School Funding Decisions
After several delays and much lobbying, final decisions have now been announced showing how the National Funding Formula (NFF) will be implemented from 2018/19.
Not all of the information is available at this point. We’re still waiting for technical notes that will explain the detailed calculations, and local authorities haven’t yet been given access through the COLLECT system to download the detailed workings for their own schools. The High Needs operational guide is outstanding too; this will set out the requirements for how this funding is spent. But these are mainly technical issues; we know enough to be able to identify the key decisions and their likely impact.
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For this post, we take a look at some broad themes in the NFF announcements. For anyone not immersed in the workings of the school funding system, it must appear mind-bogglingly complex. Understanding the notional allocations and working out what they mean is a bit of a challenge – the pack looks like a missive from an office in Sanctuary Buildings marked The Ministry of Obfuscation. Let’s take a look at some of the issues we’ve picked up.
Potential for misunderstandings
We believe there is the potential for schools to misunderstand what the figures represent. The genesis of this lies in Justine Greening’s announcement in July of the minimum per pupil increase of 0.5% and the secondary minimum funding level of £4,800 by 2019/20. She gave the distinct impression that this would be guaranteed in school budget shares once the money had passed through the local authority’s hands. That isn’t the case.
The main issue that could cause a significant variation is the position of the LA as intermediary in continuing to distribute the funding through the local formula, at least until legislation is passed to allow DfE to fund schools directly (no earlier than 2020/21). The figures published by DfE relate to the amount of money each LA will attract for those schools, not the allocations to the schools.
These exact amounts cannot be guaranteed to reach each school, because depending on how far the local values are away from the NFF values, an LA might need to phase in the changes. The DfE’s guidance allows flexibility on how the changes are made, with several different decisions open to the LA. Most significantly, the Minimum Funding Guarantee (maximum loss in per pupil funding in a year) will remain at minus 1.5% per pupil, and the minimum funding level factor is optional. This means the Secretary of State’s guarantees do not have to be applied to local funding formulae.
Individual LA decisions will cause a different profile of allocations, resulting in a different mix of schools triggering protection or having high gains which need to be capped to make the whole thing affordable. If you want to know the main reasons why LAs might not be able to deliver the 0.5% uplift or the minimum funding levels, please refer to our last blog post, ‘Broken Promises’.
Granted, DfE has tried to explain the basis of the allocations in paragraph 82 of the main policy document, and in paragraph 144 there is a helpful set of definitions of the terminology for the different sets of figures. But how likely is it that most schools will have read that far? How many times have you sat in a meeting where a report is being presented, and pieces of paper are handed round with figures on them? Cue everyone round the table to grab the paper and look for the figures that affect them. It’s much the same with the NFF announcement.
Lack of research-based decisions
The good news was the extra investment of £1.3bn (even though it’s end-loaded towards 2019/20), since this has been used to improve basic per pupil funding and provide the minimum guarantees. There had been a lot of lobbying about the sufficiency of funding and many areas of high deprivation had feared the unit values for additional needs might be reduced. Fortunately, this didn’t happen.
Yet it’s not clear what the basis is for the decisions on the basic values and the level of the minimum increase. An extra 0.5% won’t even cover the pay award, and certainly won’t make up for the last two years of static funding while cost pressures rise.
Allocating a specific amount of money to basic per pupil funding is all well and good if it is based on an understanding of how much it costs to run a basic school with low level needs. But DfE has repeatedly refused to use research on this matter as a basis for this element of the formula.
As a result, from a purist point of view, the production of a random minimum level of funding per pupil doesn’t guarantee that core funding will be covered, and a 0.5% funding increase appears to lock in an historic advantage for some schools that have had much higher funding levels relative to their needs in the past. Even with the extra investment, substantial capping of gains is still happening for those that are regarded as having been under-funded, slowing down the process of getting the extra funding to them that they deserve. It doesn’t sound much like a fairer funding formula in those terms. Yet pragmatically and politically, it was probably the only way that Ministers were going to get approval for the NFF.
