School funding

Under the national funding formula, schools that are more deprived have fared worse than those that are less deprived. In 2018–19, the Department introduced a national funding formula with the aim of allocating school funding more transparently, consistently and fairly across the country. The new formula has made allocations more transparent and consistent, but it has also led to a re-balancing of funding away from more deprived schools towards less deprived schools. Between 2017–18 and 2020–21, average per-pupil funding fell in real terms by 1.2% for the most deprived fifth of schools, but increased by 2.9% for the least deprived fifth. The Department highlights that funding allocations have been catching up with changes in patterns of deprivation across the country since the early 2000s. However, the relative re-distribution of funding is also the result of the Department introducing minimum per-pupil funding levels, which have benefited the least deprived schools. In July 2021, the Department began a consultation on moving to a ‘hard’ national funding formula under which it would set schools’ budgets directly. Recommendation: Before moving towards a hard national funding formula, the Department should publish an assessment of the likely impact of the proposed changes on individual schools and different types of schools.

It is not possible to tell whether individual academy schools are receiving the government’s guaranteed minimum per-pupil funding levels. In 2018–19, the Department introduced minimum levels of schools block per-pupil funding for all schools in England. In January 2020, the Prime Minister guaranteed that every school would receive minimum funding of £3,750 per primary pupil and £5,000 per secondary pupil in 2020–21. Local authorities are legally required to ensure that their maintained schools receive the minimum per-pupil funding levels. By contrast, multi-academy trusts are allowed to pool funding centrally, and do not have to provide each of their individual academy schools with the minimum per-pupil funding. We asked how parents would know whether their child’s academy school 6 School Funding has received the minimum funding levels. The Department says that the schools financial benchmarking website provides a range of data on income and spending for individual academy schools. However, we note that the website combines funding from a range of sources, and does not show specifically the schools block per-pupil funding that each academy receives. Recommendation: The Department should publish each year, starting with the year ending 31 August 2021, details of the schools block per-pupil funding that each academy school has received.

Schools are having to cross-subsidise their sixth forms with funding intended to support younger pupils. Between 2014–15 and 2020–21, the balance of funding shifted from secondary schools to primary schools. Secondary school funding per pupil dropped by 3.9% in real terms, while primary school funding increased by 4.2%. Part of the reason for this was that the Department reduced funding per sixth-form student, which fell by 11.4% in real terms. The Department concedes that it chose to prioritise funding for children aged 5 to 16. Local authorities have also protected funding for primary schools. The Department accepts that 16-to-19 education is facing challenges, and that some schools cross-subsidise in order to keep their sixth forms going. It has increased funding for students aged 16 to 19 in the past two years, in order to start redressing the balance. Recommendation: In making and communicating decisions about school funding, the Department should explicitly consider how different funding streams interact so that schools do not have to cross-subsidise, for example, in order to support sixth-form provision.

The Department does not seem to have a grip on the impact of falling rolls on schools. Most school funding follows the pupils—under the national funding formula, the Department allocates nearly three-quarters of schools block funding on the basis of pupil numbers. We know of schools whose rolls are falling due to changes in their local populations. These schools still have to cover their fixed costs, but are seeing their funding fall significantly. The Department highlights that there is a ‘falling rolls fund’ that local authorities can use to help schools in this position, and that the national funding formula provides a lump sum for each school regardless of size. However, the Department does not appear to have a strong understanding of the practical financial impact of falling rolls on individual schools. Recommendation: The Department should carry out an evidence-based assessment of whether there is enough support for schools whose rolls are falling, and write to us by the end of March 2022 with an update on the results of its assessment and what it is doing to address any concerns.

