At Last: Some School Funding Decisions
It feels like we’ve been waiting all year for some progress on funding reforms, and then just like buses, the decisions all come together. Well, not quite all – we are still waiting for the Schools and High Needs Stage 2 funding consultation, which is expected this week.
There has been a lot of anxiety across the country about the delay in information, particularly aspects that relate to the financial year 2017/18. It feels as if DfE doesn’t understand the timescales for local authorities (LAs) and Schools Forums in relation to the budget setting process. This is putting unreasonable pressure on those involved in identifying the available resources, to consult schools and take decisions on how much can be allocated in the local formula.
What has been announced?
On 30th November Justine Greening announced two new school improvement grants totalling £190m. Let’s not pretend this is new money, because DfE previously announced plans to cut Education Services Grant (ESG) by £600m between now and 2020.
On 1st December, the operational guidance for 2017/18 school funding was updated to incorporate the detailed definitions of local authority expenditure on statutory duties, which were previously funded from ESG.
The new information will at last help LAs to define how they can fund these functions. We will explain more later in this post, but for now let’s note that there will be different arrangements for the two elements from 2017/18:
• Retained Duties element – services performed for all schools and academies: £15 per pupil is being transferred into DSG from April 2017 to replace the ESG previously received by LAs.
• General ESG element – services performed only for LA maintained schools: from September 2017 these costs can be charged to LA maintained schools. Academies will start to see their General ESG reduce from this point, tapering down until 2020.
So this is particularly important for LA maintained schools, as they may need to pay for the second category from their school budget shares, representing an unfunded pressure. Essentially DfE is making a saving and expecting LA schools to foot the bill instead.
1st December was a busy day: the government also published decisions on the Early Years funding arrangements for 2017/18 onwards. As we will see, some changes are being made to the original proposals in response to points made in the consultation.
Before we look at each of these in turn in a little more detail, let’s consider what information is still outstanding in relation to 2017/18 budget setting for LAs and schools.
What’s still missing for 2017/18 and why does it matter?
The first critical piece of information needed for LAs and Schools Forums to do their work is the October 2016 census data. This drives the Schools and Early Years Blocks’ allocations of Dedicated Schools Grant, which is the starting point for funding to schools and early years providers. The data sets have to be cleaned by DfE to identify duplicate pupils between LAs and spot any errors. It is usual for them to be provided around this time of year, in an updated Authority Proforma Tool (APT) for every LA.
LAs already know their amount per pupil for these blocks but for the Schools Block in particular, the budget cannot be finalised without the data. You’d think that LAs would be able to use local information, and that’s true for their own maintained schools. But many academies submit their data directly to DfE, and LAs have to wait until DfE confirm and share the figures.
It can therefore be difficult for an LA to produce its own estimates of total pupil numbers for DSG. It’s even harder to estimate pupil characteristics to model budget shares for Schools Forum and for wider consultation. The problems are compounded if there are a lot of cross-boundary admissions, significant in-year international new arrivals and/or three-tier systems (junior/ middle/ high schools) where children move at non-typical points. In these situations, the usual tactic of rolling cohorts forward is unlikely to be accurate.
What has made it virtually impossible for LAs and schools to achieve accurate estimates of 2017/18 budget shares is DfE’s revision of the bands for the Income Deprivation Affecting Children Index (IDACI). This was done in response to an outcry at the impact when DfE updated the indicator to 2015 for this year’s budgets. The banding ranges have now changed, and DfE is allocating the October 2016 census children to the new bands. We don’t know when we will get the new 2017/18 APT.
The second crucial piece of missing information is the DSG allocations. The Schools Block will be fairly straightforward, applying the afore-mentioned October 2016 census data to the already-confirmed funding per pupil. The Early Years Block figures were announced with the government’s response to the consultation.
For High Needs, the allocation will equal the agreed 2016/17 baseline, plus a transfer of the existing FE budget for high needs places which DfE used to hold centrally. I’m sure we will come back to High Needs in a future blog post – there are some difficult issues in both historic funding and the NFF proposals. The FE transfer increases the risks to High Needs budgets; DfE will recoup funding for FE places, but the Department/EFA decides the amount, not the LAs that place pupils.
There is one piece of detailed information which has not yet been confirmed: the cost of licences, which the LA has to top-slice from DSG as a central budget. Licences for a host of rights including copyright of documents, music, performing rights and several others are negotiated by DfE for all schools. LAs need to know how much they will have to top-slice to make the payment to DfE, before identifying what’s available for the local school funding formula.
I submitted an enquiry on the Education Funding Agency’s online form and was told the licence cost per pupil will be announced with DSG allocations, but will increase in line with pupil numbers and there will be an inflationary uplift, which they wouldn’t disclose. This isn’t helpful – schools aren’t seeing any inflation in their allocations.
