National Funding Formula: Social Mobility

Stephen Lloyd Excerpts

Tuesday 22nd May 2018 Westminster Hall

[Stephen Lloyd (Eastbourne) (LD)]

It is a privilege to serve under your chairmanship, Mr Walker. I thank my hon. Friend the Member for Bath (Wera Hobhouse) for securing the debate. It was very short-notice but, as she flagged up, this is an important issue.

This is one of those fascinating debates where it is a bit like the old cliché of apples and pears, in the sense that one side says one thing, and the other side tweaks it a wee bit, says, “It’s an apple, not a pear,” and stands the argument on its head. Rather than going round in circles, which we can do, frankly, for hours, I will mention one point in particular that strikes home to me.

I have been involved in politics for nigh on 20 years, and previously I spent many years in business. In all the years that I have been in politics, I have discovered that senior public sector people very rarely put their head above the parapet—for obvious reasons, as doing so can put their career in jeopardy. Whether that is right or wrong is irrelevant to the argument. The main thing is that colleagues will remember that, last year, 5,000 headteachers across the country not only wrote to their Members of Parliament and to the Government but went on a march, because they were so anxious about what they said were real-terms cuts to our schools budget. Before I get on to those cuts, I reiterate that I have never seen, in all my years in politics, so many senior people within schools say, “We can’t be doing with this any more. We’re going on a march. We need the money, otherwise our schools are in trouble.” That was so significant to me.

Clearly I know a lot of my local schools, and I met a lot of the heads both when I was first an MP and during the time after I was briefly defenestrated before coming back as the Member of Parliament. I have known some of those people for a long time. I can even remember, in the halcyon days of the coalition, trying to get them to go public on particular issues. There was no way that they would put their head above the parapet, because they did not need the grief. On this issue, however, heads across the country—in Labour, Conservative and Liberal areas across England—were so angry that they rose up and said, “Our schools are facing a crisis.”

To be fair, the then Secretary of State, the right hon. Member for Putney (Justine Greening), listened and came up with an additional £1.3 billion. I am quite sure that there were sound political reasons for that as well, because of the snap election, but I will give her due credit because I think she deserves it. Despite our being on different sides politically, I thought that she was a good Secretary of State.

[Layla Moran]

Does my hon. Friend agree that it was slightly concerning that that £1.3 billion was not new money? When the Public Accounts Committee, on which I sit, questioned representatives from the Department on where that money would come from, they said that the vast majority of it was coming from so-called efficiency savings. At the time, they were unable to tell us exactly where the money was coming from. Does my hon. Friend share my worry about that?

[Stephen Lloyd]

I entirely agree. A lot of it was apparently not new money, and anyway, even with the best will in the world, it just held everything in place for 12 months—it did not solve the problem. As my hon. Friend has emphasised, as we began to pick into and drill down into those figures, what did we discover? We discovered that quite a lot of it was not the new money it was initially alleged to be.

Having said that, I pay tribute to the right hon. Member for Putney. I believe that her heart was in the right place and that she was fighting the schools’ corner as strongly as she could. I certainly think she was probably more on our side of the divide when it came to grammar schools, which is possibly why she is now the ex-Secretary of State—but who am I to make such an allegation?

I come back to the important fact that the headteachers—the people who know—say that funding is going down; there are not net increases, and it has been going on for years and causing real problems. Teachers have not had a decent wage increase in many years, and again, there is a real cross-party push on that. We are hearing soundings from within Government that there is an appreciation that teachers’ wages need to be increased more in line with inflation, similar to the situation in the NHS. However, it is terribly important, to pick up on the point made by my hon. Friend the Member for Oxford West and Abingdon (Layla Moran), that that is done with new money. If we finally do get that salary increase for teachers, and there is the same story of efficiencies—after seven years they are really beginning to cut into the lean muscle, with the fat having gone from the whole sector—that will be very disappointing. If the Government sign off a good pay increase on the one hand but then on the other hand say that it has to come from school budgets, we will go even further backwards.

I have known the Minister a long time; I hold him in genuine respect, even with our disagreements in the past. I urge him to make a statement today about the scale of the salary rise and a commitment that it will funded by new money and not taken from school budgets, which would just make a bad situation chronic.

My hon. Friend the Member for Oxford West and Abingdon and I have tabled an early-day motion today, specifically urging that the Government find new money to pay teachers a decent increase after their many years of getting static salary increases. I urge hon. Members to sign the early-day motion; I am sure it is very much a cross-party aim that many of us would support.

