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Schools Update: National Funding Formula

Volume 783: debated on Thursday 14 September 2017


My Lords, with the leave of the House, I shall now repeat a Statement made by my right honourable friend the Secretary of State for Education in the other place earlier today.

“In my Statement to the House on 17 July, I set out my department’s plans to increase spending on schools by £1.3 billion over the next two years, on top of our existing plans. I informed the House that this would mean that we could press ahead with introducing a national funding formula for schools and high needs from April 2018 that would provide a per pupil cash increase in respect of every school and every local area, and maintain the overall budget in real terms per pupil. And I promised to return to the House in September to set out the Government’s final decisions on introducing fairer funding in full. Today I am doing just that.

This is an historic reform. It means, for the first time, the resources that the Government are investing in our schools will be distributed according to a formula based on the individual needs and characteristics of every school in the country. Not only will the national funding formula direct resources where they are most needed, helping to ensure that every child can get the high quality education that they deserve, wherever they live, it will also provide that money through a transparent formula, providing greater predictability. And, by clearly setting out the sums that we are directing to different aspects of the formula—to the basic amount per pupil, or to children with additional needs—for the first time it allows for properly informed debate on this vital topic: something the existing, opaque system has held back.

The need for reform has been widely recognised across this House, and beyond. The National Association of Head Teachers says, ‘a revised funding formula for schools is essential’. The Association of School and College Leaders believes that ‘the way in which funding has been distributed to schools has been flawed for many years … Reform of the school funding system is vital’. The case is so strong because of the manifest unfairness when Coventry receives £510 more per pupil than Plymouth despite having equal proportions of pupils eligible for free school meals; or Nottingham similarly attracts £555 more than Halton, near Liverpool, in Cheshire. Addressing these simple but damaging inequalities will represent the biggest improvement in the school funding system for decades. It is a step that previous Governments have failed to take for far too long.

In making such a significant reform, it has been vital to take account of a broad range of views. Our wide-ranging consultations, in both 2016 and earlier this year, allowed us to hear from over 26,000 individual respondents and representative organisations. I am grateful to everyone who took the time to share their views and to respond to the consultations, including many Members across the House. We have carefully considered them all.

As I said to the House in July, I am putting an additional £1.3 billion into core funding for schools and high needs so that the overall budget will now rise by around £2.6 billion from almost £41 billion in 2017-18 to £42.4 billion in 2018-19 and £43.5 billion in 2019-20. Building on this firm foundation, I can today set out the final funding formulae we will introduce, which, over the next two years, will mean we will deliver on our manifesto pledge to make school funding fairer and ensure that we deliver higher funding in respect of every area and school.

Building on our consultation proposals, as I set out in the House prior to the summer recess, I am increasing the basic amount of funding that every pupil will attract. We recognise the challenge of the very lowest funded schools so we will introduce a minimum per pupil funding level. Under the national funding formula, in 2019-20 all secondary schools will attract at least £4,800 per pupil. Today I can announce that all primary schools will attract at least £3,500 per pupil through the formula in 2019-20, and the formula will provide these levels of funding quickly: secondary schools will attract at least £4,600, and primary schools £3,300 in 2018-19; and then the full amounts the following year. I will also provide a cash increase in respect of every school. Final decisions on local distribution will be taken by local authorities, but under the national funding formula every school will attract at least 0.5% more per pupil in 2018-19, and 1% more in 2019-20, compared to its baseline.

Many schools will, of course, attract significantly larger increases under the formula—up to 3% per pupil in 2018-19 and a further 3% per pupil in 2019-20. And the minimum per pupil funding level will not be subject to this gains cap—delivering particularly fast gains in respect of the very lowest funded schools.