The frustration with all of this is that LAs have a clear timeline to work to, with DfE requiring LAs to submit the 2017/18 APT by 20th January. This includes every detail of the school funding formula values and individual school allocations. It therefore requires Schools Forums to decide how much LAs can retain centrally (usually decided in December), then the LA has to consult on the proposed formula, and elected members of the LA need to approve the final formula.
Asking Schools Forums to take decisions on central budgets or give a view on proposed formula changes without clear information on how much funding is available and how many pupils need to be educated is far from ideal, but LAs have had to use estimates. The alternative for some that haven’t managed this will be an extremely long meeting in January, potentially with on-the-spot re-calculations of the funding formula, depending on the decisions taken on central budgets earlier in the meeting.
As we’ve said before, DfE seems ignorant of the impact of school holidays on the time available for decision making. The Department is expected to deliver the DSG allocations on 20th December, at which point most civil servants will leave for the Christmas holidays. LA officers will then work over the holiday period, feverishly trying to feed all the information into funding models ready for an early Schools Forum meeting when everyone returns. Note that Forum papers have to be published a week before the meeting. It is all very unsatisfactory.
Let’s now look at some of the information published recently.
School Improvement Grants
The ‘new’ school improvement grant is in two parts. The first is £50m for LAs’ statutory school improvement duties. This starts in September 2017 when General ESG ceases. The second is a £140m ‘strategic school improvement fund’, which according to the DfE’s statement will be targeted at maintained schools and academies most in need of support to “drive up standards, use their resources most effectively, and deliver more good school places”. I’m guessing that the £140m will be given to the Regional Schools Commissioners, but it’s not clear how they will decide where to allocate it.
Clearly LAs will only receive 5/12ths of the £50m in 2017/18, since it doesn’t start until September 2017. There is a transitional Education Services Grant payment in the summer term, but the updated operational guidance states that this will be at a rate of only £20 per pupil. The General ESG rate is currently £77, so five months’ worth should be £32. There aren’t any reductions in functions during this period that would explain the shortfall of £12 per pupil.
The new school improvement grant is welcome, as this activity can be a significant part of the General ESG and the cut in that grant was announced before DfE had taken any decisions on which functions could cease. The withdrawal of the White Paper on full enforced academisation led to uncertainty about the LA’s statutory role; it is good to see some clarity on this now.
Operational guidance – LA statutory functions
DfE had previously stated that the detail of the LA’s statutory functions would be announced in the consultation on draft Schools and Early Years Finance Regulations, which is usually published in November (though nothing has yet been announced). So it was quite a surprise when it was included in an update of the operational guidance for school funding in 2017/18. The detail is on pages 26 to 32 of the guidance at https://www.gov.uk/government/publications/schools-funding-arrangements-2017-to-2018.
This guidance is important to help LAs calculate the charge to their maintained schools to replace the lost General ESG from next September. As a result of the new £50m grant to LAs, statutory school improvement functions cannot be included in the charge to LA schools. However, discretionary school improvement work can be charged for. LAs are currently trying to work through the updated guidance to cost out the various functions, before asking LA maintained schools members of the Schools Forum for approval to ‘de-delegate’ these costs from all LA schools.
There isn’t much time to do this, due to the lateness of the DfE’s information. The APT to be submitted on 20th January also includes de-delegation from budget shares.
It is difficult to be precise about the costing of these functions, because ESG is currently a non-ring fenced grant and therefore LAs have never been asked to reconcile their expenditure to the grant. When the system changed from an individual rate of grant to a national rate, it was accepted that LAs would either be spending above or below the new rate. No-one needed to know which was the case, as it was all funded from the LA’s general resources including ESG. Now schools will quite reasonably want to know what they are getting for their money.
Note that an LA can appeal to the Secretary of State if the Schools Forum can’t reach an agreement on the central retention of this funding for statutory duties. It does beg the question as to why Schools Forums are being given decision making powers on duties that have to be performed, when the Secretary of State can overrule them.
Early Years funding decisions
The government published the original early years consultation in the middle of the school holidays (*sigh*), with responses due back by 22nd September. The new Early Years National Funding Formula (EY NFF) will be implemented in 2017/18, which doesn’t leave much time for LAs to consult with providers and then take decisions on the local formula.
The government published its decisions on 1st December, containing a response to comments made in the consultation, an equality impact statement, operational guidance, and detailed allocations for each local authority. Those who signed up for our fortnightly free newsletter received an analysis of the original proposals; if you go to www.schoolfinancialsuccess.com and sign up, you will shortly receive an updated analysis incorporating more details of the final decisions.
What are the key features of the Early Years funding decisions?
Funding to LAs
By and large, the proposals have been confirmed. There is still an increase in funding for both disadvantaged 2 year olds and the universal 3 and 4-year-old entitlement, but in addition, all LAs are now being guaranteed a minimum rate of at least £4.30 per hour.
