High Needs Funding in Crisis
Note: This article is better viewed on devices other than a phone, to see the tables. It’s a very long post, but this topic is one of the most important I’ve ever written about. There are many claims flying around about high needs funding and costs, and I’d like to set the record straight with some facts. I’m hoping this will help those engaged in lobbying for the right level of funding; please feel free to use it.
An invitation first: I’m leading a webinar on Tuesday 27th November for Schools North East: ‘Demystifying High Needs Funding’, based on the presentation I gave at their SBM conference in June. I will be explaining how High Needs funding works and giving practical tips on how schools can achieve value for money in SEND. You can sign up here: https://schoolsnortheast.org/events/event/webinar-demystifying-the-high-needs-funding-changes/10413/
October brought a big surprise for me: an invitation to give evidence to MPs for the Education Committee’s SEN inquiry in the Palace of Westminster. I’d made a written submission in the summer, but the last thing I expected was to be asked to attend as a witness. It took me about five seconds to respond with an acceptance. What an opportunity and a privilege.
I was on the first panel with two parents who have considerable personal experience and expertise in special educational needs: Justin Cooke from Ambitious for Autism and Matt Keer, blogger at the Special Needs Jungle website. A second panel followed, with representatives from local authorities and school and college leaders.
The time flew by, because the questioning was engaging, and the MPs on the Committee were very well informed and interested in our responses. One of the most pleasing aspects about the experience was that while all of the witnesses had different perspectives on the subject, we all managed to bring everything back to inadequate levels of funding for high needs. The evidence is also being taken into account in the school and college funding inquiry.
In this post, I’m going to expand on the points I made to the committee, explaining some of the key facts that need to be considered when making a judgement about the state of high needs funding, .
High Needs National Funding Formula issues
One of my key objectives when giving evidence to the Education Committee was to convince MPs that the National Funding Formula (NFF) is absolutely not responsive to changes in need.
Regular readers of this blog will recall my concerns:
• The basic entitlement provides only £4,000 per pupil in a special school or independent school, whereas local authorities are required to pay £10,000 per place (before top ups) for special schools and more for independent school fees. Bizarrely, there is no specific allocation for FE places, but DfE recoups £6,000 per place from each LA’s High Needs Budget. These shortfalls have to be met from the rest of the NFF. And therein lies the problem…
• The historic spend factor locks 50% of every local authority’s planned spending in 2017/18 into the formula, in cash terms, ignoring any increases in population or SEND. Note the word ‘planned’; many LAs overspent in that year. This amount will not change for the next four years, i.e. until DfE’s planned review of the NFF. This suppression of funding is unnecessary, when the floor increase is set at 0.5% per capita. It suggests a deliberate policy to restrict the overall cost of the High Needs Block: 45% of the total allocated before transition is frozen in cash terms.
• The remainder of the NFF is based on a series of proxy formula factors:
– 50% of the formulaic elements is distributed on population aged 2 to 18, which does not match the incidence of some types of SEND, particularly very high cost needs. It also ignores the extension of the duty to support students with SEND up to age 25.
– Disability Living Allowance (which excludes post-16 recipients)
– Children in bad health (based on the 2011 census)
– Low prior attainment at KS2 and KS4
– Deprivation, which includes single census FSM rather than Ever 6. This potentially understates funding for secondary pupils with SEND, due to lower FSM take up rates.
This all means that even if more money were to be put into the formula, the predominance of historic spend/population factors and the low proportion of funding allocated via meaningful indicators would prevent it from being directed to areas that need it the most.
Transition arrangements have only been confirmed for 2018/19 and 2019/20 so far. They provide a minimum increase of 0.5% per head of 2-18 population, and gains are capped at 3% per capita per year. The following diagram shows the level of turbulence caused by the High Needs NFF, suggesting that it does not reflect the level of needs currently being provided for.
The striking facts here are:
- Only 18 out of 150 LAs were on the pure formula in 2018/19, rising to just 27 in 2019/20.
- Without protection, 81 LAs would lose money or see a gain below 0.5%.
- The floor protection of 0.5% per capita per year won’t cover pay awards, let alone rising demand.