Lack of joined-up thinking
Each of the blocks within DSG is taken separately, with no thought as to the links between them in a system where LAs have had flexibility to move money around. Here are just a few examples.
The Central School Services Budget is a classic example of DfE not understanding the detail of how funding operates at a local level. Schools support central retention for services which they consider make a contribution towards school improvement, and for which they are prepared to give up some of their school budgets. The type, cost and extent of the services vary hugely between areas.
Yet DfE considers that this block can be reduced to a formulaic approach. They say in paragraph 142:
‘data shows that local authorities with similar characteristics spend very different amounts delivering the same services. We believe that higher spending authorities should be able to adjust their spend to bring them in line with other local authorities that spend less delivering the same services and achieve similar outcomes.’
The whole point is that they are not the same services. Moreover, schools in LAs which spend less on central budgets will have a higher budget share compared to areas where Schools Forums have agreed more should be top sliced centrally. DfE pays no regard to this financial relationship when allocating the Schools NFF.
Minimum values for primary and secondary per pupil funding sounded like a good idea. These are intended to boost schools with the lowest funding. However, the reason a secondary school’s funding is low could be that their LA has prioritised primary schools. As well as the boost for secondary, such an LA will receive a minimum 0.5% uplift for every primary school, even though their baselines are high. With a minimum primary level of funding as well, it also works the other way round.
Another example is the change in funding arrangements for pupils in SEN units or resource bases. These pupils will now count in the calculation of budget share, with funding transferred to the Schools Block from the High Needs Block. The place-led funding per place, which is currently £10k and is funded from the High Needs Block, will be reduced to £6k.
This works if a school gets £4k from the Schools NFF, but that may not be the case for a large primary school that gets £2,747 in basic per pupil funding, a lump sum of £110k spread over a lot of pupils, and not much else in the way of additional needs funding. LAs can even pay the full £10k for an empty place, creating a perverse situation where it could be worth more than an occupied place.
Our final example is the removal of the factor for Looked After Children from the NFF. DfE says the funding is being transferred to the Pupil Premium Plus Grant (PPPG) for LAC. However, the increase per pupil is only £400, going from £1,900 to £2,300. In 2017/18 the median factor value in LA formulae was £500, with individual LA values ranging from £175 to £5,000. However, the total funding of nearly £23m was only spent in 88 of the 152 LAs – just looking at these LAs, the median was £927 and the average was £1,072.
When this is transferred to the PPPG, all LAC will qualify, which will obviously cause a redistribution of the funding. Essentially, schools in an LA without a LAC factor or with a value below £400 will gain. Those currently receiving more than £400 per LAC will lose money; this applies to 79 out of the 88 currently using the factor.
These losses and gains are hidden, because the PPPG is not included in the NFF comparisons. As far as we can tell from a sample of some of the baselines for individual schools compared to the published APT data for 2017/18, the LAC factor doesn’t seem to be excluded from the baseline. The comparison therefore doesn’t seem to be consistent. Maybe this will become clearer when we see the technical note.
LAs will be starting to model the impact of replicating the NFF values in their local formula, to see if it is affordable, taking into account the High Needs Budget situation in case a transfer is needed from the Schools Block, and considering whether items funded on historic spend are going to cause a budget pressure in 2018/19. This will have to be done using current data, because the actual census data and updated allocations won’t be available until December. LA officers should be working with school representatives to prepare options for consultation with all schools, building a consensus with their Schools Forum in principle.
There is very little time after DSG allocations are confirmed in December to construct the final formula, before submitting it to DfE on 19th January. It will be a challenging period, and schools are advised to take up any opportunity to attend consultation events or read papers that explain the LA’s preferred approach.
We will continue to analyse different aspects of the NFF as implementation proceeds. Don’t forget to go to our homepage and sign up for the latest news and views.