Introduction, context and background to this posting. School funding reform takes place against a background of spending cuts and policies to spread Academies and Free Schools.

EDUCATION SPENDING – CUTS IN REAL TERMS

An analysis, including evidence from the Institute of Fiscal Studies, showing how inflation has overtaken projected school spending increases to become a real terms cut.

SCHOOL FUNDING – A BRIEF RECENT HISTORY

Brief history from Charles Clarke in 2003 and Jacqui Smith in 2005, through various changes in School Finance (England) Regulations to Michael Gove’s Written Ministerial Statement on Tuesday 13 December 2011.

THREE LATEST CONSULTATIONS FROM 2010 TO THE PRESENT  

Ed Balls’ “Consultation on the Future Distribution of School Funding” in March 2010, Coalition Government first “Consultation on School Funding Reform – Rationale and Principles” in April 2011 and Coalition Government second “Consultation on School Funding Reform: Proposals for a Fairer System” in July 2011. Includes context and comments on these Consultations.

MAIN ISSUES IN SECOND COALITION CONSULTATION AND RESPONSES

Details of respondents to this Consultation and summary of school funding factors in these responses. Throughout these responses there is general support for the Consultation Document.

CONCLUSIONS

Though there will be even bigger disparities if reform does not proceed, there will be big winners and losers as a consequence of any reform. A solution may be a longer transitional period to a new national formula.

MAIN BRIEFING STARTS HERE:

INTRODUCTION

Michael Gove’s Written Ministerial Statement of Tuesday 13 December 2011 said that all responses from the Department for Education’s recent Consultation on School Funding were still being considered and that the Government’s own response was still being prepared:

“However, the responses also reflect a variety of views over some of the key aspects of the system. We are now working on developing further proposals in light of the responses”.

This latest round of Government attempts to reform funding for schools has been going on since 2003.  Though this history gets overshadowed by other arguments about Academies and Free School funding, it surely makes good sense to make progress with a system of school funding which all can understand and through which inputs and outputs are more transparent. At the moment, apart from growing numbers of Academies and Free Schools, there are so many local school funding variants that it’s difficult to measure what’s happening.

Background of Spending Cuts, Academies and Free Schools 

The big difference for this round of school funding reform is that it takes place against a background of big Government spending cuts and a strong Government policy to extend Academies and Free Schools.

This piece examines the need for school funding reform irrespective of current policy contexts. Indeed, a combination of austerity measures, Academies and Free Schools all reinforce the urgent need for reform and greater transparency in schools’ revenue funding. The trouble is that, as with any reform, as shown by the Institute of Fiscal Studies report below, there will be winners and losers.

EDUCATION SPENDING – CUTS IN REAL TERMS

Education Cuts in October 2010 Spending Review 

The Coalition Government’s attempt to reform school funding takes place against a background of large cuts to education spending planned for the period covered by the Chancellors’ Wednesday 20 October 2010 Spending Review. By 2014/2015 overall education spending will fall to its lowest level since the mid-1990s.

Planned Department for Education (DfE) cuts are in line with those across the average planned across government spending as a whole. The resource budget for schools is a little better protected since the biggest cuts are in higher education and schools capital spending, followed by planned cuts to 16–19 education spending, Early Years and youth services spending.

The previous Labour and present Coalition Governments have both shifted spending away from higher education and towards schools. But though school capital spending grew fast under Labour, it is due to receive the largest cut under the Coalition Government.

Nick Gibb, the Schools Minister in a Commons Written Answer on Monday 19 July 2010, gave the Coalition Government’s first detailed response on school funding.

“Revenue funding for maintained schools currently goes through local authorities. We have inherited a needlessly complex system of funding which it is our intention to simplify.

“The core element of maintained school revenue funding is the Dedicated Schools Grant (DSG), which the Department distributes to local authorities, who then allocate it to schools in consultation with their Schools Forum. The total Dedicated Schools Grant allocation for financial year 2010/2011 is £30.6 billion (this is post the removal of an estimate of academy recoupment)”

Alongside the Chancellor’s Statement The Department for Education Spending Review of Wednesday 20 October 2010 explained that over the four year Spending Review period, £1bn would be freed up by ‘procurement and back office savings’ while the public pay sector freeze will save schools an additional £1.1bn. As part of the Spending Review, the Department for Education explained said that total funding for the schools budget would be increased by 0.1% in real terms until 2015.

October 2010 Spending Review Overtaken by Inflation 

But since then, HM Treasury projections of higher inflation have changed this real terms calculation, with a resulting real terms cut over the whole period of around 1% and a small real increase in only one year. In addition, pupil numbers are expected to increase.

Michael Gove’s Written Statement on Tuesday 13 December 2011 says that for 2012/2013 the DSG will remain at the same cash per pupil as 2011/2012  - which itself was the same as 2010/2011. No authority can lose more than 2% in cash terms. The Minimum Funding Guarantee for individual schools limits overall reductions in grant to 1.5% per pupil (the same as 2011/2012).

If the Pupil Premium is added to the 2011/2012 DSG figures, the cash increase should be 2.1% more than the equivalent 2010/2011 – 1.7% extra per pupil. But these cash increases are still below the level of inflation, however this is measured. As shown by DfE site, in 2012/2013 the amount available for the Pupil Premium will double from £625m in 2011/2012 to £1.25bn. It will further rise to £2.5bn by 2014/2015. But as shown below by the Institute of Fiscal Studies below, because of inflation only schools in most deprived areas will benefit from this.

No indicative allocations for 2013/14 or 2014/15 have yet been published pending the outcome of the ongoing consultation process on changes to the schools funding system – the subject of this piece.

The Institute of Fiscal Studies Press Release of Tuesday 25 October 2011 said:

“We estimate that public spending on education in the UK will fall by 3.5% per year in real terms between 2010/2011 and 2014/2015 (or 13.4% in total). This would represent the largest cut in education spending over any four-year period since at least the 1950s, and would return education spending as a share of national income back to 4.6% by 20142015.”

“….All areas of public education spending are expected to see real-terms cuts between 2010/2011 and 2014/2015, but the severity of cuts will differ. Current spending on schools will see the smallest real-terms cut (about 1% in total). The areas seeing the largest real-terms cuts will be current spending on higher education (40% in total) and capital spending (more than halved)”.

The Institute of Fiscal Studies “Trends in Education and Schools Spending” October 2011 in its Conclusion on page 23, explained this in more detail:

“Whether one considers economy-wide inflation or an estimate of schools-specific cost inflation, the majority of primary and secondary schools are expected to see real-terms cuts in 2011/2012.

“Looking further ahead, the Pupil Premium will grow as the budget increases to £2.5bn by 2014/2015  However, given the continuation of the cash-terms freeze in other per-pupil funding, it is again the case that only the most deprived schools would be better off financially than in 2010/2011. Under both economy-wide inflation and an estimate of schools specific cost inflation, the majority of primary and secondary schools are expected to have lower real-terms funding per pupil in 2014/2015 than they had in 2010/2011″.

All this shows is that school funding projections which looked more optimistic in the the Chancellor’s Comprehensive Spending Review in October 2010 has now been overtaken by inflation.

SCHOOL FUNDING – A BRIEF RECENT HISTORY

Current attempts to reform school funding began nine years ago.

Charles Clarke in 2003 and Jacqui Smith in 2005 

On Thursday 17 July 2003, as Secretary of State for Education, Charles Clarke in a Ministerial Statement to the House of Commons said that there were real difficulties with schools budget allocations since not enough funding was ending up in schools.  These difficulties were further explained in July 2004 in the Government’s “Five Year Strategy for Children and Learners“, which said:

“…the bulk of school funding does not come to local authorities as hard cash. It comes as a theoretical planning total based on a range of factors, and there is no guarantee that it will be spent on education”.

Page 46 described this arrangement as:

“..long-standing confused responsibility between central and local government for setting the level of school funding”.3

Page 45 said: that:

“..unpredictable and short-term budgets” also made “it harder for schools to plan ahead and take full independent responsibility for their future development”

In other words, not enough Department of Education funding was going directly to Schools.

In a Commons Written Statement on Thursday 21 July 2005 Jacqui Smith MP as Minister for Schools stated that a ring fenced Dedicated Schools Grant was “an essential precursor to three years budgets for schools”.  The Dedicated Schools Grant was introduced in 2006/2007. This was based on a “spend plus formula” which has been maintained.  So the Schools Budget became the Dedicated Schools Grant.

