of the fact that it costs more to recruit and retain teachers and other members of staff. Other areas, including the East Riding, my county of Dorset and Gloucestershire—I see that my hon. Friend the Member for Stroud (Mr. Drew) is in the Chamber—receive additional funding as they are sparsely populated, with many small, rural primary schools that are more expensive to run. The hon. Member for Beverley and Holderness made a reasonable point about that.

A couple of days ago, I visited Burstwick primary school, which the Minister would be pleased to see. It has changed its facilities under the head teacher over the past six or seven years. It has improved its performance. I visited each classroom and saw a fantastic range of learning opportunities and an improved estate. However, does he accept that there is a strong case that the formula does not properly recognise the costs of providing education in rural areas? The school is a good one in a rural area, and the head teacher faces the problem of falling rolls. He is acutely aware of the difference in funding between his school and those not far away in other authorities and feels that if that gap were closed the school would be able to maintain the excellence that it delivers.

I shall try to address that point, because relative fairness for authorities was the central point of the hon. Gentleman’s speech. When we consider the responses to the consultation next month, if we decide that we want to make any significant change or redistribution, we will have to accept that the minimum funding guarantee per pupil will have to be lower to create the financial room to allow that redistribution. Hon. Members need to be aware that if we were to choose to do that, it would create a higher risk of instability in the school funding system. We must weigh up that balance as we make those considerations.

My hon. Friend is aware that the F40 is a cross-party group, ably led by my hon. Friend the Member for Stafford (Mr. Kidney). I want to put on the record our thanks to the Department for ensuring that civil servants were present at our annual meeting. It is important that we consider the facts, and it was a good opportunity to enter into dialogue. Notwithstanding the consultation, I hope that the Department will keep that dialogue going.

I am determined to keep the dialogue going. I was going to pay tribute to my hon. Friend the Member for Stafford (Mr. Kidney), Members from all parties and the F40 group of authorities for the constructive way in which they have engaged with the Department. As well as being determined to keep that engagement with F40 and the other lobbying groups, I have renewed the sense of purpose behind the rural schools group that meets me to advise me on rural issues in the Department, so we are confident that officials across the schools directorate hear the concerns of rural areas.

The main reason for differences in funding levels is the emphasis we place on targeting deprivation through the funding system. The areas that we fund at a higher level have significantly higher levels of deprivation than average. For example, the comparison can be made between the East Riding and its neighbour, Kingston upon Hull, by considering the proportion of pupils from families in receipt of income support. That was the most significant factor for recognising additional educational needs in the funding formula that we used until 2005. More than one third of Hull pupils were from families receiving income support, whereas the proportion for the East Riding was just over one in 10. The national average was almost one in five.

The hon. Member for Beverley and Holderness made a much-repeated point—I do not want to devalue it by describing it in that way—about the cross-border movement of pupils between Kingston upon Hull and the East Riding. I am advised that the flow of pupils into the East Riding has little effect on the total of the authority’s overall level of deprivation: 8 per cent. of the pupils living in the authority are on free school meals, another measure of deprivation, and 8 per cent. of the pupils coming into the authority are also on free school meals. I accept that there can be an impact on individual schools near the boundary, and local authorities can make an allowance for that in their local funding formulas.

We include a significant weighting towards deprivation in some of the grants paid to schools outside their core funding. Some are specifically targeted at raising attainment in deprived, inner-city areas, where tackling under-achievement is most challenging. Closing gaps in attainment between different groups is critical to our aim of promoting a fair, prosperous and inclusive society.

There have been improvements in attainment at all levels of education in recent years, and schools in the most disadvantaged areas have improved most of all. However, there is still a major gap between the outcomes of children from disadvantaged backgrounds and those of their peers. That is why the Secretary of State is clear that closing those gaps is a continued target and that funding needs to reflect that. In 2006, fewer than a third of young people who received free school meals achieved five good GCSE passes, compared with more than 60 per cent. of their peers. Reducing that gap in attainment is critical and we believe it is right and just to invest our resources where they will make the most difference.

We will therefore continue to target resources through local authorities to schools that serve deprived communities. However, we want to ensure that we do so as effectively as possible. The review of the school funding arrangements therefore has a strong focus on identifying the most effective means of providing funding for deprivation to local authorities. It focuses, too, on how they distribute that funding to schools to ensure that pockets of deprivation, in rural areas for example, have that deprivation recognised in the educational needs of pupils in their schools.

As I said, I am grateful to the F40 group and other interest groups for their input into the process and their continuing input into the consultation process. I thank them for the way in which they constructed the meeting with me earlier this year.

In March, we issued specific proposals for consultation. It might be helpful to describe some of the key proposals that will be discussed. The first will be how we should distribute the dedicated schools grant from 2008-09—the choice is between the “spend plus” methodology used this year and last and a return to a single formula that would have greater degrees of redistribution from the status quo. The second will be how funding for deprivation is best recognised in the distribution of the dedicated schools grant, and the third will be what the level of the minimum funding guarantee for schools should be over the next three years. I mentioned that earlier. On the second proposal, we are seeking views on which of the most up-to-date and fine-grained indicators of deprivation we might use in the dedicated schools grant distribution and whether and how we could target funding in a more sophisticated way, reaching pockets of deprivation in areas that are not deprived overall. I am confident that the F40 group will have some constructive views on that.

We also make proposals in the consultation to support some of our most important education reforms, giving support to schools to deliver “Every Child Matters”; delivering the extended free entitlement to early-years education for three and four-year-olds; and introducing diplomas for 14 to 19-year-olds. I congratulate Beverley high school and Beverley grammar school, two schools mentioned by the hon. Gentleman. They are part of the East Riding central consortium that has applied successfully to deliver the new creative and media diploma from 2009 and will receive extra funding to deliver that.

The school funding consultation closes on 1 June and I am sure that the hon. Gentleman will take the opportunity to raise his concerns. I reassure him that we will listen to the views of all interested parties and consider them carefully before we announce our decisions this summer. I know that he shares my ambition to see even greater improvements in standards over the coming years. The spending review settlement and the options in the school funding consultation will enable us to raise standards for all and to close the attainment gap.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Four o’clock.