- 51 LAs had gains capped at 3% in the first year, dropping to 39 as the cap lifts in 2019/20.
These figures are all based on October 2017 pupil numbers, but most elements won’t be updated for 2019/20, except for the basic entitlement for special schools and the import/export adjustment which caters for pupils crossing LA boundaries to attend specialist provision.
The national movement from the 2017/18 baseline to the 2018/19 allocations was 2.4%. Without protection against losses, this would only have been an additional 0.7%. Keep these figures in mind when we move on to the changes in needs and costs later in this post.
I’m not saying that the formula should replicate existing spending; clearly it is right to move away from meaningless historic allocations. But it can’t possibly be accurate enough when the results are so far away from the current pattern.
There are some serious flaws in some of the assumptions that underpin the formula. For example, the 50% share on population was decided because it was found that areas with the lowest needs had half the average number of EHCPs. Yes, really. The logic behind this escapes me. It seems obvious that it’s not just the number of EHCPs that drives spending; the cost of supporting these learners matters far more, and that’s very variable. There are also some payments and services directed to pupils without plans. The proxies for disadvantage, bad health and attainment should have a much higher weighting, if we want to make the formula more responsive to changes in need.
Unfortunately, there have been so many technical adjustments in different years for the High Needs Block (FE, non-maintained special schools and preparation for the NFF) that it’s virtually impossible to achieve a meaningful comparison of funding over the period 2013/14 to 2018/19. I’ve looked at it every way I can, and the best I can come up with is a 4.1% increase from 2013/14 (a baseline of £5.09bn after adjusting for the 2014/15 FE transfer) up to 2016/17 (£5.30bn) before the High Needs Block was realigned to reflect LA transfers from the Schools Block (see my later section).
The High Needs Block has only reached £6bn in 2018/19 because of the realignment to recognise money taken from the Schools Block (i.e. not new money), another FE transfer (matched by higher expenditure), population growth of £130m and an injection of £85m to pay for protection (some of it was funded from capping gains).
Why is this gap between funding and reality important, particularly in the short term? Well, setting aside the dubious messages from DfE that spending on SEND is too high, it can take a long time for LAs to achieve savings. The majority of children will remain in their current placements for years to come, and the only real potential for change is for new cases, at transition points, or at reviews where learners’ needs have changed. That’s without any extra demand-led pressures.
The inadequacy of the funding is creating perverse incentives for schools to avoid taking and keeping pupils with SEND and vulnerable learners, which is miles away from the community-focused and pupil-led approaches that education needs to embrace. Heads have to be incredibly strong to keep their moral purpose and inclusive beliefs in the face of the current funding crisis. We can say much the same thing about the high-stakes accountability system; Ofsted may say inspectors take SEN into account, but heads tell me it often doesn’t feel that way.
Contrasting funding and needs
I’ve spent some time analysing the SEN statistics, which don’t include post 16 in FE colleges, and the annual statistical releases for statements and Education Health & Care Plans (EHCPs), which do. I’ve concluded that the latter are quite misleading, because there isn’t a reliable time series of data for the number of post 16 S139A Learning Difficulty Assessments (LDAs) prior to the reforms. It’s therefore impossible to separate out how many EHCPs relate to conversions of LDAs.
However, the following table shows the number of plans for post-16, which appear to be accelerating at an alarming rate:
This shows a much faster rate of growth than the original number of LDAs. I found experimental statistics on this in two of the data releases, which identified 32,180 LDAs at January 2015 and 41,475 LDAs at January 2016.
From working with a number of LAs and reading media coverage, I also know that we are seeing a surge in post-16 EHCPs, with some FE colleges identifying students of whom SEN teams have no prior knowledge. Remember also that the government has provided no funding whatsoever for the extension to EHCPs for 19-25 year olds. Anyway, just to be on the safe side, from here onwards I’m going to focus on pre-16 data, to set out some information on the changes in needs.
I examined the SEN statistics for January 2013, i.e. just before the High Needs funding changes, up to January 2018. Table 1 in each data release indicates all pupils with SEN, then gives a breakdown between those with statements/EHCPs (let’s just call them plans) and those without. In the years up to January 2014, those without plans were categorised as School Action and School Action Plus; under the reforms, these were re-classified as SEN Support. However, the statistics rely on schools flagging pupils as SEN Support in the school census, so the figures are not verified. This is a major issue in trying to draw any conclusions about lower levels of SEN.
