The National Funding Formula – Assessing the Impact of Proposals

18 Apr

I        Introduction

School governors across the country have informed the National Governors’ Association (NGA) in no uncertain terms that funding is the biggest issue they are currently facing and the biggest issue they are likely to face in the near future.   It is true that there will be over 10,000 winners (54%) among schools, in terms of increased funding balanced off by 9,000+ (46%) losers.  However, by 2020, all schools (‘academies’ is used interchangeably for “schools” in the rest of this article) will find they are facing funding reductions by 2020.   The Education Policy Institute (EPI) – a think tank – said in one of its recent reports – The Implications of the National Funding Formula for Schools – that any cash increases awarded to schools via the National Funding Formula (NFF) will be cancelled by cost pressures.

According to the EPI, the redistribution of the basic per pupil sums, the use of wider area-based measures of deprivation and the increased amounts of funding for pupils with low prior attainment will mean that money will move from schools with the most disadvantaged pupils to those with pupils who come from “just about managing” (JAM) families.

Drilling down, the EPI made the following discoveries – based on the proposed NFF.

(1)        Primary schools with fewer than 30% of pupils on free school meals (FSM) are expected to gain around 1% and secondaries 0.9% on average.  The total sum will be £275 million.

(2)        Disadvantaged primary schools (i.e. those with over 30% of FSM pupils) are expected to gain around 0.4% while disadvantaged secondary schools set to lose around 0.3%.  This will amount to a net increase of around £5.6 million for the most disadvantaged primary and secondary schools.  The reality is that many will see reductions to their budgets.

(3)        The most disadvantaged primary and secondary schools in London are expected to lose around £16.1 million by 2019/20.

(4)        Funding distribution based on area deprivation – commonly known as Income Deprivation Affecting Children Index (IDACI) – means that pupils living in the least deprived areas will experience the highest relative gains.

(5)        The additional funding for low prior attainment will mean that the lowest-performing schools in the country are set to gain £78.5 million more than the top-performing schools.  This will have a painful effect especially in London, where the net loss to the highest performing primary schools will be around £16.6 million.

(6)        Small primary schools are due to experience an average increase of 3.5% – i.e. £22.7 million overall.  Small secondary schools, on the other hand, are unlikely to see any changes in their budgets.

Justine Greening, the Education Secretary, launched the long-delayed second consultation on the NFF on 14 December 2016, trumpeting that the new formula would rid the country of the postcode lottery where children with the same needs attract varying levels of funding dependent on where they lived.

The F40 group of local authorities had been canvassing long and hard for many years to secure a fairer redistribution of educational finance.  Most of them will see their efforts rewarded – certainly in the short term.  However, some, like Cheshire, Oxfordshire and West Sussex, will, in fact, be worse off. For them, if nothing changes, their campaign would have been still-born.

The changes will be phased in.

(1)        In 2018/19, the National Funding Formula will be devised by the government and distributed to local authorities, each local authority receiving its overall funding for schools.   It will be up-to a local authority to distribute the money to its schools in accordance with its local formula (which, of course, will be circumscribed by legislation).   Academies will receive their budgets directly from the Education Funding Agency (EFA) – an arm of the Department for Education (DfE) – in accordance with the NFF.

(2)        In 2019/20, schools will receive their budgets directly from the EFA the sums being in accordance with the NFF.

II       Elements in the NFF

So, how will the country’s educational cake be cut and what will be the elements which will determine the distribution? The two overarching areas driving the distribution of the funding will be the pupils and the property/real estate.

(a)        Pupils

(i)         There will be a basic per-pupil amount – a set sum for each pupil.  Secondary pupils will get more than primary ones – presumably not only because of the specialist teaching and the option choices in the latter, but also because this is historical.

(ii)        Differentiated funding will be determined by those pupils entitled to free school meals (FSMs) – both, current and others who have been eligible at some point over the last six years.  In addition, there will be six bands in the IDACI.

(iii)       Schools will receive additional sums to educate those pupils with lower prior attainment – in the foundation stage for primary pupils, and Key Stage 2 for secondary ones.

(iv)       Pupils who have English as an additional language (EAL) will also attract extra funding.

