School Funding Formula (London)

John Redwood Excerpts

Wednesday 28th June 2017 Commons Chamber

[Sir Vince Cable]

My right hon. Friend anticipates a point I was going to make, but he is absolutely right to say that this problem is widely shared. Several elements have contributed to this anxiety in the schools sector, one of which is that we have had flat or falling funding in nominal terms per pupil, certainly over the past couple of years—it is a small fall but it is significant. Much more seriously, there has been a very big increase in costs. Costs that were previously borne by central Government are now being offloaded on to individual schools. Some of them are obvious ones, such as national insurance contributions, which have added a couple of percentage points to the payroll—that is 80% of the cost of a typical school. The increase in pension contributions is another.

One particularly bizarre item causing considerable puzzlement in schools is the apprenticeship levy. I can perhaps claim some authorship of the original ideas behind the levy, from the coalition years, but none of us ever intended that it would apply to schools. The training of teachers, and indeed other professionals, does not go through an apprenticeship route. It appears that this is being introduced because people in maintained schools are regarded as council employees, and of course the whole direction of Government funding is to move in the opposite direction. In addition, there is a completely bizarre distinction between academies and non-academies. I wonder whether the Minister, in discussions with his colleagues, can lift what is not a massive but an extremely irritating and, at the margin, onerous burden on schools. It is something that would help significantly, and the burden is clearly inappropriate.

The consequence of these changes, together with the new funding formula that the Government have mooted, is very significant indeed. The National Audit Office has estimated that, between 2014-15 and 2019-20, which is when the funding formula comes in, there will have been an 8% real cut overall in English schools. The Education Policy Institute, which has done a parallel study and is broadly in favour of the principle of the funding formula, notes that the cut is something in the order of 6% to 11% in the narrower period of 2016-17 to 2019-20, with more than half of primary and secondary schools facing cuts of that magnitude.

Let me take the discussion very specifically to the funding formula, which is how I couched this debate. I have no objection—I do not think that any of us possibly could have—to the principle of trying to achieve fairness in the allocation of funds. It is a perfectly desirable objective. Although there is never likely to be much of a consensus on this, striving to achieve better fairness in distribution is a perfectly acceptable philosophical principle. I am not coming here to make a particular whinge about my own Twickenham constituency and borough, because, as the figures net out, we are not significant losers. Indeed, on some calculations, there may be a small gain, but that is not the case in many parts of inner London, which will be hit very severely. None the less, there are some very serious problems with the funding formula as it is due to be applied, and I just wanted to raise them with the Minister in the hope that he can give us some confidence that they will be addressed.

My first concern is that, clearly, it is much easier to introduce a new funding formula when budgets overall are flat or rising than when they are falling. It is a simple matter of common sense. Some secondary schools in my constituency face 3% real cuts to meet the funding formula. If that were done at a time when their budget was flat and others were rising, one can see how they could accommodate it, but imposing on already very stressed financial budgets real cuts as a consequence of the formula is just making this deeply, deeply unattractive.

The informed estimate is that if the Government were to bring in the funding formula while ensuring that no school actually loses in absolute terms, it would probably cost them £335 million. That sounds a lot of money, but, as my right hon. Friend has pointed out, in relation to some of the other transactions of the past 48 hours it probably is not all that significant. Can the Minister clarify a commitment, which I think was made in his party’s manifesto, that the Government will ensure that no school is absolutely worse off as a result of the formula? That would certainly help to lubricate the whole process.

My second concern is different and has nothing to do with money. It is about the centralisation of decision-making that is a consequence of this new formula. At present, there is a significant degree of flexibility for local authorities in moving money within the funding blocks, particularly within the school block. That enables local authorities to take account of local circumstances. In my particular case, we have a significant number of problems in the secondary sector. This involves a significant number of outer borough pupils, the fact that we have a large number of pupils who go into the private sector at 11 or thereabouts, and more challenging demands on the secondary sector. There is an understanding locally that, effectively, there should be a cross subsidy from primary to secondary. That is the result of local circumstances, and people understand that and accept it. Under the funding formula, such local, particular concerns can no longer be taken into account. One of the practical consequences in my area is that the secondary schools, which have particular needs, will be very savagely hit, because the cuts will fall on them disproportionately. As I understand it, there will be very little capacity in the Department for Education or with regional commissioners to handle the kind of local negotiation that would be required to take account of such particularities. I ask the Minister to try to ensure that as we move to a new funding system, it does not become hopelessly over-centralised. There is a real danger that we have a Soviet style of financial allocation that takes no account of local circumstances.

My third concern is about special needs and disadvantaged pupils who fall within the special educational needs block. As the Minister knows, funding for that at a local level is a complete mess. Local authorities are not funded up to anywhere remotely near the level that is required to meet the special needs of statemented pupils. The new plan system, which was passed in the last Parliament, requires substantial funding, which is simply not available. Local schools are having to use out-of-borough private providers of special needs education, which is often very high cost. Indeed, one of the things the Government should think about is a Competition and Markets Authority referral for some of these institutions.

Whatever the reasons, local councils have run up very large deficits on their special needs budgets. They are having to use school block money in order to support it. Many schools are in great difficulty as a result of the financing of special needs, so much so that schools that were regarded as centres of excellence are now trying to deter people from coming because of the extra cost involved, and a pass-the-parcel system is developing with special needs, which is deeply unhealthy, and completely inimical to good schooling.

A fourth concern I have about the proposals as they currently stand is that all kinds of perverse incentives are built into the rather complex formula that the Department has evolved, one of which is that it penalises high achievement. I happen to represent a borough where 50% of schools are regarded as “outstanding” and the other 50% “good”. It is a very high achievement area. Parents have very high expectations: schools deliver. Under the formula, high achievement will be penalised, and the funding is being redirected to schools in which there is low achievement. One of the utterly perverse consequences is that schools in London, particularly in inner London—areas such as Hackney, Lewisham and Lambeth, which 20 or 30 years ago were regarded as dreadful sink schools—are now very high-achieving schools in terms of value added, and those schools will need significant amounts of funding.

[John Redwood (Wokingham) (Con)]

The right hon. Gentleman is making a very good point. Certainly in Wokingham, which has very low per-pupil amounts and good-performing schools, we feel there is a problem. Was not the idea of the reform to have a higher absolute amount for every pupil in the country, because there is a basic cost wherever you are being educated?

[Sir Vince Cable]

Yes, indeed. The right hon. Gentleman makes the important point that it is not just a question to read having a basic amount of funding, but an evidence base for what the cost of running a school actually is. I worry that as the formula is currently devised, there is no evidence base. Wild guesses have been made about the differential costs of secondary and primary schooling, and we need objective studies of what it costs to run a school, so that the formula can work well.