There is a steady decline in the numbers without plans across the period January 2013 to January 2018. Because they are much higher figures, i.e. around a million compared to 220k-250k pupils with EHCPs, this change suppresses the overall number of pupils with SEN. Some say the reduction is due to better early support or the lack of a financial incentive to record children when LAs focus on EHCPs as a way of triggering funding, which most do. Or perhaps some types of SEND aren’t spotted early enough. Whatever the reasons, this data appears to mask the real increases that relate to more complex needs with higher support costs.
I firmly believe that we need to focus on statements/EHCPs to understand changes in need. This is where most spending from the High Needs Block allocations occurs. The majority of costs for additional SEN support will be below £6k per pupil and are funded from schools’ notional SEN budgets within their core funding, not the High Needs Block. I’m not saying this isn’t important; but it’s a separate issue, one for the campaign about the inadequacy of the Schools Block quantum. We’re fighting on so many fronts…
Here is the pattern of statemented/EHCP pupils by categories of school/academy across the time period I examined:
The table includes the overall population change over the same period for each type of school; in total the total of statements/EHCPs rose by 10.6% against an overall change in rolls of +5.9%. There are relatively few pupils without plans in special schools, so the change in plans drives their increases. The exception is independent schools, where the population change includes mainstream private schools.
The above table shows some highly significant percentage increases in state funded special schools and independent schools. Nursery is high too, but on small numbers (the SEN statistics only show maintained nursery schools, not PVI and other settings). Primary and PRU placements of pupils with statements and plans increased by more than 10%. Mainstream secondary schools appear to be much less inclusive now than before the SEN reforms; other data shows a reduction in the number with SEN units and resourced provision. The reduction in placements in non-maintained special schools should be set against the reduction from 71 to 59 schools over this period, but it’s hard to separate out cause and effect between the two facts.
There is an assessment process which LAs have to undertake before deciding whether a plan is appropriate; not all assessments lead to an EHCP. The Statements and EHC Plan statistics show the number of assessments in a calendar year. It’s not possible to make a direct link to the resulting number of new plans, because data for plans are on a financial year, and in any case the timeline for drafting EHCPs means that many will tip into the following year. Nevertheless, the trend in assessments is telling, partly driven by population increases but also by better rates of identification and diagnosis in some types of SEN. Here are the figures:
When you combine the trends in assessments with the increase in EHCPs (which need to be reviewed annually as well) and all the conversions that have been required, this helps to explain why LAs say they are under such severe pressure. The SEN Reform Grant (a non-ring-fenced grant with no reporting requirements) has been essential in coping with the workload increase, but in my experience, it only helped to fund conversions from statements and LDAs, not the overall increase in assessments and new EHCPs.
Next, let’s look at how this all plays out in terms of spending trends. There are some limitations to the data on expenditure, which is drawn from the Section 251 budget and outturn returns. While it is possible to identify place-led costs for special schools and PRUs, historically it’s been impossible to track place funding for mainstream schools with SEN units and resourced provision (bases). In 2018, it was separated out from school budget shares for the first time: it totalled £164m compared to £1.19bn for special schools and £243m for PRUs.
There is an annual publication which claims to record high needs places, but there is a significant flaw in this. DfE collects place data from LAs annually in November for the following academic year, but only for academies and FE providers. The purpose is to calculate recoupment from LAs’ High Needs allocations, so ESFA can pay it over to the settings. The published places for LA maintained provision are woefully out of date and misleading. Maybe the UK Statistics Authority should take a look at that?
Pragmatically, top-up funding is therefore the best indicator of cost trends for SEND, as it includes top-ups paid to the full range of providers. Outturn (year end) data is only available up to 2016/17. I’ve worked out the percentage change in actual expenditure up to 2016/17 then the movement in budgeted expenditure for the last two years. It’s pretty staggering – around a 27% increase in costs between 2013/14 and 2018/19 (but probably higher in the last two years as LAs are overspending), set against minimal increases in funding and growth of 10.9% in the number of plans over the same period.
