School Funding News: The Good and The Bad
The Good News
At last we have confirmation that the National Funding Formula (NFF) will definitely go ahead in April 2018. The government has managed to find an additional £1.3 billion, allowing all schools to receive at least 0.5% extra per pupil in each of 2018/19 and 2019/20. This will mainly benefit those that would have lost money or experienced no change as a result of the NFF.
For schools that will gain from the introduction of the new formula, a maximum increase of 3% per pupil will be allowed in each of the next two years. This confirms the December 2016 proposal. It means that where the pure formula results in increases of up to 3% per pupil in each year, schools will receive that allocation. If it provides more than this, a ceiling will be applied to limit the increase to 3% per pupil per annum.
Because it is a per pupil guarantee, the changes will only amount to a cash increase if schools have static or rising rolls. There is no protection against falling rolls.
Another feature of the announcement was: ‘This formula settlement to 2019-20 will provide at least £4,800 per pupil for every secondary school’. We are assuming this means the total per pupil funding rather than the basic entitlement (as it feels like the latter would cost too much). We will need to wait for final decisions on the NFF factor values before we can see how many LAs would be below this figure and how much of the £1.3bn will be required to achieve this commitment. It isn’t clear whether DfE will work towards the £4,800 in 2019/20 or introduce it from 2018/19.
This is all a much better result than the prospect of some schools having funding withdrawn in order to fund the increases for others, particularly when you consider the extent of the cost pressures that are expected in the period up to 2020. The statement by Justine Greening is at https://www.gov.uk/government/news/13bn-for-core-schools-budget-delivers-rise-in-per-pupil-funding. This gives a breakdown of the extra funding: £416m in 2018-19 and £884m in 2019-20.
The Education Secretary also confirmed that the PE and Sports Premium for primary schools will double from £160m to £320m, starting in the next academic year.
The Not So Good News
In celebrating the provision of additional funding for school budgets, it is easy to overlook the fact that this is not an actual increase to the overall education budget. It is being achieved by making savings in other parts of the DfE’s budget. The areas mentioned in the Secretary of State’s announcement are:
- Efficiencies and savings across the main capital budget can release £420m, mainly from healthy pupils capital funding (£315m).
- In delivering the free schools programme, savings of £280m will be released up to 2019/20 by working more efficiently, including working collaboratively with local authorities to provide free schools to meet basic need.
- Across the rest of the DfE resource budget – over £60bn per year – the government will reprioritise £250m in 2018-19 and £350m in 2019-20 to fund the increase in spending. The government will redirect £200m from the Department’s central school improvement programmes towards frontline funding for schools.
Looking at the first and second bullet points above, it is noticeable that although local authorities are not allowed to convert capital funding into revenue funding, the government seems able to do so. The concern is whether this is sustainable in the long term, since capital funding is not always a permanent commitment.
The intention to deliver some free schools through local authorities is unexpected; is this an admission that LAs can organise building work more efficiently than the DfE? Labour’s Shadow Education Secretary, Angela Rayner, asked the Secretary of State whether by finding savings in the free schools budget, she was agreeing that it has always been inefficient.
However, from another perspective, this proposal could signal an intention to pass on cost overruns in free school projects to local authorities. That’s the last thing they need, given the scale of the funding cuts that have been imposed in recent years. Many LAs may not have the capacity to absorb this work. Watch out for more smoke and mirrors…
In relation to the third bullet point, there has been no indication of exactly which central school improvement programmes are to be cut. This will remove the ability to target funding to particular areas of weakness in school and pupil performance, spreading the funding more thinly in the Schools Block. That could be a mistake that costs some pupils dearly. It would have been better for the Treasury to show it values education and find the additional money to provide fairer funding, having acknowledged it’s needed.
We can’t tell yet whether particular types of schools may be adversely affected by this shuffling round of funding. It could be a case of giving with one hand and taking away with the other.
The Bad News
The additional funding does not seem to be sufficient to address the overall problems in the context of cost pressures that have already been experienced and will continue. Natalie Perera of the Education Policy Institute has observed that after the extra £1.3bn is taken into account, schools will still face inflationary pressures of just over two per cent by 2020.