Our consultation confirmed the importance of funding for additional needs, deprivation and low prior attainment. We know that these factors are the best way to identify those children who are most likely to fall behind, and to remain behind, their peers, and it is only right that we provide the greatest resources to the schools that face the greatest challenges. As I said in July, we will protect the funding that the formula will direct towards additional needs at the level proposed in our consultation, and I can therefore confirm today that the total spend on additional needs will be £5.9 billion. As we proposed in December, we will distribute that funding more fairly, in line with the best available evidence. We will use a broad measure of deprivation to include all those who are likely to need extra help, and we will increase the proportion of additional needs spending allocated on the basis of low prior attainment to give additional support to those who may not be economically deprived, but who still need help to catch up.

I can also confirm today that, as we proposed in December, the national funding formula will allocate a lump sum of £110,000 for every school. For the smallest and most remote schools, we will distribute a further £26 million in dedicated sparsity funding. Only 47% of eligible schools received sparsity funding in 2017-18 because some local authorities chose not to use this factor. Our national funding formula will recognise all eligible schools.

Our formula will rightly result in a significant boost directed towards those schools that are currently the least well funded. Secondary schools, which would have been the lowest funded under our December proposals, will now gain on average 4.7%. Rural schools will gain on average 3.9%, with those schools in the most remote locations gaining 5.0%. Schools with high numbers of pupils starting with low attainment will gain on average 3.8%.

As I set out in my Statement in July, to provide stability for schools through the transition to the national funding formula, each local authority will continue to set a local formula which will determine individual schools’ budgets in their areas for 2018-19 and 2019-20 in consultation with local schools. This means that the school-level allocations from the Government that I am publishing today, alongside this announcement, are notional allocations which we will use to set the total funding available for schools in each area. As I set out, schools’ final actual funding allocations for 2018-19 and 2019-20 will be based on the local formula agreed in their area by the local authority, and schools will receive their allocation ahead of the new financial year as normal. I will place copies of both documents in the Library of the House.

Our objective to provide the best education for every child places a particular focus on the support we offer to those children who face the greatest barriers to success, and on the high needs budget which provides for that support. The case for reform of high needs funding is every bit as strong as the case for school funding reform, and therefore the move to a national funding formula is every bit as important.

We set out the full proposals for the introduction of a high needs national funding formula last December, alongside our schools formula. I am today confirming that we will proceed with the proposals. Moreover, thanks to the additional investment that I announced in July, I can increase funding for high needs so that I will also be able to raise the funding floor to provide a minimum increase of 0.5% per head in 2018-19 and 1% per head in 2019-20 for every local authority. Underfunded local authorities will receive up to 3% per head gains a year for the next two years. That is a more generous protection than we proposed in December in order to help every local authority maintain and improve the support it offers to some of our most vulnerable children. It means that local authorities will see on average a 4.6% increase in their high needs budgets.

The additional £1.3 billion we are investing in schools and high needs means that all local authorities will receive an increase in 2018-19 over the amount they plan to spend in 2017-18. Local authorities will take the final decisions on distributing funding to schools within local areas, but the formula will provide for all schools to see an increase in funding compared to their baseline.

In conclusion, the new national funding formulae will redress historic inequities in funding that have existed for too long while maintaining stability so that schools and local areas are not disadvantaged in the process. After too many years in which the funding system has placed our schools on an unfair playing field, we are finally making the decisive and historic move towards fair funding.

The national funding formulae for schools and high needs and the increased investment we are making in schools will help us to continue improving standards and create a world-class education system. No one in this House should accept the system as it has been. It has perpetuated inequality and that is unacceptable. I am proud that a Conservative Government are now putting this right. On this firm foundation, we will all—government and schools, teachers and parents—be able to build a system that finally allows every child to achieve their potential, no matter what their background or where they are growing up”.

My Lords, that concludes the Statement.

My Lords, I thank the Minister for repeating the Secretary of State’s Statement. If today’s announcement is indeed a funding formula where not a single school loses funding and it is genuinely new money, I will welcome it. Indeed, I will offer hearty congratulations to the Minister because that would mean the Government had formally adopted Labour Party policy, as set out in our manifesto for this year’s election.