We’re hearing that a lot of councils are predicting deficits on their High Needs Budgets; looking at the trends I’ve highlighted here, it’s not hard to see why. There’s been a fundamental shortfall in historic levels of funding compared to costs, even before the NFF came along. Here’s just one of a series of news items on the subject – in this case a survey by the Local Government Association: https://www.tes.com/news/half-billion-shortfall-school-send-funding-crisis
DfE has just published a consultation about more robust monitoring of deficits in Dedicated Schools Grant, which admits that most will be due to High Needs pressures, yet the Department doesn’t seem able to persuade the Treasury to provide more funding to enable LAs to meet their statutory duties for the rising needs indicated by the hard facts.
I must thank Chaminda Jayanetti for letting me see responses to a Freedom of Information request undertaken for an article in The Observer on local authority deficits in High Needs Budgets: https://www.theguardian.com/education/2018/nov/10/councils-face-crisis-special-needs-education-funding. It was somewhat galling to read that Nadhim Zahawi, the children’s minister responded by saying: “In 2018-19 councils will receive £6bn of funding specifically for children with complex special educational needs and disabilities, up from £5bn in 2013.” As I’ve already shown, most of this increase came from realigning the High Needs allocations to reflect LA transfers from the Schools Block and a technical FE transfer! I don’t think ministers know their facts terribly well, or else it’s deliberate spin.
Chaminda’s evidence provides an insight into LA proposals for changes in the arrangements for SEND support to address the problems, but here I will simply summarise the extent of overspending on High Needs from responses by 117 LAs:
Every strategy imaginable seems to be being considered by LAs to balance the books. What will happen if they can’t? Councils are still making eye-watering cuts across all services, so they’re not in a position to subsidise this – and why should they, when the government is supposed to provide ring-fenced funding for it, and when social care is facing the same sort of funding crisis?
The problems are largely due to the increase in the number of pupils placed in special schools – the 22% increase in rolls over this period highlighted in my first table – and the 44.8% increase in pupils with plans educated in independent schools over the period under consideration. These are where the highest costs reside, along with numbers in FE. Rising numbers of exclusions is another issue; the claw back from mainstream schools doesn’t usually go anywhere near the cost of PRU or Alternative Provision placements.
There are also issues in statutory services which are funded outside of the High Needs Budget. Austerity cuts have decimated Council services, so the pressure is also being felt here from rising demand and reduced resources in real terms:
- Education Psychology – actual expenditure reduced by 6.6% between 2013/14 and 2016/17, and budgeted expenditure has increased by just 1.6% in the last two years;
- SEN teams carrying out assessment, placements and reviews – actual expenditure increased by 38% up to 2016/17 because of the SEN reform grant, which has enabled 183,678 statements and LDAs to be reviewed/converted to EHCPs (including a tiny minority not converted). Across 2017/18 and 2018/19, planned expenditure has reduced by 3.3%.
- SEN transport, which is purely funded from LA resources – the table below shows the trends, but with so many authorities overspending, the percentage changes in the end column are likely to be much higher. This table also shows the impact on transport budgets of the unfunded extension of ECHPs to post 19 students – now estimated at £26m per annum.
Tackling the problem
What solutions are open to LAs to get a grip on these problems? Only two: they can currently transfer money from their Schools Block each year to their High Needs Budget, and they can review how they spend the funding on pupils with SEND and vulnerable learners.
But for 2018/19 and 2019/20, DfE has placed a limit on transfers, allowing no more than 0.5% (if Schools Forums approve). If a greater transfer is required, an application has to be made to the Secretary of State, even if Forum agrees. In 2018/19, out of 29 requests to DfE for Schools Block transfers confirmed after DSG allocations were published, only 17 (59%) were approved. We have no idea if transfers will be permitted from 2020/21.
The problem pre-dates this, as highlighted by the re-baselining of 2016/17 and 2017/18 DSG blocks to reflect the pattern of planned spending when DfE was preparing the baseline for each LA’s NFF protection and capping. Comparisons of LAs’ actual spending against their DSG allocations shows the following amounts were transferred into High Needs Budgets:
Chaminda Jayanetti’s information shows that 52 LAs out of 91 who gave evidence of transfers in their responses to the FOI request have moved a further £47.7m from their Schools Block allocation to the High Needs Block in 2018/19.