The Institute for Fiscal Studies “School Funding Reform: an Empirical Analysis of Options for a National Funding Formula” November 2011 explains “spend plus” on its page 5:

“Each year, local authorities receive an allocation from the Dedicated Schools Grant. Over recent years, this has been calculated based on the so-called “spend-plus” methodology. Under this method, local authority grants have been determined as a flat-rate increase on what schools or local authorities received in the previous year, plus an extra increase determined on the basis of a formula. The retrospective aspect of this methodology limits the ability of the school funding system to redistribute money between local authorities on the basis of changing need. Although the Dedicated Schools Grant was introduced in 2006, the ‘spend-plus’ methodology was brought in following the school funding ‘crisis’ of 2003–04, when a number of schools complained that they were due to receive cuts in funding”

Though these three year budgets did not commence until 2008/2009, they continued on the 2006/2007 “spend plus” basis. This same formula still continues today. Underneath it still lie many of the contradictions and differing allocations which were the cause of Charles Clarke’s concern in 2003.

School Finance Regulations

Before 2006, schools were funded through the Schools Funding Spending Share (General Formula Grant to Local Authorities). The School Finance (England) Regulations 2006 implemented the new approach and set out the financial arrangements for local education authorities’ funding of schools over the financial years 2006/2007 and 2007/2008.

Moving the new School Finance (England) Regulations 2006 in the House of Lords on Thursday 16 February 2006, the Parliamentary Under-Secretary of State for Education and Skills, Lord Adonis, noted:

“The new arrangements set out in these regulations will provide for three important changes: first, a ring-fenced dedicated schools grant so that the funding intended for education is ring-fenced for that purpose alone within local authority budgets; secondly, multi-year budgets for schools so that they get the full benefit of the multi-year pre-announcement of funding that we made in December; and thirdly, a rationalisation of standards-related grants so that there is less central prescription on how standards funding is spent at school level.”

In response, Baroness Buscombe, until recently Chair of the Press Complaints Commission, but then Opposition Spokesperson for Education and Skills in the House of Lords, welcomed these principles but added:

“despite the simplification, however, school funding is still incredibly complicated”

The 2 year settlement 2006/2007 and 2007/2008 was based on “spend plus” pending a review of distribution. In 2008/2009 a three year settlement was introduced but continued “spend plus”. For the three-year period, 2008/2011, the School Finance (England) Regulations 2008 (SI 2008/228) were introduced although the Explanatory Memorandum said that “to a large degree, they re-enact provisions in the previous regulations”.

The School Finance (England) Regulations 2011 (SI 2011/371) of 15 March 2011 were intended to relate to the 2011/2012 financial year. The Government noted that the 2011 regulations “to a large degree … re-enact provisions in the School Finance (England) Regulations 2008”, although there are “some significant changes, relating particularly to … the incorporation of a number of grants within the Dedicated Schools Grant, which were previously paid as separate grants”

On the 2011/2012 calculation of DSG, the DfE explained on page 3 of  “A Consultation on School Funding Reform”, introduced on Wednesday 13 April 2011:

“This method – called ‘spend plus’ – was started in 2006/2007 and represented a reform from the previous method of school funding. When the DSG was created, in 2006/2007, its initial level for pupils in each local authority was based on what each authority planned to spend on schools in 2005/2006 – the last year before the introduction of the DSG and “spend plus”. Therefore, because we still base funding from the DSG on the previous year, current levels of school funding are, in fact, based largely on those in 2005/2006.”

The same Consultation Document  explained on page 2 that “the amount of DSG per pupil for each authority is calculated based on what the local authority received the previous year. Local authorities then fund schools using a local funding formula”. Until recently, the DfE website explained this in more detail:

“Since 2006/2007, LAs have received their schools funding through the Dedicated Schools Grant (DSG) rather than as part of the local government settlement.

“The DSG is a ring-fenced grant paid by the Department. The DSG is paid to LAs, who must use it for the purposes of their schools budget. It is for each LA to distribute funding - in consultation with its schools forum – to the schools it maintains using its locally agreed formula (drawn up in line with schools finance regulations). It is for the schools’ governing body to decide how to spend their available resources”.

Though there is an ongoing wider review of the school funding system for 2013/2014 onwards, which will determine individual allocations, the Government has said that for the time being it will carry the current formula forward.  The Secretary for Education, Michael Gove MP, in Written Ministerial Statement on Tuesday 13 December 2011, said “we will continue with the current methodology for funding schools in 2012/2013 through the Dedicated Schools Grant (DSG). The underlying school budget will be kept at flat cash per pupil for 2012/2013″.

All this shows that from Charles Clarke’s Ministerial Statement delivered to the House of Commons on Thursday 17 July 2003 until Michael Gove’s Written Statement on Tuesday 13 December 2011, the Government has been trying to reform the school funding system.  Despite the introduction of the Dedicated Schools Grant, little else has changed.

THREE LATEST CONSULTATIONS FROM 2010 TO THE PRESENT  

Ed Balls in March 2010

As Secretary of State for Children, Schools and Families, Ed Balls announced on Monday 15 March 2010  - before the last Election- the publication of “Consultation on the Future Distribution of School Funding”. Page 8 said that the DSG “Spend Plus” methodology:

“has required the setting of a base year to which future increases are applied, in this case 2005/2006, and so does not allow for changes in relative needs between local authorities since that time to be reflected. There is a strong case, therefore, for returning to a system where funding allocations better reflect current need”

Though the Coalition Government published the Consultation Responses to Labour’s Consultation, it decided to introduce its own White Paper “The Importance of Teaching” on Wednesday 24 November 2010, which assessed the current school funding arrangements as:

“…opaque, anomalous and unfair school funding system which reflects the historic circumstances of local authorities rather than the specific needs of individual schools and pupils:

“At present, as demonstrated by the graph below, inequalities in the funding system lead to huge variation in the money similar schools receive. We compared 72 secondary schools outside London, with similar size and intakes and found a variation in funding per pupil from just below £4,000 to well over £5,500.

“At the same time, only around 70% of the money that is intended for the most deprived pupils is actually allocated to schools on that basis. And the funding system has become increasingly opaque and unresponsive, with the money that schools receive depending more on what they received in the past than the characteristics and needs of pupils in the school now. Post-16 funding, although distributed on a more transparent basis, is also inherently unfair, with school sixth forms being funded on average £280 more per student than general FE colleges and sixth form colleges”.

The Financial Times on Friday 12 November 2010 reported that drafts of the White Paper proposed that “state schools in England will be directly funded from Whitehall for the first time” through a “single ‘national funding formula’”, a move which, the FT said, would “sideline local authorities from managing education spending”, with a “transition to a new funding system to begin in 2012, with a new independent Education Funding Agency taking over finance for “all schools and sixth form provision” from 2013”.  But the Financial Times on Sunday 21 November 2010 reported that these plans had been dropped.

The Government’s White Paper of Wednesday 24 November 2010, “The Importance of Teaching”, said on page 82:

“While the majority of schools are local authority maintained schools, funding will continue to pass to them through the local authority. But as more schools become Academies, with funding being given directly rather than through the local authority, so the requirement for a greater degree of transparency and consistency in allocating school funding becomes more pressing”

“Because we plan, over time, to make Academy status the norm and wish to ensure more resources go direct to the frontline in a fairer way, our long term aspiration is to move to a national funding formula to ensure that resources going to schools are transparent, logical and equitable”.

Coalition Government First School Funding Consultation – Rationale and Principles  - April 2011 

On Wednesday 13 April 2011 the Department for Education launched the first of two further consultations on school funding, “A Consultation on School Funding Reform: Rationale and Principles“, in which on page 3 it provided a more detailed critique of the current DSG funding system:

“the amount of DSG per pupil for each authority is calculated based on what the local authority received the previous year”, adding:

“3.2. This method – called ‘spend plus’ – was started in 2006-07 and represented a reform from the previous method of school funding. When the DSG was created, in 2006-07, its initial level for pupils in each local authority was based on what each authority planned to spend on schools in 2005-06 – the last year before the introduction of the DSG and ‘spend plus’. Therefore, because we still base funding from the DSG on the previous year, current levels of school funding are, in fact, based largely on those in 2005-06.

“3.3. The amount spent in 2005-06 was determined by two things:

• an assessment of what the local authorities’ needs were at that time (often using data that was already becoming out of date); and
• the amount local authorities each chose to spend on schools (itself a result partially of decisions made several years previously).

“3.4. So, current levels of school funding are based on an assessment of needs which is out of date, and on historic decisions about levels of funding which may or may not reflect precisely what schools needed then. It is inevitable that over time needs have changed and historic local decisions may no longer reflect local or national priorities”.

