School funding in 2017/18: the devil in the detail
This blog is slightly more technical than our previous posts, but it draws attention to some details in the 2017/18 school funding announcement which are worth knowing about.
What we know about 2017/18
The new Secretary of State, Justine Greening, made a statement on 21st July announcing that the National Funding Formula (NFF) would be delayed to 2018/19.
Here is what she said about the position for 2017/18:
‘…in 2017 to 2018 no local authority will see a reduction from their 2016 to 2017 funding (adjusted to reflect authorities’ most recent spending patterns) on the schools block of the dedicated schools grant (per pupil funding) or the high needs block (cash amount). As usual, we will apply an uplift for high needs later in the year.’
‘Final allocations for schools and high needs blocks will follow in December on the basis of pupil numbers recorded in the October census.’
‘I am also confirming that, for 2017 to 2018, we will retain the current minimum funding guarantee for schools, so that no school can face a funding reduction of more than 1.5% per pupil next year in what it receives through the local authority funding formula. To ensure that local authorities can start planning their budgets for next year with certainty, I do not intend to proceed, for 2017 to 2018, with proposals to create a new central schools block, allow local flexibility on the minimum funding guarantee or to ring-fence the schools block within the dedicated schools grant. These will be covered, for 2018 to 2019 and beyond, in my response to the first stage consultation in the autumn.’
This sounded reassuring enough: a guarantee of no changes apart from those driven by data, and most of the structure of the DSG remaining the same. But a look at some of the details reveals it is not quite that straightforward. Some schools and LAs could get less money for additional pupils, and rising demand for specialist provision for children with SEN and disabilities still won’t be funded adequately.
What does the Secretary of State’s phrase ‘adjusted to reflect authorities’ most recent spending patterns’ mean?
The DSG allocations for each of the three blocks (Schools, Early Years and High Needs) are largely based on historic spending, but local authorities’ actual spending follows a different pattern. The NFF proposals included a ring fenced Schools Block and protection against significant losses in the High Needs Block. A baseline therefore needed to be set.
In March, DfE asked all LAs to complete a baseline return, allocating their planned 2016/17 spending to the proposed four blocks (which at that stage included a new Central Schools Block). They had to exclude any expenditure financed from one-off funding or money from sources outside of DSG, to balance to the December 2015 allocations. Note that this exercise doesn’t reflect changes made to DSG in the recent DSG update (July 2016).
Now the NFF has been delayed to 2018/19, the baseline results will be used to set the 2017/18 funding freeze for the Schools and High Needs Blocks.
We don’t know what is planned for the Early Years Block; a consultation is due soon. In this exercise, LAs were asked to include only the allocation for 3 & 4 year olds, not the disadvantaged 2 year old funding or the Early Years Pupil Premium.
The results of the baseline exercise
Let’s start by looking at the headline national totals in this redistribution. The results will come as no surprise to schools that deal with special needs pupils and have seen the rise in needs at first hand.
In total, LAs are spending £264m more than their High Needs Block allocations, a funding shortfall of 5%. Most of this money has been moved from the Schools Block.
|2016/17 total DSG allocations compared to planned spend|
|Schools||Early Years (3&4 yr olds)||High Needs|
|DfE allocations £m||32,654.939||2,222.675||5,304.362|
|LA spending plans £m||32,398.969||2,214.011||5.568.997|
|Average % change||-0.8%||-0.4%||5.0%|
But this is a net figure; the 105 LAs who need to supplement their High Needs funding actually plan to spend an extra £322.6m, which represents an extra 8.5% on their DSG allocation.
Before we analyse the results further, the following caveats should be taken into account:
• DSG allocations have mostly been rolled forward from historic spending in 2012/13 according to Section 251 budget statements submitted by each LA. Different interpretations of the guidance may have affected both the allocations and the planned spending in the baselining exercise.
• The blocks themselves are permeable; for example SEN support in nurseries can be funded through the Early Years block (e.g. by using a higher disadvantage factor as a proxy) or by making specific payments from the High Needs Block. LAs can currently move funding between the blocks as required.
• The Early Years DSG allocation is provisional, adjusted during the year to reflect changes in headcount (January censuses). LAs estimate their initial budget in different ways, some using a single census point (which requires a bigger adjustment later) and others mirroring the variation from the last three terms.
What do the results mean?
With 105 out of 150 LAs having transferred funding from other blocks to plug their High Needs funding gap, many mainstream schools have had to manage with a lower level of funding.
