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National Funding Formula: Schools/High Needs

Volume 618: debated on Wednesday 14 December 2016

With permission, I would like to make a statement on the second-stage consultation on the Government’s proposals to create a national funding formula for schools, copies of which can be found on the website.

Since 2010, this Government have protected the core schools budget in real terms overall, but the system by which schools and high needs funding is distributed now needs to be reformed, to tackle the historical postcode lottery in school funding. These crucial reforms sit at the heart of delivering the Government’s pledge to build a country that works for everyone, not just the privileged few.

Our school funding system as it exists today is unfair, opaque and outdated. The reality is that patchy and inconsistent decisions on funding have built up over many years, based on data that are sometimes a decade or more out of date. What has been created over time is a funding system that allows similar schools with similar students to receive levels of funding so different that they put some young people at an educational disadvantage. For example, a school in Coventry can receive nearly £500 more per pupil than a school in Plymouth, despite having the same proportion of pupils eligible for the pupil premium. A Nottingham school can attract £460 more per pupil than one in Halton, despite having the same proportion of pupils eligible for the pupil premium. As those figures demonstrate, our funding system is broken and unfair, and we cannot allow that to continue.

Our overall proposals for the principles and broad design of the schools and high needs funding system—as set out in the first stage of the national funding formula consultation by my predecessor, my right hon. Friend the Member for Loughborough (Nicky Morgan)—were widely welcomed. Today we set out our response to that, and the final stage of putting in place a national funding formula.

First, we are proposing a consistent base rate for every pupil at primary and at secondary level, which steadily increases in value as they progress through the system between primary and secondary. This is the largest factor in the formula, accounting for more than £23 billion of annual core schools funding and more than 70% of the funding total.

Secondly, we are proposing to protect resources for pupils who come from disadvantaged families, and we are taking a broad view to target £3 billion of funding annually for those who are most in need of support. Our formula will prioritise not only children in receipt of free school meals but those who live in areas of disadvantage. That will help to support many more families who are most likely to be just about managing to get by.

That is alongside our broader commitment to maintain pupil premium funding for deprived pupils in full. That will be protected at current rates throughout the remainder of this Parliament. We have listened to the responses received to the first stage of the consultation, so our funding formula will include a factor for mobility to reflect the number of children who join a school mid-year. That is in response to London, which called particularly strongly for that in reply to the consultation. We will also protect small, rural schools, which are so important for their local communities, through the inclusion of a sparsity factor.

Thirdly, alongside a basic amount and an uplift for disadvantage, we will direct £2.4 billion in funding towards pupils with low prior attainment at both primary and secondary school to ensure they get the vital support they need to catch up with their peers. Our proposed reforms will mean that schools and local authorities all across England that have been underfunded for years will see their funding increase. Our proposed formula will result in more than 10,000 schools gaining funding and more than 3,000 receiving an increase of more than 5%. Those that are due to see gains will see them quickly, with increases of up to 3% in per pupil funding in 2018-19 and up to a further 2.5% in 2019-20.

At the same time as restoring fairness to the funding system, we are also building significant protections into our formula. No school will face a reduction of more than 3% per pupil overall as a result of the new formula, and none will lose more than 1.5% per pupil per year. For high needs funding, which provides local authorities with the money they need to deliver the extra support required by our most vulnerable children and young people—those with the most extreme special needs, whether they are in special schools or mainstream schools—we propose to allocate more than £5 billion a year in funding. That will mean that no local authority will see its funding reduce as a result of the introduction of the formula.

We also propose to give local areas a limited flexibility to redirect funding between their schools and high needs budgets, through agreement between the local authority and local schools, to support collaborative approaches to provision for special needs pupils. Those protections will allow all schools and local authorities to manage the transition to fairer funding while making the best use of their resources and managing cost pressures, ensuring that every pound is used effectively to drive up standards and has the maximum impact for the young people we are investing in. In addition, to support schools in using their funding to the greatest effect, we have put in place and continue to develop a comprehensive efficiency package.

As I said in my statement to the House on 21 July, I recognise the importance of this reform, which is long overdue. I am keen to allow the proper amount of time for all schools and stakeholders to have a chance to reflect on this detailed formula. The consultation will therefore be open for 14 weeks until 22 March, with final decisions to be made before summer next year. It is our intention that once we reach a final design, the national funding formula will properly be introduced in 2018-19. That will be a transitional year, during which local authorities will continue to set local schools’ funding formulae. In 2019-20 we will move to having our schools funding go directly to schools, so that the great majority of each school’s individual budget is determined on the basis of a single, national formula.

It is now time for us to consult on the more detailed design of the formula, so that with the help of the sector we can really get the national funding formula right. We are keen to hear as many views as possible, and I encourage Members and their constituents to scrutinise and respond to the detailed consultation documents that we are issuing. The proposals for funding reform will mean that all schools and local areas receive a consistent and fair share of the schools budget, so that they can have the best possible chance to give every child the opportunity to reach their full potential. Once it is implemented, the formula will mean that wherever a family lives in England, their children will attract a similar level of funding—one that properly reflects their needs.

The Government believe that the funding system that we propose will ensure our schools system works fairly, and I commend this statement to the House.

After many delays, the Secretary of State has finally come forward with the Government’s so-called fair funding formula. I thank her for advance sight of her statement and the raft of documents she sent me just half an hour ago.

If only the fair funding formula lived up to its name. Does the Secretary of State recall the commitment in her party’s manifesto to

“continue to protect school funding”?

