Schools: Funding

Lord Agnew of Oulton Excerpts

Thursday 29th November 2018 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Education (Lord Agnew of Oulton) (Con)]

My Lords, I congratulate the noble Baroness, Lady Morris, on securing this important debate on school funding. I acknowledge her great experience on this subject, particularly as a former Secretary of State for Education. It is a key priority for this Government to ensure that every child receives a world-class education to enable them to reach their full potential. We are determined to create an education system that offers opportunity to everyone, no matter what their circumstance or where they live. Raising educational standards is the key to everything we are doing, so ensuring that the financial resources are divided in the right way is vital to that.

However, I know enough about basic psychology to know that most noble Lords will approach this debate with their minds made up. None the less, as ever, I will do my best to show the House that the picture is far less bleak than commonly portrayed. We are making significant progress: more schools than ever are being rated good or outstanding. The noble Lord, Lord Watson, challenges that and says that the framework has changed. I suggest that it is actually tougher than it was seven or eight years ago. The attainment gap is closing—a significant priority for us—and, if we are here for social mobility, then that is one of the greatest pieces of evidence of what we have done. We have launched 12 opportunity areas to drive improvement in parts of the country that we know can do better. We are investing in our schools and have delivered on our promise to reform the unfair, opaque and outdated school funding system by introducing the national funding formula.

As my noble friend Lady Eaton said, we are investing an additional £1.3 billion in our schools across this year and next, as confirmed in our 2015 spending review. This significant additional investment means that core funding for schools and high needs will rise from almost £41 billion in 2017-18 to £42.4 billion in 2018-19 and £43.5 billion in 2019-20.

I take on board the comments from the noble Baroness, Lady Morris, and other noble Lords about statistics, but the independent Institute for Fiscal Studies has shown that real-terms per pupil funding for five to 16 year-olds in 2020 will be more than 50% higher than in 2000 and some 70% higher than in 1990. We could put these figures in a different way, and I accept that these debates can become somewhat reductive, but this is another way to deal with it than the way the noble Lords, Lord Bassam and Lord Storey, did. Putting it in the context of an average classroom, funding for an average primary school class this year is £132,000—up from around £124,000 a decade ago and £84,000 in 2000. That is in today’s prices. Those same children will receive an average of £171,000 when they move to secondary school per class, up from around £161,000 a decade ago and £109,000 in 2000, again in today’s prices.

It is not just the quantum of funding available that matters; it is vital that it is distributed fairly and where it is most needed. Prior to our recent reform of the funding system, schools with similar pupil characteristics across the country had been receiving markedly different levels of funding for no good reason. For example, Coventry received £510 more per pupil than Plymouth, despite having equal proportions of pupils eligible for free school meals. Nottingham similarly attracted £555 per pupil more than Halton. That is why our commitment to reform the unfair school and high-needs funding systems and introduce the funding formula has been so important. I am pleased that it has been this Government who have been able to deliver on that. The introduction of the national funding formula means that this year, for the first time, funding was distributed to local areas based on the individual needs and characteristics of every school in the country. This historic reform is the biggest improvement to school funding for a decade and is directing resources where they are needed most.

On a lighter note, I have a cold—I apologise to noble Lords—and I asked my office to get me some Tunes for my speech. None of them had ever heard of Tunes, so they said that they would google them. They sent a note through the Box just before I came here that said, “We couldn’t find choons”. Maybe my education priorities should be refocused.

Schools are already benefiting from the gains delivered by the funding formula. It has allocated an increase for every child in every school this year, while allocating the biggest increase to those schools that have been most underfunded. This year, schools that have been historically underfunded have attracted increases of up to 3% per pupil. Next year those schools will attract up to 6% more per pupil, compared with 2017-18.

We are particularly focused on supporting children who face great barriers to success, be that because they come from a disadvantaged background, have low prior attainment, or speak English as an additional language. Evidence shows that pupils with these characteristics are more likely to need extra support to reach their full potential. It is vital that we help schools to provide the support these pupils need. The national funding formula has protected the £5.9 billion additional needs funding across the system.

