School Funding

Debate between David Mowat and Karen Buck

Tuesday 24th April 2012 Westminster Hall

[Ms Karen Buck (Westminster North) (Lab)]

It is a pleasure to respond to the debate under your chairmanship, Mr Gray. I congratulate the hon. Member for Gloucester (Richard Graham) on securing the debate and on the erudite way in which he introduced his argument. When discussing an issue of local government finance, by law it is necessary to invoke the Schleswig-Holstein question, which he wisely did. When looking at education funding and the many complex questions about welfare expenditure and the formulae for allocating funding to local authorities, it is right to reflect on the complexity and difficulty of such issues, which the Government are discovering to their cost.

I understand that many hon. Members today made sincere and heartfelt arguments in defence of their own local communities and about some of the funding discrepancies that occur between local authority areas, reflecting the differences in local authority funding formulae broadly, not just in education, and some of the discrepancies that occur between individual schools in their local communities. A common thread seemed to be an argument for additional spending on education. That is absolutely fine, but it does not quite fit with some of the concern expressed about the record of the Labour Government and the deficit. The fact is that we saw a dramatic increase in investment in education and in schools during those years and we are now seeing a squeeze on schools funding within which some of these difficult issues need to be played out.

It is true, as the hon. Member for Gloucester said, that this is a long-standing issue. It goes back far longer than 20 years. The entire problem of discrepancy that we are grappling with reflects the fact that the education funding formula has a historical root. Allocation to schools and to local authorities was based on an incremental change in existing historical patterns. Then there were changes, many of which were introduced by the Labour Government, to make that system more progressive through the various specific grants that were introduced and to achieve particular ends and outcomes in education through those specific grants. The aim was also to begin the process—it was begun—to try to deal with some of the funding discrepancies through such means as the dedicated schools grant.

Therefore, it would not be fair to say that the Labour Government were not engaged in finding ways of dealing with some of the inexplicable and difficult variations in funding. The then Opposition spokesperson, Baroness Buscombe, reflected that fact when the dedicated schools grant was introduced, saying:

“We welcome the principal policy behind the regulations, the new ring-fenced dedicated schools grant, the multi-year budgets and the rationalisation of standards grants.”—[Official Report, House of Lords, 16 February 2006; Vol. 678, c. 1340.]

Progress was being made.

However, there are tensions in relation to what hon. Members want. All of us wanting to see fairer and more progressive funding need to recognise that there are tensions between those two objectives. It is sometimes difficult to be more progressive and invest money in education outcomes that deal with some of the disadvantages that children have in schools and at the same time have a more equal funding formula that flattens some of the discrepancies to allow schools to have similar levels of funding.

[David Mowat]

Three times now the hon. Lady has used the word “progressive”. Can she explain to us how it is more progressive that Warrington, which has a substantially lower income per head than Westminster, has 50% less funding for its schools? That does not seem progressive to me.

--- Later in debate ---

[Ms Buck]

I was about to come to the issue of free school meals. Of course it is difficult to accommodate, as an indicator of deprivation, any element that involves a degree of take-up. All Governments have had to and will continue to grapple with that. Some changes in local government allocations in the funding formulae, which have factored in the index of multiple deprivation and the take-up of tax credits, have proved to be even more difficult, because that variation is even more challenging. Obviously, if we could come up with a deprivation funding formula without dealing with take-up, that would be better. If we could find a way of doing that, I could understand why people would want to do so.

To return to my point, there is a tension between fair funding and progressive funding that we have not managed to resolve. There is also a tension between the core desire to see all schools and all pupils have a basic funding allocation to which a progressive element—a pupil premium or whatever people want to call it—is a relatively small top-up, and the historical desire for local authorities to have a say and for local democracy to be an element in deciding how funding is allocated. In another context, the Conservative party would argue that case quite strongly. One reason why it proved to be such a challenge, not just under the Labour Government but before that, was that local authorities were receiving funding for schools but not passing all that funding on to schools or were making their own decisions about how to share out the grant. Accusations can be levelled at all political parties, in different ways, because of what was done, but of course some of that is intrinsic to local democracy. If we take it out of the equation completely, that throws up other and very difficult questions.

