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ITEM EX14

EXECUTIVE – 19 APRIL 2005

FUTURE SCHOOLS FUNDING

Report by Director for Learning & Culture and Head of Finance & Procurement

1. In July 2005, the Department for Education & Skills (DfES) published its Five Year Strategy for Children and Learners. A highly publicised element of the strategy was to give schools the security of three budgets aligned to academic years to enable improved planning. This is a challenging aspiration and the detailed proposals have been keenly awaited. The consultation documents were received on 16 February, a little later than anticipated. (The full Consultation paper is available on the DfES website, www.teachernet.gov.uk/management/schoolfunding/consultation/) The consultation covers 5 broad areas:

• Three year budgets for schools;
• The new Dedicated Schools Grant;
• Distribution of funding from local authorities to schools;
• The new Single Standards Grant; and
• Strategic financial management, planning and efficiency.

2. There are 35 consultation questions for local authorities to respond to, the closing date for comment being 13 May 2005. This is the last opportunity for the Executive to comment before the deadline. There will also be an opportunity to discuss Oxfordshire’s response with the Schools Forum at its next scheduled meeting on 28 April 2005. The proposed response to the consultation is attached at Annex 1 (download as .doc file).

Three Year Budgets for Schools

3. The DfES intention is for schools to be able to plan ahead for more than one academic year. However, providing schools with three year budgets does not necessarily require them to account on the same basis.
4. The current Spending Review (SR) cycle generates a three year settlement every other year for all services. So the foundations do exist to give a funding commitment.

November 2004	November 2005	November 2006	November 2007	November 2008
July 04 SR
2005/06
2006/07	2006/07	July 06 SR
2007/08	2007/08	2007/08
		2008/09	2008/09	July 08 SR
		2009/10	2009/10	2009/10
				2010/2011
				2011/2012

5. The coverage for the academic year is clearly different. This raises two issues. Firstly, the school academic year 2007/08 extends five months beyond the financial year 2007/08. In order to provide academic year budgets on a multi year basis this five month issue would need to be addressed. Whilst the funding wouldn’t be guaranteed, the DfES are, nevertheless, looking to be able to give such a commitment. Secondly, figures will need to be tied back to both financial and academic years. The DfES are likening this to the approach taken with the Learning & Skills Council (LSC) funding of sixth forms whereby allocations are given on an academic year basis but detailed information is provided to break the sums down into financial years.
6. LSC funding allocations tie in with the further education planning cycle, i.e. August to July. The DfES seeks views on whether this or September to August would be most helpful. It is interesting that the remainder of their document follows the September to August path.
7. The local authority will have to continue to account on a financial year basis for a number of reasons; not least because they form part of the UK Government accounts, which are on a financial year basis. If there were a desire to synchronise financial and academic benchmarking then closure of the accounts twice each year would need to be considered. The DfES estimates that this would cost a typical primary or special school £300 and a secondary £360.

The New Dedicated Schools Grant

8. Currently local authorities are funded for Schools Block expenditure through the Formula Spending Share and hence general grant. Regulations are in place to ensure that year on year increases in funding are spent on the Schools Block. Under the proposals these arrangements will change dramatically, with a specific ring fenced grant, the Dedicated Schools Grant (DSG) replacing the formula spending share and general grant. The passporting regulations would be repealed.
9. The size of the grant will be announced during 2005. It would be calculated using the same factors and data that are used in the calculation of the Schools Block Formula Spending Share (SFSS).
10. Under the three year budget proposals DSG would need to change in response to pupil numbers. There is at present a 15 month lag between pupil numbers and funding – January 2004 primary numbers feed into the SFSS for 2005/06. A number of suggested approaches are put forward, one of which is to use forecast and adjust funding when the actuals are known, e.g. DSG allocations for April to August 2006 would use January 2006 pupils, the 2006/07 academic year would use January 2007 pupils and the 2007/08 academic year use January 2008 pupils. This would therefore not be straightforward.
11. There is a desire to use only one count; it will be some years, apparently, before Pupil Level Annual School Census (PLASC) enables the DfES to collect September pupils.
12. An alternative would be to announce a unit of resource for each authority.
13. If there is to be stability, there will also be a need to fix other data in the calculation.
14. There will be transitional arrangements put in place to ensure that no authority would receive less funding than its current level of spend. This was a commitment in the Five Year Strategy. The consultation includes some diagrams setting out how this protection would operate. There are floors and ceilings in the current arrangements and these are also planned to continue.
15. The DfES sees little justification in the continuation of a separate Teacher’s Pay Grant. It does not make sense that some 5% of the pay bill is handled differently from the rest of the pay bill. This grant would, therefore, be transferred into the DSG.