To expect the Minister to concede that point might be a step too far but in any case we are not yet there. Real questions remain about real-term protections for school budgets, the length of the transition to the new funding formula and whether the Government will finally begin to reverse the wider cuts facing school budgets. However, I unconditionally welcome the recognition given to high-needs pupils, not least in the title of the policy document itself. Yet the total spend of £5.9 billion that the Minister mentioned is not referenced. Is that the figure projected to 2020? What is the baseline figure?

On the question of cuts to schools already being dealt with by head teachers, non-partisan bodies such as the National Audit Office and the Institute for Fiscal Studies stated that even the £1.3 billion of what we now know is recycled money announced by the Secretary of State in July would reduce the 6.5% real-terms cuts facing schools only to 4.6%. What effect will today’s announcement have on these real-terms cuts? Indeed, where does the £1.3 billion announced in July stand in relation to today’s Statement? It is mentioned but it was not clear to me how it is tied in. The Statement says core funding for schools and high needs will rise from £41 billion this year to £42.4 billion next year and then £43.5 billion. It is not clear how that relates to the £1.3 billion announced in July.

I mentioned that if this is as it seems it will be welcome but head teachers, teachers, support staff and students deserve to know quite clearly where they stand in respect of today’s announcement. In announcing the £2.6 billion additional core funding, the Statement mentioned delivery on the Conservative Party manifesto in terms of fairer funding. However, it made no mention of the fact that that same manifesto promised £4 billion of new funding in the period of the entire Parliament, should it last up to 2022. What status does that commitment now command? I hope it still stands.

Finally, we welcome the fact that the Government listened to the voices of teachers and parents, as expressed during the general election. That clearly had a considerable bearing on the content of this announcement. However, as ever, the devil is in the detail. Until we have that detail, future funding for our schools will remain unclear. I hope the Minister will allay those fears. I would not expect him to come back on those points just now. It would be perfectly acceptable if he wrote to me.

My Lords, I, too, thank the Minister for repeating the Statement, which on the face of it sounds extraordinarily good news. However, we have concerns that none of this money is actually new and is being taken from efficiencies and savings in the DfE budget. We have £420 million taken out of the capital budget, including £315 million from healthy pupils capital funding used to fund improvements in schools’ PE facilities. Surely, at a time when we hear of the concerns about children’s obesity, that is not a terribly wise transfer of money.

The free schools budget is also being cut. Three of the 14 planned new free schools will now be funded by local authorities. There is a sense about this Statement of robbing Peter to pay Paul. The National Audit Office estimates that it will cost £6.7 billion to return all school buildings to a satisfactory condition. Why is the Secretary of State pilfering from the capital budget to pay for the increase in core schools budget? If the Tories can find £1 billion for the DUP, can the Treasury please find some more money for schools?

The Government broke the pay cap on police and public sector pay, and yesterday they were unable to defend the cap on NHS staff pay. Will they now look again at giving teachers a pay rise above the 1% too, with the Secretary of State increasing the schools budget accordingly? The teaching profession faces a number of crises and shortages and, surely, a long-overdue pay increase would be most welcome to try to redress some of the iniquities in the system.

The Government have scrapped their plans to make private schools help out neighbouring state schools or lose their charitable status, which is particularly worrying at a time when we see state schools unable to afford building repairs and forced to cut back on resources for their students. In our earlier debate, we heard how there was much advantage to the independent sector in creative studies. Will the Education Secretary urge the Prime Minister to rethink her broken election promise as a matter of urgency? Does the Education Secretary not also think it deeply short-sighted to fund the core schools budget by cutting the capital funding for PE facilities? I have already mentioned this, I think: we know childhood obesity rates continue to rise.

The per-pupil funding for 16 to 19 year-olds in sixth forms and FE colleges has been frozen since the 2015 spending review. Now that the Government are pledging that per-pupil funding for schools will increase with inflation, will the Secretary of State make the same commitment to 16 to 19 year-olds? I repeat that we welcome anything which causes funding for schools to be fairer, particularly if it focuses on the more deprived children and areas, but I would be grateful for the Minister’s reply.

