School Cuts: Alarmist or Realist?
Last week NUT and ATL published a website, www.Schoolcuts.org.uk, demonstrating the impact of a National Funding Formula for every school in the country by 2020. The NFF, as it is (not so) fondly known, is one of the school funding reforms which the government plans to introduce from 2018/19. The website shows the cash change, per pupil change, and (controversially) the number of teachers whose jobs could be lost. According to the website, nationally a total of 68,088 teachers would have to be removed by 2020, based on an average salary cost of £37,250.
The tool is essentially a database with a front end on it to present the data in an accessible way. Behind it sits a set of calculations to construct estimates of the real terms impact of the proposed new formula at individual school level.
It all looks very authoritative, and some head teachers certainly got a shock when they saw their school’s results plastered over the front pages of the local newspaper. They were unaware of the tool being published and therefore hadn’t had chance to explore where the data had come from. I expect there were a few difficult staff meetings last week as a result.
So why was the tool published? Is the information reliable? Is it a piece of scare-mongering as the DfE claims, or a valid attempt at a wake-up call for heads and governors, creating much-needed publicity to make parents and the wider public aware of what the government is doing to school funding?
Why was the tool published?
The National Funding Formula will address unjustifiable variations in the current level of funding per pupil between local authority areas and indeed between schools with similar characteristics. School funding is intended to reflect differences in cost for educating particular types of pupils, but with 150 LAs operating their own local formula, and with the DfE allocating grant based on historic local spending, it’s no wonder these variations exist.
To achieve its aims, the NFF will need to be based on some sort of average values across each of the factors. This will create a consistent level of funding for pupils with characteristics such as deprivation, English as an Additional Language and low prior attainment. Each school’s data will then drive its funding.
Obviously an averaging approach will create winners and losers. That is where the concern lies, because the government will not provide additional money to bring the least fairly funded schools up to the ‘right’ level. Actually that’s not quite true – George Osborne granted £500m over the period to 2020, but that only represented around 0.5% of the total over the three years from the original planned implementation date of 2017/18. By delaying it to 2018/19, the same money magically grows to an increase of 0.78% of the total over two years.
To put the £500m in context another way, in 2015/16 there was an uplift for the 69 least fairly funded areas using an approximation of average formula values, which cost £390m just for one year; this is now locked into the grant for these areas.
Without extra money being provided to meet the increases for those who aren’t fairly funded, it will still largely be a case of robbing better funded schools to pay the worst funded schools. We await the Autumn Statement on November 23rd to see if there are any changes to these plans.
It is evident that NUT and ATL, along with everyone else involved in trying to make school funding work for schools and pupils, is fed up of waiting for the DfE to publish the Stage 2 consultation on the new arrangements. Stage 1 was published in March, setting out high level principles and a structure for the formula, along with proposals for High Needs funding.
In the summer, when announcing the delay in the NFF to 2018/19, Justine Greening said:
‘I will therefore publish the government’s full response to the first stage of the schools and high needs consultations and set out my proposals for the second stage once Parliament returns in the autumn. We will run a full consultation, and make final decisions early in the new year.’
A full consultation usually means twelve weeks. Those of you who have worked in education for a long time will know the DfE is notorious for publishing consultations that span school holidays and rarely allow more than six weeks for responses. You’d think a department in charge of schools would know about term dates. When LAs need to work with their Schools Forums to draft responses, it really isn’t good enough.
We still don’t know if direct funding by the DfE will still go ahead in 2019/20, or if that will be delayed a year as well. Could it be abandoned, if the DfE has woken up to the fact that by taking LAs out of the process, they will also remove a convenient middle man? Civil servants will face complaints by half of the schools in the country who are facing funding reductions, and half who think their increases aren’t high enough.
So there is huge frustration in the system as schools await their fate. The government doesn’t seem to understand the timescales and work involved in consulting with schools on the local formula, and hasn’t taken into account the desire in some areas to start moving towards the NFF early, in order to manage the turbulence in a more measured way. This is one policy change where you really don’t want to wait until the last moment to react.
In producing the School Cuts website, The NUT and ATL are also seeking publicity, hoping to galvanise people into lobbying against the policy. The website contains buttons for ‘Sign The Petition’ and ‘Email Your MP’. The call to action is a laudable aim – the absence of information from DfE allows some school leaders and governors to keep their heads firmly in the sand, pretending it isn’t going to happen.
As regular readers of our blog will know, we are firm advocates of starting to plan as soon as possible, so that learners and staff don’t suffer from savage cuts that have to be made at short notice. That was the motivation for publishing our ebook and tools, ‘A Helping Hand to Secure a Sustainable Budget’, which guides schools through the production of a five-year set of projections for their funding and the preparation of a Financial Sustainability Plan. We’ve shown schools how to make projections based on the Minimum Funding Guarantee (MFG). All this is possible as a high level estimate even before you know the NFF per pupil values for your school.