Does she accept that the National Audit Office has confirmed something that the Institute for Fiscal Studies had already told us, which she tried to ignore—that the Government will be cutting the schools budget by at least 8%, and that is not changed at all by today’s announcement? Does she remember that that same manifesto promised:

“Under a future Conservative Government, the amount of money following your child into school will be protected”?

The National Audit Office has made it clear that funding per pupil will also fall by 8%. Is the National Audit Office wrong, or is the new, unelected Prime Minister ripping up the manifesto that her predecessor put to the country?

The Secretary of State said that the so-called fair funding formula would mean that no school would lose more than 1.5% of its funding per year. How can she possibly reconcile that with the projections of schools facing actual cuts of up to double that and real-terms cuts of up to 10%? Can she tell the House how exactly a funding formula can be fair when it will mean that a third of local authorities and around 10,000 schools, serving more than 2 million children, lose money? In a period when pupil numbers and inflation are rising in tandem, the pressure on school budgets will continue to increase. The National Audit Office has told us today that school budgets are facing a “real-terms reduction”. Will the Secretary of State tell the House what percentage of the schools budget will be cut over this Parliament, and how much that cut will be for the average secondary school? Will she tell us how, at a time when pressure on schools is increasing, she can possibly justify that position?

The Department has said that schools will need to make £3 billion in efficiency savings over this Parliament, but the National Audit Office has said that schools are not prepared for the “scale and pace” of the changes, and that the Department has failed to make that clear to them. Will the Secretary of State tell the House how exactly the Department will ensure that schools are able to meet her demands? Is the suggestion that schools make £1.7 billion in savings by “using staff more efficiently” just a crude euphemism for cutting the jobs of teachers, teaching assistants and vital support staff, at a point when the workforce is already facing a crisis? The Department has said that the funding formula will be about targeting on the basis of pupils’ need rather than their postcode. Can she explain why schools up and down the country will be losing out, and why many in the most disadvantaged areas will lose the most?

The only new money being offered to English schools is to expand the few remaining grammar schools, 80% of which are in Tory-held seats, regardless of where the need for places is. Does the Secretary of State accept that that means that the only parts of Britain denied new funding are the comprehensive areas of England? Does she acknowledge that nearly 60% of secondary schools across the country already receive less in funding than they spend on teaching, and that they are already running at a deficit? Will she tell us her projections of the increase in pupil numbers over the spending review period, her forecast for the rate of inflation facing schools, and therefore the rise in costs facing schools? The Secretary of State seems to believe that all these savings and all these cuts can be managed without any impact on the education of our children. Will she tell the House how exactly she will ensure that that happens in practice?

You know, Mr Speaker, they used to say the Tories knew the value of nothing but the price of everything, but now they do not even know that. They have failed on the economy, failed on protecting our NHS and now failed on our children.

I have to say that I am absolutely staggered at that response from the shadow Secretary of State for Education. There is cross-party support for reforming the national funding formula and, from representing our constituencies, we all know that it is impossible to justify the current approach. It would have been better if we had had a more thoughtful response, rather than just a diatribe of political rhetoric, from the Opposition Dispatch Box.

On some of the points the hon. Lady tried to make, the reality is that we have been able to protect the schools budget—the core schools budget—in real terms. That is because we have a thriving economy, which is generating the taxes that mean we can continue to invest in our public services. She talked about fair funding, but did not seem to understand or to have listened to my statement. Perhaps she had already written what she wanted to say, and was not actually interested in the reality. The funding formula absolutely bakes in making sure that we have the right amount of funding for children from more disadvantaged areas. In fact, we have taken a broader definition of disadvantage to make sure that it is not only the children eligible for free school meals who will get additional support. We have also made sure that the formula builds in a strong focus on low prior attainment, so that the children who have fallen behind—we need to invest in and support them to catch up—get additional resourcing. Schools with more of them will get more.

The hon. Lady seemed to fail even to hear the statement I made. I have to say that, based on the lack of engagement from the Labour Front Bench, I will sit down and give colleagues with more thoughtful questions a chance to ask them.

I certainly welcome this statement, as will many parents across the country. It has been long awaited, as the Secretary of State conceded, but it has the right tone, the right context and, essentially, the right capacity to make the changes. It will also enable schools to plan ahead, which will be very good for all schools in terms of teacher recruitment and teacher retention, which we also need to address. Will she be sure to accommodate issues about the future of local government, because there will be some changes? This is a national formula, so the future of local government must be considered in that context.

We are busy doing that already. I felt it was quite important, in the second-stage consultation, to recognise the need to understand how a little bit of local flexibility could help us to make sure that the formula works right on the ground. That is therefore part of the consultation I have set out. We have set out our plans for the 2018-19 transition year, and we are asking how we can look at this more carefully for future years. That is precisely why it is important for colleagues from both sides of the House to take the time to engage with the documents—there is a lot of data—we are publishing today.

We would all agree with the aims of a fairer funding formula, but does the Secretary of State not recognise that she is delivering this in the context of dramatic and significant overall cuts to schools budgets? Even the so-called winners under her formula will also face school budget cuts. In a constituency such as mine, which is a loser under this formula—over 50% of children are living in poverty, which makes it the constituency with the second highest level of child poverty in the entire country—school budgets losing money will mean that one-to-one tuition will be going and catch-up classes will be going. Extra-curricular activities—the drama, the Shakespeare—and all the vital things I want kids in Moss Side and Moston to do will be going as a result of her funding crisis, aside from the announcement today.