As I said, it comes down to apples and pears. The National Audit Office—as we all know, it is a highly reputable, respected body—says that in 2018-19, schools will experience additional cost pressures of 1.6%. That may not sound an awful lot, but after a few years of consistent 1%, 2% and 2.5% rises, and a failure to get net funding increases, it adds up considerably. The additional cost pressure comes on top of several years of static Government funding and increases in pupil numbers, salary increments, employer national insurance contributions, employer pension contributions and inflation, meaning that real school budgets have seen a decline of—wait for it—about 15%.

I was in business for years before I went into politics. I know how to trim and how to make efficiency savings. When times are tough, we have to go through efficiency savings. I wholly signed up to those necessary efficiency savings in coalition, but there comes a time when a line needs to be drawn. If someone is looking at a 15% real-terms cut in their business, school or hospital, they are heading for a car crash. That is why I, my hon. Friend the Member for Bath, my hon. Friend the Member for Oxford West and Abingdon, who is the Liberal Democrat lead in this area, and the Labour party urge the Government to make a longer-term, significant increase to contributions to the schools budget, as well as a separate increase to teachers’ wages.

[Layla Moran]

Does my hon. Friend recognise from meetings he has had with headteachers, as I have had, that the reason why this is significant is that roughly 75% of a school’s budget goes on its teaching and support staff? The reduction in budget can only come from what is left. Schools have now got to the point where they can cut no more without affecting frontline staff, and that will lead to a drop in the quality of service that we can give children and parents across the country.

[Stephen Lloyd]

My hon. Friend is so right. We know that is true. Hon. Members will have spoken to their local headteachers and visited their schools. The number of teaching assistants has been slashed, and support for disabled children is under tremendous pressure. The schools are creaking—there are no two ways about it. I know that the budget is huge and there are thousands and thousands of schools across the country, but having proper funding is such a crucial part of our nation’s future.

I reiterate the point made by my hon. Friend the Member for Bath about grammar school investment. I thought that, after the catastrophic consequence of the snap election in 2017 for the governing party, the whole idea of grammar schools had been kicked into the long grass. Suddenly, out of nowhere, it got into the headlines last week—another £50 million for grammar schools. There really are better ways than grammar schools in a society where we are trying to give everyone the same opportunities to succeed. Without banging on about it, there is so much empirical evidence that shows that they are counterproductive and do not improve outcomes for disadvantaged people. There is so much evidence there that I will not even bore the Minister by outlining it.

I am grateful to my hon. Friend the Member for Bath for securing this really important debate on an issue that affects our future and our children’s future. I had the pleasure of welcoming pupils from a wonderful school in my constituency called Shinewater this morning. I know it well; I have visited it probably one gazillion times over the years that I have been either the MP or the parliamentary candidate. It is in a more disadvantaged part of my wonderful constituency of Eastbourne, in Langney. It is a great school with passionate teachers, and the sort of school where the Liberal Democrat policy of the pupil premium, which we delivered when we were in coalition, makes such a difference. That additional funding and support means that children who may not have the obvious advantages that I and many other Members of Parliament have had have an equal chance to have a very successful life in their jobs and relationships.

It was wonderful to welcome the children here. They were all about six or seven years old. Many of them had never even been on a train, let alone an underground. It is so long ago that I was that young that I can barely remember, but it was a pleasure to welcome them. I know the pressure that school is under. It is a good school, and it is doing its best and doing well, but it does not have anywhere near the number of TAs that it used to have. Its funding for special educational needs is severely stretched, and likewise its funding from the county council. It is the sort of school where the teachers go the extra mile, beyond anything that any teachers would have even contemplated 30, 40 or 50 years ago. They do it because they are passionate about the children and the school. I urge the Minister to help us to help schools such as Shinewater around the country—to give them the budget they deserve, to give the teachers the salary rise they deserve and to secure our schools’ funding and future for many years to come.

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[Stephen Lloyd]

On that basis, how does the Minister explain the fact that in the past 18 months or so the number of schools releasing teaching assistants has grown faster than in the previous few years? Does he accept that that must be because of budgetary pressures and that, if it happens across the piece, it could lead to severe challenges down the line?