If you have a strategy now for best, middle and worst case funding scenarios (worst case being the Minimum Guaranteed Funding Level), you can produce budget plans to address any shortfall. You can also take advantage of any staff turnover to achieve natural wastage, renegotiate or retender contracts and collaborate with other schools to save costs. Starting early gives you ample preparation time, which is much better than having to reduce spending urgently in areas that directly affect pupils. Rushed decisions often aren’t good decisions.
Is the School Cuts information realistic?
So far I’ve established that the publication of the School Cuts website is fuelled by frustration (shared by many) on account of DfE’s delay in sharing information, and that it helps to raise awareness of the potential funding reductions that schools could face when the NFF is implemented. But is the information presented on the website realistic?
I’ve looked at the data provided in the website links and the statements that explain the School Cuts approach, and compared it to what we know from other publicly available data and evidence about the DfE’s intended policy. I have had the benefit of seeing data recently published by the DfE (not available at the time NUT and ATL were doing their research), which shows a full breakdown of 2016/17 funding for every school and academy at https://www.gov.uk/government/publications/schools-block-funding-allocations-2016-to-2017.
1. The F40 formula
The F40 group comprises the 40 lowest funded LAs in the country. They have campaigned for a fairer formula for over 20 years, and have done a lot of work on a model, which has been discussed with the DfE. Understandably they have a particular set of views which their proposed formula is designed to serve.
The papers on the F40 website indicate all member LAs would gain from the formula if implemented in full. However, it would cost an extra £734.9m to implement and therefore factor values would have to be scaled back to around 85.9% of their pure formula to keep within the current total available funding. It is not clear whether the School Cuts website has used the original or scaled back F40 formula. My own rough calculations suggest it is the scaled formula.
The main point here is that no-one knows what values the DfE will attach to the factors in the NFF. They haven’t even published Ministers’ decisions about the structure of the NFF in response to the first consultation. So the School Cuts information cannot be regarded as definite. It is simply one option designed to provide an indication to schools of what could happen. The concern is that because it looks authoritative, some may take it at face value.
I’m working with an authority at the moment whose schools are keen to explore whether to take some early steps towards the NFF in the 2017/18 local formula, to make it real and encourage schools to start planning for any potential losses while the level of protection is still reasonably high. They consider this preferable to taking a big hit in a year when the MFG might allow a loss of 2%, 3% or even worse. But we have no indicative figures to work on.
So I’ve looked at the 2016/17 returns for all LA funding formulae (which are published at https://www.gov.uk/guidance/schools-block-funding-formulae-2016-to-2017) and examined the average and median values for every factor. A mathematical average should be used with caution; not all LAs use all factors, and there are some very high or low outliers in individual factors. The table below compares the average and median values with the F40 values used in the School Cuts calculations.
|2016/17 Average||2016/17 Median||F40 formula used by School Cuts|
|Primary basic entitlement||
|KS3 basic entitlement||
KS4 basic entitlement
|Low prior attainment primary||
|Low prior attainment secondary||
|Lump sum primary||
Lump sum secondary
You can see that the F40 group have weighted some factors differently to the average or median, which will produce different results for schools with varying characteristics. There should be a very strong health warning, since we don’t know which approach DfE will take.
The formula used by School Cuts excludes IDACI from the deprivation calculation, despite the fact that 120 out of 150 LAs currently use it. The exclusion is probably because it is incredibly difficult to model, especially with DfE changing the bandings in 2016/17 and now reworking them for 2017/18. The formula also only uses Ever 6 FSM. The NFF will include IDACI, single census FSM and Ever 6 FSM. Data for single census FSM seems to have dropped dramatically in 2016/17. This has not been reflected in the School Cuts data, which relates to 2014/15.
Their low prior attainment data is also from 2014/15. It is not yet clear what the impact will be on secondary schools from an increase in pupils not achieving the more challenging 2016 KS2 targets, although LAs will be able to moderate values to avoid too much turbulence.
This brings us to another significant question mark over the School Cuts results. LAs will still be setting a local formula at least in 2017/18 and 2018/19, although from 2018/19 their grant allocation that drives it will be determined by DfE applying the NFF to school data. So even if the NFF values are close to the F40 formula, LAs can choose a different distribution up to the point of direct funding from DfE. This alone will mean the School Cuts findings can’t be relied on.
2. Total reduction in funding
There is a statement on the School Cuts home page that 92% of schools will have their funding cut. The data behind the website indicates only 490 out of 19769 primary and secondary schools will gain. If we assume the approach to be taken by the DfE is likely to involve averaging the values, by definition more than 8% of schools must gain, because around half are below average now. The data shows a total for 2016 (which I assume means 2015/16) of £31.211 billion, but it falls to £28.675 billion by 2020, a reduction of £2.536 billion or -8.13%.