I encourage the hon. Lady to look at the detail in relation to her constituency. The documents will be published following the statement, as is the normal practice of the House, and I encourage her to look at them. Yes, we need to work with schools to help them to deliver efficiencies, but one thing we have learned over the years from such a divergent funding formula across schools is that many schools are able to deliver excellent and outstanding results on very different cost bases. That shows we need to be able to work with them to get more value out of the system and to make the investment we are putting into schools—core school funding is being protected in real terms over this Parliament—go as far as possible.

I would also say to the hon. Lady that, yes, the National Audit Office report flags up the cost pressures on schools, but there are of course cost pressures on introducing the living wage for the lowest-paid workers in our country. Some of them work in schools, and they should benefit from the introduction of the living wage. There are additional employer contributions to teacher pension schemes, which will make sure we have sustainable pensions for teachers in the long run. I would have hoped that Labour Members welcomed such steps, but we will also work with schools to help them to achieve efficiencies.

I warmly welcome the statement. May I urge my right hon. Friend not to move from the very clear timetable she has set out for the formula’s implementation? It is very keenly anticipated and looked forward to by underfunded local authorities, such as mine in Trafford.

I have set out a very clear timetable today. In spite of the fact that the Labour party clearly has no interest in having fair funding or funding that goes to the most disadvantaged children—the children who need to catch up—we will press on with this process.

The Secretary of State is to be congratulated on grappling with this issue, but, as she has indicated, the devil is in the detail, and I look forward to looking at it. The education of 16 to 19-year-olds, who are in schools as well as in colleges, had a cut of 14% during the coalition Government. There is a big difference between what they get and what four to 16-year-olds and those at university get. What will she do about that funding crisis?

The hon. Gentleman and I share a deep interest in technical education and a passion for improving it. As he will know, my right hon. Friend the Minister for Apprenticeships and Skills is looking at how to implement a skills strategy that will make sure that our technical education system is at the same gold standard level that we are steadily ensuring our education system is reaching. We have protected per pupil core funding post-16, but we want to look at how to make sure that further education improves its attainment levels in the way that has happened across the broader schools system.

West Berkshire and Wokingham education authorities, which serve my constituency, are among those worst funded. They are finding it very difficult to keep their excellent education and their current teacher workforces going. We therefore welcome the statement. Will there be any transitional relief for 2017-18, because our financial need exists now?

My right hon. Friend will know that the previous year’s transitional relief has been carried over to the forthcoming year. Beyond that, I am now setting out the steps we will take to make funding fairer. This is important, and despite the debate that will no doubt be kicked off on the back of this consultation, we just cannot accept a situation in which a similar child with similar needs has such a difference in funding put into their education and their school for no other reason than that they are in different places. This simply cannot and should not be accepted, which is why we are setting out our solution today.

The Secretary of State will be aware of the transformation of London’s schools. In 1997 when Labour took power, schools in my constituency were among the worst. By the time we left office, they were among the best, and that continued under the last Government. That transformation happened thanks to the London challenge and continued investment. Will the Secretary of State confirm that London’s achievement will not be damaged by this formula and that London’s schools will not lose the £260 million we have heard about? We need to learn from London’s success and replicate it in other parts of the country.

I can reassure the hon. Lady that under the formula, London will continue to be well funded. Despite the percentage of children eligible for free school meals in London having fallen from 28% to 17% over the last 10 years, London still has some of the most deprived parts of our country. The funding formula will ensure that London still receives some of the best funding of any region for its schools. That is happening because it is appropriate, but what we cannot accept is areas in other parts of the country that have similar challenges of deprivation and, additionally, low prior attainment not being funded for no other reason than that they are not London. It is time to ensure that we have a fair approach, but it is a fair approach for London too.

I wholeheartedly support this announcement. For too long, Swindon’s children have been short-changed by Labour’s hopeless funding formula. Change cannot come soon enough. I urge the Secretary of State to explore options on private finance initiative schemes, which are frustrating improvement plans in many of my local schools.

That issue was raised in response to the phase 1 consultation, so we will ensure that the formula reflects the fact that there are PFI commitments that will continue in real terms. I have no doubt that that will be good news for my hon. Friend’s local area. Obviously, we do not want to perpetuate those schemes when they have steadily run down, but it is important to reflect the reality of those cost pressures on schools that are in that position.

The Secretary of State listed a number of factors—mobility, disadvantage and prior attainment—that are crucial in many constituencies, particularly those in urban areas like the one that I represent. Will she give us more detail on how big a factor they will be, because that will determine how much constituencies like mine lose out? The concern in Liverpool is that, on top of the substantial cuts to local government funding, our schools will lose out at a time when they are finding it challenging to recruit teachers and headteachers.

As the hon. Gentleman points out, in addition to the core base amount of funding, there is roughly a further 25% that is uplifted in relation to deprivation, additional needs and locational needs. Although mobility was not one of the original factors in the phase 1 consultation—in other words, this is the challenge that some schools and local areas face when children arrive during the year, as opposed to growth, which relates to steady demographic change and sometimes an influx between years—we recognised that it was important to reflect it in the formula. We have looked at the cost pressures that we think relate to mobility. We will initially base the 2018-19 formula on historical levels, because that is the one evidence base we have, but we will consider what is a sensible way to look at mobility going forward.

I welcome the statement. Gloucestershire County Council has been a poorly funded local authority, so this will be welcomed in my county. I welcome the fact that sparsity will be taken into account, which is important in rural constituencies like mine. Will the Secretary of State confirm that, based on the timetable she has set out, with the final position being reached in 2019-20, we will have delivered on our manifesto commitment to deliver fair funding in this Parliament?