Coalition Government Second School Funding Consultation – Proposals for a Fairer System – July 2011

Following its basic statement of policy in “Consultation on School Funding Reform: Rationale and Principles”  on Wednesday 13 April 2011 – which set out the Government basic premises, on Tuesday 19 July 2011, the Government published “Consultation on  School Funding Reform: Proposals for a Fairer System”, which described these in more detail:

From the outset the July 2011 Consultation Document on page 3 Government’s outline national funding formula is made clear:

“The new national formula will include:

• A basic amount per pupil
• Additional per pupil funding for deprivation
• Additional funding to protect small schools
• An adjustment for areas with higher labour costs”

Page 6 of the Consultation makes it clear that there will be three blocks of funding:

• Schools
• High Needs Pupils
• Early Years

Institute of Fiscal Studies’ Analysis  

Reform Dilemma

The Institute for Fiscal Studies in “School Funding Reform: An Empirical Analysis of Options for a National Funding Formula”  November 2011 described all this on its page 1:

“School funding exhibits wide variation. Last year, most primary schools received between £3,000 and £6,000 per pupil, while most secondary schools received between £4,000 and £7,000. This variation arises largely because schools differ in their characteristics, but funding levels also vary across schools with similar characteristics”.

On page 3, the IFS analysis poses the Government’s basic dilemma, to which the Consultation seeks to provide some answers:

“The crucial question for the government is whether the advantages of a national formula – simplicity, transparency and responsiveness of funding – exceed the costs that the adjustment process would entail. However, maintaining the status quo is unlikely to be desirable either. Without reform, school funding may become less transparent and less related to educational needs over  time. The fact that there will be winners and losers per se is not necessarily an argument against reform. If one believes that a national funding formula represents the most desirable system, then the numbers of winners and losers merely show how far the status quo is from an ideal scenario. Moreover, failing to implement substantial reforms to school funding would lead to a further drift away from the desirable system and a greater cost of implementing reform towards it in future”.

Basic Workings of School Funding 

As the November 2011 Institute of Fiscal Studies Report on School Funding Reform explains on page 6 about the basic workings of school funding:      

“Local authorities’ allocations from the Dedicated Schools Grant are ‘ringfenced’, meaning that they must be spent on pupil provision in support of a local authority’s schools budget. Local authorities are free to add to this money using other sources, such as other grants that are not ring-fenced, council tax revenues and local charges for some council services. However, only 10% of local authorities actually do so.

“Some of this schools budget is spent on central services provided by the local authority, such as high-cost special educational needs and school admissions.  This  amount  varies  by  local  authority.  On  average,  local authorities retain about 13% of their schools budget for central services, while 10% of local authorities retain less than 9% and 10% retain more than 17% of their schools budget.”

The Institute of Fiscal Studies Report provides a good background to the current Consultation on its page 6:

“Each local authority then has its own ‘fair-funding’ formula for allocating the remainder of its schools budget to schools. This is intended to ensure that schools within a local authority that have similar characteristics (in terms of the pupils they serve) receive the same level of per-pupil funding. The formulae vary by local authority, but the most important element of them is clearly pupil numbers. Overall, the most common aspects of these fair-funding formulae are:

•  the number of pupils at each Key Stage
• indicators of social deprivation, such  as  the  number  of  pupils  eligible for free school meals (FSM)
• Individually Assigned Resources for pupils with a Statement of Special Educational Needs (SEN)
• number of pupils with SEN without a statement
• number of pupils with English as an additional language (EAL)
• site and school factors (the school’s business rates bill, an amount per square metre of the school’s site, and many other factors)”.

Minimum Funding Guarantee and “Spend Plus”

The Institute of Fiscal Studies Report on page 7  explains that all this is further complicated by the Minimum Funding Guarantee and “spend plus” in the Dedicated Schools Grant. IFS believes that “spend plus” and MFG have further weakened relationship between financial provision and educational needs. There are also specific schools grants over which LAs have no control, including School Standards Grant, School Development Grant and other standards funds.

As Michael Gove explained in his Written Statement on Tuesday 13 December 2011:

“To protect schools from significant budget reductions, we will continue with a Minimum Funding Guarantee that ensures no school sees more than a 1.5 per cent per pupil reduction in 2012-13 budgets (excluding sixth form funding) compared to 2011-12 and before the Pupil Premium is added”.

Funding for Academies

For academies, all this is further complicated by the Department for Education’s and Young People’s Learning Agency’s  not knowing how local authorities distribute funding between schools, as shown in Department for Education’s August 2011 “Academies’ Pre-16 Funding: Options for the2012/13 Academic Year”.  This has led to some recent press reports, including the Financial Times of Wednesday 07 December 2011, about Academies’ receiving incorrect funding.

MAIN ISSUES IN SECOND COALITION CONSULTATION AND RESPONSES

Latest Statement  
This Consultation closed on Tuesday 11 October 2011. On Tuesday 13 December 2011, in a Written Ministerial Statement, Michael Gove said:

“I am publishing today a report on the consultation responses: there was a good deal of consensus around some proposals, such as the factors to include in both any national and local formulae, and the need for careful transitional arrangements. However, the responses also reflect a variety of views over some of the key aspects of the system. We are now working on developing further proposals in light of the responses”.

Who Responded? 

The DfE published its “Analysis of Responses to the Consultation Document” on Wednesday 14 December 2011. Most interesting is the analysis of respondents, including:

• 562 Parents/Carers
• 211 Academies
• 168 Maintained Schools
• 114 Individual Local Authorities

On Sunday 01 January 2012 the Department for Education said that there were 1529 Academies open in England, including 1194 new Academies. Applications had been received from 1775 schools and 1576 had been approved. There is some overlap in these figures since Academies in a Federation may submit a single application for that Federation, which will include more than one school.

At this pace, it looks as though the spread and results from the Summary of Consultation Responses above will soon be out of date, since Academies will easily outnumber maintained schools.

The Consultation Reponses Overview says:

“Just over half of those responding to the first question felt that using a notional budget for every school was the best option as this would be fair and transparent and would be a move towards what was described as a long-awaited national baseline for school funding.  There was some concern that an option based on the pupils in each local authority (LA) area simply provided a funding formula for LAs and that it would leave the current system unchanged”

The following sections proceed in the order of the July 2011 Consultation: 

Chapter One – The National Funding System

On page 7 of the Tuesday 19 July 2011 Consultation Document, the Government gave options of two ways for calculating the schools block:

• A formula based on the schools within the area and the pupils within those schools (“school-level”);
• A formula based solely on the pupils within the area (“local authority-level”).

The Consultation Response Summary shows:

“Just over half of all of those responding to this question preferred option (a) which proposed a formula based on the schools within the area and the pupils within those schools, for calculating the schools block, rather than the option (b) proposal for a formula based solely on the pupils within the area. There was some concern that instead of a national funding formula for schools, what was being proposed was a national funding formula for LAs.

Chapter 2 – The Schools Block

For local flexibility in the Schools Block, page 10 of the Consultation Document proposes to reduce the number of local formula factors:

• Basic entitlement per pupil (currently Age-Weighted Pupil Units)
• Funding for additional educational needs (AEN) (e.g. deprivation, SEN)
• Rates
• Exceptional site factors (e.g. split site, PFI and rent)
• Lump sums for schools

Local Decisions

The Consultation Response Summary shows:

“Just under half (45%) of all respondents who answered this question supported the retention of all of the listed factors at a local level and a further 41% supported some of them.  Respondents considered it beneficial to streamline additional factors which could be taken into account and welcomed the reduction from the current 38 factors to a more manageable number. It was suggested, however, that there needed to be a sufficient amount of local flexibility to ensure that the local formula remained needs-led, transparent and equitable. It was suggested that if only five factors were permitted they should be sufficiently flexible to cover the majority of local circumstances”

“(8%) respondents, the majority of which were from Academies, did not support the retention of any local level factors to maximise decision making powers at school level.  It was commented that all schools and Academies needed to know that their funding allocation would be fair and transparent and would not vary depending on which LA they were in.”

Additional Factors at Local Level 

On additional factors to be decided at local level (Question 3 on page 10 of the Consultation Document), there was a very wide range of responses, with the highest percentage (23%) concerned about pupil mobility.

Ratio for Primary and Secondary Schools

The largest percentage, just under 50% of respondents, thought that setting a range of allowable primary/secondary ratios around the national average was the right approach.

The Institute for Fiscal Studies Report on pages 22 and  23 demonstrates the current variations in ratios between different aged pupils. This is based on the Average Weighted Pupil Unit, which is allocated to pupils of different Key Stages or ages. Though Key Stage 2 in every local authority counts as 1, ratios for other Key Stages vary with each local authority.

“On average, schools receive 50% more funding for pupils aged 14–16 than for pupils aged 7–11. At the extreme end of the scale, some schools receive 70% more funding for such pupils”.

The Consultation Document proposes a ratio of 1.27 for primary/secondary funding allocations. In its analysis, the Institute of Fiscal Studies Report on page 37 says:

“It is clear that implementing a ratio of 1.27 for basic per-pupil funding at secondary schools relative to primary schools leads to significant redistribution from secondary to primary schools, if combined with the consultation’s proposed £95,000 lump sum for primary schools.  The consultation did not explicitly make the case for redistribution from secondary to primary schools and it thus seems likely that the government would want to adjust basic per-pupil funding ratios to prevent this. Such redistribution can be limited by using a higher secondary to primary funding ratio, such as the 1.45 employed here.”

