SEND Funding Alert
There is a lot of noise at the moment about the changes to school funding as a result of the National Funding Formula (NFF) proposals. The Stage 2 consultation published in December finally provided some indicative figures to show exactly which schools would gain or lose if the government proceeded with its intended approach.
There have been some high profile debates around the impact of the changes to school budgets, amid claims that some schools will need to make huge cuts to survive. Concerns have been raised by (among others) the National Audit Office, the Public Accounts Committee, Education Select Committee, various teaching unions, and groups of head teachers and governors.
But there is not much attention being paid to the High Needs NFF proposals. Perhaps it is because the funding goes to local authorities (LAs) and the pathways for it to reach schools are not as straightforward. In the Stage 1 consultation, there were just 1,075 responses on High Needs, but over 6,000 on the Schools NFF questions.
Well, it’s time to sit up and take notice. Because the High Needs proposals have the potential to derail school budgets just as much as the changes to the main funding formula. Read on to find out why.
SEND funding system in a nutshell
First let’s do a quick recap on how funding for SEND works. The High Needs Block element of the Dedicated Schools Grant (DSG) provides funding to LAs for pupils aged 0-25 who need significantly more support than the average pupil. This covers provision for learners with Special Educational Needs and Disabilities (SEND) and mental health problems in all types of schools and post 16 education institutions, Pupil Referral Units/Alternative Provision, Hospital Education, and a host of services to pupils and schools related to supporting pupils with these needs.
Mainstream schools and colleges have to fund the first £10k of total costs from their ordinary budgets (£4k classified as an average cost for all pupils and up to £6k of additional support for those with SEND). A ‘top-up’ payment can be requested from the LA for any costs over £10k for an individual pupil. Special schools and other specialist providers receive £10k per place plus top ups over that amount. Top ups apply to pupils on roll, not places.
The funding for the High Needs Block of the DSG has been frozen in cash terms for several years, with a relatively small uplift in each of the last three years, e.g. £92.5m (+1.8%) in 2016/17. This extra money has been distributed on population, a measure that is hardly targeted to needs.
Changes in SEND
The problem is that while the grant has been more or less frozen, needs have not remained static. If you work in a school, the likelihood is that you will have noticed more children being identified as having SEND. In particular, the number of diagnoses of autism seems to be escalating. The incidence of complex SEND, mental health problems and behavioural difficulties also appears to be increasing. It is not yet clear whether these are actual increases or just a greater awareness leading to better diagnosis. Whichever it is, there is an increasing pressure on schools in trying to support these children to achieve.
The most recent statistics on SEND are from January 2016 (SFR29-2016). These show that the overall incidence appears to be falling, but this is solely down to a reduction in lower level SEND, i.e. those without statements or Education Health & Care Plans (EHCPs). Those with statements/EHCPs have remained at 2.8% of all pupils throughout the last 10 years.
However, these statistics do not show the increases in complexity and types of need, and certainly don’t reflect the recent rise in referrals and diagnoses which many schools and LAs are expressing concern about.
In the years leading up to 2012, out of all pupils with SEN, just over 5% were in special schools. In 2013 it rose to 6% and by 2016 it was 8.5%. There were also increases in independent schools. Look at the difference in trends between mainstream settings (which can include SEN units/bases) and specialist provision in the last five years:
Section 251 published statements of LAs’ planned high needs expenditure also provide evidence of the impact of SEND increases. Unfortunately, it is not possible to identify the total place-led funding (£10k per place), as the amount for SEN units/bases is hidden away in the line that records mainstream school budgets. However, expenditure on top ups and other SEND support shown in the following graph provides a good indication of the level of complex needs:
Over the last three years, expenditure on top ups has increased by 14%, SEN support services by 9%, and hospital education/alternative provision by 7% (but by 10% in the last two years, following a drop in 2014/15). The total increase over all headings is 12% in three years, a steady rise of 4% per year. Anecdotal evidence suggests this trend may well continue.
How are LAs managing this tension between funding and needs – and how is it affecting schools?
The baseline exercise DfE did in March last year provides some indications of how LAs have tackled this problem. It asked LAs to identify their actual planned spend for 2016/17 across the three funding blocks within the Dedicated Schools Grant: Schools, Early Years and High Needs Blocks. This was intended to set the baseline for any protection mechanisms when the National Funding Formula was introduced.
We can compare the spending baselines to the DSG allocations received in 2016/17 to get an indication of where the funding pressures are in individual LAs. DSG allocations are largely based on what each LA was spending in 2013/14 when the grant was split into the three blocks.
