Saturday, 13 November 2010

The rocky road to a National Funding Formula

Education Secretary Michael Gove is right to aim for a National Funding Formula, where schools are directly funded by Whitehall. When it is in operation it will bring greater clarity to school funding, remove unjustifiable anomalies and make it easier to ensure that specific funds like the Pupil Premium get directly to schools in a manner that is fair. But getting there will be a huge problem, and the obstacles en route could derail the policy. Gove will need to model the effects very carefully - and insist that his civil servants produce such models - to ensure that as some schools gain, other schools don't have their budgets cut.

In government, Labour took several steps towards a national formula. Local management of schools was extended so that schools now typically receive 87-90% of all funding (with the remainder for local authority services) delivered through a Dedicated Schools Grant (DSG). The only reason Tony Blair did not go further was because of opposition from both John Prescott and Gordon Brown to the loss of local authority responsibilities. However, while the DSG must go to schools, local authorities have the freedom, in agreement with local heads and governors through the Schools Forum, to impose their own formula on how it is distributed between local schools. In addition, schools have benefited from other funds outside the DSG including formula funding for revenue and capital, money to improve standards and money for specialist schools. The coalition said it plans to wrap these grants into the DSG to create a single revenue pot for schools. The assumption until today had been that this money would be distributed by the local authority according to its own formula. That will still apparently be the case in 2011-12.

And that's where the trouble could start.

The coalition will have at least two years of major funding upheaval at a time when budgets are likely to be almost frozen. In 2010-11, the misguided decision to scrap specialist school and other budgets will see these funds redistributed by local authorities on different formulae, while the first tranche of pupil premium funding will also start to filter through. If the coalition has any sense it will impose a rigid Minimum Funding Guarantee so that school receive at least an extra 1% extra per pupil (jncluding the pupil premium). Otherwise, the whole raft of changes will make Charles Clarke's troubles in 2003-4 seem like a picnic.

Moving to a National Formula a year later will require much greater skill. And while head teachers' leaders may welcome the principle of the NFF, their support will be sorely tested when schools that have done well out of the existing formula start to lose teachers. Put simply, if two similar schools are receiving funding that differs by as much as £1000 a pupil, then any equalisation will require one school to lose £500 for the other to gain £500 at a time of limited funding growth. The only way to make the change will be to freeze the better off school's budget while gradually increasing that of the less well off one. That is much harder in the current climate, as there is little spare money to achieve such growth or fund any damping measures. Changes will also be needed at sixth form level, as colleges get less per student than schools, and there can be no further reason for continuing this anomaly. And then, in inner city areas which currently receive far more for poorer pupils than the maximum pupil premium, will schools see their funding slashed to equalise funding, and how will that affect coalition claims of fairness?

Nevertheless, I'm all in favour of a National Funding Formula. Labour should have introduced one in government. But there will be a very rocky road getting there. And as Sir Humphrey has no doubt advised, it is a very brave minister indeed who tries to introduce one at a time of virtually no spending growth.

This posting also appears at Public Finance.


Tim said...

I don't see why a national funding formula is seen to be so important, particularly given the problems of developing one. And if one is introduced by a Government which has already shown a willingness to take money away from areas with high levels of needs, I can only see that it will relatively benefit the better off areas at the expense of the north.

School funding is not really determined by the LEA, but done in partnership with local schools through the schools forum. If greater transparency is the aim, it can be achieved by requiring schools and LEAs to publish per pupil funding statistics.

Why embark on a massively complex reform when it is entirely unclear what the real benefits will be - unless the intention is, as Conservative Home, implies, to pave the way for the introduction of vouchers?

Terry Connolly said...

Totally agree - Labour should have got there first. However, if Labour had tried there would have been a massive outcry.

Although Gove brave it will be a major step forward.

Anonymous said...

A few years ago I had an interesting doorstep discussion with a Tory voter in th town that elected the Leader of Derbyshire Councty Council. He wanted more of the funding for poor kids for his School. I told him that where I lived there was hardly a School with less than the national average % of pupils eligible for Free meals; if I was making the budget for Derbyshire I'd think a certain % the schools should cope with and I'd expect the County's formula to contain a threshold. He said that's what Derbyshire had and the the money all went "to the east of the county" (meaning the former coalfield).

Anonymous said...


In some places there's hardly a child with special needs that doesn't have a Statement written at huge expense, and scarce money from outside the formula goes to that child's school.

In other's the view is that the children and the budgets are both in the Schools and complicated Statements are for complicated stuff outside School.

I fear that they'll rationalise that by wrecking it.

Anonymous said...

Its rediculous that School sixth forms are better funded than Sixth Form Colleges or FE Colleges.

But that's a result of tow things
1) previous Tory nationalisations
2)dozy reactionaries who are so out of touch that they really seem to think that a majority of A levels are taken in School sixth forms.

Beware! Gove appears to be one of 2)

Anonymous said...

How many fully qualified accountants are there in the DfES and how many work in the School and LEA Funding Division?

Answer given by Charles Clarke to Tony Banks: 33 & 1

DfES Press releases slagging off Councils about managing money promptly stopped!

Nervous Civil Servants told Graham Lane (who wasn't the author of the question) that they did understand that they needed more accountants.

The notion that the Civil Service in general, and the Education deparment in particular, is better about money than County and Borough Councils would be funny if the consequesnces didn't threaten to be so serious.

Bob Deed said...

A national formula would be objective and transparent. More importantly it would also allow funding to follow the learner – “voucherisation” to facilitate greater choice and competition.

(Anonymous is right about the scandal of college under-funding. A national formula would get rid of this anomaly.)

In the Spring the Institute of Fiscal Studies published their Pupil Premium report. It showed the impact of a national formula. The figures in that report show how most secondary schools would lose. As with all reforms – the losers will shout louder than the winners.

Has Michael Gove got the political capital to see this through?

Anonymous said...

"Bob Deed said...
A national formula would be objective and transparent. More importantly it would also allow funding to follow the learner "

Those achivements are already in place and have been delivered by local formulae for several years.

Bob Deed said...

I hardly think the local arrangements are transparent. It is very hard to find information on how allocations are made even if some local authorities are more open than others.

Funding does not follow the learner when local councils restrict the expansion of successful schools.

Anyway, it looks like the government is doing a U-turn already on a national funding system.

Anonymous said...

Bob Deed said...
"when local councils restrict the expansion of successful schools."

Have you seen the figure for cuts to investment in Schoool builidngs?

Donlt live too close to a popular School. Someone will want to demolish your house to expand it,

Anonymous said...

Bob Deed said...
"when local councils restrict the expansion of successful schools."

Have you seen the figure for cuts to investment in Schoool builidngs?

Donlt live too close to a popular School. Someone will want to demolish your house to expand it,

Bob Deed said...

I think most people would rather live next to a popular school than a failing school.

I really think Anonymous should not worry about bulldozers.