Podcast | Season 1 | Episode 35: Understanding School Funding

In this week's episode we explore how school funding works in England.

💡 Simon Oxenham, Director of Resources, Southend High School for Boys & National Lead on School Finance & Efficiency, ISBL  

🏫 This session was recorded live on 14th November 2019 in the Business & Finance Theatre of the Schools & Academies Show at the NEC in Birmingham.

Listen On
Apple Podcasts | Google Podcasts | Spotify

 

Transcript

Simon Oxenham
00:30
I'm Simon Oxenham, Director of Resources, Southend High School for Boys and the ISBL, National Lead on School Finance and Efficiency. So we're looking at funding, and I'm going to take it's difficult to pitch it because I don't know where everybody's at in as far as their understanding. So apologies if it's a little bit basic at times, but a little bit deeper, others. So what is the National Funding Formula? So the National Funding Formula is the method that the government uses to decide how much money should be given to schools each year, it is a relatively new formula, it was brought in to remove the historic discrepancies that we used to have in the funding system.

Simon Oxenham
01:06
Currently, the NFF is in what we call the soft phase, it hasn't been full, for a full hard implementation yet, local authorities will be forced to use the formula. But that requires a change in primary legislation and that will be what they call in the heart implementation. Let me try and unpack that a little bit for you. At the moment, the DfE allocate X to your school, then that allocation then goes through your local authority schools forum and what you end up with is Y, which could be plus or minus X. Okay. However, having said that, increasingly, local authorities are actually now following the National Funding Formula. So what's happening next with the National Funding Formula? 2020/21, is going to be based on the current National Funding Formula and there's been some delay because of the comprehensive spending review. So that's why they're staying with the formula as it is. For 2021, we know that we've got £5000 for secondary school says this is the minimum funding per pupil of £3750 for primary, and that for the following year, it's going to go to £4000 for primaries. So being the impertinent kind of chap that I am, I said to the DfE, that's a big percentage difference between what the rise for secondaries and the rise of primaries, is it that all the primary schools are heading over the financial cliff, and nobody's told us? I said, well, where are these numbers come from? They said, from a certain person's leadership campaign. So I said, you telling me you've done no modelling to make sure that the minimum is, levels are actually rights, it came from somebody leadership campaign, we could see an NFF version two for the following year for 21/22 but that would require a public consultation. and as I said, the hard implementation would basically mean changing the statutory duties of local authorities. So would require legislation, there is another possibility that the DfE could do. You got a thing called the operational guide for funding, which you can Google and you'll find, don't try and searching.gov website, Google it and in the operational guide, it says, these are the factors that are available to local authorities. If you think of it like a mixing desk, that's the best way to describe it, you've got all of these funding factors. Some of them, they can choose not to use, others they have to use, but the sliders don't go from 0 to 100%. They're banded, so they can only move them a little bit. What the DfE could do, is close the banding so there's no movement. So you could actually get a hard implementation without changing legislation but what they're doing at the moment, they keep putting the hard implementation onto the parliamentary agenda, but it keeps getting knocked off but they are committed to try and get us there.

Simon Oxenham
03:53
If you want to know what ISBL think about the National Funding Formula version two, we have the ISBL NFF Manifesto, or we call it the rising sun manifesto, because that's the part we read when we came up with it shouldn't have told you that really like I've put it on the slides at the end. So you've got that information. So latest funding, bits of news that we have, the rate for 16 to 19 for next year, will be £4188. There's also something called the high value courses premium for next year. So if you've got 6th Formers who are studying two of those subjects, you'll get an extra £400 per pupil. So that may make a difference. Interestingly, when we think about the 16 to 19 funding, that rate came into play £4000 back in September 2013. Now raise the rates campaign have been campaigning long and hard and they actually wrote to the Chancellor in August and said, we need £4760 now per pupil to deliver 16 to 19 education. So we're still a long way away from where we need to be.

Simon Oxenham
04:59
In fact You could be forgiven for thinking actually, it'd be sensible to close the 6th Form or fill it with lower school pupils if you've got 6th Form, because it would be, you'd get more money for them, but probably a little bit too controversial. Of course, the Education Select Committee have also taken a position, they are asking for a 10 year settlement for schools so that we can actually realistically plan for the future. The teachers pension scheme has had an issue, which is probably not so well known about. And that is that somebody brought a case for age discrimination. And this was to do with the fact that the scheme changed from final salary to career average, if you within 13 years retiring at the point of change your state on final salary, somebody now challenge that and that's probably going to put about £4 Billion hole per year in Treasury's coffers. Obviously, the LGPS you've had the McLeod's case going on and we're all enjoying getting through our actuarial valuations at the moment for that, for Southend High School for Boys, my black hole, of course, it'd be armageddon, if it was ever called in and the Secretary of State's underwritten it. So there's a debate why it needs to be an account but mine went up for a single Academy by £623,000 in my accounts this year.