The results show that over the period 2013 to 2016, 111 out of 150 LAs (with 75% of the national High Needs grant) have moved a total of £322.6m to the High Needs Block from the other two blocks. This represents a total increase in spending on High Needs of 8.1% above their 2016/17 grant allocation. The biggest transfer was 32%. The other 39 LAs moved £58m (4.1%) in the other direction, i.e. out of their High Needs Block to increase funding for mainstream schools and/or early years providers.
This means that schools and early years settings in three-quarters of authorities have had their budgets reduced to plug the shortfall in high needs funding from DfE. Some of the high needs money goes back to mainstream schools who educate children with complex needs, but many other schools with lower levels of SEN have less money than if DfE had funded high needs appropriately.
So we already have a lack of funding to recognise complex and rising needs. Now let’s look at what the redistribution of this inadequate pot will mean from 2018/19 if the proposals go ahead.
High Needs NFF proposals
If you sign up for our free funding news on our homepage, you will receive an analysis of the NFF proposals, so I won’t go into a lot of detail here. But essentially the new formula will drive funding to LAs on the basis of the following:
a) £4,000 per pupil on roll in special schools/providers at January 2017 for 2018/19 allocations – a time lag that won’t reflect increases in September 2017, let alone 2018, and it won’t cover the £10k for each place that LAs have to pay.
b) An historic spend factor: 50% of each LA’s High Needs spending in 2017/18 – this amount will be locked in for FOUR years until the NFF is reviewed.
c) A set of proxy factors – split as follows:
- A population factor for 2-18 year olds (50%)
- Free School Meals eligibility – single census (10%)
- Income Deprivation Affecting Children Index – IDACI (10%)
- Children in Bad Health from 2011 census (7.5%)
- Disability Living Allowance child claimants (7.5%)
- KS2 low prior attainment in the last 5 years (7.5%)
- KS4 low prior attainment in the last 5 years (7.5%)
d) Import/export adjustments for cross-boundary children
e) Hospital education (a small number of authorities) – based on historic spending
f) Area cost adjustment for areas with higher labour market costs
DfE is making much of the transitional arrangements that mean no LA will lose funding for High Needs. Of 150 LAs, 78 will receive protection, costing £190m in total. The highest cash protection for an individual LA is £16.6m and the highest in percentage terms is 19.9%.
The other 72 LAs gain a total of £190m from the pure formula, but to balance to the available funding and cover the cost of protection, their gains are capped in the first year to £65m. One LA will see a gain of 22.9% reduced to 3%.
These huge swings away from current spending strongly suggest the balance in the pure formula is wrong. DfE seems to have treated this as a mathematical exercise, with no attempt to link it to what is actually being funded, i.e. the levels of need and the cost of provision and support to enable children with SEND to thrive and achieve in line with their individual potential. There is plenty of evidence on needs they could have used, some of which I have outlined in this article.
DfE commissioned the ISOS Partnership to undertake research on a solution to high needs funding, but their recommendations have not been followed. This is a shame, because the research did focus on the incidence of need and how it is met. Some of the indicators ISOS suggested have made it into the High Needs NFF, but they have been given a low weighting because of the very substantial population factor and the historic spend factor.
Protection at current spending is all very well if needs stay the same. But as we have seen, there are more children with complex needs in specialist provision and certain types of need are rising rapidly. When you set this alongside the failure to provide sufficient funding in the mainstream schools NFF, it has the potential to cause a real storm.
Even LAs with an increase won’t see that much of a benefit, because they are only being allowed to see an extra 3% gain in order to fund the protection. So they could pretty quickly reach the point where the extra funding is absorbed by higher referrals and placements, and they will then be in the same difficult position as everyone else.
There are two signs that DfE has acknowledged that needs are rising. Firstly, they are providing capital funding for the expansion of special schools and creation of new special free schools. Great – but the formula won’t provide sufficient revenue funding to actually fund these on an ongoing basis. Secondly, for 2018/19, LAs will still be allowed to ask mainstream schools and academies to give up some of their budget share/GAG funding by transferring grant from the Schools Block to the High Needs Block. This will not only require Schools Forum approval, but also agreement from a majority of local schools.
How likely is that to happen in an area where many schools are losing out from the NFF? DfE are considering placing a limit on these transfers in 2018/19, and from 2019/20 when it funds schools directly, the only way of increasing High Needs budgets will be for schools and academies to agree to hand over some cash under a pooling arrangement. Again, how likely is that?
Impact of the proposed High Needs NFF
The number one question is whether the funding will be sufficient to handle any increase in needs, to avoid the need to take money from mainstream schools. There are some obvious indications that it won’t be:
• The time lag on several elements of the formula, in particular for special school pupils and the children in bad health indicator (ten-year national census);
• The £4k not reflecting the £10k payments, plus the fact that DfE is allocating funding only for pupils on roll at the relevant census point, and not for empty places which may be occupied during the year that is being funded;
• Absence of an Early Years low attainment indicator – schools do a lot to get pupils to the required standard at KS2, particularly for speech and language delay, and this costs money;
• The high historic spend factor weighting is frozen for four years – yes it provides stability, but it allows less in the formulaic factors that are more responsive to needs, and if there is a funding floor that ensures no LA will lose funding, is this necessary?
