School Funding Reform

1. School Funding Reform Susan Acland-Hood Director of Education Funding, DfE F40 Fair Funding Conference Thursday 6 February 2014

2. A look back on 2013

3. The financial climate remains challenging

4. The schools budget will be protected in real terms in 2015-16. We will consult on how best to introduce a new national funding formula to make sure that money is distributed fairly and transparently. The pupil premium will also be protected in real terms, continuing our commitment to support disadvantaged pupils. We will continue to fund the growth of our flagship academies programme but we will also make sure that the central costs come down, saving £150m in 2015-16. Savings of £200m to the Education Services Grant, reflecting the evolving role of local authorities. But the schools budget has been protected and prioritised

5. We know the current system needs reform • A school in Birmingham which has only 3% FSM pupils receives more funding than a school in Shropshire which has over a third of FSM pupils. • A secondary school in Lancashire with 337 pupils and 34% FSM pupils receives 46% more funding than a school in Hertfordshire with similar characteristics. • A primary school in Birmingham with 203 pupils and 55% FSM pupils receives 37% more funding than a similarly sized school in Salford. Level of funding of schools with high deprivation intake Level of funding of schools with low deprivation intake

6. It has not kept pace with changing pupils’ needs Reading, Croydon and Hillingdon all have a higher proportion of pupils with FSM and English as an Additional Language but lower rates of funding when compared with Lancashire, Wakefield and Southend-on-Sea, even after we adjust for difference in area costs. Source: Published 13/14 DSG Allocations & SFR21/20113 “Schools, pupils and their characteristics: January 2013”

7. The 2013-14 changes were our first step towards a national funding formula. We have: Improved the transparency of the Dedicated Schools Grant – allocating funding through 3 identifiable blocks for schools, early years and high needs Simplified local formulae – moving from 37 variable factors to 12 comparable and consistent ones Ensured maximum delegation to schools – giving head teachers greater control and ending schools-block LACSEG Simplifiedand speeded up the process for funding academies – reducing the time lag from 17 months to 5 months Streamlined funding for pupil with high needs - ensuring that specialist and mainstream settings are funded on an equivalent basis We made a number of important changes in 2013-14

8. The early signs are that we are succeeding in moving towards a more pupil-led system. In 2012-13 most authorities distributed between 60% and 75%* of funding through their pupil led factors. In 2013-14 however, all local authorities (with the exception of the Isles of Scilly) are allocating at least 77% per cent of funding through a combination of the pupil-led factors. In 2013, more funding was based on pupil need * For this analysis, we derived the 2012-13 schools block pupil led funding by excluding some lines we deemed as ‘early years and high needs’ funding from the 12-13 ‘school budget shares’ on section 251. We then aggregated them up to LA level. For 13-14, we used the schools block proformas . In both cases we identified the AWPUS, deprivation, prior attainment, looked after children and EAL as pupil-led factors.

9. In both primary and secondary phases, we can see some consistency in the per-pupil allocations and increases compared to 2012-13. The majority (83%) of local authorities set their primary AWPUS within the range of £2,250 to £3,250. And there was greater consistency in the per-pupil rates For KS3, 76% of local authorities are allocating between £3,500 and £4,500 per pupil, and for KS4 74% are allocating between £4,000 and £5,000 per pupil.

10. Almost half of local authorities are allocating between 75% and 80% of their schools block funding on the basic per-pupil entitlement – significantly more than in 2012-13. And overall a very large proportion of the budget was being allocated through the basic entitlement

11. Two-thirds of local authorities are allocating between £1,250 and £2,750 per FSM pupil but the total range of funding spans from below £500 to over £5000 per FSM pupil. But there was still considerable variation on other factors – deprivation, in particular, is complicated • In turn, the proportion of funding spent on deprivation also varies across the country from 1% to 25%.We recognise that this variation is due not only to the variation in funding levels across the country, but also to the approaches that different authorities take in targeting funding to deprived pupils.

