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School Finances

Volume 467: debated on Monday 12 November 2007

As I made clear in my statement of 30 October, schools and local authorities must work to reduce revenue balances substantially over the next three years, making full use of existing local authority clawback powers, because revenue funding is for today’s pupils and capital funding is for future investment. The operation of a modest surplus year on year makes sound financial sense but, at £1.7 billion, the national total is unacceptable, and if balances remain high we will act to release some of the money for the benefit of current pupils.

I am sure that the Minister knows of, and will want to recognise, the high quality of the head teachers in my constituency. Perhaps he would also like to know that when I wrote to them about his proposal, the balance of the sentiment of the replies was that it is “absolutely ridiculous” and “ill thought-out”, and

“will undermine the whole concept of financial independence”


“create a perverse incentive to spend money before the year end to prevent clawback rather than”

prudently to roll money over for the next year for higher priorities. Against that background, will the Minister not take the message that the best thing would be not only to remove the retrospective element of the calculation but to take away the entire scheme and think again, as it is creating disillusion and concern for responsible and prudent head teachers?

We certainly believe that, as I have just said, a modest surplus year on year makes sound financial sense. In the Bromley authority, in the area that the hon. Gentleman represents, the net revenue balance was relatively modest, and I am sure his head teachers are doing a good job and enjoying spending the increased capital money to invest in their pupils, which has increased from £1.66 million 10 years ago to an allocation of £576 million in 2011. That reinforces the point that if schools continue to build up excessive surplus balances, they need to be dealt with so that the money can be spent on current pupils. However, we have now given schools good notice—at least a couple of years—of the need to get their act together, to work with local authorities and to reduce excessive balances, while maintaining a prudent surplus.

Does the Minister recognise how welcome it was to schools throughout the country when this Government introduced money that can be spent at the discretion of head teachers, which has enabled schools to develop transformative projects that are not necessarily part of the national priorities, but that best fit those schools’ needs? Will he reassure head teachers that that approach, which allows them to decide local priorities, will continue?

I absolutely assure my hon. Friend that we shall continue that discretionary approach of allowing head teachers the freedom to allocate funds. In capital terms, we now delegate directly to schools more money than was in the whole capital fund under the previous Government. In the schools funding announcement that I made this morning, the school standards grant, the SSG personalisation element and the school development grant will all increase in line with the minimum funding guarantee. All those funds go directly to schools, and head teachers decide how to spend them.