Under the national funding formula, a secondary pupil who had low attainment in key stage 2 will attract some additional £1,550 per year while in secondary education. A secondary pupil who speaks English as an additional language will attract an additional £1,385. A secondary pupil eligible for free school meals and living in one of the most deprived postcodes will attract an additional £2,035. Funding through these factors is all in addition to the basic per pupil funding that the child attracts. These important priorities are often misunderstood or ignored by the commentariat. I accept that it is a complicated system, but it is very much aimed to deal with those children in most need.

[Baroness McIntosh of Hudnall]

My Lords, I do not know whether the noble Lord is about to leave the question of the funding formula, but before he does, could he comment on the observations from my noble friends Lady Morris and Lord Knight that, while there might be some merit in the formula in itself, trying to implement it when the overall quantum of funds available is not increasing sufficiently means there will inevitably be many losers as well as a few gainers?

[Lord Agnew of Oulton]

My Lords, I entirely accept that this is an extremely difficult subject that has been kicked down the road for a long time. Doing it at a time when there are not huge amounts of additional money makes it difficult, but the system puts a floor in the bottom so that no one loses out. Of course, the debate will always be about why we are not moving the bottom ones up quicker. I met a head from West Sussex only last week—

[Lord Bassam of Brighton]

The noble Lord is being extremely courteous and helpful to the House, but what he does not seem to be doing is explaining why it is that all these schools, in experiencing what he is saying are increases in budgets, are also experiencing reductions and losing the ability to provide the level of service that they have provided in the past. The Barnet study is a good case in point, because it is not just one isolated school; it is all the Barnet schools. While I am here, I recommend to the noble Lord that he uses Lockets next time, rather than worry about Tunes.

[Lord Agnew of Oulton]

I thank the noble Lord for that very important piece of advice. There is a very complicated answer to the noble Lord’s question. It goes right back to the 1990s, to a system of training called COSMOs that was given to head teachers then. That training has not been continued and has lapsed, but what it showed senior leaders in the 1990s was how to most effectively allocate resources in their schools. A lot of those skills have been lost. I will cover some of the individual questions that have been raised—I have some figures for the noble Lord, Lord Bassam, on Barnet, for example.

I now turn to high needs. We recognise the concerns of the noble Lord, Lord Addington, and my noble friend Lady Eaton about funding for children and young people with high needs. We are also concerned about provision for excluded pupils. We have produced a range of support for local authorities to help them best use the resources they have available, including a high needs benchmarking tool by which they can compare spending. We have increased overall funding allocations to local authorities for high needs by £130 million last year and £142 million this year. We will increase this further next year, by approximately £120 million. In fact, high-needs funding will be more than £6 billion next year and will have risen by £1 billion since 2013. Every local authority will see an increase to their high-needs funding per head of the population of two to 18 year-olds this year and next, with underfunded authorities receiving up to 6% more next year than in 2017-18.

The noble Lord, Lord Knight, and the noble Baroness, Lady Massey, asked about mental health care for young people. We are very concerned about that—one would be callous to say anything else—and are putting more resources in. Our Green Paper last year set out proposals to support schools to put in place senior leads for mental health, to introduce new mental health support teams working in or near schools and colleges, and a trial of a new four-week waiting time for NHS children and young people’s mental health services. As came up in a Question earlier this week, the NHS itself is committing £2 billion more to mental health, which will include, over the next several years, adding 8,000 mental health professionals to the system.

The noble Lord, Lord Addington, asked about improving teaching for, and increasing awareness of, the kind of challenges that he is so passionate about. We are increasing the level of resources available to help teachers support children with SEN. We have a special resource in the initial teacher training modules. We have online resources for teachers and the department has also contracted with the Whole School SEND Consortium to deliver a programme to equip schools to support children with SEND, which includes dyslexia.

The noble Lord, Lord Addington, was also concerned about education, health and care plans. We carried out a survey last year that showed that 66% of parents are satisfied with the process. This is, of course, a new process and one we aim to improve.