• The high population factor weighting, which only represents low levels of need, not the incidence of complex needs
• Hospital Education funding frozen at historic spend when mental health needs are known to be rising and government has identified it as a priority.
It seems inevitable that many LAs will start to experience difficulty in balancing the books on High Needs. DfE is clear that strategic reviews of provision and services are needed, and we would agree with this – everyone needs to prove they are efficient and making the best of the money that is available. But once efficiencies have been achieved, the formula is unlikely to provide long term sustainability if needs go on rising. It is a fundamental issue of insufficient funding to meet needs, just as in the Schools NFF.
Do you have an SEN unit or resource base?
One aspect of the reforms is that the government intends to change the way in which schools with SEN units or resource bases are funded. Instead of receiving £10k per place plus top ups, pupils on roll in these bases will count in budget share calculations (they are currently deducted from census data). The place-led funding paid by LAs will therefore change to only £6k per place.
This involves an assumption that every school with such a base will receive £4k per pupil in its budget share. But this is not the case. The basic per pupil rate being proposed for primary schools is £2,712. The lump sum of £110k will only yield another £550 per pupil in a school with 200 pupils, and even less than that in a bigger school. If there is low deprivation, good KS2 results and no EAL or LAC, the total budget share per pupil might not add up to £4k. The school will then be subsidising the SEN base.
LAs are to be allowed to pay the full £10k for an empty place in an SEN base, which for some schools could create a perverse outcome: an empty place could be worth more than an occupied one.
High Needs in FE colleges and Post 16 providers
In 2017/18, the DfE’s budget for SEND support in FE colleges and other post 16 institutions (£125m) is being transferred to LAs’ High Needs Block allocations. This represents £6,000 per student with high needs, i.e. the extra support they need over and above the £4k in the national post 16 formula for every student. LAs already pay top ups to these providers to cover any costs above £10k per student.
The DfE’s document explaining this transfer admits that ‘any increases in 2016 to 2017 are being funded from the local authority DSG high needs block allocations’, so there is an immediate problem there. But it is about to get worse. While the LA commissions post 16 places for students with high needs, it will not have control over this aspect of its budget in future.
Each year the LA has to submit a place return to DfE to identify the number of places it needs for its pupils with high needs in academies and post 16 institutions. DfE will recover (recoup) the £6k support costs per place from the LA’s High Needs Block in order to pay it to these settings. Now recoupment will include FE funding.
If the LA wants to reduce the number of places in an FE College/post 16 provider, the institution has to agree the reduction. If agreement can’t be reached, DfE awards the number of places from the previous year’s census and removes £6k for each place from the LA’s High Needs Budget, including for places the LA doesn’t need.
This leaves insufficient money with the LA to buy the places at providers where the students actually want to go. Meanwhile the college or institution will receive more funding than it needs. So this will cause an additional pressure which will affect the amount of money available for pre-16 schools. It is a ridiculous situation when the purchaser of places is not in control of their own budget.
What does all this mean?
It seems likely that mainstream schools will feel the squeeze as LAs try to make ends meet; children with the highest needs will probably have to be prioritised, to avoid any legal challenges. Either LAs will ask schools to agree a transfer from the Schools Budget, or it will become much more difficult to get additional top up funding for high needs pupils.
Schools will probably be asked to provide robust evidence of how they are using their notional SEN funding – the amount within budget share that is deemed to be available for the first £10k of costs for children with SEND – before the LA will agree any further payments. Remember that the notional SEN budget is not additional funding, and currently the calculation varies in each LA.
In the Schools NFF, many schools will see an increase in their low prior attainment funding factor within budget share, because above average values are proposed. This in turn will create a higher notional SEN budget, because low prior attainment is one of the main factors that most LAs use to calculate it.
The implication of this is that LAs will probably expect schools to be more inclusive. Schools whose notional SEN budget increases will find it more difficult to argue that their funding does not cover the cost of SEND support if they have a relatively high number of pupils with high needs. The new funding arrangements could create further tensions between LAs and schools in arranging suitable provision for children with high needs, given that the high-stakes accountability system already provides a disincentive to be inclusive.
So, there is plenty to be concerned about here, and the overall picture means that some schools could suffer further pressures in addition to those caused by the Schools NFF decisions. If you share our concerns, please respond to the consultation at https://consult.education.gov.uk/funding-policy-unit/high-needs-funding-reform-2/. It needs a high volume of responses from schools to make the government listen.