I believe we will have done so. We will have brought in a formula that works more effectively and we will have transitioned it in appropriately. I believe that it will be a big step forward, particularly for schools that have been so underfunded for so long.

The Secretary of State is right that this kind of funding has to be upgraded and uprated over time. I certainly welcome that. However, is she also aware that it is the responsibility of this House to check the fairness of that over time through the Select Committee system and in this Chamber? Does she accept the implication that, overall, the challenges in our education system are grave when the chief inspector, who is about to retire, points out that so many bright children in our country, who grew bright through good primary schools up to the age of 11, are lost to education post-11? Will she do something about that? Will she also do something about the chief inspector’s deep worry that pupils in many of the big towns and cities in the midlands and the north are severely underperforming?

The hon. Gentleman sets out some of the challenges that we continue to face in our education system. That is precisely why the national funding formula makes sure that resources go to schools that are in more disadvantaged areas and those that have cohorts of young people and children who are starting from furthest behind. That is not only the sensible approach; it is the right thing to do for those children and schools. For too long, that has not been built into the school funding formula. That is what we are trying to resolve today. This is the second stage of the consultation. There are 14 weeks for everyone to look at whether the way in which we have blended the different criteria is right. I think that it is.

In addition to what we are announcing today, the hon. Gentleman will be aware that we have launched six opportunity areas to look at how we can ensure that we have excellent education in those parts of the country where we still have not seen enough improvement.

Both Plymouth and Coventry were bombed heavily during world war two, have areas of deprivation and have similar demographics. Does my right hon. Friend therefore agree that the discrepancy of £500 per pupil per year simply cannot be justified? Her statement will be warmly welcomed. May I ask for maximum clarity at the earliest opportunity on what schools in my constituency will get in 2018 to help them prepare for the September 2017 budget, which is likely to be challenging?

After the statement, we will publish a lot of detail in relation to individual schools. We will take the draft final formula and apply it to individual schools’ budgets, so all Members will be able to look at all the schools in their constituency and see, notionally and illustratively, how the formula will operate. Of course, when the funding formula comes in, it will apply against the up-to-date pupil numbers and pupil data, but we want to be very clear with the House about how it will work on the ground. I encourage all Members to look at the data for their own communities. They show that although no school will get exactly the same under the new formula as it has had in the past, it will be much fairer.

Regardless of this statement, which is by no means all bad, it is indisputable that school overheads are going up and that more and more secondary schools will go into debt. Why are we continuing to squander money on pointless pet projects and restructuring? Surely that is a huge diversion now.

I do not agree with the hon. Gentleman. We have seen year-on-year improvements in our education system. As one of my predecessors said on the “Today” programme earlier this week, it is important that we continue the reforms we have already got under way. That is precisely what we will be doing.

I very much welcome today’s statement on behalf of schools in my Kent constituency, which are significantly underfunded and disadvantaged by the current formula. I welcome the Secretary of State’s commitment to a rapid introduction of the new formula. In the meantime, will she consider seriously whether there is any possibility of interim funding for schools until the new formula is introduced?

As I said in reply to my right hon. Friend the Member for Wokingham (John Redwood), the additional uplift that was provided last year will continue into the forthcoming year, after which we will introduce the national funding formula in 2018-19. Today, we are coming forward with a fundamental solution to a long-term problem that has been building up not just over the last decade, but for 20 years—some people would argue it has been 30 years in the making. Now is the time, finally, that we sort this out.

Will the Secretary of State confirm whether an area cost adjustment multiplier will be applied as a result of the new formula? The funding gap between the national average and what is received by schools in the north-east stands at £45 million a year. Will that gap increase or decrease as a result of the formula?

The formula includes an area cost adjustment. It will be based on a hybrid measure that will look at not only general labour market costs but those relating to teachers, reflecting consultation feedback. It is also one reason why expensive parts of the country such as London will continue to be well funded, even under this formula.

Thank you, Mr Speaker. I welcome both the substance and the tone of the statement. Schools in Solihull receive £1,300 a year less per pupil than those in nearby Birmingham. As a result, we lose teachers to Birmingham. Will the Secretary of State assure me that at least some of that unfairness will be addressed during this Parliament?

I have set out the timelines for the roll-out of this national funding formula. My hon. Friend sets out some of the by-products of the current unfair situation. That is another reason why it is important that we address that situation.

I will keep the gloating to a minimum, Mr Speaker. The Secretary of State is dressing it up very well, but the reality of what she has announced is that some schools in the most deprived parts of the country, which face the biggest challenges, will have money taken away from them and given to schools elsewhere. Would it not have been much fairer for her to have asked the Chancellor for more money to bring the gap up that way? Instead, she is making schools in the toughest areas make teachers redundant to pay for this change.

Again, there is a lot of rhetoric, but in the end the right hon. Gentleman does not seem to have listened to my statement, which was very clear that this funding formula absolutely reflects issues of deprivation and lower prior attainment, as well as local cost issues. It is a step forward in making sure that we have a much fairer approach than in the past. I do not think he would be able to justify the current situation to many parents who simply cannot understand why their children get less funding than other children purely because of where they grow up.

Earlier this year, I held a roundtable for all the headteachers of primary and secondary schools across North Dorset. One big issue they raised was the recruitment and retention of staff in a rural area where living and other costs are higher, and all the rest of it. This announcement is very welcome. The sparsity quota that my right hon. Friend has referred to will be warmly welcomed by those headteachers. On their behalf, may I simply say, “Thank you”?