Simon Oxenham
06:08
Other DfE bits and pieces that are around at the moment, their intention for 21/22 and beyond, is to move the money that currently goes towards the Teachers Pay Grants and the teachers pension grants the top ups into the main funding and not have them as separate grants. So that makes actually forecast in the following years, very difficult, because we just don't know what's going to happen at this point, of course, because when out of the £14 Billion that they talked about was a little bit mischievious, because what they're actually doing is effectively increasing the pot by £2.6 billion in year one, two, lots of 2.6. in year two, three, lots of 2.6 in year three. So it's a little bit misleading when they say that. They're obviously funding there are two arguments. One is about quantum, the total amount, and the other is about distribution. Often people conflate the two, so we need to try and keep those separate. It's interesting, when you talk about we're going to level up schools funding, what's actually happening for next year is that most of the factors in the national funding formula are going up by 4%. There's a few which are they're going up by 1.86%. But of course, if you give everybody the 4%, the gap gets wider. So actually, it's not levelling up, it's the complete opposite. So you might want to just bear that one in mind, snakes or politician trots that one out.

Simon Oxenham
07:31
I thought it might be worth a while we're talking about funding just to talk about the role of the School and Academy Funding Group, SAF G. ISBL are part of that group and that is how the DfE engage with the sector about funding, I say, engage, often what happens is a decision is made and it flows down. So there actually is probably not so much consultation, the real difference to that was the minimum per pupil, which the ISBL team, we were actually able to get the minimum per pupil into the funding formula through SAF G. But that's how it engages. So the trade unions and the sector bodies meet the DfE once a month to talk about funding. So if you have concerns about funding, you need to be talking to your unions or talking to ISBL, and we can make representation on your behalf.

Simon Oxenham
08:18
So the current funding system, call revenue funding, revenue being different from Capitol core revenue funding is delivered through the dedicated schools grant, that's the money that's going to the frontline. The DSG is now split into four blocks. So you've got the schools block, either national funding formula piece, then you've got the high needs block, the early years block, and the central services block. The blocks are notional, and there is a little bit of flexibility for local authorities to move funds between them, but not much. Now, there's only three blocks that really get talked about. That's because the central services block is the money that goes to the local authority for them to carry out their statutory duties. That's about making sure there are enough school places and that sort of thing. I mentioned the operational guides, there's also conditions of grants, which you should be familiar with, which you'll get by googling because sometimes people start using funds for things they're not supposed to. We'll pick that up again in a bit.

Simon Oxenham
09:15
Other bits of funding, you've got the 16 to 19 funding that we've spoken about. There's pre and post, opening grants for new Academy converters, sponsored academies and free schools. There's other grants out there as well like the trust capacity funds if you're thinking about becoming a MAT of growing your MAT. There's a 16 to 19 bursary, and obviously pupil premium. I say again, capital of course, is separate from revenue funding. So let's look at what the national funding formula actually looks like under the hood. So this is a DfE diagram is not one we've come up with, but you can see see the blocks the sections there. So you've got the basic per pupil funding, which has a minimum level and then you've got your additional needs funding, which includes things like deprivation, low priority statements, lack of people mobility, EAL, English as an additional. Sorry, slipping into abbreviations. Then you've got the school aid funding, which is sort of sparsity, the lump sum, split sites, rates and exceptional premises costs, then you come to the next section, which is the geographical funding, that's the London fringe. There's other factors in the bottom section, which is the funding floor.

Simon Oxenham
10:18
From the operational guide, you'll find all of this sort of information in there. So the basic entitlement is the the amount that the DfE say you need in order to educate a pupil but of course, and that's a compulsory factor, often referred to as off who the average weighted pupil unit, then you've got the minimum per pupil, which is an optional factor that schools forum can choose to use or not, as I say, more and more local authorities are adopting the national funding formula without making any changes. Now, moving on, you've then got deprivation, which is compulsory. So this is based upon an FSM. And it's interesting, the pupil premium was brought in as a policy to deal with deprivation and the inadequacies of the previous funding formula. So it is quite possible that a political whim might be to take it away again. So what we're arguing for is to actually it needs to be rolled into hardwired into the national funding formula.

Simon Oxenham
11:11
Why is it still there? Because in the Conservative Party Manifesto, when Justine Greening was Secretary of State, she said, 'How do we keep people premium because we've had it in the manifesto, and we've won the election'. The funding policy unit said, 'just leave it there, keep it'. So that's why it's still there at the moment, but it is open to political whim. Prior attainment again, this is another optional factor that the local authority can turn on or turn on looks after children is another one. English as an additional language is optional as his pupil mobility. Sparsity is optional. A lump sum is optional. The lump sum is an interesting one. If you've got some, as I have two schools on the same site, I've got an infant and juniors on the same site, the logic would say, merge. However, if I do that, I'm going to lose £110,000 because I'm going to lose all of my lump sums. That's an interesting dilemma, isn't it? Split sites, rates.

