Decentralizing and Centralizing: tensions between local autonomy and central government education policy initiatives in

1. Decentralizing and Centralizing: tensions between local autonomy and central government education policy initiatives in England 1988- 2005 Rosalind Levačić Institute of Education, University of London World Bank Conference on Education Finance and Decentralization Washington January 2005

2. Tensions between centralisation and decentralisation in education Movement for increased consumer choice: diversity and individualization. • To increase citizen satisfaction • To increase efficiency of education sector Government concern with raised educational standards: economic prosperity and social harmony. Education has changed over time from a local public good to a national public good. Consequently the long-standing model of local decision making to ensure efficiency in the allocation of a local public good and fiscal equalisation across jurisdictions to achieve equity has fallen out of favour.

3. Levels of decision making in the English school system • DfES - Department for Education and Skills Secretary of State for Education • LEAs - Local Education Authority (149) • Schools: • 18,000 primary schools • 3,600 secondary schools • 7.6 million students

4. England: since Education Reform Act of 1988 Market model (first phase) Conservative Gmt ERA: brought in a major decentralization of the management of resources to school level; formula funding of schools – demand led funding; greater parental choice But also a centralising strand: National curriculum and testing: to both raise standards and inform parental choice; 1992 Office for Standards in Education – national inspections

5. England: since Education Reform Act of 1988 ‘The third way’: New Labour 1997- 2005Central government decides how education is best produced and promotes specific practices. Backed by funding from central government. Growth in central government funding streams. Furtherdelegation of resource management responsibilities to schools: all resources including small capital works. Strengthened performance management. School diversity promoted as well as co-operation.

6. Dedicated Schools Budgets An earmarked grant for LEA’s education expenditure: announced for 2006-7 in December 2004 by Department for Education and Skills. Ends nearly 50 years of funding public schools through block grants to local authorities (school districts).

7. State welfare model: English school system before 1988 Education Reform Act • Dept for Education set general policy framework but did not intervene • Local Education Authorities (LEAs) ran schools (are now 149 were around 100) • LEA appointed headteacher and managed teaching force : could deploy a teacher to a school • LEA allocated pupils to schools on administrative criteria • LEAs managed resources centrally: a unitary form organisation • Schools had small budget (capitation) for books, materials • Light inspection, no performance targets • Schools had large degree of curricular freedom

8. England: assignment of powers between levels pre 1988

9. What did the reformers see as wrong with the English school system in the 1980s? Educational standards too low due to teacher control of the curriculum and lack of incentives to perform. Lack of parental choice of school: LEAs allocated pupils to school places. Inefficient labour and management practices in LEAs – no competition to supply school inputs.

10. Main elements of decentralization introduced by Education Reform Act 1988 Separation of purchaser and providerParents choose school (constrained choice) LEA purchases education from schools via formula funding Budgets for most resources delegated to schoolGoverning Body and head teacher determine how to spend delegated budgetSchools choose own staffing establishment and staff Governing Body appoints head teacher Central government: ensures information provided and schools & LEAs regulated

11. Centralizing measures introduced by ERA 1988 and later National Curriculum (from 1990) New key stage tests of English, maths and science at ages 7, 11, 14 Publication of school key stage and GCSE and GCE exam results at 16 Office for Standards in Education (OFSTED) inspections from 1993: inspects LEAs from 1998 School target setting for test and exam results (from 1998) LEA Education Development Plans (from 1999) Performance Management (2000): performance related pay for head teachers and teachers.

12. Further financial decentralization to schools: from 1999 Building and repairs maintenance: all Staff costs (cover, INSET) Advisory and inspection services Central support and ancillary services: payroll, financial, personnel, legal, governors’ support School library and museum services Devolved capital 2002 Post 16 student funding for schools taken from LEAs and given the Learning Skills Council: has own formula. Schools can switch it to younger pupils. School finances managed through bank accounts.

13. England: assignment of powers between levels post 1988: first phase

14. Funding formulae: each LEA has its own LEAs must allocate at least 75% of the Individual Schools Budget according to the number and ages of pupils. The rest may be delegated in relation to: a fixed amount regardless of size of school; ‘objective’ indicators of social and/or educational disadvantage; indicators which relate to the costs of operating the school building and grounds (size, condition, split-sites, special facilities, etc). Special schools & units may in addition be funded in relation to the number of places.

15. Central government education interventions Teacher training programmes and incentives School effectiveness and improvement grants Improved teaching: national literacy and numeracy strategies: KS3 strategy; 14-19 curriculum reform. Raising standards in disadvantaged areas: e.g. Excellence in Cities School diversity, co-operation, dissemination: specialist schools, academies (run by trusts) All funded via STANDARDS FUND General increase in funding for school education.

16. Sources: DfES Departmental Reports: Statistics for Education & Training

17. 2004 Spending Review for Education • Total spending on education in England will be £12 billion higher in 2007-08 than in 2004-05, an average growth rate of 4.4 per cent per year in real terms • Education spending will rise to 5.6 per cent of GDP by 2007-08 from 5.4 per cent in 2004-05 • Schools for the Future: capital investment in education will rise from £0.8 billion a year in 1997-98, £5 billion in 2004-05, to £7 billion a year in 2007-08 • Efficiency gains worth at least 2.5 per cent of the DfES 2004-05 baseline will be made each year over the Spending Review period, releasing additional resources for the front line.

18. Spending Review Targets 2000: examples Public service agreement targets: examples Increase proportion of 11 year olds who achieve level 4 or above in maths and English to 85% by 2004. By 2005 85% of 14 year olds achieve level 5 or above in English, maths and ICT and 80% in science. Increase percentage of 16 year olds achieving 5 or more A* to C GCSEs to 55% by 2004.