But Luke Sibieta of the Institute for Fiscal Studies has said that while the £1.3bn will ensure that per pupil spending is frozen between 2017 and 2019, there will still be a real-terms cut of 4.6% over the full period between 2015 and 2019. Certainly, the extra money doesn’t reverse the cuts that schools have already struggled to deal with, which are around £3bn in real terms (i.e. by the time costs related to inflation and rising rolls have been taken into account). It will be interesting to see whether school balances have fallen when the position at 31st March 2017 is reported later in the year.
We are also wondering how this announcement fits with the manifesto commitment of an additional £4bn for the education budget. The announcement only mentions the £1.3bn as being on top of the amount awarded in the 2015 Spending Review. The fact that it is being taken from other DfE budgets suggests it is not part of the £4bn, which was represented as new money.
The TES said in an article on 11th July that the government was struggling to meet its pre-election promise, after being forced to abandon plans to scrap universal free school meals for infants. Since the manifesto commitment was for the period up to 2021/22, without any indication of how it would be phased, it sounds as though Ministers are giving themselves time to find the money.
There is a danger in all this, which is that schools in particular circumstances may make assumptions based on the average figures that are being published. Individual schools are very different, each with their own characteristics and quirks. When you consider that the bulk of the cost pressures are related to employment costs, it is fairly evident that schools which spend a higher proportion of their total budget on staffing than average could see unfunded cost increases at a much higher level.
The other question that is unanswered at this point relates to the level of flexibility that local authorities will have in setting the local formula in 2018/19 and 2019/20. As the Queen’s Speech, which covered a two-year legislative programme, made no mention of primary legislation to introduce direct funding of schools by DfE, the so-called ‘Hard NFF’ cannot be introduced in 2019/20 as originally intended. Local authorities will therefore run a local formula for the next two years.
If the consultation proposals are confirmed, there will be some elements of the NFF which will be allocated on the basis of historic spending. These include rates, Private Finance Initiative costs, pupil mobility, and pupil number growth. If the costs in 2018/19 are greater than the baseline year of 2017/18, local authorities will need some flexibility to manage these pressures within the overall formula, otherwise schools with these characteristics will be put at a disadvantage.
If this flexibility is allowed, it could allow some of the current inconsistencies between schools in different areas to continue, which is not what the government wants. On the other hand, if this flexibility is not allowed, some schools could find themselves in greater financial difficulty. It is a difficult balancing act.
To find out the answers to some of these questions, we will have to wait for the operational guidance for LAs on the 2018/19 budget, which has been promised soon. But it will be September before LAs are notified of their actual allocations of Schools Block funding per pupil for 2018/19. The Autumn term will be very busy for Schools Forums and LAs.
The Hidden Problem: High Needs
Finally, let’s consider the position for the High Needs NFF, which is due to be introduced in 2018/19 alongside the Schools NFF. This was briefly referred to within the Secretary of State’s announcement: ‘continue to protect funding for pupils with additional needs, as proposed in the consultation published in December’.
The reality is that the proposed High Needs NFF could result in around 73 local authorities seeing a cash freeze in their High Needs allocations. Those that are fortunate enough to gain from the High Needs NFF will see their gains capped at 3% per year in cash terms. In December 2016 DfE said that 15 LAs would have to wait until 2019/20 to receive their full High Needs increase.
None of this pays much attention to rising pupil numbers, which even with static levels of SEND would bring an increase in the number of pupils requiring support to help them achieve. So far there has been a pitifully small addition each year to the High Needs Block pot to recognise changing population, but it’s been allocated on pure pupil numbers, without any recognition of levels of SEND which vary between authorities. It might as well have been put into the Schools Block for all the difference it’s made.
The trouble is, we don’t have static trends in SEND. The DfE seems fixated on the number of pupils with Education Health & Care Plans, but that doesn’t tell the whole story. EHCPs are for individual children whose needs vary widely and who require vastly different amounts of money to be supported. There are also changes in the profile of children with lower level SEND who don’t meet the thresholds for EHCPs, and for whom schools have to provide the right support from within their mainstream budget share or academy General Annual Grant.