The Department cannot say when it will implement its commitment to a starting salary of £30,000 for new teachers. In September 2019, the Government set out its intention that salaries for new teachers would rise to £30,000 by September 2022, in order to improve the competitiveness of teacher pay. In February 2021, it told the School Teachers’ Review Body that it had paused planned pay rises for teachers in 2021/22, and that starting salaries would not reach £30,000 by September 2022. The Department says that it will not be able to confirm until after the next Spending School Funding 7 Review when its commitment to a starting salary of £30,000 will be implemented. For several years, the Department provided separate grants to help schools cover increases in teachers’ pay costs and higher pension and national insurance costs. However, from 2021–22, it is incorporating most of this funding within the dedicated schools grant, making the funding less transparent. Recommendation: The Department should set out a timetable for meeting its commitment to a £30,000 starting salary for teachers, along with details of how this will be funded. 8 School Funding 1 The school funding system

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Education (the Department) and the Education and Skills Funding Agency (the ESFA) on school funding in England.1

There has also been a relative re-distribution of funding from more deprived schools (those with a higher proportion of pupils eligible for free school meals) to less deprived schools. Between 2017–18 and 2020–21, average per-pupil funding for the most deprived fifth of schools fell in real terms by 1.2% to £5,177, while funding for the least deprived fifth of schools increased by 2.9% to £4,471.7

The written evidence that we received raised concerns about the impact of the national funding formula. Professor Tanya Ovenden-Hope said that the formula had not delivered the expected significant increases in funding for small schools, including rural schools which have traditionally struggled to remain sustainable.8 The NASUWT (The Teachers’ Union) described the formula as “regressive”, and said that it was vital that the 17.9% of schools block funding which was allocated on the basis of pupil need did not reduce over time.9

The Department said that the national funding formula had fixed a system that had become broken. It explained that, between 2005 and 2017–18, school funding had not been adjusted to reflect changes in pattens of need across the country. For example, while the proportion of pupils eligible for free school meals nationally went up from 16% to 17% between 2005 and 2020, in Inner London, the proportion dropped from 38% to 25%.10

The Department told us that funding allocations were now catching up with changing levels of deprivation—some areas remained very deprived but were not as deprived as they had been in the early 2000s, while other areas remained less deprived but were significantly more deprived than they had been. This situation had created what on the face of it looked like a slightly peculiar pattern of some areas that were less deprived having larger funding uplifts than other areas that were more deprived.11

The Department also highlighted the impact of the new minimum per-pupil funding levels on the distribution of funding. The effect of these had been to shift funding in the direction of schools that had very low levels of deprivation.12 The Department told us that it had always known that the minimum funding levels were likely to benefit the least deprived schools. This was because the national funding formula was weighted towards disadvantage, so the schools with the lowest per-pupil funding were highly likely to the least deprived schools. It noted that only a small proportion of funding (less than 2% of total schools block funding) was distributed via the minimum funding mechanism.13

The Department provides pupil premium funding (£2.2 billion in 2020–21) to help schools improve the attainment of disadvantaged pupils.14 From April 2021, the Department has calculated pupil premium allocations based on the number of eligible pupils recorded by schools in the school census in the preceding October, rather than the more recent January census as was previously the case. As a result, schools received £90 million less in pupil premium funding.15 We asked the Department why it made this change. The Department said that there were two reasons: firstly, to bring pupil premium 7 C&AG’s Report, paras 2.31, 2.33 8 SCF0001 Professor Tanya Ovenden-Hope, Plymouth Marjon University submission, pages 1–2 9 SCF0002 NASUWT submission, page 2 10 Qq 59–61 11 Qq 59–60 12 Q 59 13 Qq 75, 78 14 C&AG’s Report, Figure 2 15 C&AG’s Report, paras 1.34, 1.37 10 School Funding into line with most other aspects of school funding which were based on the October census; and secondly, because the COVID-19 pandemic had meant there were high levels of uncertainty around the January 2021 census.16 Transparency over funding levels

In 2018–19, as part of the national funding formula, the Department introduced minimum per-pupil funding levels for all schools in England in support of the government’s aim of ‘levelling up education funding’.17 In January 2020, the Prime Minister guaranteed that every school would receive minimum funding of £3,750 per primary pupil and £5,000 per secondary pupil in 2020–21.18