The struggles are continuing; with a predicted overspend of £201m at the end of this year from respondents to the Observer’s FOI request, reserves must be running out. One LA, Kingston-upon-Thames, obtained an advance of its 2018/19 DSG in order ‘to support the council’s short-term cash position and enable it to set a balanced budget’ (here is the link).
The issue I have with the limit on transfers is that they interfere with local democracy and create perverse incentives. Transfers from core school budgets may be difficult, but they enable the pain to be shared more equitably and the cost is spread more thinly. If LAs have to manage within High Needs allocations, they are forced to ration funding, which not only penalises schools with specialist provision and highly inclusive schools, but potentially has a detrimental impact on support for pupils with SEND if those schools can’t cover the shortfall from their already-stretched budgets. And the government wonders why some schools are reluctant to take and keep high cost learners.
It’s already difficult to predict patterns of need in such a personalised area of provision. But when the funding system doesn’t keep pace with the need to spend, LAs are placed in an impossible situation. There has to be a way of convincing the government it can’t continue to evade its statutory duty to provide enough funding to match the level of need. I’m glad to see that a group of parents is mounting a legal challenge to the government on this and I hope it succeeds. See here for further details: https://specialneedsjungle.com/help-send-parents-legally-challenge-the-government-over-national-funding-crisis/.
I’ve been at the DfE table when certain civil servants have proclaimed that LAs with high spending must be profligate. I doubt SEN officers, finance officers and parents would agree with that analysis! Expenditure is significantly affected by historic patterns of provision which tend not to change. Areas with specialist hospitals often have higher levels of special school places. There is a correlation between some types of SEN and areas of high disadvantage. It’s not rocket science.
LA statutory services are in firefighting mode, cut to the bone but tasked with meeting statutory performance indicators for achieving plans across multiple agencies within 20 weeks (shortened from the statementing timescale of 26 weeks). Many have struggled to cope with the extra workload of converting old statements and LDAs to EHCPs because of the burden of new assessments and plans. As I’ve shown, this has all happened over a period when increases in the proportion of pupils with SEND have far outstripped population growth and funding. The problem’s been building up for a long time and is now at crisis point.
We are left with High Needs reviews as the only way of dealing with the problem, unless the urgency of the funding situation is recognised. LAs are forced into making unpalatable choices about where savings can be achieved – they don’t want to, but there’s no alternative.
The sad thing is that the situation is pitching school against school, parents against schools and LAs, and everyone against the government. Everyone’s time could be much better spent in getting the right provision for the children. We seem fairly united on the matter of Health contributions being totally inadequate and inconsistent, and the government really needs to get a grip of that, to stop the variability of Clinical Commissioning Group decisions.
I don’t deny there are some serious problems in the assessment, planning and review process, and I can’t defend LAs that don’t consult properly or ride roughshod over statutory entitlements. Systems don’t always work effectively, and human error can happen. But many of the issues are largely a result of the complete inadequacy of funding. If only those who are most vocal about others’ shortcomings could walk in their shoes for a week.
It’s incredibly difficult for parents to understand the system, and the boundaries between education and care are not particularly well understood. The Education Committee has heard a lot of evidence about how parents have had to struggle to get provision for their children. Surely there are examples where the right placements are made for learners, and they thrive with the support they receive? But we never hear about those.
None of this in-fighting is helpful; it wastes time and is divisive, which allows government to claim that providers and statutory bodies are in disarray. We need to unite, to pool our knowledge and make a persuasive case that government cannot ignore. The Education Committee, led by Robert Halfon, is doing a brilliant job of getting underneath the issues and drawing attention to the problems. The lobbying is building up – please see the ‘Worth Less?’ national campaign for emergency High Needs funding on Twitter at @WorthLessFF, and the NAHT’s survey of school leaders at https://www.naht.org.uk/news-and-opinion/news/funding-news/empty-promises-the-crisis-in-supporting-children-with-send/.
Let’s all get behind it and pile on the pressure for a realistic increase in the Spending Review. The alternative is too awful to contemplate.