The High Needs NFF is not responsive to rising needs. It includes 50% of the current spending being locked into the formula for four years from 2018/19, and funding for special schools being restricted to £4k per pupil on old data (January 2017 for 2018/19) rather than the £10k per place that LAs have to fund. Half the formulaic element is calculated on the basis of population, rather than indicators that reflect higher levels of need. This is all very concerning when you consider the pressures that schools and LAs are under.
As we observed in our post ‘SEND Funding Alert’ on February 19th, at https://schoolfinancialsuccess.com/send-funding-alert/, the proportion of children with SEND who are educated in special schools has increased from 5% in 2012 to 8.5% in 2016. There has also been a 14% increase in top up payments (costs above £10k per child) in the last three years.
These facts suggest that the complexity of children’s needs is increasing, needing more specialist provision, and therefore many areas with limited or no increase in their allocations could struggle to balance the High Needs Budget.
Yet DfE is withdrawing the ability for LAs to move money between the blocks within Dedicated Schools Grant. This will leave LAs unable to manage the rise in demand, with referrals and diagnoses increasing at an alarming rate for autism in young children.
What are the High Needs options for LAs?
If LAs are to avoid a deficit on the High Needs Budget, they will need to work hard to identify savings in the High Needs review that the DfE has asked all authorities to complete.
The areas that each LA looks at in their review will vary depending on their starting point. Some have an over-reliance on expensive special school placements. Others use out of area independent and non-maintained special schools which can be even more costly. LAs differ in the extent to which their schools are inclusive, some providing specialist SEN units or resource bases in mainstream schools. The nature of these can vary, some being physically separate and others integrated into mainstream classes. There are also different approaches to the delivery of support services.
DfE insists that LAs can make efficiency savings in High Needs provision and services. There may indeed be some potential, but the reality is that there is a core cohort of children whose provision must be maintained, and the cost of their support is not static; it is subject to the same inflationary pressures as mainstream provision. On top of that, there seem to be some genuine increases in need.
One thing is clear: where LAs have a cash freeze in their High Needs NFF allocation, they will need to demand more from their mainstream schools in terms of how they support learners with SEND. Some LAs may need to move thresholds upwards, so that more children are educated in mainstream provision rather than in special schools. DfE is providing more capital funding to create extra provision, but if this is spent on expanding and creating new special schools, there won’t be sufficient revenue funding to sustain the extra places.
Mainstream schools can therefore expect to be put under much more pressure to provide for pupils with higher level SEND and to prove exactly how they are using their notional SEN budget to support the first £10k of total costs (including £6k of SEND support) for them as well as support for those at the lower end of the scale.
The notional SEN budget is an amount within budget share (not additional to it) that is deemed to be for SEND, though in reality the whole of the school budget is at a head teacher’s disposal for this purpose. Unfortunately, many SENCos don’t get to know how much is available, and they will need to be on their toes to manage any increase in the SEND population within their school.
If the notional SEN budget is deemed to be insufficient to support the number of pupils with SEND, which is likely to happen if a school is particularly inclusive, the LA has to provide additional funding. Naturally, if thresholds change, schools are likely to submit more requests for extra money.
You can see where this is going, can’t you? In order to manage the High Needs Budget, LAs will need to challenge schools to a much greater extent on how they have spent their notional SEN budget and any other funding for SEND (e.g. allocations for SEN units or resource bases) at the school’s disposal. Schools will have to work much harder to evidence the need for extra funding.
The extra funding in the Schools Block NFF is welcome, as an improvement on the original proposals, but the reality may feel very different for schools that only receive the additional 0.5% per pupil per year in 2018/19 and 2019/20. We still don’t have true multi-year settlements, because no one can predict what will happen from 2020, which is the start of a new Spending Review period.
There can be no reversal of the real terms cuts that have already happened, and in addition, schools will have to cope with an added pressure in the number of pupils with SEND requiring support, funded from the mainstream school budget.
It all sounds a little like make do and mend, in the belief that at a future point the Chancellor will be able to balance the books. Or will a letter be left in the desk for the next incumbent saying the piggy bank is empty?