Simon Oxenham
12:02
We said to the DfE, why don't you just take rates out because it just confuses things? Why don't you just pay the local authority direct and apparently, there's some rules, some legislation which prevents the DFE being able to actually pay the rates direct. So it still has to come into our synapse, announced the local authority. PFIs is optional, as are the exceptional premises. London fringe, another one of the optional factors, and as is the funding flow. So high needs funding bloc that is there to support pupils up to the age of 25 with SEN and disabilities. And it supports those who are school age who are not in school, because they're polluted or otherwise not able to attend school, alternative provision it pays, it funds those for children and young people and that includes pupil referral units and hospital schools. A child is regarded as being high need if their costs exceed around 10,000 pounds per year. But funding here isn't so much formulaic and the DfE recognise that. And so it's it's based on past spending patterns. So the high need really has two core components, poor funding, and then top up funding, depending on the type of provision if it's a mainstream school or academy, you're required to fund the first £6000 of that child's education, and then you claim top up funding for the rest. Again, it's something we've been talking to the DfE about.

Simon Oxenham
13:26
So my institution, currently we get the £4800 per pupil. So for every high needs I take, I'm losing £1200, feels a bit twisted, doesn't it? So we've been talking to them about that. If you've got a special school, you get £10,000 for the place, and then you get top up funding on top of that, according to the needs of the child. Independent Schools, the core funding doesn't apply. The £10,000 can be quite interesting, because what I'm saying is that some people are actually now negotiating with local authorities and saying, well, you want us to take these people, we could squeeze a couple more in, but actually, we can offer this, this and this, these pupils which are really hard to place that you're paying an awful lot of money to take out of a borough, we'll take them with these specific conditions, but the funding needs to be X. So I'm actually seeing people started to really negotiate with local authorities on that.

Simon Oxenham
14:19
Early years block is going up by small percentage, it's not one I'm going to cover in any great detail today. Moving on to capital funding, the DfE allocates capital funding through the school's condition allocations, which is for academy trusts wih five or more local authority. But note, this is something I've seen people trip up on the SCA is not for funding ICT, the devolved capital formula grant, which we all get can be used for ICT. In a Multi Academy Trust scenario, the SCA goes to the trust and it's for the trust to then decide how that money is used and at which location. So normally what you end up is with some kind of process or priority rating system within the trust to allocate out the capital funds. Within a Multi Academy Trust, the default capital formula will go to is allocated to the individual institutions by the DfE and only by agreements, can it be drawn back into the centre of the trust. So capital funding allocations go to local authorities work with the local authority maintain schools, also for the voluntary ad bodies involved 20 schools, and as I said, it goes to the large Multi Academy Trusts, it also goes to the sixth form colleges. Also it goes to special schools that are not actually maintained by the local authority, and special post 16 institutions with eligible students.

Simon Oxenham
15:40
Single Academy Trusts or Multi Academy Trusts with four or less schools and less than 3000 pupils, they have to bid for their capital funding, other than the devolve capital formula. That's called the condition improvement funds, again, the condition improvement funds can't be used for ICT. So if you think about it, if you are going to expand your school and build a new block, you can get the capital funding from various sources to build a new block. But you can't put any furniture and ICT equipment into it. Other than using your revenue funding, or you devolve capital formula grants. Does that make sense? Okay, good. Just highlighting that one because I have seen people tripped over that.

Simon Oxenham
16:19
So other points to consider. Local authorities have a duty to ensure that school buildings are in a suitable condition. So if you've got a school, joining a multi Academy trust or joining your trust, or you're going to be joining a trust, make sure due diligence is done. And there's now a ISBL guide on their website for about due diligence. There were five schools in Leicestershire that decided to get together as a Multi Academy Trust. One of those schools had been saving up to refurbish its library by had raised £200,000, happy days. Another one of the schools that joined the trust hadn't been doing any maintenance work and had £200,000 worth of compliance issues that urgently needed addressing. Can you guess what the Trust Board had to do? Take the money for what was set aside for the library, use it for the compliance side, make sure when the local authorities handing the buildings over, that they're in the right condition. Schools can make urgent requests to the local authority if they're maintained and if it's an academy the ESFA, for smaller Multi Academy Trusts. For larger Multi Academy Trusts, it will be to the centre of the trust, the Trust Board, if something occurs, you're going to get classroom closure. So if the boiler suddenly dies, you can make an appeal. What you really want to have is an asset management plan for your settings. Yeah, so you've had compliance checks, you've had condition surveys through surveys know the rest of it for risk assessments, so you actually know what's going on so you don't get caught with any surprises. Consider looking at the DfE good estates management guide, ISBL do training on that. If anybody needs that.