12. We continued our reform programme for pre-16 funding • Following the review of the 2013-14 funding arrangements, we made some important changes for 2014-15: • A new sparsity factor to support small schools in rural areas • Flexibility to set separate lump sums for primary and secondary schools • Flexibility to support good or outstanding schools with falling rolls (if population is set to rise) • A requirement to spend at least 80% on the pupil-led factors • The review was shortly followed by an announcement in the June 2013 spending round that we would consult on how best to introduce a new national fair funding formula in 2015-16. • We’ve spent the past few months considering some important questions: • What is ‘fair’? • Should we prioritise moving schools quickly to a new formula or should we prioritise stability and move at a more considered pace? • Should the priority be to pull low-funded areas up? • How do we balance the need for a simple and transparent formula against the need for responsiveness to the particular circumstances of schools?

13. We also made important changes to high needs funding • New arrangements for 2013-14 meant that: • Schools meet any extra costs for children with SEN up to £6,000 – the threshold will be mandatory for all LAs in 2014-15 • Schools receive the funds to meet the needs of all their pupils up to this threshold through the local formula which includes factors such as FSM and prior attainment • For costs above this, the pupil’s home LA provides top-up funding • For special schools and units, the LA/EFA funds every place at £10,000, and then the LA provides top-up funding for excess costs – this will apply to all age groups 2014-15; for 2013-14 post-16 pupils get a different amount • LAs have the flexibility to give extra funding to some schools with a high proportion of pupils with SEN, where the local formula is not able to target SEN funding effectively • We believe there is a continuing need for LAs to explain to their schools how the new high needs funding system works, so that they are reassured that funding is still available. • And some LAs probably need to look again at how they derive the notional SEN budget and how they support schools with high concentrations of pupils with SEN. We have sought to provide maximum flexibility to allow this.

14. We are extending Free School Meals • Every child in reception, year 1 and year 2 in state-funded schools will receive a free school lunch from September 2014. • The aim is to improve academic attainment and save families money – over the course of a year the average family spends £437 on school lunches per child • Approximately 4 in 10 children living in poverty not eligible for free school meals • In pilot areas: • students were found to be on average 2 months ahead of their peers elsewhere • around 2% more children reached target levels in Maths and English at Key Stage 1; while at Key Stage 2 the impact on achievement of between 3% and 5% was a bigger improvement than the 3.6% boost that followed the introduction of a compulsory literacy hour in 1998 • academic improvements were most marked among children from less affluent families • there was a 23% increase in the number of children eating vegetables at lunch and an 18% drop in those eating crisps • Disadvantaged students at sixth form colleges and further education colleges will also be eligible for free school meals from September 2014. • Overall cost of approximately £600 million

15. We also published a review of efficiency in schools

16. We found some interesting new results

17. Another interesting new result

18. We committed action to support efficiency • Introduce a simple indicator of overall school efficiency for schools to compare their effectiveness with other schools. • Develop a benchmarking report card comparing financial and performance data with similar schools • Work with schools to exploit economies of scale in national purchasing and develop a real time price benchmarking system • Provide greater access to clusters by providing small start-up grants to enable clusters of primary schools to take on an SBM • Strengthen our expectations of governor’s roles in driving financial efficiency and develop financial training specifically for governors through the National College. • Remove unnecessary restrictions that constrain how workforce decisions can be tailored to the requirements of individual schools

19. A look ahead to 2014

20. We will confirm arrangements for pre-16 funding • On the Dedicated Schools Grant: • Ministers announced last summer that we would be consulting on a National Fair Funding Formula. • We will shortly be publishing a document with proposed arrangements for 2015-16. • On Universal Infant Free School Meals • We will confirm the allocations for each school and details of how we intend to allocate £22.5m to small schools in 2014-15

21. We will implement recommendations from the Efficiency Review • We expect to introduce a new summary schools benchmarking report card this year • As part of that, we are developing options for a new metric which will enable schools to compare their efficiency with other schools of a similar type • We are developing new material for training school governors on financial matters which will be available in April • We hope to run a grant scheme this year to promote the employment of school finance managers by about 200 clusters of primary schools • We are continuing work on securing better purchasing deals for schools and on providing them with a better tool on which to see the best deals that are available

22. Questions? If you don’t get a chance to ask your question today, here are my contact details: Susan Acland-Hood Director, Education Funding, DfE susan.acland-hood@education.gsi.gov.uk