School Funding Formula and Northern Schools

Debate between John Pugh and Liz McInnes

Tuesday 17th January 2017 Westminster Hall

[John Pugh (Southport) (LD)]

I beg to move,

That this House has considered the school funding formula and Northern schools.

It is a pleasure to serve under your chairmanship, Mr Streeter—it is a first for me. The circumstances of the debate are strange in so far as I originally put in for a one-hour or 90-minute debate, knowing that many parliamentary colleagues were exercised about this topic. I did not win the lottery for an Adjournment debate, but a half-hour slot became available and Mr Speaker offered it to me, so I thought I would go ahead and try to condense this important subject into half an hour. However, I do apologise, Mr Streeter, because you could have had a range of eloquent speakers addressing the subject but unfortunately you will have to listen simply to me droning on. I am sure this will be the first of many such debates for the Minister, because the national funding formula will be contentious in many places, not only in the north, and I dare say he will have an opportunity to rehearse some well-tried Department for Education lines in defence of it.

The Government set themselves a laudable task: to close the north-south gap in educational attainment. I am a little sceptical about the gap because “the north” is often seen from London as an undifferentiated mass. I was brought up on BBC weather forecasts in which the presenters went into great detail about the weather on the south coast and in London, and then they would glibly say, “but in the north it will be” and use that blanket label for the entire area anywhere north of Watford. The tendency is to see the north as a homogenous culture, possibly peopled by men in flat caps with whippets and living with constant drizzle. However, I looked further into what the Government meant by the educational gap—I had to address what the evidence showed—and, if we control for factors such as income and deprivation and exclude pockets of genuine excellence, we see that outcomes for northern secondary schools are inferior to those found in London and the south-east. Primary schools show less evidence of a northern problem.

I am not sure whether the difference we see would be so stark if we excluded those areas that have benefited from schemes such as the London challenge, which has been a successful concentration of money and resources. I met recently with Anne Longfield, the Children’s Commissioner, whom the Government charged with testing some of the assumptions underlying the project. The principal one seems to be the belief that if we have an educational problem, it is capable of an educational fix. The commission has suggested that other things could be taken into account: for example, parents in the north could be a bit pushier.

In a report for the previous Chancellor, Sir Nick Weller, who works for an academy chain, suggested unsurprisingly that the north could do better with more academy chains—and, incidentally, better teaching. Proponents of grammar schools have not been slow to suggest that what we need in the north is more grammar schools. The Minister will be aware of the study done by ResPublica in Knowsley, which suggested that grammar schools might be a panacea. However, to my certain knowledge, Knowsley has had grammar schools since 1544—I was once a pupil at Prescot grammar school.

The harsh reality is that, in order to change aspiration in the north, we need to do more than change school structures, because the reality that dawns on adolescents in the north is that opportunities are more limited compared with those they might face in the south, regardless of the education they receive. That is why so many young people gravitate to the south, particularly after their degrees; why there are more start-ups in the south; why the south is a magnet; and why the south has critical mass. Young people’s aspirations are simply less when there is less around them to aspire to—it is a chicken and egg dilemma. If we factor in limited parental optimism based on a degree of experience in the north and the limited opportunities available to those who are industrious but not especially talented, is it surprising that the optimism of childhood dwindles as schooling progresses and aspiration and attainment falls? I suggest that correcting that is beyond the scope of the school system alone; it involves regeneration of the whole community to which the child belongs.

That said, we all recognise that education plays a key part in regeneration. It is worth funding, and it is worth funding properly. I am far from believing that good funding is a sufficient condition of educational progress. Were that so, many schemes in the past would have worked far better than they have done. If we think about the money spent over the years in places such as Knowsley to provoke better educational outcomes, we would expect far superior outcomes to those we got. I do, though, note that, according to the Institute for Public Policy Research, £900 less is spent per primary school pupil in the north and at secondary schools that figure goes up to £1,300. That could go part of the way to explaining the significant difference in outcome. However, it is probably fairer to regard good funding as a necessary rather than a sufficient condition. In that respect, the Government’s revision of the school funding formula leaves a little to be desired. Indeed, its effects in some places will probably be catastrophic.

I recognise that no one will oppose a national school formula in principle because it sounds fair on paper, given that we have the effective nationalisation of school funding anyway through the dedicated schools grant. The current situation looks unfair and anomalous partly because of national decisions, but also because of the history of local decisions. We must look at that and see where that has led us.

When local education authorities were important—I do not suggest that they are not important at the moment—some bravely took decisions to sustain or increase budgets while others, less concerned about education, cut school funding to appease ratepayers and council tax payers. A feature of the new system is that that degree of discretion has simply gone, and councils charged with regeneration have lost all real leverage over the educational system. That is regretted by councils now, and clearly it will be also be regretted later on by city region cabinets and by Mayors as they get their hands on the levers of power, because they will want to prompt regeneration but they will lack some of the active levers that would enable them to do that.

I was a council leader in Sefton borough, and during tough years in the 1990s and so on we put money into school funding, sometimes at the cost of other services, because we regarded that as a high priority, and schools were therefore well funded—in fact, they were so well funded that sometimes the council dealt with its financial problems by borrowing from the schools’ balances. However, that was something we could do locally; it was a way in which we could emphasise our commitment to education in the area.

However a new formula is dealt with, it will obviously not please everyone. There will be winners and losers; but the background to the present situation is somewhat unpromising. The cost pressures on schools, such as national insurance, pension increases and school-based inflation, significantly outweigh the projected funding settlement for the sector. The Minister knows—and I think that we will all get to know—that the National Audit Office has vividly set that out. Its report will be investigated in greater detail at a hearing of the Public Accounts Committee, probably next week. To give the House a flavour of it, the NAO concludes that despite modest real-terms increases, the cost pressures on schools and increases in pupil numbers will result in a real-terms reduction of something like 8%. That is the NAO’s figure, not mine or that of a think tank or political party.