I am grateful for the general tenor of support for our proposals. It may not surprise the noble Lord, Lord Watson, if I do not go quite so far as he wished in his dreams that I would but I will write to him in more detail about his points. The £5.9 billion is for additional needs, not high needs, and we have maintained the existing total that authorities are currently allocated. This funding will be maintained in 2018-19 and 2019-20, and rise in line with pupil numbers, but I will write to him with a more detailed figure.

There is a lot of talk about cuts but, as I think everybody knows, they are not actually cuts. They are cost pressures, which everybody has suffered from in the private sector and business. Schools are more than half way through those cost pressures, caused by things such as pensions. Well-managed schools do their budgeting extremely well and are managing to improve this.

We have a huge amount of advice available to schools—I have referred to our website before—with a lot of resources such as toolkits, benchmarks and comparators for them to look at. We have a buying strategy in place, as £10 billion of schools’ spend is on buying services. This is a bit theoretical and top level but our analysis reveals that if all schools bought at the cheapest prices available there would be considerable savings, probably over £1 billion. We have a big programme in place on that and it is true that our best-performing school groups on finance, the MATs, are also often our best performers educationally—and, sadly, vice versa—because those school groups have learned how to focus their resources on exactly the areas they want. They have thought through where they want to spend their money and drive efficiencies so that there is much more available for the front line. If I have not covered any other points and noble Lords feel that they would like me to, I will write to them.

My Lords, would my noble friend not agree that what the Opposition Front Benches meant to say was that they are immensely grateful to this strong and stable Government for grasping the nettle and making a reform that they jolly well should have made when they were in power?

Well, it is true that we are the first Government who have actually done this. It is not easy and I pay tribute to the officials in the Department for Education. They tell me that they have been working on this for at least 10 years, as I am sure the noble Lord, Lord Knight, knows, and are personally delighted that it has happened.

My Lords, I congratulate the Government and particularly the officials on bringing this forward. I certainly remember commissioning a review of the funding formula back when I announced one, about 10 years ago. Unfortunately it felt as if politics, with things such as general elections and changes in government, got in the way of implementing the outcome of that review. These things happen. I am particularly pleased to see sparsity issues recognised in this announcement.

My question relates to a welcome guarantee, if I heard the Minister correctly, of a real-terms, per-head increase of at least 0.5% next year and 1% the year after. That is important. However, I am also mindful of this week’s report from the National Audit Office regarding the recruitment and retention of teachers—and I remind the House of my interest in respect of my work at TES. At paragraph 2.2, the report states:

“To meet the increasing need for teachers, particularly in secondary schools, the Department for Education … and schools will need to improve teacher recruitment and retention. We reported in February 2016 that the Department has not met its overall target for filling teacher training places in each of the past four years. It has since missed the target for a fifth year”.

As the department reflects on that, particularly given that this week we have seen the pay cap go for the police, is it possible that it might reflect that the pay cap for teachers needs to be lifted? If so, will the department then ensure that the Treasury funds that rather than it coming out of the money announced in this funding formula? I would hate to campaign to raise the pay cap for teachers but then see the ensuing problems as schools scramble to try to fund 0.5% from what, certainly in some of the urban areas, will be quite a limited extra amount of money.

The noble Lord makes some very good points about teacher recruitment and retention. Of course we have a strong economy with very high levels of employment and very low levels of unemployment which impacts on the ability to recruit teachers. We are doing a huge amount of work on improving our recruitment approach, which is a much more regionally focused approach to look at where we particularly need to recruit teachers. There is no doubt that the work of a number of our multi-academy trusts in career development, CPD and teacher retention will help teacher retention.

The independent School Teachers’ Review Body has recommended teacher pay increases. We have listened carefully to what it recommended and accepted the recommendations. We continue to work closely with schools to help them manage their finances.