Local authorities can apply local funding formulae in deciding funding for maintained schools and academy trusts. However, the Department limited the extent of local authorities’ discretion from 2020–21 by requiring them to include the minimum per- pupil funding levels in their local formulae.19 By contrast, academy trusts are not required to provide their schools with the minimum per-pupil funding levels. The Department allows multi-academy trusts to pool funding centrally, and they can also re-distribute funding between their schools based on their own assessment of need.20

We asked why multi-academy trusts had more freedom in how they distributed funding. The Department replied that academy trusts and local authorities had different roles: local authorities were responsible for distributing funding between schools, whereas academy trusts had direct responsibility for the provision of education in the schools that they ran. The Department explained that there were some circumstances, particularly where an academy trust had taken on a challenging school, where the trust might pool funding in order to do things across the academy chain that had benefits for all the schools but might, for a period, help one school more than another.21

We asked how the parent of a child in an academy school could establish whether the school was receiving the minimum per-pupil funding levels that they were promised. The ESFA said that the most accessible source of information was the schools financial benchmarking website, which contains income and expenditure information on every school in the country, along with additional detail on academy accounts.22 We understand, however, that this website combines income figures from a number of different funding streams, and that it is not possible to see whether a school is receiving the minimum per- pupil schools block funding specifically.23 The Department said that it strongly supported transparency and that it was happy to look at whether there were improvements it could make to the financial benchmarking website to make it more helpful.24 16 Qq 70–73 17 C&AG’s Report, para 13 18 Government press release, PM guarantees minimum funding levels for all schools, 30 January 2020 19 C&AG’s Report, para 2.26 20 C&AG’s Report, para 2.29 21 Qq 81–82 22 Q 79 23 Qq 92–93 24 Q 94 School Funding 11 Funding for sixth forms

Overall, between 2014–15 and 2020–21, the balance of funding shifted from secondary schools to primary schools. Secondary school funding per pupil fell by 3.9% in real terms, while primary school funding increased by 4.2%. The main cause of this shift was local authorities protecting funding for primary schools in their local funding formulae. In addition, the Department reduced funding per sixth-form student, which fell by 11.4% in real terms.25

The Department said that it had looked carefully at the balance between funding for primary and secondary schools when it had designed the national funding formula.26 We asked whether school sixth forms were losing out in an attempt to prop up the rest of the system. The Department disagreed with this suggestion, saying that government had needed to make some hard fiscal choices, and had chosen to prioritise and protect core funding for pupils aged 5 to 16. It also emphasised that funding for 16-to-19 education was now rising—the 2019 Spending Review had provided an extra £400 million (the biggest single year increase in post-16 funding since 2010), while the 2020 Spending Review had provided an extra £291 million.27

The Department told us that it was mindful of the challenges facing 16-to-19 education, including significant demographic pressures.28 It recognised that some schools with sixth forms were cross-subsidising their post-16 provision from the rest of their budgets, and said that this was one of the reasons why it had increased funding for 16- to 19-year-olds in the past two years.29 Impact of falling school rolls

The funding that schools receive is largely determined by how many pupils they have. Under the national funding formula, the Department allocates 73.5% of schools block funding based on pupil numbers. A further 17.9% of funding relates to the number of pupils with characteristics that indicate additional need, including deprivation and low prior attainment. The remaining 8.6% of funding is linked to school characteristics, and is intended to help cover costs that do not necessarily vary with pupil numbers.30

We have heard concerns about the funding of schools, across London and elsewhere, whose rolls are falling. Small schools, such as those with a single-form entry, may face a disproportionate financial impact if their pupil numbers fall. The Department recognised the themes we described including the impact in London, with changes in patterns of living and people moving out of the capital in some circumstances.31

The Department emphasised that all schools receive a single lump sum regardless of size to cover some of the fixed costs that do not vary with pupil numbers. In addition, 25 C&AG’s report, para 1.12 26 Q 32 27 Q 33 28 Q 39 29 Q 40 30 C&AG’s Report, para 2.7 31 Q 65 12 School Funding the funding system includes a mechanism called the falling rolls fund, which allows local authorities to support schools where declining pupil numbers are affecting their financial sustainability, but whose provision will still be needed in the longer term.32