Turning to efficiency and the points raised by the noble Lord, Lord Watson, on high pay, I completely share his concern about high pay in academies. The very first thing I did when I took on this job just over a year ago was to tackle it. We went after about 213 trusts, I think it was—more than 200 trusts—and since then 56 have stopped making those sorts of payments, for various reasons. That is a campaign that I will continue. I completely support the noble Lord in calling out those who do that.

On school resource management more generally, we recognise that schools have faced cost pressures. I want to be clear to the House that we are not in denial about that. The idea that I operate in a citadel is a dream that I can aspire to, but the real world is rather different, and that is why we are providing extensive support to schools to help get the best value out of every pound. We recently launched a strategy setting out the support, current and planned, that we have designed to help schools reduce costs. It provides practical advice on how to identify potential savings from their non-staff spend that can be put back into teaching to get the best value. To put that in perspective, we have a non-staff spend of about £10 billion a year, and we believe that £1 billion of that could be pulled out of the system over the next three or four years.

We know that marketplaces can be complex, leading to schools facing higher costs than they need to. The initiatives in our schools buying strategy aim to reduce this complexity when procuring goods and services. For example, we recently launched an agency supply teacher deal to provide schools with greater transparency on costs. We now have 34 national deals to help schools save money on items they buy regularly.

The noble Lord, Lord Storey, referred to my comments at the Schools & Academies Show last week—he is obviously very thorough in his research. The reason I used a somewhat strong or controversial approach there is that, for a year now, I have been going round forums such as that show giving endless speeches pointing out that we have these deals available for schools. In the audience for the address he referred to were 200 head teachers and chief executives. I asked those who had used our deals to put up their hands. Out of the 200, five put up their hands. When I arrived in this job a year ago, I wrote to 1,300 chief executives of trusts and told them about the deals that were in place. I said, “If they are no good, please tell me”. How many responses did I get? I did not get one response. I understand the pressures in the system, but the system also has to respond to us. Since we are trying to help them improve efficiency, they need to tell us how we can help them more. That is why I made those comments the other day: it was not to be glib. I am a huge fan of spreading best practice and if there were schools in that audience that were doing interesting, innovative things, I want to let other schools know about that. It is important to put that into context because the trade magazines made fun of me, which of course is grist to the mill in this job.

We have created a benchmarking website for schools. This allows them to compare their spending with that of similar schools elsewhere in the country. We continue to improve this service and recently introduced a trust-to-trust comparison functionality. This will help school and trust leaders to identify if and where improvements can be made.

I am conscious of time. On teachers’ pay and pensions, we have recently responded to recommendations made by the School Teachers’ Review Body to confirm the 2018 pay award for main scale teachers. It is our aim that schools continue to attract high-quality recruits—I take on board the many comments about recruitment challenges—and this award will support them to do that. We will see a 3.5% uplift to the main pay range, 2% to the upper pay range and 1.5% to the leadership pay range. In the main pay range, it is important to stress for noble Lords, this is the biggest percentage increase since 2011.

[Lord Watson of Invergowrie]

The Minister has not mentioned the fact that schools are meant to meet the first 1% of the pay rise themselves, so that is not funded. Can he explain that? Can he also answer my earlier question as to whether he accepts the figures in the Institute for Fiscal Studies report?

[Lord Agnew of Oulton]

The noble Lord is correct that the first 1% of the pay rise is expected to be funded by schools. We believe that that is possible within the efficiencies that I have mentioned. As for the Institute for Fiscal Studies, I believe that it includes within its figures the 16 to 19 year-olds sector, which has seen a tougher regime than the mainstream system: I acknowledge that. We are fully funding the teachers’ pay award beyond the 1%. This will be worth £187 million in 2018-19 and £321 million in 2019-20.