(v)        Schools will receive extra for educating pupils who join part-way through the academic year, in particular, those schools that have at least 10% in the total cohort who are mobile.

(vi)       Small schools – especially those in the countryside – will be compensated.  Two criteria must be met, i.e. the distance travelled – at least two miles at primary and three at secondary and the year group threshold.

(b)        School-led factors

Schools incur expenditure whatever the characteristics of pupils they attract.   These school-led factors are to be recognised in the funding that the government will distribute to them.

(i)         The first is rates – which will be no different to what it is now.

(ii)        Split-site schools will receive more than those on single sites.

(iii)       Schools which have exceptional premises – like those housed in farms – will receive additional funding.

(iv)       Schools that were rebuilt or refurbished under the Private Finance Initiative (PFI) scheme are now lumbered with having to pay off annually their mortgages/debts on the substantial sums borrowed. The government is to acknowledge this in the NFF.

Finally, over the next few years, losers will receive some protection in the funding loss – making winners that much less triumphant in how much they win.  For the winners, the gains will be no more than 3% in 2018/19 and 2.5% in 2019/20.

Schools that are set to lose will be protected from going “below the floor”. They will go no lower than 3% of their current budgets with a maximum capped at 1.5% annually.

III     Impact

The only “good time” to introduce a National Funding Formula is when the country is flush with riches – a time when the government can increase the size of the educational cake – so that those that gain do not do so at the expense of the rest.   At a time when we have a national debt of £1.65 trillion and rising, an NFF will, inevitably result in much weeping and gnashing of teeth.

Chancellor Phil Hammond has been unequivocal that over the coming years educational spending will not increase albeit, it will not lose in cash terms. However, education is set to lose because of inflation, increases in staff salaries and rises in on-costs (i.e. National Insurance contribution and pension costs).  The National Audit Office (NAO) has warned that schools will lose 8% funding per pupil by 2019/20 as a result of cuts of £3 billion.   If one factors in the expenses schools will incur for the Apprentices “tax”, the loss will be greater.

Altogether, over 100 local authorities will gain funding under the NFF (the lowest will have their funding increased by 3.6% on average), while nearly 50 will see cuts.  The top five losers will be London boroughs.  The average loss for the Inner London boroughs will be 2.4% and for the Outer London ones, 1.0%.

A DfE document stated that the greatest increases in funding will be for schools in the East Midlands (by 2.5%) and the South-East (by 2.3%).   Schools in Barnsley and Knowsley are also expected to gain while those in Manchester and Liverpool will lose by 2.2% on average.

IV     Reflections

It is not a good time to make changes to the current method of financing schools when going through a period of national austerity.  However, while the government is damned if it does (as it is being), it is also damned if it doesn’t.   Just ask the F40 group of local authorities who have been banging their discontented drum.   Previous Education Secretaries had the opportunity of introducing the NFF when there was plenty, but avoided doing so knowing that this would not be an election winner.  Michael Gove, the last Education Secretary but one, could have done something, but steered clear of this minefield.  It has now fallen to Justine Greening to act.

The government had hoped that Brexit would absorb the nation’s attention, but there is an increasing cacophony of protests coming from all parts of the country.  You only have had to turned on your television sets to have seen the anger of the teacher unions.  So, what can the government do?

Charlotte Santry, a Times Educational Supplement (TES) journalist has suggested five possible courses of action, outside the present one of introducing the formula.

(1)        First, the government could confine its NFF plans to the dustbin of history.   However, Pandora’s Box has been opened and it is now impossible to get the stinging insects back into it.   Per pupil, Tower Hamlet receives £6,906 annually while a child in Woking or Berkshire attracts only £3,991.  How can this be just and fair?

(2)        The second option would be to put off the evil day and postpone implementation. While it would give the government more time to reflect on a better carve-up with the possibility of persuading Chancellor Hammond to rub his financial lamp and conjure up a genie who can give schools more, it will stir further resentment from the F40 local authorities.

(3)        Third, Justine Greening could placate the shire counties.   She is suffering a backlash from Conservative backbenches who thought that an NFF would mean more funding for their schools but are now discovering that the changes will still result in cuts.  The DfE could reduce the funding allocated to deprived pupils through the dual mechanism of the IDACI and the Pupil Premium Grant (PPG). This would appeal to grammar schools.   However, the government would end up with egg on its face as it has trumpeted that it is keen to promote social mobility and has presented, as evidence, its plans to increase the number of grammar school places – especially for those at or below the poverty line.

