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John Viner

All change: the new funding formula explained

At last, the DfE has released its plans for the long-awaited national funding formula for schools. Here's what we know about the proposed reforms.

Since the new national funding formula will impact on schools in every parliamentary constituency, MPs have received a detailed briefing. This summary is based on that Commons briefing paper.

A new formula

The government’s plans for major school funding reforms apply only to England. There will be a new schools national funding formula (NFF) and another formula for high needs funding for special educational provision.

Responding to the lessons of the general election, the government has changed the proposed funding reforms and promised an additional £1.3 billion across 2018-19 and 2019-20. The NFF will operate as a 'soft' formula in these two periods, to work out notional individual school budgets only. These will be aggregated so that local areas will then be able to determine how to distribute the core funding between schools. 

The formula will not, then, be introduced in full to begin with. There are transitional arrangements for 2018-19 and 2019-20, which will include caps on gains for those schools hitherto considered as underfunded and minimum per-pupil increases for all schools – the new funding yet to be identified by the secretary of state for education, Justine Greening. 

Most pupil premium funding and funding for new school premises (or expansion of current ones) lie outside the scope of the current reforms.

How will it affect my school?

The DfE has published provisional funding tables to enable schools to get a better handle on the figures. Within these tables, note that the final 'in-full no transition' figures are not actual allocations for any specific year. They have been produced to help people better understand the NFF outside of the transitional protection in the first two sets of figures. The DfE has pointed out that 'actual allocations for future years will reflect updated characteristics and pupil numbers and will be subject to future spending review decisions'.

The justification for the changes has been much repeated by Justine Greening: ‘This is an historic reform. It means, for the first time, the resources that the government is investing in our schools will be distributed according to a formula based on the individual needs and characteristics of every school in the country’.

This view is not rejected by the profession. The National Education Union, drawing together the old NUT and ATL under a common banner, has said:

‘In terms of how the money is shared out, it is clear the funding system shouldn’t be reformed to give more money to some schools by taking money away from others. Fairer school funding can only be achieved by putting more money into the system – so schools that need more money can receive it while other schools’ funding is protected.’

The profession's view

From there, the government and the profession at large part company. Greening has already admitted that the post-election promise of more money will be hard to find as it will not really be new money at all. Most, it seems, will be found from an unidentified £600m in new cuts to the central DfE budget. 

£200m is likely to come from topslicing the free schools building budget and the balance from raiding the capital budget for building and repairs, largely by cutting spending on sports facilities and wellbeing.

None of this is especially welcome news since, for example if a school wanted to create a wellbeing programme, it would no longer have access to supplementary funding but would have to pay for it all itself. The NEU-sponsored School Cuts website offers another perspective on the impact of proposed funding.

Greening has already admitted that the post-election promise of more money will be hard to find

However, the main headline is that, under the new formula, all schools will gain in the two transition years. Under the original school funding proposals, which were the basis of DfE consultations, there would have been winners and losers’ even in the first year, even with transitional protection.

This gap would have widened still further when the NFF was fully implemented. Now, we are told, the final arrangements, will ‘provide for up to 6% gains per pupil for underfunded schools by 2019-20 and, as a minimum, a 0.5% per pupil cash increase in 2018-19, and a 1% increase by 2019-20 compared to their baselines, in respect of every school.’

The caps on gains and the new minimum increases compared to baseline are a way of balancing the protection of some schools from incremental reductions while ensuring that there are gains for two those schools considered ‘underfunded’ against the NFF.

In hard figure terms, the government is promising all primary schools that they would attract a minimum funding level of £3,300 per pupil in 2018-19, and £3,500 per pupil by 2019-20. Secondary schools would attract a minimum of £4,600 by 2018-19 and £4,800 by 2019-20.

However, the DfE is quick to point out that, ’this does not necessarily mean that all individual schools currently receiving less than these minimum threshold will be necessarily be allocated these sums'.

Independent scrutiny

Both the National Audit Office (NAO) and the Institute for Fiscal Studies (IFS) have considered the implications of the new arrangements. Looking at the pre-election plans, the NAO concluded that mainstream schools, overall, would need to find £3 billion of efficiency savings by 2019-20. This equated to a net real-terms reduction in per-pupil funding of around 8% for mainstream schools between 2014-15 and 2019-20.

The IFS were raising similar, although slightly more optimistic figures. After Greening's July statement, they have suggested that, even with the promise of new money, real terms funding for schools in England will still have fallen by 4.6% instead of the 6.5% that was previously forecast.

Looking at the DfE’s map of changes predicted by LA area, the likely initial impact of the NFF will mean that, with the exception of a very few small authorities who will lose out by less than 1%:

  • some areas will gain by 1-2%
  • most will gain by 2-6%
  • for several areas, such as the South East, Yorkshire/Humberside, Somerset and some areas of the Midlands, gains could be higher than 6%.

However, this is but part of the story. Increased funding, however much or however little, will come in the face of accelerating pressures on salaries, national insurance and pension contributions.

Perhaps the final word should come from the IFS:

'We don’t know anything, however, about government plans after 2019–20, either in terms of continued transitional protections or the full introduction of a school-level national funding formula. This is a source of major uncertainty.

The government still says it is their "intention" to implement a "hard" formula. Whether it actually happens – in particular given that this change would require primary legislation to pass through parliament – remains to be seen.' 

Do more with less

With an uncertain financial future ahead, now is a good time for SBMs to come together and discuss ways of making every penny count. 

Our forthcoming 'Effective financial management in uncertain times' conference will be a day of practical workshops that cover everything from efficient restructures to income generation tips.

Register now to secure your seat!

More from Optimus

Budget cutting should be long-term, not knee-jerk

Fairer funding or financial catastrophe? Stephen Morales on challenging the status quo

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