On pensions, we propose to fully fund the increase in pension contributions recently announced for state-funded schools. We know that school budgets for the academic year have already been agreed and, in most cases, schools have allocated those budgets. That is why we have worked with the Treasury to get agreement to implement the changes from September 2019, rather than April 2019. We will consult on the best mechanism to distribute funding to individual schools and announce how it will be distributed in good time, before schools experience the pressures in September 2019.

As we distribute this funding, we will be at the same time more fairly in line with the best available evidence. For example, by using a range of indicators to measure deprivation we are able to ensure our funding reaches all those pupils who need it. It is not limited simply to those who qualify for free school meals. Alongside the additional needs funding in the formula, we continue to deliver the pupil premium, with more than £2.4 billion this year. This is above the funding that we provide through the national funding formula. We will have invested over £13 billion in the pupil premium since 2011 to improve the outcomes for less well-off pupils.

I will now try to address specific questions raised by noble Lords. The noble Lord, Lord Bassam, asked about Barnet but I think he has gone. No, he has not—apologies. Under the NFF for 2019-20, schools in Barnet will attract £4,999 per pupil. This is an addition of £68 per pupil, or 1.3% compared to the 2017-18 figure. The total cash funding will increase by 3.2% and an additional £7.7 million, once rises in pupil numbers are taken into account. Just to explain how important that is, the marginal additional cost of educating one more pupil in a school is not the average per pupil amount. Barnet’s local authority received £48.1 million for high needs, an increase of £1.2 million compared to 2017-18.

My noble friend Lady Eaton and the noble Lord, Lord Watson, referred to the EPI report and the rise in deficits. They are rising, which is a concern, and I am having to spend a great deal of time on that. We are offering advice to local authorities on how to deal with this, but to put things in perspective, 91% of maintained schools reported a cumulative surplus, or that they would be breaking even in 2016-17, with total surpluses of more than £4 billion against a total deficit figure of less than £300 million.

The noble Baroness, Lady Morris, mentioned the shortfall in academy accounts. This is a myth that I want to slaughter early before it gathers traction. The figure referred to is driven almost entirely by an increase in impairment charges, which are non-cash changes to the value of land and buildings. Academies do not have to spend money on impairment charges, and a more realistic figure is that of the net cumulative reserves of the academy sector, which has seen an increase from £2.1 billion to £2.3 billion.

I share the concerns that the right reverend Prelate the Bishop of Worcester and the noble Lord, Lord Storey, have about rural schools. That is why I attended the Lambeth Palace address earlier this week and met the right reverend Prelate the Bishop of Ely yesterday, when we specifically discussed rural schools. I again make a pitch for multi-academy trusts, which are a very good solution to the problem. It is complicated in rural areas because of distance and how small many schools can be but, as I said in my address at Lambeth Palace, we are committed to always having a presumption against the closure of a rural primary school. They are the glue of these rural communities. My own son went to one, which faced closure last year. Since it was in Norfolk, the noble Lord, Lord Watson, would have been upset if I had intervened, but I did not. However, I am pleased to say that it has now joined an academy trust—one which I can tell your Lordships I have nothing to do with. It is important that we have sparsity funding, which is allocated to rural schools. The NFF allocates £25 million and we also give every school a lump sum of £110,000. When that lump sum is coupled with the sparsity factor, it provides meaningful support.

The right reverend Prelate made particular reference to a school where he said that the head teacher was struggling because the school had been asked to double the number of pupils. We have allocated a tremendous amount of basic need funding, with £7 billion during the current spending review between 2015 and 2021. Over the course of the Parliaments since 2010, we have increased the number of pupils by some 825,000 and they have all been funded. I want to reassure him on that.

The noble Lord, Lord Knight, asked about teacher recruitment and supply teachers, among other issues. I mentioned that we have just created a teacher recruitment service, which is now being rolled out across the country. It is a much more cost-efficient service than that provided in the market generally. Likewise, with supply teachers we have created another portal which has got the main supply firms in the country together. It has made them cap their fees and stopped the pernicious practice of charging a recruitment fee if the supply teacher becomes a permanent employee after a number of weeks. These may be only small things, but they all add up.