Even if the current system were not changing, this approach cannot go on forever, because the Minimum Funding Guarantee acts as a brake on reductions to school budgets. Once all schools are at their lowest possible level, no more can be removed.
However, we now know that transfers from the Schools Block will not be permitted from 2018/19. The NFF proposals involve a ring fence round the Schools Block, meaning that LAs have to passport it all to mainstream schools.
LAs and schools will therefore have to rely on the High Needs NFF; there will be problems if DfE doesn’t get this formula right. Some LAs could still get insufficient funding to meet needs, and some could see reductions; there will be some protection to limit these, but the pace of the change hasn’t yet been identified. Particularly worrying is the intention to use ‘a substantial child population factor’. This won’t allocate funding to need, but will redistribute money to areas with lower needs.
There is a lot of variation in the movement between blocks at individual LA level. To demonstrate this, I have extracted the largest transfers in and out of each block, both in cash and in percentage terms. Remember that generally, the majority of areas are spending less than their allocations on the Schools and Early Years Blocks, and more than their allocations on the High Needs Block.
|2016/17 planned spend compared to national DSG allocations|
|Schools||Early Years (3&4 yr olds)||High Needs|
The highest cash transfers to the High Needs Block are large authorities: Kent, Birmingham, Surrey and Lincolnshire. So let’s examine the transfers in terms of the percentages.
I’ve shown the top ten LAs below, with a couple of indicators to compare their profiles to national averages. The indicators are taken from SFR20/2016, ‘Schools, Pupils and their Characteristics’, based on the January 2016 census data for primary, secondary and special schools and academies.
|Top 10 LAs for the % increase in High Needs expenditure compared to DSG allocation|
|Cash transfer £m||% increase||FSM % Jan 2016||% pupils with SEN|
|Bath and North East Somerset||5.252||32.5%||8.7%||13.7%|
|Telford and Wrekin||2.814||17.1%||16.2%||18.5%|
There are some seriously large transfers of funding here, indicating that the High Needs Block allocations simply don’t match the current need to spend.
The LAs shown here do not all share the same characteristics. Six are Unitary Authorities, two are outer London Boroughs, one is a county and one a Metropolitan Borough. Six of them have above average free school meals but only four have an above average proportion of pupils with SEN and disabilities (SEND). Of course, it isn’t necessary to have a high number of pupils with SEND to see a significant increase.
This lack of commonality among LAs that have had to supplement their High Needs allocation could be seen as casting doubt on the theory that a formulaic approach will work as a method of allocating High Needs funding.
Looking at the top 40 LAs for high transfers (all bar one have exceeded their High Needs allocation by more than 10%), there are 15 Unitary Authorities, 12 London Boroughs, 7 Metropolitan Boroughs and 6 Counties. It appears that smaller authorities are more vulnerable to rising demand for SEND provision.
Why has this situation arisen?
Spending has increased to meet rising demand for specialist places for children with SEND, but the DSG High Needs Block cash freeze has failed to recognise this. Funding can be granted for extra places in academies (pre 16 only), FE colleges and charitable & commercial providers (CCPs). However, DfE will not accept applications for funding for any new places in LA maintained special schools, or for academy post 16 places.
So when the Secretary of State said ‘we will apply an uplift for high needs later in the year’, she didn’t mean for all types of provider.
Yet to comply with legislation and statutory guidance, the LA still has to pay schools if the pupils are named in an Education, Health & Care Plan, or if they are assessed by professionals as needing extra support which costs more than £10k per annum.
My experience from talking to a range of schools and LAs over the last few years tells me there are significant and genuine increases in some categories of need right across the country, but there appears to be a total lack of recognition by DfE that these need to be properly funded. Paradoxically, DfE plans to provide capital funding for the expansion of special schools, but this doesn’t seem to extend to revenue funding for the children occupying the new places.
Data from January 2016 shows that the number of pupils with SEND who do not have a statement or Education Health & Care Plan has been declining, while the number of those who do has increased, in line with rising rolls (the percentage has remained static).
The proportion of children with a statement or EHC plan who attend maintained special schools and independent schools rather than mainstream provision has risen. This is consistent with reports from LAs of increases in high cost complex needs, and now the baselines exercise has exposed the resulting gap between funding and the need to spend.
There are various contributory factors to the variations between authorities, for example the demographic profile of the population, local practices in the identification, referral and assessment of children with SEND, the level of inclusion in mainstream schools, decisions by health professionals and the location of specialist provision.