I am grateful for that. As my hon. Friend points out, it is important that the formula reflects the very different challenges that schools face in very different situations and parts of our country. That is why the sparsity factor matters.

The Secretary of State will be aware that schools all over the country are finding it difficult to recruit teachers because we are not training enough of them. For example, in Slough, where we do not get as much resource although we have exactly the same kind of challenges as inner London, headteachers are desperate. House prices in Slough went up faster than anywhere else in the country in the past year. Will she assure me that schools in my constituency will not face a cut as a result of this formula but will be rewarded for their brilliant work?

The right hon. Lady should welcome the formula, because at the moment the flow of money into our schools is unfair. For a community such as hers, our proposed architecture for the national funding formula will make sure principally that funding is fair and there is an equal amount for children in primary and in secondary; then our main drivers of additional funding will be deprivation—as I said, £5 billion a year for that—and low prior attainment. That is the right way to structure the formula. Although we have seen progress in many schools in many parts of our country, we now need to make absolutely sure that resources flow towards those areas that need to lift.

The Minister for schools was kind enough to meet me recently to discuss funding for schools in Wealden and East Sussex, and I am very grateful for that. My pupil funding is just £4,433.58. My small rural schools face severe challenges because of their small size and location, and a heavy weighting for sparsity in the formula is therefore vital if we are to ensure that Wealden’s superb schools can carry on providing a brilliant education.

My hon. Friend is absolutely right. When we looked at the national funding formula mechanism, we saw that some local authorities do not use the sparsity factor. Our sparsity factor will go to all schools that should get additional support. That is why the formula should be welcomed.

Children in my constituency start school up to 19 months behind where they should be in terms of development. Without fantastic teachers and extra resources, they struggle to fulfil their potential and play catch-up for the rest of their lives. Will the Secretary of State tell me and schools in my constituency whether they will see their funding increase—yes or no?

There is a greater focus in this formula on low prior attainment, which should address the hon. Lady’s question.

Under the current funding formula, Kingston schools are the third worst funded in London, receiving £2,400 per pupil per year less than Tower Hamlets, which is just 14 miles away. Having campaigned for changes and for fairer funding with teachers, parents and councillors, I look forward to responding to the phase 2 consultation. Will my right hon. Friend confirm that the mobility factor that I and other London MPs called for recognises the very real pressure that London and other urban and suburban schools face from children joining mid-term in large numbers?

I think it can. Obviously, my hon. Friend will want to look at the detail in the consultation, but under this formula we will put £23 million into supporting children who move in-year and their schools. As a London MP, I know that has been an issue for some London schools. But it is not just an issue for London; there was a general response to the phase 1 consultation document saying that we needed to put the issue into the phase 2 consultation and that it should be made part of the formula. That is why we have done so.

I am grateful to the Minister for schools for listening to the case for adding mobility to the school funding formula and to the Secretary of State for her announcement; I will look carefully at the details. Should she not have secured the Chancellor’s support to make sure that no school sees a cut in its funding per pupil, given the cost pressures that she has referred to?

I make two points. In spite of the need to reduce the deficit over time, which the Government have set about doing, we have protected the core schools budget in real terms. In addition, I recognise that there is a need to reduce the year-on-year reductions schools faced, so those will be no more than 1.5%. Indeed, the overall reduction for any per-pupil amount will be no more than 3%. I hope the right hon. Gentleman will welcome that.

Following on from that point, there is a similar fair funding formula in the health service, but Wellingborough is always at the bottom. It never catches up because we are not prepared to reduce the money that the best funded get. I am slightly worried that my right hon. Friend’s answer suggests that that sort of thing will creep into the school system. Are we actually ever going to move to the formula—are schools actually going to get the cash that the formula says they will?

In the transition year, some schools that are so far behind as to be eligible will get 3%; those schools that are even further behind under the fair formula will get a further 2.5% the following year, when the formula operates in full and properly. My hon. Friend is right to flag up the issue. It is important that the schools that have been underfunded see those gains coming through. That is what we are proposing.

Schools in areas such as Westminster have a combination of exceptionally high costs—not least recruitment and retention—and very high deprivation, and they are already making staff redundant. The Secretary of State partially blamed policies such as the introduction of the national living wage. Why are the Government introducing policies impacting on schools that they are not prepared to fund?

I am not sure whether the hon. Lady supports the living wage, but the Government think that it is important. We also think a further two things, however: first, it is important to introduce this national funding formula—I hope that MPs can support it as a mechanism to make sure that the funding flowing into schools is delivered fairly—and secondly, it will ensure that children growing up in deprived areas see additional funding. I hope that she will reflect on that. In addition, wherever they grow up—whether or not in a deprived community—children who need to catch up will receive additional funding through this formula.

I welcome my right hon. Friend’s statement. One group we must not overlook is parents. In my constituency, parents work hard and often tell me, “I’m paying the same rate of tax as people in other areas. Why am I getting so much less money for my children in the state school system?” I urge her, when she gets the backlash from the more generously funded areas, to stand fast, particularly on support for rural schools, and to deliver this in full and in practice.

We are at the beginning of a 14-week consultation, and it is important that everybody looks at the formula we are proposing. I think that it strikes the right balance, and I hope that it can command the broad support of the House.

I represent the 19th most disadvantaged constituency in the country—the Secretary of State spoke about disadvantage and deprivation—but can she tell parents and schools in my constituency whether they will receive more funding under this proposed formula or less?