We asked whether the Department was confident that the falling rolls fund had sufficient resources to help all the schools that might need support. The Department replied that there were mechanisms for the funding to vary according to local need and the context in a particular area.33 It also highlighted that it collected data every year from local authorities, at local planning area level across the country and forecasting years into the future, for the basic need and capital funding systems. It had a regular dialogue with the local authorities that were experiencing the biggest demographic changes and funding pressures.34 32 Q 62 33 Q 63 34 Qq 64–66 School Funding 13 2 Progress on departmental initiatives Review of support for children with special educational needs and disabilities

In September 2019, the Department announced a review of the support system for children with special educational needs and disabilities (SEND). The review aimed to improve services for families who needed support, equip staff to respond effectively to children’s additional needs, and end the ‘postcode lottery’ that families often faced. In May 2020, we concluded that many children with SEND were being failed by the support system, and recommended that the Department should, as a matter of urgency, complete and publish its SEND review.35

In March 2021, the Department told us that it planned to publish a Green Paper towards the end of June 2021 with its proposals for improving SEND support.36 Consulting on proposals for change will be only the first step towards providing children and families with better services. Supporting the growing proportion of pupils with education, health and care plans is a significant cost pressure on mainstream schools.37 In its written evidence, the National Association of Head Teachers emphasised that the factors underpinning the growing demand on SEND funding, including a shortfall in funding of the health and social care sectors, were likely to continue for the foreseeable future, and that this situation required more than a review of how existing funding is distributed.38

In July 2021, the Department wrote to tell us that it had decided it should take more time to ensure its reform plans could deliver the systemic change needed, noting that the COVID-19 pandemic had materially altered the context for reform. It said that it would use the additional time to make certain its plans complemented the wider work being done on recovery and school reform, and that they had the longevity needed to offer stability to the sector.39

The Department recognised that the review process was taking much longer than it had wanted, but explained that, as it had started to test its emerging proposals, the risk had become clear that the review would not be as effective as intended, because the early stages of the work had taken place before the impacts of the pandemic were clear. The Department had therefore decided that it would be appropriate to spend longer on the work to make sure that its conclusions and proposals were robust.40

The Department highlighted three key things that it was doing while it worked on the SEND review. First, it had increased high-needs funding by about £1.5 billion in two years and made available £300 million of capital funding in 2021 for school places for children with SEND. Second, it was offering targeted intervention for the local authorities that had the most challenging situations. And third, it was focusing on children with SEND in its thinking about catch-up learning and recovery.41 35 HC Committee of Public Accounts, Support for children with special educational needs and disabilities, First Report of Session 2019–21, HC 85, May 2020 36 HC Committee of Public Accounts, Oral evidence: COVID-19: Education, HC 944, 25 March 2021, Q 80 37 C&AG’s Report, para 9 38 SCF0005 National Association of Head Teachers submission, page 3 39 Letter from Department for Education, 6 July 2021 40 Qq 4, 6–8 41 Qq 4–5 14 School Funding

We pressed the Department on the projected timeframe for the review to be completed, asking if it might be autumn 2021, the end of the calendar year, or the end of the 2021–22 financial year. The Department would not commit to a date, saying only that it would finalise the review as soon as it could.42 Changes to the national funding formula

The school funding system currently involves local discretion in that local authorities and academy trusts are free to vary the allocations that the Department calculates using the national funding formula. The government has said that it intends to move to a ‘hard’ national funding formula, where the Department would set schools’ budgets directly.43

The Department explained that it had begun a consultation process about moving to a hard funding formula on 8 July 2021. Ultimately, its goal was to allocate funding consistently across the system as whole, so that schools with the same characteristics and pupil needs would be funded at the same level wherever in the country they were located.44 The Department said that it had not committed to a specific timetable for implementing the hard formula, because this was a complex reform that would take time to get right. The consultation proposed progressively bringing local authorities closer towards the national funding formula and evaluating the impact at each step. The Department told us that 73 local authorities were already mirroring the national funding formula almost exactly.45 Teachers’ starting salaries

