Because this is a long piece, please click on the following headers to go straight to these sections:


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.


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.


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.


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.


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.


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.



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 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.


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.


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.


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.


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.


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.


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.


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