I think we all welcome this, and the Government are to be congratulated on bringing a fair funding formula forward—four Fs, such alliteration. I have a number of questions. Schools will still face financial difficulties because the problem for school budgeting has been oncosts, such as national insurance and the costs of buying in services, which vary dramatically, and we will not know the full financial impact until we see the figures working in schools. In terms of primary schools and £3,500 per pupil, will that be the same for each key stage—that is, foundation, key stage 1 and key stage 2—or will it vary between the stages? I am fascinated by the fact that we are gradually bringing local authorities back into the frame. Who would have thought that the archenemies, local authorities, are now going to have a little role in terms of the distribution of funds in their areas? In terms of schools in remote areas, what is the definition of a small school which would be eligible for this extra funding?

The noble Lord is absolutely right about the oncosts, which is what I was referring to, and them actually being cost pressures rather than cuts. But as I say, we have very sophisticated work under way in the department looking at school finances. We have something called a RAT—a risk assessment tool, which is slightly easier to say than a fair funding formula. We are working with local authorities and with academy trusts to ensure that their financial planning is good. I do not really recognise the expression “archenemy” as applied to local authorities. We are working very closely with local authorities on a number of fronts, including the free schools programme and our basic needs school place planning. We have increased the number of school places by three-quarters of a million in the last six years. We now have the strategic improvement boards, on which local authority representatives and regional schools commissioners sit, among others. I am confident that this will improve relationships even further. But, as I think I have said, the relationships with local authorities are generally extremely good. The noble Lord may be very pleased to hear that.

My Lords, it would be churlish not to congratulate the Government on a fairer formula, although we will need to look at the repercussions. I still meet head teachers who are having to reduce the number of teachers and are under pressure as a result of national insurance, pensions and things like that. There is concern on that front. I have two other points to make. I presume, as we have not heard any reference to it, that the £50 million or so of funding for the extension of grammar schools has disappeared. I hope that will not be a further oncost, as I share the view of the noble Lord, Lord Lucas, on that. I read the couple of paragraphs in the document, but does this sustain the existing pupil premium or slightly increase it? Can the Minister just confirm that? It certainly makes a significant difference in my primary school budget. I have already declared an interest in a previous debate as chair of the governing body.

I think the noble Lord knows that we will not be changing the rules about new grammar schools. They can of course expand. The pupil premium rates are being sustained. That is all I have to say.

Will Members of Parliament receive a briefing from the Department for Education about the implications, constituency by constituency, of this remarkable announcement today and the good news that it brings to every constituency in the country? I also want to ask my noble friend about independent schools, which the noble Baroness, Lady Garden, touched on. Will my noble friend confirm that the Government remain as fully committed now as they ever have been to securing the closer involvement of independent schools in co-operation with schools in the maintained sector? What individual independent schools can do varies so much depending on their size, their resources and the facilities that they have to share with the state sector. It also all has to be on a reciprocal basis. Is this not the underlying intention and aim of the Government today, just as it has been in the past? Finally, would my noble friend agree that it is always worth noting, when charitable status is mentioned, that independent schools give more in means-tested bursaries than they receive in benefit from their charitable status?

The answer to my noble friend’s first question is yes, there will be detail by school and by constituency. I entirely agree with what he says about independent schools. We had of course an event yesterday about independent and state schools working more closely together. Interestingly, that afternoon I went to visit an independent school close to one of my academies and was struck by the willingness of the head teacher there—who himself was state-educated, and the first in his family to go to university—and his school to engage with our state school.

There has been some lack of awareness in the past, which I hope has been partially solved by the Schools Together website, which now has more than 1,000 examples of schools and the independent sector working together. Fantastic examples include both King’s, Wimbledon and the York Independent State School Partnership, where all schools in York—I think it is three independents and 10 state schools—work closely together. We are dedicated to ensuring that every part of our school system, whether independent or state, works quite closely together and it is clear to me, having had detailed discussions with the Independent Schools Council, that it is determined to do that.

House adjourned at 5.05 pm.