In September 2019, the Government set out its intention that salaries for new teachers would rise to £30,000 nationally by September 2022. It stated that this increase would make teacher pay among the most competitive in the graduate labour market.46 However, at the 2020 Spending Review, the Government announced that pay rises in the public sector would be restrained and targeted in 2021–22. The Department said, in evidence to the School Teachers’ Review Body, that it had paused planned pay rises for teachers in 2021/22, and that the move to increase teachers’ starting salaries to £30,000 would no longer be achieved by 2022/23.47

In its written evidence, the National Association of Head Teachers emphasised the need to improve salaries for teachers and school leaders as a critical element of any strategy to resolve the “longstanding recruitment and retention crisis”. It said that schools did not have the fiscal headroom to reverse the real-terms decline in the salaries of teachers and leaders, and that all future employer costs, including salary, National Insurance and pension contributions, should be fully funded by government.48

In the three years from 2018–19, the Department gave grants towards teacher pay increases, and to meet the full cost of increased pension contributions. From 2021–22, the Department will incorporate most of this additional funding within the dedicated schools grant instead of giving it as separate grants, which will make the funding less 42 Qq 9–10 43 C&AG’s Report, paras 2.24–2.25 44 Q 18 45 Qq 18–20, 88 46 Letter from the Secretary of State for Education to the School Teachers’ Review Body, 18 September 2019 47 C&AG’s Report, para 1.18 48 SCF0005 National Association of Head Teachers submission, page 4 School Funding 15 transparent.49 The Department told us that the extra money for pay and pensions would be maintained in the short term, but could not give this assurance for future spending review periods.50

The Department said that it remained committed to the £30,000 starting salary for teachers. It explained that it had had to adjust the rate of progress towards this based on conversations with HM Treasury and on the wider context. It stated that pay increases in September would represent an average rise of 3.1%, but this would be significantly weighted towards starting salaries, with 5.5% going on salaries for new teachers.51 The Department said that the question of when it might implement its commitment on starting salaries could only be answered after the next Spending Review.52 Education recovery and catch-up learning

The Department plans to provide funding of £3.1 billion between 2020–21 and 2024–25 to help children and young people catch up on learning lost during the period of disrupted schooling caused by the COVID-19 pandemic.53 Most of the money is expected to be spent by the end of 2022–23, and funding is projected to fall significantly after that.54 In addition, the funding that the Government has committed falls well short of the proposals totalling around £15 billion that were recommended by its Education Recovery Commissioner, Sir Kevan Collins.55

Sir Kevan resigned as the Education Recovery Commissioner in June 2021. In his resignation letter, he said that he did “not believe it is credible that a successful recovery can be achieved with a programme of support this size”.56 The Department said that it was very grateful to Sir Kevan, who had made a number of propositions across a wide range of areas. Collectively with HM Treasury and Number 10, it was taking forward much of what Sir Kevan had recommended around investment in tutoring and teaching quality. The Department said that there was a strong evidence base around both of these areas and, in response to feedback from the sector, it was introducing a new programme that would allow schools themselves to train tutors.57

The Department noted that a large part of the additional funding that Sir Kevan had recommended had related to suggested changes to the timing of the school day, which had met with a mixed reception among schools and teachers. It had therefore decided to take more time, ahead of the Spending Review, to consider the evidence base for such a large investment. It was looking at exactly how extra time in school might be spent and what happened already within the sector.58 49 C&AG’s Report, para 1.17 50 Q 47 51 Qq 23–24 52 Qq 25, 29 53 C&AG’s Report, para 10 54 C&AG’s Report, Figure 5 55 HC Education Committee, Oral evidence: Education Recovery, HC 452, 29 June 2021, Q 10 56 Letter from Sir Kevan Collins to the Prime Minister, 2 June 2021 57 Qq 103–104 58 Qq 103–104 16 School Funding