Calculation of Schools’ Budgets

47% of consultation responses supported LAs’ calculating budgets for all schools in the area. Nearly 40%, however, supported the option that the EFA could make the calculation.

26% respondents considered the first option, the LA based option, to be less bureaucratic and easier to administer.  It was suggested that a system where the LA calculated budgets for all schools in its area would be open and transparent and would support accountability.  It was also suggested that this option could deliver budgets more quickly and accurately as it would remove the potential for inaccuracies in future Education Funding Agency (EFA) calculations. During this year, the EFA will replace the Young People’s Learning Agency and gradually administer more DfE funding.

12% respondents said that Academies wanted independent control of how their budgets were allocated and that the LA should not be involved in the process.  There was concern that if LAs were allowed to determine Academy budgets there was the possibility that they could favour some schools at the expense of others. Respondents commented that it would undermine the principle of autonomy for Academies if LAs were to have control of Academy budgets.

Schools’ Fora

Pages 12 and 13 of the Consultation Document paragraphs 2.23 to 2.26 proposed options to improve the working of Schools Fora -  whether main groups on the Forum should all separately have to approve a proposed formula and whether the Forum should have more decision making powers. In response:

“Just under half of all respondents to this question did not believe the options listed would help achieve greater representation and stronger accountability at a local level”

Monitoring School Fora

Though there was no clear view on whether the new Education Funding Agency should be involved in monitoring compliance, the biggest block – 16% – felt there was no need for checking compliance, since School Fora should be able to check compliance. Others thought that having the EFA checking compliance or acting as a review body potentially duplicated any scrutiny or audit process that currently existed.

All this suggests though there is a preference for Local Authority School Budget allocation, with more Academies this view will change to favouring the EFA.

On these questions above, the Institute for Fiscal Studies in “School Funding Reform: An Empirical Analysis of Options for a National Funding Formula”  November 2011 on page 3 says:

“In this Briefing Note, we describe the options for a national funding formula for schools and examine how different options would affect the finances of different schools or areas of the country. Our analysis is based on data held by the Department for Education (DfE). Curiously, such analysis was not present in DfE’s second, more detailed, consultation on school funding reform. The lack of such analysis makes serious public debate difficult”

However, to be fair, had DfE published this analysis, responses to these questions would have been largely pre determined.

Chapter 3 – The Schools Block – Formula Content

Page 15 of the Consultation Document sets out in paragraphs 3.3 to 3.6 the proposed Schools Block formula content and proposes that the new formula could consist of:

• A basic per-pupil entitlement
• Additional funding for deprived pupils
• Protection for small schools
• An Area Cost Adjustment (ACA)
• English as an Additional Language (EAL)

Formula Composition

The Summary of Consultation Responses shows that 50% of respondents thought that these factors were appropriate for a fair funding formula and 43% believe that some of them were.

Deprivation

The Consultation Document asked whether Free School Meals Ever 3 or 6 ( DfE shorthand for having received Free Schools Meals at any point during the past three or six years) should be used to allocate deprivation funding in the national formula.  Alternatives included the Index of Multiple Deprivation, benefits data or the Income Deprivation Affecting Children Index. Although opinion was divided on the best method for allocating deprivation funding in a national formula, Ever 6 was the most popular with 36%.

On page 10 in its Figure 2.2, the Institute of Fiscal Studies “School Funding Reform: An Empirical Analysis of Options for a National Funding Formula”  November 2011 makes a significant points that:

“these  implicit FSM premiums have grown substantially since 2005–06, from £1,100 to £2,000 in primary schools and from £1,600 to £3,400 in secondary schools (all in 2010–11 prices), doubling  in  real  terms  in  just  five  years.  This is  far  in  excess  of  overall growth in funding per pupil over this period; school funding has certainly become more targeted at more deprived schools over recent years.

“In previous analysis, we  have  shown  that  local authorities’ funding formulae are less targeted at deprivation than the allocations they receive from the Dedicated Schools Grant. In other words, local authorities seem to spread or ‘flatten’ the funding they receive for deprived pupils, distributing it across all the pupils in the area”.

Protection of Smaller Schools

For the protection of smaller schools, the Consultation Document asked whether there was agreement that £95,000 is an appropriate amount for a primary school lump sum. Opinion was divided on this. This lump sum is advantageous to some Academies and Free Schools when starting.

Area Costs Adjustments

Other Consultation Document issues included allocation of premium for sparsity of provision how the Area Costs Adjustment should be calculated. Teachers have a national pay structure, but the General Labour Market, Specific Costs and Combined Costs approaches affect different areas differently. There is also an issue of whether teachers are paid enough in areas where they are difficult to retain. The majority of respondents favoured a combined approach, including Specific Costs for teachers’ salaries and a General Labour Market approach for other staff.

Chapter 4 – Central Services and Defining Responsibilities

On pages 23 and 24 of the Consultation Document, paragraphs 4.1 to 4.7 discuss the development of a funding model, having first defined the respective responsibilities of maintained schools, Academies and local authorities. The model would clarify what elements of funding would be delegated to schools or centrally retained for maintained schools, if there is local discretion.

Retaining Local Authority Central Services

On retention of local authority a majority supported retraining central services if there was local agreement.  Although it was agreed that funding should generally go directly to schools, there was support for the pooling of resources across the LA in certain cases.  By agreement schools could delegate this funding to the Schools Forum for determination and allocation.  Respondents said that as the rationale for Schools Fora was to provide the local knowledge not available at national level, they should be trusted to act in the best interests of pupils.

Funding Blocks

A majority also thought that the split of functions between the proposed funding blocks – Schools, High Needs Pupils, Early Years, Central Services and Formula Grant (based on DCLG/LACSEG – Department of Communities and Local Government/Local Authority Central Spend Equivalent Grant) – was broadly acceptable.

Local Authority Central Spend Equivalent Grant (LACSEG)

There was a majority in favour of moving LACSEG calculations to a national formula since current disparities in LACSEG represented a major cause of disparities between schools. A majority also supported LACSEG funding arrangements’ more accurately reflecting the actual pattern of where Academies were located.

On page 31, the Institute of Fiscal Studies “School Funding Reform: An Empirical Analysis of Options for a National Funding Formula”  November 2011 says:

“Going forwards, the government has not explicitly stated how funding for these central services will be distributed across local authorities once the reforms are implemented, merely stating that the total funding will reflect the total resources available and that transitional measures will take account of baseline levels”

Chapter 6 – Children and Young People requiring High Levels of Support

Parents and Schools 

Running throughout the Consultation is difference over Higher Needs Pupils between parents and schools. There was support in Consultation Responses for some basic principles for funding high needs children and young people, including funding to age 25, the role of commissioning and involvement of individual budget holding. Just under 50% thought that it would be appropriate to provide a basic £10,000 with an individual top-up and just under 50% wondered whether this was enough. Just over 16% thought that a post 16 base rate was helpful and that the local authority should be responsible for higher level costs over £10,000 for post 16s. A majority favoured a system for High Needs Children and Young People based on numbers, since this had provided stability.

Consultation Response opinion was evenly divided about funding for Special and Alternative Education Provision Academies directly from the commissioner or through the EFA with a top up from the commissioner.  There was no clear opinion on an approach based on proxy variables, with just under 50% preferring that deprivation should be linked more to Alternative Provision rather than SEN needs.

CONCLUSIONS

For those still reading this, the following arise as important issues for any future formula:

Even Bigger Disparities if No Reform

The most powerful argument for change, as this piece has tried to show, is that the longer these reforms are left undone, then the more the disparities will increase. This piece has tried to show that though successive Secretaries of State have tried to reform funding since 2003, the basic formula used has not changed since the announcement of the Dedicated Schools Grant by Jacqui Smith in July 2005.

Formula

Great care is needed in devising a new national formula for all schools, especially for the distribution of funding across Key Stages. Appropriate weighting is needed to ensure no unintended funding redistribution from secondary to primary schools. Though deprivation funding, based on Free School Meals, is currently geared towards secondary schools, it may still be necessary to adjust the ratio of primary/secondary funding to a higher ratio. The £95,000 lump sum small school premium is also relevant here.

Big Gains and Losses

Because of the wide variety of different local authority funding formulae and practices, the effects of funding changes will be concentrated in some local authorities which could experience big gains or losses of 10% or more.  There will be cases where primary and secondary funding changes will offset each other and others where these will reinforce each other.

Winners and Losers

The inescapable consequence of reform of a current funding system based on dozens of local historical factors is that whichever funding formula is chosen, there will be winners and losers. Some of this will happen in dramatic fashion, with anticipated media hyperbole. A solution for many may be a longer transitional period to a new national formula.