The hon. Lady can look at the details for her own constituency once all the data are published, but I hope she will reflect on what I said earlier: we have designed the formula to ensure that the funding follows children from disadvantaged backgrounds. Indeed, we did not just consider the formal deprivation factors that many local authorities have; some local authorities, where virtually all the children are from deprived backgrounds, do not necessarily have a formal factor that reflects that, but nevertheless we tried to capture the hidden funding flowing through to help deprived children as part of the deprived factor.

For decades, Staffordshire has languished 15 places from the bottom on funding. I have heard this all before, from Tony Blair and the unelected Prime Minister—as the hon. Member for Ashton-under-Lyne (Angela Rayner) so charmingly put it—Gordon Brown, so I thank my right hon. Friend for coming up with a firm date for these reforms. Will she assure me that the children of Staffordshire will no longer be disadvantaged?

I believe that this will be a fair funding formula that will be in everyone’s interests, including those of my hon. Friend’s constituents.

I have a letter from the National Union of Teachers, which is extremely alarmed that pupils in Bishop Auckland will lose £452 over the Parliament. Will the Secretary of State tell me what will happen in my constituency? She has reassured London MPs and the home counties. In the interests of intellectual honesty, will she say who are the losers out of her funding formula?

We heard terrible scaremongering and numbers from the NUT that proved to be incorrect. It said that some schools would lose 10% under this funding formula, but, as I have set out, that is absolutely not the case. I would encourage the hon. Lady, like all Members, to look at the data for her own constituency. We will be publishing a lot of data once this statement is done, as is customary, because we want to be clear. This is a big step forward for schools funding and it is important that we are clear with people about the implications for their schools. That is what we have done.

I particularly welcome the Secretary of State’s reference in her statement to sparsity and mobility. It is great news for constituencies such as mine. Does she agree that one of the most mobile pupil populations are the children of our armed forces families? How will she promote the pupil premium that we introduced in 2011 in the funding formula?

The pupil premium is largely unaffected, but as my hon. Friend points out, there is now an element to ensure that the children of forces families are not disadvantaged when, as often happens, people get posted to different places and their children have to switch schools. That was one reason we were keen to handle the mobility issue carefully within the funding formula.

Schools in my constituency are among the lowest funded in the country, so we will look with interest at what the Secretary of State is proposing, but those schools are struggling now because of the Government’s actions: cuts to the education services grant have taken money out of the dedicated schools grant; schools are being inadequately funded under legislation on additional need; and our high-needs block is very underfunded. What will she do to assist these schools now, before the new funding formula comes in and before even more damage is done to the education of children at school now?

The hon. Lady raises a number of issues. On local authorities and school improvement, we have launched a strategic school improvement fund to ensure school improvement, particularly in those parts of the country where schools have made less progress than we would have wanted. In relation to high needs, as I set out, no local areas will see a reduction in their funding, but areas that have been most underfunded will see 3% gains over 2018-19 and 2019-20, which I hope she will welcome.

I welcome today’s statement. Hampshire is the third lowest funded local authority in the country and faces significant pressures—it needs 9,000 extra secondary school places by 2025 and 40% of its school estate is largely un-upgraded since the 1960s. Does the Secretary of State agree that today’s proposal will address the single biggest factor causing the disparities around the country—the historical nature of the funding formula—and will restore equality and fairness to the system?

Yes, I do. The old formula was arbitrary at both central Government and local authority level, which, as the formulae were set, baked in a second set of imbalances. It is now time to tidy that up and—critically—to make it fair and equal wherever children are.

The Secretary of State knows that Nottingham schools face enormous challenges in raising education standards in a city with high deprivation. School leaders are already telling me they are struggling to cope and having huge difficulties recruiting and retaining high-quality teachers. We know that all schools are facing a real-terms cut in funding, but how does she think headteachers, staff, parents and pupils in Nottingham will feel when she says it is fair that their schools are being cut even deeper to fund increases in other places?

I do not think that anybody can argue in favour of a system that is simply a postcode lottery and in which there is very little, if any, relationship between, on the one hand, the needs of a school and the underlying cost base of where it is operating and, on the other hand, how much the school and the child get in funding. We are today setting out a formula that genuinely addresses that. It is a 14-week consultation, so there is plenty of time for Members to look at the impact on their local area and then take part in that consultation. I hope that MPs will do that.

May I warmly welcome today’s statement on behalf of schools in Nottinghamshire, which have been poorly funded for a long time? In particular, does my right hon. Friend agree that this is part of addressing the lazy assumption that there is no deprivation in rural areas and counties? Counties such as Nottinghamshire and towns such as Newark have pockets of extreme deprivation—in former coalfield communities such as Ollerton and in Ashfield and Mansfield—and it surprises me that Opposition colleagues do not recognise that.

I agree strongly with my hon. Friend. The funding formula now enables us to take a proper, validated, evidence-based approach, including to deprivation, which was often driven by data that were 10-plus years out of date. It is time to fix that, and that is what we are launching today.

Does the Secretary of State recognise and understand the grave concerns of schools in my constituency and across Cumbria with above-average numbers of children with high needs that the change to the funding formula for teaching assistants, which will require schools to fund the first 10 hours rather than the first eight, will significantly impact existing budgets and mean cuts in those schools? Is it not the case that the proposed floor for maintaining the existing budget will be of little help if the current numbers of high-needs pupils continue to rise?

I would encourage the hon. Gentleman to look at the consultation. Alongside having an element of funding for local areas based on historic spend levels, which vary, we will look at population and needs within that as strong proxies for understanding how much funding we think should flow to different places. That will put us in a much fairer position, but as I have set out clearly, as part of that we will also ensure that no area will lose any funding as part of the transition.