(4)        Inner cities areas are standing to lose substantially.  The government could, therefore, give schools located in them more.  However, this would infuriate many Conservative MPs. In any case, softening the blow to London schools can only come if the government finds more money.

(5)        Finally, the education’s financial pot could be increased.  But this would be impossible now when the nation is threatened with a £50 billion bill from the European Union as part of its Brexit, divorce settlement.    Besides, it would add to the national debt – a detrimental legacy for our children, children’s children and generations after – for which we have to hang our heads in shame.    We certainly don’t want to add to that.

Those schools that have been frugal in the past have been severely chided by their local authorities for “hoarding” money.  In fact, they were faced with a dilemma of spending on their present pupils or saving for that rainy day.  Many decided on the latter.  The rainy day has arrived and these schools will have time to drawn breath when planning their financial futures.  For those who have been less prudent or not had the scope to save because they were poorly funded in the first place, the future is grim.  At any rate, all schools will need to plan carefully in two ways.

(a)        The first will be to reduce spending. Those in the front line of education – the teachers and teaching assistants directly responsible for classes – will need – like the Pharaohs of old – to be preserved.   Surplus teachers (not directly responsible for classes), support staff and the luxuries will become casualties.   If it comes to reducing staff it does not have to be through compulsory redundancies.  With careful planning, this could come through natural wastage.

Schools leaders – in particular, the Executive Headteachers of Multi-Academy Trusts – can consider taking cuts in their salaries, some of whom are “very well fed and watered” by their Trust Boards.

(b)        Second, schools will need to think of myriad ways of generating funds – through the parents, letting of their premises and, of course, applying for grants and sponsorships.  Some schools already have dedicated staff members who, among other aspects of their job descriptions, fundraise.  They can scour the country to find organisations, big and small, like the Daiwa Anglo-Japanese Foundation, to augment their income.   When I suggested to one governing body that they will need to knock on doors, the response I had from one governor was that he would be quite prepared to “kick doors down” to get at the golden fleece.

(c)        Finally, parents at voluntary aided schools – especially the Jewish ones – have been digging into their pockets to supplement their schools’ budgets for some considerable time.  Jewish schools particularly have asked for these voluntary contributions to make ends meet when promoting the religious curriculum.   This will now increasingly become the norm.

Writing in The Times, Toby Young, the Free Schools champion, is appalled that members of the public are appalled with schools that ask parents to cough up to enable them to make ends meet.  For instance, Sir John’s Primary School in Crowborough, East Sussex, asked parents to donate toilet rolls.  (This chimes well the comment of Blair’s former spokesman, Alaistair Campbell, when he described so many state schools as being “bog standard”.)  Caversham Primary School in Berkshire has requested parents to contribute £1 a day or £35 a month.  Fortismere School in Muswell Hill, North London, has asked parents to donate £25 a term.

Young has asked for “a bit of perspective” on the real-terms reduction in school spending.   The Institute of Fiscal Studies worked out that state spending on schools grew by 5.1% in real terms from the year 2000 to 2010 and 3% every year from 2010 to 2015.  The “looming” cuts will take us back to the real spending six or seven years ago.

Half-a-loaf may be, after all, better than no bread.  But, in the state schools’ setting case, wouldn’t ninth-tenths of a loaf be even better?

V       Tailpiece

A survey carried out by solicitors Browne Jacob and the Association of School and College Leaders in 2016 revealed that 94% of school leaders are dissatisfied with the government’s funding of schools and of those, 74% are very dissatisfied. This is a 33% increase on the previous year’s survey findings.  More school leaders – i.e. 95% – than ever have either reduced the spending or maintained them at previous levels.

Leaders’ views on funding mirror their reaction to the government education policies generally.   Three-quarters felt negative when asked about the impact the government’s education policies were having compared to 12 months previously and a mere 9% were positive.

There is no sign that the government will take any notice of this survey. Why should they, after all, given their preoccupation with other national matters and the impotent opposition they have in parliament?

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