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For a long time, many MPs haven’t been happy with the way school funding is allocated. Historically, money has been dished out to local authorities with an advisory note attached saying how much is intended for different levels and types of education – that is then divided up by the local authority as it wishes, with advice from their local schools forum feeding into the mix.

The problem to date has been that those grants handed down from the Department for Education to the local authorities often vary a great deal from area to area. In the words of the Education Secretary, these imbalances are

‘…unfair, untransparent and out of date. Similar schools and local areas receive very different levels of funding, with little or no justification. Patchy and inconsistent decisions have built up over many years, and mean resources are not getting to the schools and pupils that need them most.’

For obvious reasons, MPs whose areas receive funding below the average based on “little or no justification” tend to dislike this process. The solution, they argued, was for the Government to recognise that there is a standard basic cost of providing one year of education to one child in primary, secondary or various specialised forms of school. There could be some extra money where there were specific requirements – poverty, failing schools and so on – but every school would get a reasonable and equal share of the pot as a minimum, making things fairer nationally.

That’s a reasonable argument, and the Department for Education recently accepted it – much to the delight of those in Parliament and in education who felt their schools weren’t being treated fairly. In future, every school would get a set amount directly from central government based on a clear formula, applied equally across the country.

Since that initial decision, though, the reform has come unstuck. Headteachers, and now many MPs, are reportedly up in arms at the draft funding formula published at the end of last year which lays out how the budget for each school would be calculated in practice.

Part of the problem is an expected price of a fiscally neutral rebalancing. If no extra money is going into the pot, and the pot is being more equally distributed, then some schools with more money than the average will inevitably receive less funding. That’s awkward, and sure to raise fury in affected areas, but the calculation was that the number of people pleased by the change would outweigh the number annoyed by it.

It hasn’t worked out that way. Indeed, some of the MPs who now criticise the new formula are the same people who made the case for its reform in the first place. One issue seems to be that the share of the formula which allocates funding as the standard minimum required for educating a child is lower than many expected, and the proportion allocated variably to different schools based on special factors is correspondingly higher. That has undercut the hopes of schools which currently get by on below-average amounts of money but who don’t qualify for special consideration under the new formula.

Take the prior attainment measure as an example. In practice, its application means that schools which have produced good results – even doing so on lower than average budgets – are penalised for doing so. Some who disliked the old system anticipated reform shifting money from London, where budgets were boosted in the Blair years to target what used to be the problem of inner city underperformance, to rural areas, which have historically tended to lose out, but have been shocked to find that schools doing well despite limited cash now stand to lose even more money, in some cases deepening existing imbalances rather than ameliorating them.

At the same time, there are other upward pressures on costs in education. For a sector where staffing is a major regular overhead, rising National Insurance and pension contributions have a big impact. Meanwhile, the school-age population is growing faster than the schools budget. One headmaster in West Sussex told the BBC that he was pleased to learn his school would be £180,000 better off from the new formula – only to discover that his costs are set to rise by £220,000. Not only are those losing out more vocal than those gaining (as is always the case), and not only are the gains often smaller on average than the losses among the best-funded schools (as was inevitable), but some of those who gain on paper from the formula are still set to have less money overall.

These factors have all combined to erode support for a long-sought reform and increase opposition to it beyond the levels that were anticipated. The Department for Education is reported to be considering its options – but its room for manoeuvre is limited. It could soften the blow for schools which already have the least funding by recognising an official, national minimum level of per-child funding. But to do that would require either capping increases for the schools who stand to gain the most – costing them further support – or beating a track to the Chancellor’s door for more money. And he has other problems to be getting on with already.

32 comments for: How the school funding formula got bogged down

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