There’s a bit of smoke and mirrors around this – the average rate per hour for 3 and 4 year olds across all funding elements has now jumped up to £4.94 per hour instead of the £4.88 quoted in the original consultation. But this is not an extra uplift for everyone – it is the consequence of 45 LAs being brought up to the minimum £4.30 per hour at a total cost of £27.6m.
Other protection arrangements remain as in the consultation. Most LAs will see increases in their funding per pupil, but some will lose due to current values being much higher than average. None will lose more than 10% per pupil, a permanent protection. Furthermore, the most that can be lost in a single year is 5%. All LAs are expected to be on the formula by 2019/20.
The rationale for the -10% floor isn’t entirely clear. Of the 15 LAs that are receiving this, 7 are London boroughs who receive £15.6m out of a total of £23.7m. Their baseline rates in 2016/17 are extremely high – from £6.48 up to £9.46 per hour, compared to the average baseline of £4.43. It is difficult to understand why there is this sort of variation in spending to provide the same entitlement. There are different variables – Area Cost Adjustment funding which allows more to be spent (but surely can’t account for more than double the average?), the balance between different types of providers with different costs, and levels of central expenditure. It appears that DfE has taken the baseline spending at face value and has not challenged this situation. If they were brought down to the pure formula over time, it would put another 5p on the hourly rate for all LAs.
The other main change is the extension of supplementary funding for nursery schools to the end of this parliament, i.e. 2019/20. LAs are being asked to achieve a universal hourly base rate by then, and earlier if possible. This is in spite of the DfE’s own Cost of Childcare report which established clear differences in cost between PVIs and nursery classes in primary schools. Nursery school costs were conveniently brushed aside in this report, but clearly responses to the consultation emphasised the detrimental impact the universal hourly rate would have on these providers.
The supplementary funding will not resolve the issue for the long term, and the government has stated ‘We remain committed to consulting openly regarding the future role of maintained nursery schools and how best to secure their high quality provision for the longer term’. Some believe there may be proposals to treat them as schools in funding arrangements rather than early years providers, due to statutory requirements on their staffing. We will have to wait and see.
Funding from LAs to providers
Deprivation is still to be a mandatory supplement, but there has been a change in the discretionary supplements permitted in local formulae to distribute funding to providers. The efficiency supplement has vanished (a very subjective measure, regarded as difficult to design and implement) and so has the originally-proposed supplement to incentivise the 30-hour entitlement. Instead, quality can remain, for workforce qualifications and system leadership, and English as an Additional Language (EAL) can be introduced.
In the papers, DfE is encouraging LAs to issue their early years funding consultation on the proposed new formula before Christmas. That’s a bit of a cheek, when the announcement was made so late in the year and changes have been made to the permitted supplements. One LA I’m working with has had a meeting with its provider group and is currently doing the modelling on the basis of their suggestions, ready for a January consultation. Now we will need an extra meeting of the group to revisit some of it, which is a waste of scarce time and resources.
SEN and disabilities
Proposals for SEN and disability funding have been strengthened; previously LAs were being encouraged to have an Inclusion Fund but now this will be required through legislation. The values and how funding is allocated must be published as part of the Local Offer for SEND.
Inclusion Fund expenditure only counts towards the limit of 7% (2017/18) or 5% (from 2018/19) of total funding if it is given as a grant to providers, not if centrally employed staff are provided. That is not logical or helpful; often it is difficult for settings to recruit staff with the specialist skills, and it can be more flexible to have a central pool of staff providing a number of hours support to several children.
LAs can appeal about this to get agreement for staffing allocations to count within the ‘high pass-through’, but there is a very tight set of criteria and the deadline for submissions is 31st December. That is unreasonable given the late announcement, the amount of work needed, and school holidays limiting the consultation on it.
Two year olds are not eligible for the Inclusion Fund, but LAs can use a similar approach for them. LAs are urged to target the fund at lower level or emerging SEND. The value of the Disability Access Fund has been set at £615 per 3 or 4-year-old child in receipt of Disability Living Allowance.
So, those are the main pieces of information that have been released in the last ten days or so. Keep an eye open for your local Schools Forum papers (which should be on a public-facing website) and for consultation opportunities if you want to make your views known to your LA about their proposals for schools and early years funding. The next month will be critical for budget decisions and it is best for schools to be aware of what changes are being made. Then you can decide how to use that information in your planning.
Don’t forget to sign up for our regular free newsletter on our home page, with information on what’s happening in the world of education funding. This will also bring you updates and analysis of the changes once they are announced.
Note from Julie Cordiner:
I’m leading a workshop at EdExec Live, an event for School Business Managers, on 18th January at the Radisson Blu Hotel, Manchester Airport. My session is entitled ‘Navigating Budgetary Turbulence’ and I’ll be showing you how to plan for the future to achieve a sustainable budget when there is so much uncertainty around. You can find out more at http://www.edexeclive.co.uk/. I look forward to seeing some of you there.