[Liz McInnes (Heywood and Middleton) (Lab)]

I am grateful to the hon. Gentleman for bringing this important debate to the Chamber. It is not just the NAO’s figure. I have had letters from headteachers of schools in my constituency who say they appear to be facing an 8% cut in real terms, and that that will lead to schools either going into deficit or having to make devastating cuts, having already made many efficiency savings.

[John Pugh]

Yes; they are mandated to make further efficiency savings.

Interestingly, on page 14 of the document, the NAO states that schools

“have not experienced this level of reduction in spending power since the mid 1990s.”

It may be pure coincidence, Mr Streeter, that there was a Conservative majority Government in the mid-1990s, but I draw your attention to that. Impacts will be worse on secondary schools; the NAO said that the number spending above income has increased from 33% to 59%. Not only has the number gone up but the size of the deficits that are being handled has gone up. If we add to that the disappearance of the education services grant, the fact that—as the hon. Member for Heywood and Middleton (Liz McInnes) mentioned—schools are expected to find £3 billion of efficiency savings, and the cost of implementing endless Government initiatives, we have what most of us would describe as a perfect storm, and an absence of financial sustainability.

What is most interesting in the NAO report is what schools appear to be doing to respond to the looming crisis that they can see all too clearly, as the hon. Member for Heywood and Middleton suggested. According to the NAO, they are, generally, increasing class sizes, adjusting teacher contact time, reducing supply cover, replacing experienced staff with less qualified temporary staff, and hiring more bureaucrats to manage the finances as heads become not school leaders but accountants. An odd feature of the situation is that schools are spending less in percentage terms on teaching staff than they were. They are shoring up balances to cope with anticipated deficits and potential redundancies. If they are really unlucky, they must also deal with increasing PFI payments, which are the endowment of a Labour Government.

None of that is conducive, most of us would agree, to educational progress. Some areas of the north are already in fairly dire straits. Cumbria is one example. The NAO report was complete before the Government’s new national funding formula went out to consultation, but it has already altered people’s take on the consequences of the new national formula. The realisation is dawning that the formula is not universally good news and that it will do little to offset a particularly bleak outlook.

We must accept that the redistribution of diminishing resources will always have a predictable outcome. In the north the consequences are severe—certainly in the mid to long term. After inner London, the north-west of England benefits least from the general distribution away from London. However, within that regional profile there are significant losers—for no obviously good reason. The worst affected include Manchester, Kirklees, Wigan, Cheshire, Liverpool and Sefton, whether or not we make allowances for floors and ceilings or the 1.5%. Those areas are key components of the northern powerhouse.

When we drill down to the consequences for particular schools, the position is even more frightening. Christ the King school in Sefton in my constituency—the school that my children went to—is scheduled to lose £426,000, or £441 per pupil. Greenbank high school is scheduled to lose £527,000, or £558 per pupil. Down the road in Sefton Central, Formby high school and Range high school are scheduled to lose similar amounts.

I find it ironic that the situation I am now lamenting as an MP is one that I sought assiduously to forfend and prevent as a council leader. Had we in Sefton not, on a cross-party basis, sought to protect the education budget over many years and given schools both enormous financial independence and active support, the shock and the comedown of the national formula would not have been so severe. Paradoxically, a great strength of Sefton has been its tight network of primary schools. A perverse consequence of that is that, under the new formula, handing children on to secondary schools with good prior attainment de facto damages the budgetary position of the secondary schools, and their ability to sustain progress. That is the particular way in which the formula is rejigged. I think the Minister will understand the point I am endeavouring to make.

I hope that the Minister is taking account of what I am saying. I want to put it in a constructive fashion and put my sentiments across in a helpful rather than a wholly negative way. However, the Department for Education is not famous for its listening skills. I speak to many people to whom the Minister and the Department also speak, and I do not hear a constant refrain about the Department being particularly good in that area. At times it has shown an active contempt for those who have brought it messages it did not want to hear, but it is not malicious—I give it credit for that. It wants to help. It offers financial health checks and warnings from school commissioners. It even makes videos to be helpful, because it is genuinely ambitious for schools and genuinely keen on across-the-board improvements in the north.

However, I can see from my analysis no obvious reason why schooling in the north would change for the better in the present circumstances. Many of the ingredients for improvement that were seen in the London challenge are missing. The London challenge had sufficient predictable funding, although unfortunately that will go under the new formula, I think, and there will be rather less funding. Another thing it had going for it was collaboration, but the school system is now more fragmented than ever, with schools that are financially and academically weaker fearing takeover. The London challenge had clear, effective leadership, but heads are now stressing over finances and personnel management rather than the main issue, and local authorities are withering away.

The demise of the local authority has acute effects. Its statutory functions are barely affordable at the moment, given the pressure on council budgets, but following the phasing out of the ESG, its other strategic functions will be dependent on funding from schools that cannot afford to meet their own costs, let alone to pay back and hire local authority services. Ironically, back-office services, which are growing in individual schools, are one area in which schools can get good money from a local authority, from collaboration through the sharing of services. We need only look at the increased problem that primary academies are having with meeting back-office costs to realise that.

I have not come here simply to present the Minister with problems to which there are no obvious solutions. The solution is to recognise that we have a problem and to engage in a debate with headteachers, who have no particular political axe to grind but are now looking at a worrying landscape. That headteachers in the north are looking at that worrying landscape should give us no confidence that any attempt, by commissioners or whomever, to raise educational standards in the north and to deal with long-standing problems will be properly and sustainably addressed. With that plea and that degree of pessimism, I will sit down.