The noble Baroness, Lady Morris, raised issues about capital. We have committed some £23 billion to capital between 2016 and 2021 but, significantly, I should stress that we have also reduced the build costs per square metre by some 30%. This rises to 35% per square metre when improvements in efficiency and design are included, so we are very committed to that.

The noble Lord, Lord Storey, gave an example of a friend who wrote about possible boiler problems in his or her school. I am not sure whether he said it was under a local authority or an academy but, if it was a local authority school, we make an allocation to local authorities every year of the school condition allowance. It is then for schools inside a local authority to bid in for that. If it was an academy and had more than 3,000 pupils, the academy trust is given an amount of capital which it can then choose to spend as it sees fit.

This leads me on to the BBC documentary “School”, which I have not seen all of, although I of course will do so. However, I saw the first part and felt it was a very disappointing piece of journalism, because it was clearly set up to show how bad everything was. There are a number of challenges in that trust, but just on repairs one line from the journalist said that there were terrible, draughty windows and that the classrooms were therefore cold. When I looked up the figures for the school condition allowance, this trust receives over £1 million from that a year. The school in question—I think it is called Marlwood—is the biggest and, although we do not publish individual amounts per school, because the academy trust is free to use it as it sees fit, I can assure the House that there was plenty of money to deal with those windows. If it had a better call on its money than windows that increase heating costs, this is the sort of thing I get frustrated about. It is not all as one-sided as people think.

I am running out of time—my goodness, I apologise—and I had better sum up. On efficiencies in schools, I heard the comment from the noble Lord, Lord Watson, about the Harris Federation. The fact is that the Harris Federation is so efficient that it is able to employ centrally 80 school improvement teachers, who go out into its weaker schools—or ones it has just taken on—and provide the extra resource. That is one of the secrets of it being such a high-performing trust. Outwood Grange, a trust in the north of England, does a similar thing: it has 65 centrally employed school improvement teachers doing exactly the same and raising standards. It already has more than 900 pupils registering year-on-year for the schools that it took over from WCAT—a trust that failed—because of the improvements being seen.

[Lord Watson of Invergowrie]

I apologise for interrupting the Minister. I just want to be clear for the record that I was not criticising the Harris Federation, for which I have a high regard, but I wish that the noble Lord, Lord Harris of Peckham, had the same regard for the Government’s new funding formula.

[Lord Agnew of Oulton]

I had dinner with my noble Friend, Lord Harris, two nights ago and he is always frank in his views. He is a passionate advocate for his schools and what he has achieved is fantastic. I would like that to go on the record.

I would also like to give an example of a relatively small trust, the Thinking Schools Academy Trust in Kent, which has taken the novel approach of paying £2,000 more to its newly qualified teachers when it recruits them. You may say, “There’s no money around, so how has it done that?”. It has done so because its retention rate on teachers is double the national average. It has only a 10% turnover of staff every year, as against a national turnover of 20%. Thinking in ways like that can make such a difference.

I have been told to stop. I am very grateful to the noble Baroness, Lady Morris—

[Lord Young of Norwood Green]

I am sorry to delay the end, but I asked when the Government were going to review the transition to the new funding formula.

[Lord Agnew of Oulton]

My apologies. We are on a soft programme at the moment that is being reviewed, and then it will be reviewed more formally with the spending review. So I cannot answer that question at the moment. As the noble Lord will know, we are experimenting with giving delegation to local authorities for the high-needs funding block. Some local authorities are using that and some are passing all the funding straight back to schools. That soft launch will last until the funding review, which will be next year.

I thank all noble Lords for their contributions to this important debate. Even more, I pay tribute to the hard work of teachers and schools who give their best to raise standards in our education system. I have worked very closely with these wonderful people and I support the noble Baroness, Lady McIntosh, in what she said about the morale of teachers in the workforce and the fact that they are making a vital contribution.

We are changing the way that funding works. It is not easy, but we are seeing it beginning to bear fruit. This will underpin a further improvement in standards to help create a world-class education system that finally allows every child to achieve their potential, no matter what their background.