Having wrestled with the education funding formula in local government for 20 years before I was elected to this place, I welcome the principle of fair funding, and in particular sparsity and the other elements contained within it. However, as a fellow London MP, my right hon. Friend will know that the cost of living in London is much higher than in the rest of the country. With 85% of a school’s budget typically spent on staffing, the need to pay staff extra salaries for recruitment and retention is paramount, so will she outline what extra money will be given to cover the cost of living and to protect schools from losing money?

The area cost adjustment should enable us to do that effectively. As I have said, it is not based just on overall labour cost assumptions; it is based on cost assumptions in relation to teachers more specifically, so it should enable us to reflect that in the funding formula that we have now put in place. My hon. Friend will of course have a chance to respond to the consultation, but that is what we have tried to do.

I am grateful for the Secretary of State’s statement. Will she explain the flexibility between local authorities? For example, in 2010 the funding for children’s services in Haringey, one of London’s poorest boroughs, was £102 million and in 2017-18 it will be £46 million, although the population has grown and the children are no less needy. How does she see that interplaying, and will she explain how it will be addressed in the consultation?

I was talking about two flexibilities in the consultation. They include, in relation to the high-needs fund that we are now consulting on, the ability for local authorities that will still receive high-needs funding to share some of that with mainstream schools, if they feel that is a better way of operating to provide for special needs locally. Of course, some special needs children are in mainstream schools and some are in special schools. We wanted to include an additional flexibility for 2018-19, so that where there is agreement locally that the funding should flow the opposite way—from the schools budget into high needs, perhaps because of the way that special needs are delivered locally—that should be possible if there is overall agreement from the majority of schools. That is what we are consulting on. We want to look at whether there is a longer-term approach, but the whole point of the second-stage consultation is to get feedback on those proposals.

I warmly welcome the statement on fairer funding for schools. It is not right that constituencies such as mine have a £2,000 difference per pupil compared with other constituencies. I noted with interest that the Secretary of State identified as one of the reasons the fact that the data are a decade out of date, so going forward it is fundamental that we have the correct data, particularly in areas of high growth. Will she assure me that the data will be collected sufficiently late in the year, so that we know the accurate figures per pupil for the following school year?

As part of the figures for deprivation we will be using IDACI—the income deprivation affecting children index—which essentially looks at how deprivation affects children in particular. It was last updated very recently, so it gives us a fresh database to use. In relation to broader pupil cohort characteristics, the census is updated in October every year and that feeds into the following academic year’s funding formula details. Those two things should mean that we have up-to-date data to feed in.

Is it not the case that this reform of the funding formula, which many of us agree needs to happen, would have been much easier had the Chancellor given some additional money to fund some of the changes? Also, notwithstanding what the Secretary of State has said, will not every single school in the country face real-terms cuts in their budget, including even those that gain, or think they gain, from the change to the funding formula? One way of tackling disadvantage is the pupil premium, so it would be interesting to hear what discussions took place about the pupil premium in making these changes. The Secretary of State said that the pupil premium “will be protected at current rates throughout the remainder of this Parliament”. Can she confirm whether that means rates as they are now or real-terms increases through the Parliament?

We said that we will continue to put around £2.5 billion into the pupil premium, which is separate from the additional funding that will be uplifted on top of core basic funding rates, as part of the consultation that we are setting out today. Both those things underline the fact that this Government are determined to ensure that our schools funding really supports children in some of the toughest parts of the country who are most likely not to come out of the schools system with the outcomes that we want for them to be able to fulfil their potential.

The people of Worcestershire will welcome this statement because funding per pupil is £1,000 lower there than in neighbouring areas. Does the Secretary of State recognise that not everybody who lives in the countryside lives in some kind of rural idyll and that there are pockets of poverty and deprivation right across our countryside, including in my constituency, so investing in our children’s futures based on need and fairness is absolutely the right move?

My hon. Friend is absolutely right, and that is why it is so important that we move to a sensible approach to how deprivation should be captured. It is also why we wanted to take a broader approach than using just those children eligible for free school meals. We did not want that cliff edge, so we will be looking at three components: existing eligibility for free school meals, children who have been eligible for free school meals over the past six years, which gives us a sense of the underlying need, and IDACI, an index that captures a broader definition of deprivation.

Teachers in my constituency are increasingly telling me about the funding pressures they are under. I was interested to hear the Secretary of State admit that young people in my constituency were at a disadvantage—she specifically cited the case of Halton, so I assume she knows it. What will the real-terms increase be for Halton pupils? She must know that, because she has cited Halton.

I quoted what the current position was. The hon. Gentleman will no doubt be interested to look at the details for his local community, once we release them, when this statement to the House is finally finished.

Schools in York have some of the lowest, if not the lowest, per pupil funding in the country, with some schools in London receiving more than £3,000 per pupil more, leaving schools in York on the brink of making some very difficult decisions, despite delivering excellent education. What message can the Secretary of State send to schools in York that have been waiting for this announcement for far too long and want to see it implemented as soon as possible?

I think this will be a much fairer approach for all schools, including those in York, and we are taking steps to introduce it rapidly over the remainder of this Parliament, which is good news.

Order. I hope that everyone who wishes to ask a question of the Secretary of State will have an opportunity, but now that she has been answering questions for over an hour, it would be appropriate if questions were short and sharp, or we will be here all day.

Funding should be related to need, and this is a long-standing problem. In Liverpool, which is one of the most deprived areas, over 58% of the budget has already gone, and the NUT says that over £602 per pupil will be lost under the Government’s programme. Can the Secretary of State guarantee that the students of Liverpool will not lose out in this redistribution of funds?