AND, FINALLY

If all of this works out, school funding should become more transparent so that everyone, especially parents, may see what funding each school receives. Since schools will need to provide more information about courses and results, it should become easier to judge what additional value each school makes to pupils’ lives.

Since many more, and soon most, schools will be academies, there will be increasing demands all round to know the value added to funding inputs to produce pupil outputs. Since this information may no longer be in Local Authority Department of Education papers, there will be a demand for publishing all of this.

Above all, remember. It’s never over till it’s over

Especially, this piece – with apologies for its unenviable length – seeks to summarise the deluge of  Local Government funding initiatives and consultations which appeared immediately prior to Christmas.

Regional Policy by Eland House and Victoria Street

Instead of making tracks to Priestley Wharf to see Advantage West Midlands, West Midlands Councils and LEPs must look to funding available and allocated at national level and, just as important, to increasing their own powers. From management of EU Structural Funds to devolving Community Budgets, the Departments of Communities and Local Government and Business Innovation and Skills have replaced the Regional Development Agency.

1)      Core Cities with their LEPs will fare best. They might do even better with an Elected Mayor – though this shouldn’t become a celebrity sideshow contest.

2)      Non Core Cities with a LEP will become more dependent on their LEP. Though Wolverhampton can benefit from the Black Country LEP and Coventry from the Coventry and Warwickshire LEP,  perhaps they should think of leading a new national Non Core Cities Group? They might establish links with Nick Clegg’s Core Cities Unit and invite them to meetings.

3)      District Councils and second tier authorities need seriously to think about reinventing themselves. Through funding and governance changes, in future, there will not be a “mainstream” or typical District Council.

A) LOCALISM FUNDING – THE NATIONAL PICTURE

Before examining different funding routes for the three groups of councils above, this Section details DCLG and other funding now available or allocated at national level.

 i) The Economic Background

For all authorities, irrespective of their size or grouping or whether or not the Eurozone stays intact, the economic background is not good.

While in his Autumn Statement the Chancellor spoke of two more austerity years stretching into the next Parliament and taking £30bn more out of the economy, there has been little mention of further spending reductions he required during the present Parliament until 2015. In the Local Government Chronicle on Thursday 15 December 2011, Tony Travers, Director of the Greater London Group at the London School of Economics in a piece called “Bad Times are Here to Stay” wrote:

“In the light of the Chancellor’s announcement that there will be a public sector pay cap for a further two years, adjustments have been made to spending levels for the years up to 2014-2015. The Department for Communities and Local Government’s ‘local government’ spending line has been cut by £240mn in 2013/2014 and £497mn in 2014/2015″.

He continues:

“Health service spending will rise by 3.8% in cash terms this year, while local authority revenue spending fell by more than 3%. DCLG capital programmes have been chopped by 46%, compared with an 11% public sector average”.

“Council expenditure at the end of the current decade will probably be at the level, in real terms, it was 20 years previously”.

“Public sector austerity will last until at least 2017/2018 – unless the Eurozone implodes, when cuts might have to continue until beyond 2020. This may be a bleak midwinter message, but it is an entirely realistic one. Bad times are here to stay”.

And though local councils may extend their territory though setting up Health and Wellbeing Boards, forthcoming changes in Education Capital and Revenue Expenditure could mean that much future education funding completely bypasses them.

The relative position of the West Midlands is shown in the Price Waterhouse Cooper UK Economic Outlook Chapter Four “Regional Household Exposure to Finance Stress”

“The West Midlands stands out as a potential area of concern here, with both low earnings growth and high increases in unemployment, perhaps reflecting the particularly severe impact of the recession  on relatively cyclical manufacturing industries in that region”

“The North East and Wales are the regions that have suffered the highest levels  of household financial stress since the  recession began, followed by the West Midlands. A mixture of high increases in  unemployment and economic inactivity rates; marked falls in house prices and increases in personal insolvencies have all contributed to these findings”.

“Closing the North-South divide is therefore more difficult than ever for government, particularly at a time when money is tight and so the scope for significant transfers to more highly stressed regions is limited, particularly within England!”

ii) European Funding

EU funding will be covered in a later posting on this site. Under current 2007 to 2013 EU Structural Funds Programmes, Local Councils and LEPs may continue to apply for European Regional Development Fund, provided they can find the required match funding contribution. Applications may be made for ERDF, irrespective of size or council designation.

The West Midlands has more limited access to European Social Fund than some other regions, where some local councils have opted themselves to become ESF CoFinancing Organisations.

Councils can also apply under a wide range of Transnational Programmes including Eighth Framework. Applications may be made under most of these, irrespective of council designation.

And, despite previous difficulties, there’s always possible future development of JESSICA (Joint European Support for Sustainable Investment in City Areas)  and JEREMIE (Joint European Resources for Micro to Medium Enterprises) – about which more at an appropriate time.

iii) Regional Growth Fund

A detailed analysis of the regional breakdown of receipts from the first two rounds of Regional Growth Fund bids shows that almost 70% of the projects successful in the first round (April 2011) were located in the North of England. Second Round Winners show 55% in the North.  So far this shows that the West Midlands is not a major beneficiary region from Regional Growth Fund.

However, the formulae for the Growing Places Fund and New Homes Bonus are more favourable to the West Midlands.

iv) Growing Places Fund

On Monday 07 November 2011, the Growing Places Fund Prospectus launched  a £450m invitation for local partnerships to bid for infrastructure funding that will promote economic growth and the delivery of jobs and homes. The fund has been distributed indicatively by formula to LEP areas. The formula includes a 50% weighting given to resident population, and 50% given to “employed earnings”. These distribution criteria benefit more populous areas with higher rates of employment and higher average wages, mostly in London and the Greater South East.

So far the North has only received a collective total of 10%. The South East has received 20% whilst the broadly-defined ‘London mega-region’ as a whole has received around 40%. LEPs in the North East have received less than 5% of the GPF allocation, the North West under 15% and Yorkshire and the Humber just over 10%.

The Black Country has received £9.6mn.  Greater Birmingham and Solihull £14.9mn . Coventry and Warwickshire received £8.5mn.  Much will depend on structures involving local councils to use this revolving loan fund. 

v) Community Infrastructure Levy 

Though trailed by the previous Government, amended Community Infrastructure Levy Regulations were introduced on Wednesday 06 April 2011. DCLG is currently consulting on amendments following the Localism Act 2011, to require local authorities to pass some receipts to neighbourhoods where development is taking place and to clarify how receipts fund ongoing costs of providing infrastructure. All this gives more local choice over how to implement and utilise the CIL charge.

With DCLG’s capital programmes cut by nearly 50%, funding for new or replacement infrastructure funding might come from:

• Central Government Formula Grant
• Council Tax
• Disposals from Property Portfolio
• Prudential Borrowing
• Government Ring Fenced Grant
• Partner Investment (Network Rail or Energy Supply Company)
• Other Grants including Lottery
• Community Infrastructure Levy.

The National Infrastructure Plan published on Tuesday 29 November 2011 alongside the Chancellor’s Autumn Statement mentioned 500 projects and programmes worth more than £250bn. The Chancellor announced a number of initiatives, including borrowing against future Community Infrastructure Levy receipts.  In addition, the Chancellor announced £1bn for the road network and £1.4bn for rail infrastructure and commuter links.

As the DCLG March 2011 Presentation shows, Community Infrastructure Levy may be spent on infrastructure which legally includes (the list in the Act is not exhaustive):

• Flood defence
• Open space
• Recreation and sport
• Roads and transport facilities
• Education and health facilities
• Affordable housing

Authorities are advised to keep their infrastructure evidence simple and should demonstrate that there is an Infrastructure Funding Gap against existing funding streams. Authorities seeking to raise funds through CIL have to strike a careful balance between:

-        Meeting all or part of the infrastructure funding gap; and

-        The potential impact of CIL on the economic viability of development across its area.

One of the more solid works of reference on CIL is from the Planning Officers Society in October 2011. In addition, the Planning Advisory Service has been recently recruiting pilot authorities. So help is available for those authorities seeking to move forwards on CIL.

Shropshire is one of the DCLG’s Phase One Front Runners for the  introduction of CIL and has embarked on an admirably detailed local consultation at parish level about local projects using CIL and other funding. There are no West Midlands authorities in Phase Two of the DCLG queue. Because CIL is an important source of revenue, there is surely a need for more West Midlands authorities to become involved.

The Newark and Sherwood CIL came into force in December 2011. Redbridge and Shropshire followed on New Year’s Day 2012. Portsmouth and London (with its importance for Crossrail) are at Examination Stage. Broadland, Croydon, Huntingdonshire, Norwich, Poole, South Norfolk and Wandsworth await Examination.

Though six more authorities are consulting on their charging schedule, after Shropshire, there are no West Midlands authorities in any of these lists.