In some areas, local hospital specialisms have led to pressures to increase SEND provision to meet needs. Neo-natal expertise can save the lives of very early pre-term babies (as early as 23-24 weeks gestation) but these babies may have complex needs or disabilities. Parents of children with long term conditions treated in specialist hospitals can decide to move to a particular area where there is high quality provision (the ‘halo effect’).
If an LA’s schools provide for neighbouring authorities, it has to provide funding of £10k for every place. Each authority then pays the top up costs above this threshold for its own pupils. This arrangement can seriously skew the level of spending for an LA with significant cross-boundary or sub-regional provision, which is often at the higher end of the specialist spectrum. While the original 2013/14 DSG High Needs allocation recognised these costs, since then the host LA has usually been unable to access additional funding for new places as it needed to expand the provision.
The potential for the High Needs Block NFF to reduce High Needs allocations from 2018/19 onwards should provide LAs with the motivation to review their assessment and planning processes, their provision, and funding arrangements for specialist places and central services, to make sure they are fit for purpose and achieve value for money. But when they’ve assured themselves of all that, what will happen then?
The High Needs funding guidance for 2016/17 states that: ‘changes to place numbers in maintained institutions are to be managed at a local level using the high needs allocation flexibly.’
It’s a convenient phrase, which really means the government is passing on the problem to local authorities. But there comes a point when the extra costs can no longer be absorbed.
The impact of baselines on pupil number growth
The reworking of the baselines affects the per-pupil funding in the Schools Block. If an LA has transferred money to meet High Needs pressures (remember 105 of them have), the amount they receive in the Schools Block for every pupil will reduce. Obviously the money is being transferred to the High Needs Block, so you might think it all evens out.
That is true to some extent, but it means that LAs in this position who also have a growing pupil population will see a reduced amount not only for existing pupils, but also for the additional pupils.
I’ve done some analysis of the extent of the reduced funding for the additional pupils as if it had occurred this year. It’s a bit complicated to get a like for like comparison, but the steps I’ve taken to analyse the change for each local authority are as follows:
A. 2016/17 Schools Block planned spending (before the addition of Education Services Grant for retained duties) is divided by the 2016/17 pupil numbers.
B. The original 2016/17 DSG allocations for the Schools Block plus NQT induction (non-block) are totalled and divided by the 2016/17 pupil numbers.
C. Calculate A minus B to find the change in per pupil funding, excluding the ESG transfer.
D. Recalculate the 2015/16 pupil numbers to include non-recoupment academy pupils whose funding was transferred into DSG last year. This allows us to see the change in pupils between 2015/16 and 2016/17.
The above calculation helps us to work out the difference in funding for additional pupils if the baselined Schools Block values had been in place this year. I’ve excluded the transfer of Education Services Grant into the block, as that has to cover the costs for the relevant services.
So, what would the impact have been if the baselines had been adjusted in 2016/17? Nationally, the additional pupils in authorities that transferred money into the High Needs Budget would have attracted £5.3m less in funding. The LAs that moved money in the other direction, towards the Schools Budget, would see gains of £1.05m for their additional pupils.
The 10 LAs that would have lost the most in per pupil funding from their Schools Block are shown below, with the difference this would have made to funding for new pupils:
|Top 10 LAs for the % reduction in Schools Block for new pupils|
|Per pupil||New pupils in 2016/17||Change in funding for new pupils|
|Bath and North East Somerset||-£212.11||584||-£123,873|
Here is the top ten list in terms of the amount of cash they would have lost under this scenario. Some have lower per pupil reductions but higher growth in rolls.
|Top 10 LAs for the cash reduction in Schools Block for new pupils|
|Change in funding per pupil||New pupils||Change in funding for new pupils|
|Bath and North East Somerset||-£212.11||584||-£123,873|
With more pupils, it’s possible there could be an increase in the number of pupils with SEND. But once the money has been transferred to the High Needs Block, that allocation is frozen in cash terms. This feels like we’re going round in circles…
If SEND pressures continue without increased funding, LAs will find it increasingly difficult to meet their statutory responsibilities without going into deficit. Then schools will be faced with even more cost pressures as thresholds rise and they are expected to pay for more SEND support to resolve the shortfall in funding.
At best, the lack of a fair process to fund new places for children with SEND is tantamount to the government failing to carry out its responsibilities. At worst, it represents discrimination against pupils with SEND and against certain categories of school.
The next stage of consultation on the NFF provides an opportunity to challenge DfE to provide sufficient funding for children with SEND. Please make your views known.