Simon Oxenham
17:54
I would strongly recommend using professionals to manage your estate because they will improve the chance of successful bids and ensure compliance. So both my trusts I have retained property consultants who write the bids create the asset management plans carry out the surveys to make sure that they pick up all the fire risk assessment information and any aspirational plans that the schools have. So we have a total picture of where we're going to need to spend capital so we don't get caught with a boiler suddenly failing on us. State funding schools, including primary secondary and special schools with special educational needs fall into two main groups maintain schools where funding is overseen through the local authority and academies where funding and oversight is from the DfE by the ESFA and they're run by an academy trust and this academy trust that employs the staff. Academies themselves are owned and run by not for profit, private trusts, trusts are companies registered at Companies House and subject to company law. The great thing is that this whole academies programme, I'm sure dates back to a conversation in a bar in Westminster between Tony Blair and Andrew Adonis about this, let's form this academies programme. We're really trying to transform the school sector. Yes, but how do we do it without changing primary legislation? I know, we'll use the charities model. So what we've ended up with is the most complex set of accounts of any sector in the UK, which has to be produced in the shortest time of any sector in the UK.

Simon Oxenham
19:23
So, because academies are funded directly by central government, the Office of National Statistics classifies us as central government, which is why we have to have an accounting officer as the Chief Executive of a trust. Whereas maintain schools because they are looked after and funded by the local authority, you don't. An accounting officer, their job is to make sure that the funds given by Parliament's are used by the purposes intended by Parliament. So that's called regularity, which is why as part of our audit, we have a regularity audit each year. It means that if something goes bang, the accounting officer can be called before the Public Accounts Committee, I would venture to suggest if that scenario was to play out that the Chief Financial Officer will probably be holding hands with the accounting officer at the hearing and obviously, you've got Single Academy Trusts and Multi Academy Trusts. It's interesting that the number of Academy Trusts is actually going down but the the number of academies is going up. What's happening is basically this merger, the golden number at the moment seems to be 15 to 20 schools and the trust and read geographically based, it changes all the time it possibly to do with the regional schools, commissioners, key performance indicators, but it used to be 5 to 10 but currently, it seems to be 15 to 20, we find ourselves in an interesting time, we're PURDAH. Hence, you've got me or not the DfE this afternoon.

Simon Oxenham
20:48
So ISBL, we've put down what we think are the sort of the public priority policies for around funding. At this point in time, because we're in the period of election, you have an opportunity, folks, you have an opportunity to influence education funding. So when those candidates come knocking on your door, you can impart some information upon them. So maybe we'll get us a proper settlement or long term payment for schools going forward. This is ensuring that there's sufficient funding with sustainability for every learner, the funding for additional needs is adequate. Because what's happening at the moment is that because the additional needs funding is is actually almost equated, if you had a child that ticks every box in the national funding formula for it would actually get to about £4700 which is more than that the basic need. So what's happening is it's being used to subsidise and of course, 6th Form funding is too low. So if you've got a 6th Form, that the lower school was probably subsidised in the 6th Form, so it's all out of kilter. So what we're saying is that these things need to be in kilter, every school should be adequately funded, meet the full needs of SEN, increase the post 16 no surprises there, protect the small schools, the risk of closure. The social behaviour piece, actually, if we need more, if you pump more into education, you have less misbehaviour, so you don't need better health in your population. So we would need to spend less on health and less on prisons if we spent more on education. So it's an interesting point, and so on, and so forth.

Simon Oxenham
22:21
I'm not going to carry on reading through those. There is the manifesto that I spoke about for national funding formula version 2. So I was in this well known supermarket recently, when this chap with a small child comes in, and this child is in a trolley and he's right kicking off. You can hear the father saying, George, calm down, right, we can do this. This chaps wheeling this trolley around the supermarket. You can hear this child really still going for it and the dad saying, George, we can do this, just got to get a few more items on the list and then we can go and pay. This continues as he navigates around the store hanging there, George, just one more thing to find and then we can go and pay. Finally he gets the tills. Right, George we just got to get through the tills and pay and then we can go home to mommy and have dinner. At this point. This lady comes up to the chat and says, I'm really so impressed with how you've been talking and communicating with your son, George. No, you don't understand says the bloke. No no I'm really, you've handled it superbly. No, no, no, you don't understand says the bloke, he's not George I am.

Simon Oxenham
23:27
I just want to challenge our perceptions around funding and the situation that we have, as I said, we have an opportunity as the candidates knock on the doors. Talk to them about funding, read up on what we're saying. Something we think that the whole sector can get behind. Challenge your MPs we have a chance to change the way funding is working at the moment. I don't know what the colour of the next government will be. It could be multicoloured for all we know, but we have an opportunity to make a difference. Thank you very much and good luck.