Since the first twelve CIL Charging Schedules show significant differences, it is difficult to predict average yields from CIL. But they will be significant.

Bristol predicts £14mn over five years. In its detailed Levy Rationale Background Paper in March 2011  Shropshire identified an overall Infrastructure Funding Gap of £385,459,000 for 2010 till 2026 for Road Transport Facilities, Flood Defences, Education, Medical Facilities, Open Space, Sports and Recreation, Police and Electricity Supply – based on estimates and existing developer contributions. This initially equlated to £17,800 per projected dwelling.

In her succinct but methodical Examiners’ Report to Shropshire Council on Friday 02 September 2011, Sue Turner concluded:

“Since the Core Strategy was adopted, work on infrastructure planning has continued.  The LDF Implementation Plan 2011/12 provides an up to date picture of the infrastructure projects to which CIL is expected to contribute.  It identifies a funding gap of £212,815,912 and an indicative CIL requirement of £180,148,912.   All of the figures above show that there is a significant infrastructure funding gap and demonstrates the need to levy CIL”.

Shropshire’s prediction of £180mn over 15 years shows that CIL can be a significant source of future income. In accordance with the DCLG Code of Practice, 10% of net CIL monies will be directed to strategic infrastructure schemes, and 90% of net CIL monies will be spent on local infrastructure.

Shropshire’s Community Infrastructure Levy documentation is all online and represents a first class online or distance learning tutorial in building a Charging Schedule and introducing the Levy.

As CIL Charging Schemes proceed, their Examiners may need to revise some CIL estimates on account of the following:

• Ageing population and changing implications for a range of social infrastructure facilities
• Changing household patterns. Many current planning ratios are based on historical household demands. More single person households are changing the pattern of education demands. Primary and Second School contributions are changing.
• Digital Media and changing models of learning, particularly in the FE/HE sector
• Externally commissioned service delivery and new models of delivering social infrastructure in partnership with retail and leisure establishments.

There are still outstanding issues about Councils’ ability to borrow against future CIL receipts, though Sections 1 to 7 of the Localism Act 2011 probably give more powers than some local councils may currently recognise. The easiest way to begin progress is through the Planning Advisory Service or Planning Portal sites on Community Infrastructure Levy.

CIL is not the only way in which local authorities can pre fund infrastructure since they can use income, loans and bonds, especially from 2013 onwards. But the Levy represents a step forward through its removal of the uncertainties and arguments surrounding the Section 106 process.

It will take time before most local authorities have a CIL scheme in place. Currently, only 35% have Adopted Local Plans and there is some interesting debate on what constitutes a “local plan”.  All this means that the remaining 65% may not be able to afford to wait for CIL and should get moving.

vi) New Homes Bonus

There was an extended piece on New Homes Bonus in Who Speaks for the West Midlands?

There is a useful DCLG New Homes Bonus Calculator on the DCLG site. From this Wolverhampton provisional total receipts for Year One and Year Two are £1.2mn and for Coventry are £2.8mn. For Birmingham these are £7.4mn. The ongoing issue to be decided is the extent to which New Homes Bonus is fully funded or siphoned off the Formula Grant.  

vii) General Power of Competence

The Localism Act 2011  provides local government with substantial new powers, greater freedom and flexibilities through a General Power of Competence, which will enable them to act in the interest of their communities and in their own financial interest. Local Government will be able to generate efficiencies and raise money by charging and trading in line with existing powers. Local authorities now have the opportunity to own assets, develop property and generate revenue. A growing number of councils are also examining a Local Authority Mortgage Scheme, with support for first time buyers through underwriting so much of their deposit.

viii) Communities

The Coalition is inching its way towards devolved powers, including Total Budgets at Community Level.

On Community Budgets, the Government announced on Wednesday 21 December that in Birmingham, Balshall Heath, Shard End, Castle Vale will become a pilot for more pooled budgets focused on prevention. Balsall Heath Forum and Shard End will be a community led approach. Castle Vale Community Partnership will led by a Housing Association. This process should mean moving power away from central government and allow communities and councils to assume greater control of, for example, skills, transport and employment. Community budgets should lead to more pooling of public service budgets.

Alongside Community Budgeting, Councils should not ignore the size of funding available for community projects in which they may become partners or for which they may provide match funding. Community groups have access to funding programmes to which local councils don’t. In September 2011 Big Lottery’s “Reaching Communities Programme” offers up to £500,000 for revenue and capital projects for most deprived LSOAs.

The Community Builders Fund, the latest round of which which closed on Friday 09 December 2011, has offered up to £750,000 loans and investments to support ‘community anchor’ organisations.

Various Social Investment and Social Impact Bond proposals offer similar sums from which their private investors seek a return. It’s worth keeping up to date with the Social Investment Business website.

There is more detail about funding for Community Projects elsewhere on this site. 

ix) Retention of Business Rates

Under new proposals in its Consultation Response to Proposals for Business Rate Retention, on Monday 19 December 2011,  DCLG proposes that councils will be able to retain a greater percentage from the business rates that they generate. It is hoped that the proposals will create incentives for councils to promote local economic growth as they will directly benefit from any increase in rates. Against this, there is increasing concern that the progressive redistribution which operates through the current centralisation of business rates will disappear.

Arising from previous concerns, in its Consultation Response, DCLG now proposes an initial rebalancing of resources using tariffs and top ups, based on previous average income, depending on whether an authority has received more or less in business rates than others. Despite this, there are still concerns about the potential of some areas to raise much more in business rates than others.

Local authorities will be able to come together to form a pool, with scope to generate additional growth through collaborative effort and to smooth the impact of volatility across a wider economic area.

B) GROUPS OF LOCAL AUTHORITIES

1) Core Cities

Throughout these difficult times, the Government’s designated eight Core Cities of Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield will have more direct access to funding.

“Unlocking Growth in Cities” – launched by Nick Clegg in Leeds on Thursday 08 December 2011 – heralded a series of ‘tailored deals’ between Core Cities and Central Government. There was no talk of a “second wave” for the rest. And some are predicting that only Core Cities will be able to bid for Tax Increment Financing in the new Local Government Finance Bill, published on Tuesday 20 December 2011.

Perhaps most depressing for Core Cities are the document’s current comparisons of GDP per capita and patent applications between English and comparable non capital cities in Germany, France and Italy. Only in education to tertiary level of 25 to 64 year olds are English non capital cities comparable.

For Core Cities, these proposed “tailored deals” represent a tempting menu:

• Giving cities one consolidated capital pot for investment
• Giving cities powers to create Business Improvement Partnerships
• Access to new infrastructure funding through Tax Increment Financing
• Devolving major local transport funding and the power to commission local, or even regional, rail services, including managing franchises
• Giving cities the power to consolidate local public sector property assets into a single local property company
• Creating ‘City Skills Funds’ and ‘City Apprenticeship Hubs’

Six out of the eight Core Cities have a Passenger Transport Executive, with precept powers –  so they have a regional reach. The Core Eight have their own structure and organisation, based in Manchester. Manchester, the most ‘core’ of all, benefits from the Greater Manchester Combined Authority as a forerunner for further devolved powers. In April 2011, the new Authority replaced a range of single-purpose joint boards and quangos to become a formal administrative authority for all Greater Manchester for the first time since abolition of the Greater Manchester County Council in 1986.

Though the Authority is still progressing initial procedural matters, ultimately, instead of GMCA’s bidding on a project by project basis, more funding could be devolved so that decisions on funding and expenditure could be taken in Manchester.

Bob Neil MP as DCLG Under Secretary told the Commons’ Delegated Legislation Committee on Monday 14 March 2011:

“The measure involves the authorities having competence concurrently with the joint authority, so the Government are satisfied that this is not a regionalising and centralising model, but that it is something of genuine collaboration”

But, despite this reasoning,  this is in reality Regional Government under another name. It’s also interesting that the Greater Manchester Combined Authority was set up under the Labour Government’s Local Democracy, Economic Development and Construction Act of 2009 not the Coalition’s Localism Act of 2011.

2) Non Core Cities 

It is the larger Metropolitan Authorities and Cities, especially in the West Midlands, which are left out of all this. Apart from Coventry and Wolverhampton, there is a long national list including Carlisle, Plymouth, and Preston. Each has a significant subregional hinterland. They might seriously think about becoming a new National Network and build relationships with Nick Clegg’s Core Cities Unit.

Coventry and Warwickshire LEP has other projects for a Growing Places allocation of £8.5mn apart from Coventry City. Coventry will vote on an Elected Major in May 2012. The Black Country LEP has £9.6mn to spend across four Black Country Boroughs. Preston will have to argue that the £13mn for Lancashire LEP under the Growing Places Fund should be spent in Preston. While some of this will happen, it would be better still if Non Core Cities might develop more direct access to their own funding.