19. Increased central funding of schools 1984 Conservatives introduced Grants for Education Support and Training. Very small percentage of total school funding. 1998 became Standards Fund. Many streams: change annually. At first was bidding and a lot of earmarking. Now mainly distributed by formula and schools can use most of the grants flexibly. 2003/4 - 10% of school funding.

20. Standards Funds 2004/5 • Ethnic minority achievement grant; • Advanced Skills Teachers; Teachers threshold grant • Golden Hello Payments for teachers in shortage subjects • Targeted support for primary strategy and KS3 strategy • Leadership incentive grant • Targeted improvement grant • Leading edge programme • Specialist schools and Training schools • Extended schools and Federations • Summer schools for gifted and talented children • Excellence in Cities and Excellence Clusters • Targeted behaviour and improvement programmes • Aimhigher (yes it is one word!) • Fresh start and new partnerships

21. Grafting new onto the old The decentralized school funding system which developed after the 1988 ERA was grafted onto the existing local authority block grant allocation system. Introduced in 1958. Fiscal equalization formula introduced in 1960s. Modified in 1980s.

22. School Funding System in England 2002 -2005

23. System of financing schools 1988 - 2002/3 Two stages 1: from central government to LEAs: Revenue Support Grant (Office of Deputy Prime Minister) School Standards Fund (DfES) to LEAs and schools 2. from LEAs to schools (the Local Schools Budget) via a formula. A global budget for schools to determine how to spend.

24. Formula for distributing Revenue Support Grant to LEAs: Fiscal Equalisation Consists of two parts: 1. An assessment by central government of need to spend on each service by each LEA. This was called Standard Spending Assessment and now is (Education) Formula Funding Share 2. A deduction from this needs assessment of the amount of council tax the authority can levy on residential property from a notional standard rate. .

25. Complaints re post 1988 school funding system Adequacy - government pressure on LEAs to delegate more. Irrationality – school formulae not needs based; SSA calculation not needs based. Horizontal inequity – LEAs fund schools differently: a national funding formula? Uncertainty – schools can’t plan long term. Complexity and lack of transparency because of many funding streams. DfES: cannot ensure funding increases get to schools. Vertical inequity – not all LEAs fund sufficiently for disadvantage. Some LEAs did not ensure schools managed finance efficiently.

26. Main features of the ‘new’ system for 2003/4 Education Formula Spending Share divided into 2 blocks: amount LEA is assessed as needing to spend SCHOOLS BLOCK under 5s, primary, secondary, high cost pupils LEA BLOCK LEA central functions Youth and community

27. Sub-block formulae for EFSS For under 5s, primary & secondary Basic entitlement: split into minimum entitlement + basic allowance for Additional Educational Needs Top- ups for: Additional educational needs: based on evidence on costs Area costs Sparsity (primary only) High cost pupils sub-block HCP = (0.01 + 0.07*income support + 0.21*low birth weight)* no. pupils 3-15

28. Other elements of the ‘new’ system Shifted some Standards Funds into EFSS DfES obtained powers to force a LEA to increase its Schools Budget Strategic budget management: if LEA set 3 year school budgets could claw back schools’ excess balances

29. Minister: virtues of the new system I believe the new system is a substantial step forward from the old: it is evidence based, not backward looking; it reflects LEAs’ and schools’ separate responsibilities; it uses up-to-date data, that are relevant to the current needs of children; and it is simpler than the old system. We promised a fairer, simpler system, with rising budgets across the country, and I believe this has been delivered. December 2002

30. School budget fiasco: 2003 In 2003/04 schools promised a 5% per pupil real increase in funding. But when budgets announced many schools complained of cuts. Possible reasons Some Standards Funds put into block grant Not allowing sufficiently for increased pensions contributions Redistribution of block grant between LEAs LEAs not passing on all of increase to schools Schools having too high expectations Schools’ poor financial management

31. Minimum guarantee to schools budgets Schools guaranteed a minimum x% increase on previous year’s baseline budget: (a) per pupil for variable costs (b) on fixed cost part of budget. Schools with falling rolls get more than x% and schools with rising rolls less than x% of last year’s baseline budget. For 2005/ 6 Primary & nursery schools: x = 5% (minimum = 4.9%) Secondary schools: x = 4% (minimum = 3.9%)

32. Other DfES measures Guaranteed floor increase in Schools Formula Spending Share - 5.5% in 2005/6. Central expenditure limits: LEAs cannot increase central spending by more than they increase Individual Schools Budgets. Transitional grant (2004/5 and 2005/6) which LEAs applied for to help schools in financial difficulties. (51 LEAs) DfES continued to fund teachers’ threshold pay

33. Dedicated schools budgets for 2006/7 A hypothecated grant to each LEA for all its expenditure on school education. Every school gets a guaranteed per pupil increase over three years. Funding channelled through LEAs which use a formula to determine its distribution. Not a national formula. LEA grants calculated using same EFSS as currently.Schools in LEAs which spend more than EFFS will be protected from central grants – for how long not clear. LEAs still responsible for capital planning, SEN, school places and transport plus school improvement.

34. DfES rationale Financial stability – schools can plan strategically. Guaranteed increases in per pupil spending. Gives schools greater control. Enables further moves to streamline funding streams. Ends annual wrangling between central and local government on funding.

35. Reflections on 17 years of decentralised and re-centralised school funding Can local authority discretion in funding co-exist with central government attaching great importance to education policy? Some retrograde features of policy making on the hoof: school budget relativities are now historically determined. LEAs unlikely to change formula to redistribute funds because must meet guarantee of annual increased per pupil funding for every school. Blunting of financial discipline: schools with deficits received help.Budget stability: better financial planning should be possible. (For how long?)