We recognise that school funding is extremely complex, that there is a case for further reform and that that reform is of course far harder to achieve when funding is as tight as it is now. We are seeing the squeeze on school budgets. Even with the pupil premium, funding will fall. At the time of the 2010 spending review, the Department for Education said that total funding for the schools budget would be increased by 0.1% in real terms in each of the following four years. However, subsequent higher projections of economy-wide inflation have changed the real-terms calculation. They indicate, according to the Institute for Fiscal Studies, a real-terms cut over the whole period of about 1% and a small real-terms increase in only one year. Of course, that is at a time when pupil numbers are expected to increase. That gives us an indication of the broader context in which some of these demands have arisen.

To make the position even more complicated for the Government, there is an absolute shambles going on because the Department for Work and Pensions has failed to work out a system whereby the new universal credit can accommodate a proper indicator for school dinners. It is struggling to find a way of doing that. That means that the way of calculating the deprivation indicator is moving even further away from what the hon. Member for South East Cornwall (Sheryll Murray) is saying should be the case. We are, at the moment, at a complete loss to know how the deprivation factor will be properly assessed when it comes to future funding. Both those things—the squeeze on funding and the inability to calculate a future pupil premium, because of the free school meal entitlement shambles—undermine the Government’s case that the problem is so desperate that an immediate solution must be found.

Following the Government’s consultation, the Institute for Fiscal Studies brought out an absolutely damning critique of the Government’s thinking. The report exposes the rather arrogant belief, which we see in so many other areas of public policy, that the problems can be sorted now that we have a Conservative Government, and that the previous Government had, by definition, got everything wrong. When it looked at the small print, however, it found that things were much more difficult.

The report, which I encourage all Members to look at, shows that: the Government’s plans would lead to a large funding transfer from secondary schools to primary schools; the average gains and losses could be 10% or more; one in six schools would face budget losses of 10% or more; there would be huge numbers of winners and losers; and, even over a transitional period lasting six years, some schools would incur annual cash losses of up to 5%. The Secretary of State has therefore started to row back from his enthusiasm for seeing early movement on finding a response.

[David Mowat]

I am sure the IFS’s list of problems, which the hon. Lady has just read out, is correct, but does that not demonstrate the size of the problem that must be fixed? The fact those problems will exist if we move to a fair formula demonstrates how much inequity there is at the moment. However, will the hon. Lady clarify the Opposition’s position on introducing a new funding formula? Would they like us to carry on as we are doing, or would they prefer to see a new formula developed, albeit over time?

[Ms Buck]

As I thought I made clear in my opening remarks, I completely understand that there are arguments about similar schools with similar characteristics receiving different grant funding because of an historical pattern. I am merely pointing out that that was difficult to tackle when we had a generous funding framework, because of the impact on schools and the numbers of winners and losers. If it had been easy to tackle those issues, and there had not been large numbers of winners and losers, much greater progress would have been made, and some of the winners and losers would have been secondary schools in Conservative Members’ constituencies. Now, however, we are in a time of public spending constraint, so most of the challenges are far greater and could be far more damaging for schools, including some in the constituencies represented by Members here, who have made a powerful case, in principle, for having a fairer formula. My critique relates to the fact that the Government are rushing in and saying, “This can all be solved. The previous Government made a complete shambles. We’ll be able to oblige you with a solution,” when they cannot, of course, offer one or answer many of the questions that have been asked.

I want to finish by asking the Minister a few questions. How many winners and losers will there be as a result of the “Next steps” proposals and the Government’s decision to dictate to local areas how they organise their funding? Do the Government propose any modelling or pilots to test their proposals? In the light of what head teachers, collectively, want, why are the Government restricting local formulae to 10 centrally chosen criteria? Why will they not allow some flexibility to reflect differences in local circumstances?

What is the cost of using the Education Funding Agency to administer the budgets of increasing numbers of academies? Can academy chains gather all the funding and distribute it as they see fit, including holding back money for central services? If that is the case, does the Minister propose any restrictions? Is he taking any steps to monitor salaries in academy chains? Obviously, top pay will impact on the money spent on pupils.

How will the introduction of universal credit affect the Department’s thinking on free school meals and the pupil premium? The Department acknowledged it will cause “turbulence”. What exactly did that mean? Is free school funding per pupil per actual pupil or per notional pupil? Finally, will the Minister confirm that, as a result of the Government’s botched efforts, there will be no major overhaul of school funding during this Parliament?