Elected Mayors

What follows is not written in support of having directly-Elected Mayors, but to illustrate the Government’s consistency of approach in their favour.

There are currently 13 Elected Mayors. Though the Secretary of State has power to direct authorities to hold referenda – as he has done already – a petition by 5% of the total electorate can do so. This has already happened in Salford. Outside the Core Cities, under the Localism Act there will be referenda in May 2012 in Bradford, Coventry and Wakefield for Elected Mayors.

Overall policy on Elected Mayors appeared in the “Open Public Services” White Paper in July 2011, under Section 5.10 “Democratic Decentralisation: the key policies we are already implementing”:

“- giving cities the power to elect mayors …We will also consider making it easier for other cities to take up the option of city mayors. Decisions on whether a city should adopt the mayoral model should ultimately be for local people”

Directly elected Mayors hold office for four years. They decide on the size of the cabinet, appoint cabinet members and decide on the delegation of  executive functions. These executive powers may also be held by Council Leaders. Mayors set the Council Budget and formulate significant policy framework plans but amendment or rejection of proposals requires a two thirds majority in Council. Based on their mandate, Elected Mayors also have a range of “informal powers which enable them to influence, persuade and co-ordinate on a wider scale.”

Much of the argument for Elected Mayors made by the previous Labour and current Coalition Government is based on low turnouts at Local Council Elections. Though many local and regional debates show no strong preference for elected Mayors, the Chancellor of the Exchequer announced in his Autumn Statement on Tuesday 29 November 2011 that:

“As part of its commitment enable Tax Increment Financing, the Government will also consider allowing city mayors to borrow against future CIL [community infrastructure levy] receipts where this can make a significant contribution to national infrastructure.”

“Funding and Financing Infrastructure Investment” on page 7 of the National Infrastructure Plan, published alongside the Chancellor’s Statement, makes the same point:

“As part of its commitment to enable Tax Increment Financing, the Government will also consider allowing city mayors to borrow against future CIL receipts where this can make a significant contribution to national infrastructure”

The November 2011 DCLG Consultation “What can a Mayor do for your City?” makes the position clear in Section 21 on page 10:

“The Localism Bill, if enacted, will provide the Secretary of State with a power to transfer by Order, subject to Parliamentary approval, local public functions to any local authority outside London. Local public functions are functions currently the responsibility of government or other public authority, which are carried out in relation to the people who live, work, or carry on activities in the authority’s area”.

“Unlocking Growth in Cities” also emphasises that “tailored city deals” with transfer of powers for economic growth, infrastructure development, housing and planning, skills and employment may be available, but also that they represent a “two-way transaction”. Page 10, Section 1.18 “The Government’s Asks” says:

- “leadership and accountability: where cities want to take on significant new powers and funding streams, they will need to demonstrate strong, accountable leadership, an ambitious agenda for the economic future of their area, effective decision-making structures, and private sector involvement and leadership (cities with a directly elected mayor will meet this requirement)”.

All these policy documents above are not offered as evidence to support elected mayors but to underline the coherence of the Government’s preferences. They show how strongly the Government keeps pressing the case.

One of the strongest arguments against all this was mounted by Sir Howard Bernstein’s comment “An Elected Mayor is Not for Us” in Manchester Confidential on Tuesday 13 December 2011:

“In Greater Manchester, we have demonstrated that for reform to be successful, it requires a genuine bottom up approach rather than one that is driven top down from central government. Imposition of a mayor for the City of Manchester cuts across this approach”.

The Greater Manchester Local Enterprise Partnership (GM LEP) has also said that plans for directly elected mayors would bring no advantages to the city region.

Their argument is stronger because Greater Manchester now has a Combined Authority, which gives constitutional form to more than twenty years of the Association of Greater Manchester Authorities. All this shows that if Non Core but regionally significant Cities don’t favour Elected Mayors, they may need to strengthen their arguments for local accountability.

The risk with the Government’s strong preference for Elected Mayors in all these proposals is that some areas may get sidetracked with local celebrity contests from some of the real debates and arguments. Apart from accountability, DCLG seeks to devolve powers to bodies operating at the appropriate geography.  Though “Unlocking Growth” has much comment about cross boundary working. “Local economic area” is defined as the “functional economic area as defined by LEP.”

3) District Councils

Describing its “Future Councils: Life After the Spending Cuts“, published in September  2011, the New Local Government Network said that lack of funding and new rights for citizens to control service delivery “could, by 2020, leave local authorities in the same kind of position as the state government of California: struggling to provide services in the face of high demands, low income and increased direct democracy”.

Its author, Simon Parker, describes a gradual series of significant changes driven by budget cuts and rising demand for public services, so that by 2020 few Councils will be recognisable. He continues that beyond initial “traditional” cost cutting, some authorities will seek to slim down their core. Beyond this, some councils may become largely commissioning bodies. This brings back memories of Nicholas Ridley, MP for Tewkesbury. Throughout the 1970s and early 1980s from the Conservative Front Bench, he advocated that Councils should meet once a year to agree contracts with the private sector.

Liam Scott-Smith in the New Local Government Network’s ” Delivering Distinctiveness“: The Future for District Councils, amplified this further.  He offers four basic models:

-        Residual Councils are authorities who outplace a large proportion of  their services to outside providers. They may retain a pool of funding which can be targeted at specific projects or services for the poorest  communities.

-        Clustered Councils are authorities who through sharing so many services become de facto federations. Councils may cluster in major city-regions as each authority recognises the need to pool sovereignty to encourage greater economic growth.

-        Commercial Councils are very entrepreneurial councils. They will set up trading arms and be heavily involved in selling services to other local authorities. These councils could also begin to trade with business and the community.

-        Lifestyle Councils will focus primarily on promoting an areas brand and way of life. Such authorities will focus on capturing a niche focus through which to promote a distinctive local existence, both economically and socially associated with their areas.

These are significant options for District Councils and second tier authorities in times when local government is changing. They need working through for individual authorities. For example, why shouldn’t a Further Education College be a central feature in town centres rather than Tesco?  Hinckley and Bosworth offers the examples of strategies based on North Warwickshire and Hinckley College, a Business Improvement District and MIRA. There are many more.

District Councils will not have the same access as Core  Cities and Non Core Metropolitan Authorities to the bigger funding programmes. So the Government’s proposed funding reforms not only give second tier districts a chance to build local level partnerships but ultimately may force them into new relationships. Assembling funding packages from Community Infrastructure Levy, New Homes Bonus, retained Business Rates, including NHS, Further Education, Academies, LEP and Community Project contributions, will become more frequent.

So all this presents an opportunity for District Councils and second tier authorities to develop a distinctive role. The danger for many is not that their structures are unsustainable, but that they may not recognise opportunities in these changing times for increasing their influence and leadership. District Councils need more ownership of this inevitable process of change. If they don’t, they may become its victim.

And, Finally

My reason for such a lengthy post is that the flurry of Government documents published just before Christmas was plentiful and significant:

• “What can a Mayor do for your City?” was published on Tuesday 01 November 2011
• The Localism Act received Royal Assent on Thursday 15 November 2011
• HM Treasury’s National Infrastructure Plan, HM Treasury/BIS Plan for Growth: Implementation Update and the Chancellor’s Autumn Statement were published on Tuesday 29 November 2011
• “Unlocking Growth in Cities” was published on Thursday 08 December 2011
• Proposals for the Retention of Business Rates were published on Monday 19 December 2011
• Local Government Finance Bill Impact Assessment was published on Tuesday 20 December 2011
• Community Budget pilots were announced on Wednesday 21 December 2011

All this means that things are beginning to move. There is a general theme running through all of this – that local councils should act now before they are forced to act.

Above all, remember. It’s never over till it’s over.

This was also the week when Department of Business, Innovation and Skills almost unnoticed published two further episodes of “New Challenges. New Chances” – papers for Further Education Reform and Funding.  Whether these are Green or White Papers, they are both significant and are covered in a separate blog alongside this.

I am sorry that this blog is long. To make it more digestible, throughout there are links to pages in the Education Grants Menu.

The Education Funding Agency - Early Years to Further Education

Before the Budget next spring, this may be the last big Economic Statement before the Education Funding Agency gets going. From April 2012 EFA will handle direct funding for all age 3 to 19 provision, including Free Schools, Academies, and resources for local authorities to pass to schools which aren’t academies.

Following the end of Building Schools for the Future and Sebastian James Report on Schools Capital Expenditure in April 2011, EFA will also handle schools capital expenditure. Again, this will include Free Schools, Academies, UTCs and maintained local authority provision. Partnerships for Schools closes as a Non Departmental Public Body in March 2012 with its staff and resources moving to the EFA. Its site still has a handy map of schools. The Government has been consulting on how capital spending will be distributed locally.

