Thank you for your letter of 1 September, enclosing correspondence from Mr Andy Couldrick, Chief Executive, Wokingham Borough Council, about school funding. Thank you also for taking the time to meet with me last month and setting out your concerns about school funding in Wokingham.
I was sorry to read about Mr Couldrick’s concerns about school funding. We recognise that there are anomalies in the current school funding system, and are committed to making schools’ funding fairer. As Mr Couldrick will be aware, the coalition government allocated an additional £390 million to the least fairly funded local authorities in the country in 2015-16. This meant that Wokingham Borough Council gained an additional £716,000 in 2015-16. Despite the progress towards fairer funding, we recognise that there is more to be done, and we will put forward our plans in due course. As I hope Mr Couldrick will understand, we will only be able to come forward with detailed proposals once we have set budgets for education and other public services after the Spending Review.
As Mr Couldrick noted, the allocation process for high needs funding, and consequently the amount of high needs funding each local authority receives, is currently derived from local authorities’ own past spending decisions. There is widespread recognition that this arrangement is unfair and out of date, with a wide variation in the funding provided for children with similar needs. Our aim is to make the funding distribution fairer.
To help inform this, we undertook a substantial research report on the future funding of special needs. The report contains a large number of recommendations that we will be considering. We hope to introduce changes from 2017-18, although this is still under consideration within government, and to consult on them by early 2016. One of the recommendations we will be considering is to implement a national high needs funding formula, driven by pupil numbers and characteristics.
Funding for schools is calculated on the basis of pupil numbers from the previous year because this enables local authorities to set school budgets before the year starts, which helps schools with their financial planning. It is difficult for schools to change their expenditure at short notice and this system protects schools against sudden changes in the amount of funding they receive. We believe that this is preferable to the alternatives of basing funding on unreliable estimates of pupil numbers or the uncertainty for school budgets caused by real-time tracking of pupils.
We do, however, recognise the importance of funding for growing schools. This is why we have enabled local authorities, with the approval of their schools forum, to hold some of their schools block funding centrally for a growth fund. As part of our wider reforms, we are looking at how to support local authorities experiencing exceptionally high levels of pupil growth, and we will consider Mr Couldrick’s suggestion on diseconomies funding as part of this work.
On teachers’ pay, the last government’s pay reforms have meant that rather than continuing to be locked in to statutory pay arrangements where pay progression was automatically awarded to most teachers, schools now have much more autonomy over the management of their budgets and are able to use their total salary budget more creatively to reward the best teachers. Giving headteachers more flexibility over pay enables them to manage their overall budgets and meet their school’s unique set of needs more effectively.
On national insurance, currently, employees who are members of defined benefit occupational pension schemes, like the TPS, pay a reduced level of national insurance, as do their employers. This is because they are ‘contracted out’ of contributing to the second State Pension. As you may be aware, from 1 April 2016, there will be a single-tier State Pension aimed at providing a higher level of basic benefits that all employees will have the opportunity to build up, including members of the TPS. As a result, all employees will be required to pay the same full rate of National Insurance contributions, as will their employers. In return, employees will receive a larger State Pension than before. The liability for this will fall on the state. Public sector employers will have to absorb the burden of increased contributions.
With regard to schools facing deficit budgets, as I am sure Mr Couldrick is aware, if an academy anticipates financial difficulties and is formally proposing to set a deficit revenue budge for the current financial year, which it is unable to address after funds from previous years are taken into account, the board of trustees should notify the Education Funding Agency (EFA). In the most serious cases, the EFA is able to consider funding to support the academy, but only where appropriate, as determined on the merits of the individual case. Maintained schools should contact their local authority if they are planning to set a deficit revenue budget.
Mr Couldrick also mentions deprivation funding, and in particular the use of IDACI. It is for each local authority to decide how much money to allocate through their deprivation factors. Local authorities can decide whether to use IDACI for this purpose, and if so, which IDACI bands to use for funding schools. The Department does not currently direct funding to local authorities for school on the basis on IDACI.
If schools have not already, they may find it helpful to consider our document Review of efficiency in the schools system, which sets out the characteristics of the most efficient schools. This document is available online at: http://tinyurl.com/p52lxda. In addition, the EFA is developing an online efficiency toolkit that provides head teachers, school business managers and governors with information and guidance to help improve the efficiency of their school. The toolkit is a set of short videos providing practical advice to help schools identify efficiencies and cost savings, and the current content can be found at: http://tinyurl.com/pgpf2vn.
Thank you for writing to me on this important matter.
Sam Gyimah MP