I encourage the hon. Lady to look at the details that will be released by area and by school. To give her some reassurance, this is a formula that absolutely wants to ensure that we direct funding fairly, but also in relation to need, whether it be disadvantage or indeed low prior attainment. We think that the formula should be driven by data that, as I have said in my answers to other hon. Members, are more up to date. I encourage the hon. Lady to look at the consultation and at the details that will be released as part of it.

I welcome today’s statement, and schools in Cornwall will be very grateful that, at long last, the historical underfunding of its schools is being addressed. I am pleased to be part of the party of government who are at last dealing with it. I would like to raise the particular issue of the pupil premium and eligibility to it being based on free school meals. It is often difficult to get parents to register for free school meals, because of personal choice or the stigma they believe is attached to it, yet these data are already held by other Departments. Can we not get cross-Government co-operation so that people can be registered for free school meals automatically, rather than having to go through the process?

My hon. Friend raises an important point. We want all children eligible for the pupil premium and free school meals to be properly registered. We have done a lot of work to try to make sure that that is the case. As my hon. Friend sets out, there is still a challenge ahead of us, and I am looking at what we can do to try to make further progress because it matters.

I do not resent in any way the idea that Members are representing their constituents in rural areas. If particular concerns need to be taken into account, it is right to do so. The problem I have is that that should not be at the cost of urban schools, where significant levels of deprivation exist. In Oldham, the current proposals could see a loss of over £400 per pupil under the new formula; and for some schools, up to £600 per pupil could be taken away from the council’s budget. The town is already struggling to recruit and retain good-quality, high-performing teachers. We know that because it is one of the areas being looked at by the Department for special intervention. May I have an absolute commitment from the Secretary of State that we will not get into a “them versus them” argument, but that a proper review will take place to make sure that every school has sufficient funding to meet its demand and needs?

Order. Before the Secretary of State answers the question, let me say that I have allowed the hon. Gentleman some leeway because he has waited a long time to put his question. However, it does not follow that he should take twice as long to put it. I do not criticise him specifically today, but I hope that we can be a little faster now.

I am sure that the hon. Gentleman will want to see the impact on his own local constituency, but I think this formula is a step forward to make sure that wherever children are, funding is there. As I have said on a number of occasions, it very much bakes into the formula the idea of having money follow disadvantage and need. I think that is the right approach to take.

I am grateful to the Secretary of State and the schools Minister for listening to my concerns and those of so many of us from the south-west about school funding. I congratulate them on correcting the real unfairness in the funding that schools in the Wells constituency have had to endure for too long. Does she agree that this is the start of a series of investments in the south-west that will correct an imbalance in funding to our region, and that she has blazed a trail that other Departments will surely follow?

That was a fantastic question. I, too, would like to take the opportunity to thank the Minister for School Standards, my hon. Friend the Member for Bognor Regis and Littlehampton (Mr Gibb), for the work he has done on this complex project that we have undertaken. My hon. Friend the Member for Wells (James Heappey) is absolutely right that we want to see children in the south-west achieve their potential. This is a funding formula that will mean—I think, for the first time—fair funding, which I believe will help a number of a children, and perhaps some of the children in my hon. Friend’s local community.

I am delighted to speak as a Member from the county of Cambridge, which has for decades been one of the lowest funded councils in the whole country. I would like to press my right hon. Friend a little further on the interim funding, which some Members have mentioned. I do not wish to be ungrateful, but last year the interim funding was completely swallowed up with pension and national insurance increases. We are building schools like they are going out of fashion. It has to be subsidised, but the funding has to come out of the main pot while, as my hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer) said, the number of pupils is going up. There is a high cost of living and an average mortgage is 16 times the salary in South Cambridgeshire, so please, please, please will my right hon. Friend look at the interim funding again, because just the same is not going to be enough?

We will be rolling forward, but my hon. Friend’s point underlines why it is important that we move on beyond an interim approach to put in place a final funding formula. That is what the consultation is on. As my hon. Friend says, it will affect areas that have been underfunded for a very long time. That is why we need to get on with it.

West Suffolk—[Interruption.] I always do my best to help my colleagues, but I mean West Sussex, which has historically suffered from very low funding and very high costs, being outside the London weighting. Can the Secretary of State give me any reassurance that we will benefit from the area cost adjustment?

I hope my hon. Friend will see some improvement in how the funding works, following the introduction of the fair funding formula. He mentions costs, which is precisely why one of the key factors we built into the formula is an area cost adjustment to make sure that schools in locations with higher innate cost bases have that reflected in the funding that pupils have attached to them.

I welcome the statement. Does the Secretary of State agree that it starts to address the myth that constituencies such as Cheltenham in Gloucestershire do not have areas of deprivation? The reality is that Cheltenham has intense urban challenges. This formula is starting to address funding on the basis of need and not postcode.

I strongly agree with my hon. Friend. Up to now, school funding has been the ultimate postcode lottery, and funding has been overly determined by where children were growing up. That is completely unacceptable. If we are to make Britain, and in this case schools in England, a country with schools where all children can progress, we have to get on with fair funding.

The prize for patience—this shows what happens when you sit behind the Speaker’s Chair—goes to Jason McCartney.

Thank you, Madam Deputy Speaker, and merry Christmas to you.

How far will the inclusion of a sparsity factor go in protecting the small and rural schools that are so important to my local community?

I think it will help. It will go together with a fixed lump sum, which is also part of this formula. Overall and on average, small rural schools will benefit from the formula.