All this means that the EFA will distribute and allocate £50bn revenue and capital funding each year, as well as capital spending for all publicly funded schools. Its funding will range from the Dedicated Schools Grant and Pupil Premium to capital allocation and distribution for 16 to 19 year olds.

Free Schools

The Chancellor’s Statement contained £600m to fund an extra 100 Free Schools, including new specialist Maths Free Schools for 16-18 year olds, “supported by strong university maths departments and academics.”

This included invitations to those seeking to establish Special Free Schools. The Green Paper “Support and Aspiration: a New Approach to Special Educational Needs and Disability” in March 2011 showed the Government’s intention to give parents a choice of school from any state funded school including Free Schools. Special Free Schools will normally only admit pupils with Special Education Needs. Children without SEN may be admitted in exceptional circumstances. Special Free Schools should ensure curriculum plans are tailored to meet the individual needs of pupils, as set out in their statements of Special Educational Need.

Funding for Free Schools

The Government is currently consulting on a longer term funding system for schools – including Special Free Schools. But interim funding arrangements enable Special Free Schools to receive a base level funding of £10,000 per place. There may also be funding from the local authority, depending on individual needs. Special Free Schools will also receive an additional grant to compensate for services that maintained schools receive free of charge from their local authority.

Free Colleges

It is also possible to set up a Free Further Education College for provision up to age 19, since funding for all providers for this age group will in future be the same. Proposed changes for FE Colleges’ governance and corporation structures are summarised under “New Challenges. New Chances” in a separate posting appearing very soon.

School places

There will be an extra £600m from 2012/13 to help fund an extra 40,000 places for those local councils facing additional demand. There is more on maths and science teaching later in this blog.

Apprenticeships

The Autumn Statement included £17mn for 19 apprenticeship partnerships of employers and training providers, following a competitive bidding process in July 2011 as part of a £25m fund for Higher Apprenticeships.  A further £1.7m has been invested in 2 new ‘Trailblazer’ projects in information technology and science, engineering and manufacturing, delivering 6,000 Higher Apprenticeships.

Though the Higher Apprenticeship Fund supports thousands of apprenticeships up to degree equivalent, most of the 250 employers are larger companies, including Leyland Trucks, Unilever, TNT, and Burberry.

So the Government is providing an additional £30mn for 20,000 places – a £1500 incentive for smaller firms to take on young apprentices, bringing the total number of payments available to 40,000 next year.

Though there will also be an employer-led review into quality and standards in spring 2012, the small number of apprenticeship places in smaller firms still gives cause for concern.

There will be a further round of bidding in Spring 2012 for Higher Apprenticeship places.

Science teaching

There will be £10m over 5 years from 2013/2014 to improve the quality of science teaching in schools. This will be channelled through Project Enthuse, matched by the Wellcome Trust.

The Government will offer undergraduates access to mentoring from the existing network of STEM Ambassadors to give undergraduates insight into STEM occupations and raise the profile of the STEM sector.

Youth Contract

Though Government announcements about the Youth Contract in the Chancellor’s Statement range over different websites, the following seeks to summarise them.

With around 1.16mn 16 to 24 year olds not in employment, education or training, the £1bn (£940m) Youth Contract programme over 3 years aims to provide work placements, apprenticeships and advice and guidance for 18-24 yr olds and particular support for 16-17 yr old NEETs.  Overall 410,000 work and training placements will be created.

HM Treasury’s “Autumn Statement 2011” on page 43 states the objective “to ensure that every young person not already in work, education or training has support to get into the workplace”. The Youth Contact will:

• fund a new £50 million a year programme providing support to some of the most disadvantaged 16-17 year olds not in education, employment or training across the UK.  The programme will help 25,000 16 and 17 year olds into an apprenticeship or into work and also provide 20,000 additional incentive payments for firms offering apprenticeships to 16 – 24 year olds
• provide extra support from Jobcentre Plus for unemployed 18-24 year olds, with additional advisor time and a careers interview from the National Careers Service after three months on Jobseeker’s Allowance, and with weekly, rather than fortnightly, signing for all 18-24 year olds from month fiv3
• provide an offer of a work experience or Sector Based Work Academy place for every unemployed 18-24 year old who wants one after 3 months on JSA, before they enter the Work Programme. The Government is providing an additional 250,000 places
• provide for young people still unemployed after nine months on JSA to transfer to the Work Programme

In addition, the overall programme will:

• provide funding for an estimated 160,000 wage incentives of £2,275 to make it easier for private sector employers to take on young peopl3
• provide for longer-term JSA claimants over 6 months to be referred to full-time training for up to 8 weeks while remaining on JSA. The Autumn Statement on page 12 says that this “will allow people claiming JSA for 6 months or more to be referred to training of up to and including 30 hours per week and remain on JSA, rather than transferring to a training allowance, provided training is only for 8 weeks. Whilst on training, claimants will be required to remain actively engaged with the labour market. This will take effect from November 2011. These will be JSA claimants for 6 months or more who have been identified with a skills need. This is estimated to be around 9,000 people per year, based on internal forecasts of training starts.”

Work Experience

£4.5m will be provided over 2 years to support post-16 work experience with particular emphasis on small businesses taking on recruits. For 18 to 24 year olds, a £2,275 subsidy is payable to firms giving 160,000 unpaid work experience for 6 months. This is more than enough to cover an employer’s National Insurance contributions for a year. There will be an additional 250,000 Work Experience places over the next 3 years, taking the total to 100,000 a year.

The Autumn Statement on page 60 says that the Government will support work experience as part of post-16 learning and work with the Federation of Small Businesses and other employer groups to review regulation affecting work experience by the end of December 2011. A guide will be published on common misconceptions about work experience.

The Post 16 Labour Market

This programme is ambitious. However, though details above on the Youth Contract and Work Experience above project 410,000 new work places for 18 to 24 year olds, there are cash subsidies for 160,000. Youth Contract is open to all businesses, including those that already employ large numbers of young people – like retail and construction – and emerging sectors like the green economy, creative industries and ICT.

But this still leaves around 500,000 young people not in employment, education or training. Because employers – and who can blame them – will choose most the qualified and work-ready young people to participate, this majority who do not participate will be those needing most help.

Increasing apprenticeship numbers is only part of the solution. But from 126,000 new apprenticeships places created last year, 89,000 were taken by employed people over 25.

Getting into the labour market for Post 16s is a major issue, especially for those who failed after previous economic downturns. As Alison Wolf’s Vocational Training Report in March sought to explain, the Post 16/Post School Labour Market has almost disappeared. IPPR and others are forecasting that regions like North West may not reach 2008 output levels until 2020 and the North East in 2020 may only recover to 1990 levels.

So we need to think seriously what Post 16s are expected to do. Though raising the school leaving age to 17 and 18 is part of the solution, we should think seriously what Study Programmes for 16-19 are appropriate. For many, GCSE English and Maths may not be the answer. This is part of the Government’s ongoing consultation on Study Programmes, concluding in January 2012. Whatever emerges, skills provision should be built into or linked to initiatives for entering the labour market.

Careers Advice

£4.2m over 3 years will provide careers interviews for 18-24 year olds on JSA for 3 months or more.  The Autumn Statement on page 60 projects an “improved careers information portal as part of the National Careers Service from April 2012, through which the public can access up to date, employer-sourced information on occupations, progression routes, wages and employment trends”.

Destination Data

The Autumn Statement on page 60 says that the Government “will publish destination information at ages 16 and 18 from spring 2013 to encourage schools’ focus on young people’s future beyond school as well as attainment. The Government “recognises the contribution that strong links between schools, colleges, and business can make to outcomes for young people, and will keep the impact of this measure under review and consider stronger incentives if needed”.

Course Kite Marking

A group of Science, Technology, Engineering and Mathematics (STEM)-focused Sector Skills Councils – Science, Engineering and Manufacturing Technologies, Chemicals, Pharmaceuticals, Nuclear, Oil and Gas, Petroleum and Polymer Businesses and E Skills – will lead an industry group to kite-mark courses, indicating those valued by employers. Other Sector Skills Councils will be encouraged to follow. However because elsewhere, under the proposed Employer Ownership Pilots (see “Employers’ Funding”), there will be a diminished role for SSCs, this sounds rather incoherent.

Employer Ownership Pilots

As already announced, employers will be able to bid into a new £250m fund from early 2012 to help develop and ‘buy’ the vocational training they want. This is will be described in more detail in Grants for Employers.

In summary, these pilots represent the beginning of the end for direct public funding of employer led courses. This future training agenda will be for employers to decide and fund. The Government will create appropriate market conditions – but as funding supporter rather than direct funder.

Adult Literacy and Numeracy

The Autumn Statement on page 61 says that the Government “will reform adult basic literacy and numeracy provision by piloting a new funding method for the providers of courses, which creates incentives for them to deliver the greatest skills gains for learners on basic skills courses”. There is more about Adult Community Learning on in Community Project Grants.