Distribution of Funding from Local Authorities to Schools

16. There are initial implications for local authorities. They will need to take a decision on the split between delegated items and central items such as Special Educational Needs and Early Years. The Central Expenditure Limit regulations will remain. The Minimum Funding Guarantee will also remain; here the debate is whether to put in place a high guarantee, greater than cost pressures or a lower one, which would allow some flexibility in local formulas.
17. Authorities will need to plan further ahead with formula review. The consultation sets out when formula review would be feasible.

	Academic Years	Work up formula changes	Consult on changes	DSG allocations	School budgets
First Settlement	06/07 07/08	To summer 05	Autumn 05	Nov 05	Early 06
SR06	08/09 09/10	To summer 06	Autumn 06	Nov 06	Early 07
SR08	10/11 11/12	To summer 08	Autumn 08	Nov 08	Early 09

18. There is a similar discussion here as with DSG. Should three year allocations be adjusted only for changes in pupil numbers or should other formula factors be updated? There is also a question as to whether funding for named SEN pupils should be included at all.
19. There is further mention of the Teachers’ Pay Grant. The DfES preference is for it to be part of the formula – the current arrangements do not incentivise schools to manage their staffing and pay decisions actively.
20. Running parallel to this consultation is the Deprivation Funding Review; there is much diversity in the way in which local authorities address this issue. The outcomes of this review will feed into this consultation.

The New Single Standards Grant

21. There is to be a two stage transition to bring Standards Funds and Schools Standards Grant together. Firstly, the existing Standards Funds will be amalgamated and the Schools Standards Grant would move to a fairer fixed sum plus an amount per pupil basis. There would then be a merged single grant from April 2008.
22. A number of existing Standards Fund grants would continue separately outside these arrangements.
23. A number of grants currently require matched funding. This would effectively be part of the DSG but will instead be moved into this new Single Standards Grant to make it 100% funded. The baseline for the new grant will be 2005/06 Standards Funds allocations, not take-up. This does have implications for Oxfordshire where we have not taken up £278,000 of the £8m allocation for the School Development Grant and £77,809 of the £431k for Advanced Skills Teachers. We would, effectively, need to find the 176k matched funding.

Strategic Financial Management, Planning and Efficiency

24. This section is essentially descriptive, setting out and developing a number of initiatives already in place.
25. The Financial Management in Schools Programme put in place after the funding crisis continues this year with workshops on planning, preparation and assessment (PPA) time for teachers. Oxfordshire was part of the programme and it was an excellent development opportunity for two members of the Finance Team.
26. Financial benchmarking is well in place as we move to the third year of Consistent Financial Reporting (CFR).
27. The DfES have put together a very comprehensive Financial Management Standard and Toolkit. We have been using it as a reference point for advice, guidance and training. The DfES are looking to make it a mandatory standard.
28. The Spending Review 2004 sets efficiency targets of 2.5%. Efficiency in schools is about making the most of resources, not cutting expenditure. DfES will measure these gains and report to the Office for The Deputy Prime Minister (ODPM).

RECOMMENDATIONS

29. The Executive is RECOMMENDED to agree the response to the Consultation paper as set out in the Annex (download as .doc file) to the report.

KEITH BARTLEY
Director for Learning & Culture

SUE SCANE
Head of Finance & Procurement

Background Papers: Nil

Contact Officers:
Matt Bowmer, Strategic Finance Manager, Learning & Culture Tel. 01865 815474
David Illingworth, Finance and Planning Consultant, Resources Tel. 01865 815352

April 2005

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