[Nick Gibb]

We have a benchmarking website where schools can look at their pupil-staff ratios. We have a tool that schools are using, called the curriculum-led financial planning tool. Schools can examine their curriculum using the tool, which was developed by some schools in the north of England—the Outwood Grange multi-academy trust—to ensure that over a three to five-year time span they are planning their staffing to reflect their curriculum. I think that a lot of schools are applying that tool and becoming more efficient. We are helping schools to manage their resources in a way that ensures they can balance the budget.

Every school will, according to the national funding formula, receive an increase in funding of at least 0.5%, but the Secretary of State has acknowledged on many occasions, as I have today, that there have been cost pressures: employers’ national insurance contributions have risen, as they have across the public and private sectors, and there are higher employer’s contributions to the teachers’ pension scheme. We think that is the right thing to do, to get the balance of the cost of those things spread between the schools and the taxpayer and to help to deal with the deficit. We are helping schools to tackle those cost pressures, but the hon. Gentleman should remember that we are spending record amounts of money on schools—£42.4 billion this year rising to £43.5 billion next year. We have been able to do that and maintain per pupil funding in real terms because we have a strong economy and have managed the public finances in a sensible way, bringing down the deficit and keeping public spending under control.

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[Nick Gibb]

We have to live within our budget, and the Treasury has to work with the tax receipts it receives and deal with the historic budget deficit it inherited. Somebody has to lend the state that money, and they would not lend us £150 billion every year if we showed no sign of reducing that figure to something more manageable and did not plan ultimately to eliminate it altogether. That is what is happening. That is why we have a strong economy and the lowest level of unemployment for 40 years, why there are opportunities for young people to have a job once they leave our school system, and why fewer children are living in workless households. That is all part of how to manage the public sector in a serious way, which is what the Government have been doing since 2010. That is why we have been able to maintain school funding in real terms over that period, spend £23 billion on capital funding for schools, and fund an increase of 825,000 school places to deal with the increasing pupil population.[Official Report, 19 June 2018, Vol. 643, c. 2MC.]

When we came into office in 2010, we discovered that the previous Government had cut 100,000 school places, despite the increase in the birth rate at the turn of the millennium. We were very sensible in how we managed the capital budget and the revenue budget at a time when we had to tackle a very serious budget deficit as a consequence of the banking crash in 2008.

[Stephen Lloyd]

The Minister has been talking a lot about the national fair funding formula and the additional money in the constituencies of the hon. Member for South Shields (Mrs Lewell-Buck) and of my hon. Friends the Members for Bath and for Oxford West and Abingdon. When exactly will that national funding formula come in? Does the Minister acknowledge that when it comes in, it will be taking over from cuts of upwards of 20%? There is an awful lot for it to make up for.

[Nick Gibb]

It came in this year, for 2018-19. In the first two years, because of the transition, we want to allow local authorities to have some discretion over how they implement it on a school by school basis. Most authorities are moving quite close to the national funding formula if not moving to it fully, but some want to tweak it for the two years of the transition, and we have allowed that. As I said, we acknowledge that there have been cost pressures, and are helping schools to manage those cost pressures. Going forward, as the IFS said, we are maintaining funding in real terms per pupil for the next two years, because we have managed to secure an extra £1.3 billion.

We are absolutely committed to providing the greatest support to the children who face the greatest barriers to success. That is why we have reformed not just the schools formula but high needs provision, by introducing a high needs national funding formula. It will distribute funding for children and young people with high needs more fairly, based on accepted indicators of need in each area. The extra money that we are making available means that every local authority will see a minimum increase in high needs funding of 0.5% in 2018 and 1% in 2019-20. Underfunded local authorities will receive gains of up to 3% a year per head for the next two years. Overall, local authorities will receive £6 billion to support those with high needs in 2018-19, up by more than £1 billion since 2013-14.

I will draw my remarks to a close, to allow the hon. Member for Bath to make a final contribution to the debate. I thank all Members who have contributed to the debate. Our prime concern is the investment we are making in schools and the steps we are taking to ensure that that money reaches the schools that need it most. That is why we have introduced the national funding formula.

We have been reforming our schools system since 2010, by changing the curriculum to improve the way children are taught to read and the way that maths is taught in our schools. We have reformed our GCSEs so that they are on a par with some of the qualifications taken in higher education institutions around the country. We have been improving behaviour; we have given teachers more powers to deal with bad behaviour in our schools. Standards are rising in our primary and secondary schools, and the attainment gap between children from wealthier and poorer families is closing by 10% in both. Clearly there is more to do, but we are on the right track. Our funding formula is a fairer and more transparent way of distributing funding to our schools.