Academies Funding Transfer

Thursday 8th December 2011 Written Statements

[The Secretary of State for Education (Michael Gove)]

I am today publishing a consultation setting out my “minded to” decision in relation to the academies funding transfer for 2011-12 and 2012-13.

The decision has been reached in consultation with the Secretary of State for Communities and Local Government and takes account of the responses received from local authorities to our consultation, issued in July 2011, about the basis for the decision.

The decision takes account of the need to ensure that both academies and local authorities are funded fairly for the pupils they provide services for and the responsibilities which they hold. We have also considered how best we can ensure that the amount transferred better reflects the distribution of academies between local authorities.

We plan to make changes from April 2012 to the methodology for calculating the level of the transfer to ensure that the amount transferred properly reflects the services which transfer to academies from their local authority. We will do this in two ways. First we will, in future, only take account of net expenditure on education services; and secondly, in areas where some responsibilities remain with the local authority, we will only use a proportion of spend in those areas to determine the amount to be transferred.

To provide financial stability and certainty to local authorities we will cap the maximum amount to be transferred in 2012-13 at the level of the top-slice of formula grant which has been announced by the Department for Communities and Local Government. In addition we will make a calculation for each authority in January 2013 of the costs of the local authority element of local authority central spend equivalent grant (LACSEG) based on the number of academies in each authority. Where the costs calculated for an authority are below the amount top-sliced from formula grant, we will make a specific grant payment to that authority equivalent to the difference between the costs and the top-slice.

To provide further certainty to local authorities we plan to make no changes to the previously announced top-slice for 2011-12 as we believe that taking action to redistribute costs at this stage in the financial year would cause unnecessary turmoil and instability.

This arrangement, whilst providing financial certainty and stability to local authorities, means that the Government will continue to provide a considerable amount of double funding in this area. Given the poor value for money which this provides the taxpayer these arrangements should only be seen as transitional.

The Government are committed to resolving the double funding of local authorities for services which devolve to academies permanently from 2013-14. As part of the local government resource review, we will explore removing the funding for these services from formula grant into the budget of the Department for Education. In this option, the Department would then a administer a grant to authorities and to academies proportionate to the number of pupils for which they are responsible according to a national rate. We plan to consult, jointly with the Department for Communities and Local Government, in 2012 on how we could put our commitment permanently to solve this issue into effect.

I have placed copies of the consultation paper in the Vote Office and the House Libraries.