The 8% inflationary increase that the website says has been taken into account must be a factor in this headline figure. The Institute of Fiscal Studies (IFS) stated in a 2015 pre-election briefing that forecasted economy-wide inflation between 2015–16 and 2019–20 was 7.7%. But as the School Cuts exercise is focused on school funding, not school spending, it isn’t clear how the inflationary aspect has been factored in.
This makes it difficult for a school to interpret the figures; in fact, it is potentially misleading unless you fully understand what it means when it refers to real terms cuts. The actual funding won’t reduce by 8%, but on top of any changes in the NFF, schools will need to increase spending to cover pay awards and other unfunded cost pressures. Only those with the biggest gains from the NFF will see a real terms increase. The risk is that schools will see their headline figure, assume funding will be cut to this level, and then factor in their cost pressures as well when reviewing budgets. This would double up the projected cuts.
3. Education Services Grant reductions
There is a genuine cash reduction within the figures presented by School Cuts: they assume a cut of 75% in Education Services Grant paid to academies, totalling -£175m. However, I believe academies will lose all of their ESG. The total ESG for 2016/17 is distributed as follows (all in £m):
General ESG paid to LAs 387.418
General ESG paid to academies 233.650
Total General ESG 621.068
Retained Duties ESG paid to LAs 117.249
Total ESG £ 738.317m
The Autumn Statement in 2015 stated ‘Savings of around £600 million will be made on the ESG, including phasing out the additional funding schools receive through the ESG’. The Retained Duties ESG of £117m shown above (duties that benefit schools and academies) has already been transferred into the Dedicated Schools Grant (DSG) for 2017/18 as part of per-pupil funding. As this will grow with increases in pupil numbers, this must be where the 25% residual ESG is going.
We now know that General ESG will be cut completely for LAs in September 2017 and will taper down by 2020 for academies. My analysis above suggests that tapering for academies will be to zero rather than to 25%.
Incidentally, the public information about academy ESG does not include protection payments against ESG reductions, which totalled £62.5m in 2015/16. It includes allocations of up to £434k per year for some early academies whose rates were originally derived from LA spending. I am assuming this must also vanish, which will cause greater reductions for some academies.
For 2017/18, LAs are being allowed to ask their own schools to cover the shortfall in General ESG. We are waiting for draft Schools and Early Years Finance Regulations to be published, to find out which functions can be charged to LA schools (paragraph 84 of the Operational Guidance for 2017/18). Yes, more uncertainty which interferes with planning timescales.
So while the School Cuts website information includes bigger reductions for academies due to the loss of ESG, LA maintained schools will also be affected by having to give up some of their funding to cover the statutory services. All types of schools will therefore suffer pressures.
4. Growth in pupil numbers
As is usual in this sort of modelling, static pupil numbers are used in the comparison; in this case data relates to 2015/16, when there were 6.8m pupils. Rolls are expected to continue to rise, and since funding operates on a per pupil basis, DfE will need to provide extra funding for the additional pupils.
Dedicated Schools Grant allocations to LAs for 2016/17 are based on 7.04m pupils, so the starting point for the School Cuts exercise is lower. In January 2016 there were 20,123 primary and secondary schools, 354 more than the number shown in the School Cuts data for 2015/16.
Pupil number growth will affect the cash position for some schools. Where schools are able to expand, extra funding for pupil number growth may offset some or all of the cash reductions from the NFF. Where staff might have been made redundant, they may be kept on to teach new pupils, although there may need to be consideration of larger class sizes to balance the budget, given that more pupils will bring an increase in costs.
5. Minimum Funding Guarantee
The website assumes the MFG will continue at -1.5% per pupil up to 2020. In reality this is unlikely. As Ministers have stated a desire to move money more quickly towards the least fairly funded schools, we could see a reduction in protection to achieve this. It could be immediate or phased, e.g. -2% in 2018/19, -2.5% in 2019/20 and so on. It all depends whether the Chancellor has some more money to add to the pot in the Autumn Statement on 23rd November.
What happens now?
We are waiting for the government’s analysis of the responses to Stage 1 consultation and the publication of Stage 2, which they have promised will contain indicative values for the Schools and High Needs NFF. I haven’t mentioned High Needs in this blog, but will certainly be returning to that topic soon, because the redistribution involved in that NFF will also impact on schools.
Please bear in mind that the indicative values are only for consultation purposes and may change further down the line. The October 2017 census data will drive the actual 2018/19 allocations to LAs, and DfE won’t want to be caught out by higher pupil numbers. LAs will also be considering their position on the local formula, depending on the final decision for timing of direct funding by DfE. We advise careful monitoring of your local Schools Forum website to see what lies ahead.
So there is quite a way to go before we have any certainty over funding levels for schools under the new system. Yes, there is a need for publicity about the delay in information and the unfairness of robbing one set of schools and pupils to benefit another, but the School Cuts website really should give a clearer set of health warnings to avoid misunderstandings.