Education: Academies Funding

Lord Hill of Oareford Excerpts

Tuesday 21st June 2011 Lords Chamber

[Baroness Jones of Whitchurch]

To ask Her Majesty’s Government what are the implications for funding of the academy programme of reports that errors in departmental calculations have led to some academies being overfunded.

[The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford)]

My Lords, the current system of funding academies that we inherited is overly complex and needs to be simplified. We have therefore announced a review of school funding. Where there are occasional problems of classification in the current system, we look into them on a case-by-case basis. We want a system where schools with similar characteristics are funded on an equal footing and where academies are funded on the same basis as maintained schools.

[Baroness Jones of Whitchurch]

I thank the Minister for that reply. Does he recognise that the overpayments that have been made are in some cases considerable, for example equating to around £300,000 per school in Hampshire? Does he agree with his noble friend Lady Ritchie, of the Local Government Association, who said last week that the overspends on academies arose,

“because the government has misinterpreted council education expenditure returns for purposes for which they were not intended”?

Can he explain how the overpayments to academies will now be clawed back? Can he guarantee that pupils in maintained schools will not be penalised by this error, and does he acknowledge that the error illustrates once again the folly of pushing ahead with policies without adequately consulting those concerned?

[Lord Hill of Oareford]

My Lords, as I said in my opening Answer, we inherited the system that we operate for funding academies and for trying to ensure that the basis of equal funding is maintained, and it is inherently complex. It has been in place since 2002 and because it is complex, sometimes the classification of returns under Section 251 leads to difficulties and some of the problems alluded to by the noble Baroness. Our aim is to make sure that funding is provided on an equal basis. Where there are problems of the sort that she mentioned, the department will look into them on a case-by-case basis and, if it is appropriate, make arrangements to claw back money or in some cases pay additional money. Sometimes, the way in which this complex system operates can lead to an academy getting less than it should. We will look at this, and I hope that the funding review of the whole system that we announced some time ago will help to address these problems and enable us to reach a sustainable solution.

[Baroness Walmsley]

My Lords, will the Minister bear in mind that some local authorities’ ability to deliver services to schools that have not opted out and become academies is hindered by the fact that they no longer get economies of scale when they purchase services for those schools and therefore they become more expensive? Does he intend to compensate local authorities for that situation?

[Lord Hill of Oareford]

There are a number of complexities in the system. One that is not widely recognised is that, because of the way in which the LACSEG system operates, local authorities continue to receive funding for some services that academies are being funded for. So there is some double funding. It is not that an academy is getting more than it should; it is that, traditionally, the local authority has carried on receiving that funding. We need to look at that and to address all these issues to make sure that the principle of equity is maintained.

[Lord Knight of Weymouth]

My Lords, I agree that the current funding system is too complex, which is why I announced a review when I was Minister in 2008. The consultation was ongoing when the noble Lord became a Minister—perhaps he could have encouraged his colleagues to deal with it quicker by picking up that consultation. Will he answer the specific point raised by the noble Baroness, Lady Jones of Whitchurch, about making sure that no maintained schools have lost out? I have looked at comparisons across local authorities, including in Hampshire, where maintained schools are getting considerably less than they were in contrast to schools in other authorities. Given that the academies in Hampshire have done so well, can he give us an assurance that maintained schools will not lose out as a result of this problem?

[Lord Hill of Oareford]

My Lords, as a former Academies Minister, the noble Lord, Lord Knight, will be one of the few people on the face of the earth who may have some glimmer of knowledge of how the LACSEG operates. I had not realised that he had initiated a review. I would be happy to discuss where he got to with it, because we are obviously grappling with the same issues. He will know that, because of the complexity and because the approach taken varies from year to year and from local authority to local authority, it is hard to be definitive about how the system operates. I give the noble Lord an absolute undertaking that our aim throughout is to make sure that the funding that an academy gets is the same as it would have got as a maintained school, and that a maintained school will not be disadvantaged by the development of the academies programme.

[Baroness Perry of Southwark]

Will my noble friend confirm that one of the difficulties that academies experience as they go through the transition is the enormous disparity between the amounts that local authorities have retained for their central expenses and therefore the amounts that are handed on to schools as they become independent? Is it correct that the disparity ranges from below 5 per cent of academies’ budget to more than 25 per cent?

[Lord Hill of Oareford]

I am not aware of the specific percentages, but there are big variations between local authorities and the decisions they take as to how they want to spend their money, which seems to me to be proper. There are variations between years, and then, more generally, the school funding system operates in a way whereby some children in some schools in some parts of the country are funded at a significantly lower level than children in similar schools with similar characteristics in other parts of the country. As well as looking at academies’ funding and trying to make sure that it follows the principles that I set out, we are consulting on the whole school funding formula to try to make sure that children in one part of the country are not out of pocket compared with children in schools with similar characteristics in another part of the country.

[The Lord Bishop of Liverpool]

My Lords, I declare an interest in that the diocese of Liverpool is co-sponsor of three city academies together with the Catholic archdiocese of Liverpool. Is the Minister aware of the difficulties faced by the early academies in raising their sponsorship of £2 million now that the funding arrangements have changed? It is good news to hear that there is a review. Will the review body take this into consideration?

--- Later in debate ---

[Lord Hill of Oareford]

I am aware of the point to which the right reverend Prelate refers. As the circumstances have changed, they have clearly given rise to the issue that he mentions. Obviously we continue to keep those kinds of issues under review and to discuss them with individual sponsors.

[Baroness Sharp of Guildford]

My Lords, where is the £400 million that was announced last week as going to the academies programme to be spent?

[Lord Hill of Oareford]

Forgive me, my Lords, I am not sure about the £400 million to which my noble friend Lady Sharp refers. If I am being slow, perhaps my noble friend and I could have a word outside the Chamber and I will attempt to answer her question.