National Funding Formula: stage 2 - SCHOOLS NorthEast response

22nd March 2017

In December 2016, the Department for Education announced it was seeking views on the detailed design of the schools national funding formula, as part of the second stage of its consultation.

On behalf of Head Teachers across the region, SCHOOLS NorthEast submitted the following response:

Q1. In designing our national funding formula, we have taken careful steps to balance the principles of fairness and stability. Do you think we have struck the right balance?

No. SCHOOLS NorthEast does not believe that the proposed national funding formula strikes the right balance between fairness and stability:

• Schools in the North East have been historically underfunded and this formula does nothing to redress this. The North East’s share of the national schools block funding will increase by just 0.0058% and when the higher needs and central school services block are taken into account, our region’s share of national funding will actually decrease.
• The inclusion of the Area Cost Adjustment (ACA) element of the formula undermines fairness and ignores wider difficulties for schools in geographically disparate areas in recruiting high quality teaching staff. It moves money away from many of the most deprived communities to those in the most affluent areas of the country.
• The formula as it currently stands does not adequately address the impact of poverty. Many factors relating to deprivation have led to lower starting points for pupils in areas like the North East and schools need adequate resources to redress that imbalance. Whilst the formula does take deprivation into account, this is undermined by the inclusion of the ACA multiplier.
• The current weighting disproportionately punishes North East secondary schools where attainment is currently below national average. The unintended consequence of this could be to lower attainment as schools struggle to provide the appropriate quality of education on diminishing budgets.
• If the national funding formula were implemented as it currently stands, 12.24% of North East schools – and 29.58% of North East secondaries – would lose 2.5% or more of their annual budget. This is largely a result of the ACA taking money away from our region.
• The Government cannot fund individual schools fairly until they fund the whole system fairly. As things stand, the schools budget is inadequate to provide all children and young people across the country with the education that they deserve. The government needs to increase funding in the system rather than simply rebalancing.

Q2. Do you support our proposal to set the primary and secondary ratio in line with the current national average of 1:1.29, which means that pupils in the secondary phase are funded overall 29% higher than pupils in the primary phase?

No. We support the principle of a primary and secondary ratio that recognises the higher per pupil spending necessary to deliver the secondary curriculum. However, we have some concern over the method used to arrive at the 1:1.29 ratio that has been used. The Government is right to note that there are historic inconsistencies in primary and secondary ratios used by local authorities, resulting in the underfunding of hundreds of schools. Arriving at the new ratio on the basis of an average of these ratios therefore seems like an inadequate shortcut. In the longer term, the Government should conduct research to understand exactly how much more secondary schools need to spend per pupil compared to primary schools to deliver the curriculum effectively, and also how and why this might differ in different parts of the country. This would then provide a much firmer base from which to make decisions over the appropriate ratio.

We do, however, have particular concerns about the impact of the proposed formula on our region’s secondary schools. Whilst the majority of our primaries will see their funding increase under the formula, the majority of North East secondaries (59.86%) will have smaller budgets. This includes every single secondary school in Hartlepool and North Tyneside and the majority in County Durham, Darlington, Middlesbrough, Newcastle, Northumberland, and Redcar and Cleveland. It is particularly concerning that some of the secondary schools serving our most deprived communities will lose significant sums. For instance, one secondary school in our region – with an FSM rate of 45.5% - is due to see its annual budget cut by 2.6% because of the formula. A truly fair formula would not have this effect.

The government has been clear that North East secondaries need to step up their game to match our region’s high performing primaries, but at the same time is cutting most of their budgets.

Q3. Do you support our proposal to maximise pupil-led funding, so that more funding is allocated to factors that relate directly to pupils and their characteristics?

Yes. We agree that pupil-led funding should be maximised. As the consultation document acknowledges, evidence shows that certain characteristics are strong predictors of later outcomes for children and young people. These additional needs often require additional resources and so it is only right that this is acknowledged in the national funding formula.

We feel, however, that the inclusion of the Area Cost Adjustment as a multiplier undermines this. Whilst a primary school pupil in receipt of Free School Meals with low prior attainment in Middlesbrough would attract £4,742 through pupil-led factors, an equivalent pupil in Kensington and Chelsea would attract £5,592 through these factors - £850 more. The only difference between the two pupils is that one goes to school in one of the poorest parts of the country, whilst the other goes to school in one of the most expensive part of the country. We do not believe that this is fair.

The government should also consider using existing data to take into account the “depth” of deprivation. Research by Professor Stephen Gorard at Durham University has shown that there are very large differences in the mean number of years that FSM-eligible pupils have been eligible between local authorities. For instance the average FSM-eligible KS4 pupil in Wokingham has been eligible for 0.5 years, whilst the average FSM-eligible pupil in Middlesbrough has been eligible for 3.1 years – more than six times as long. This “depth” of deprivation is not taken into account in this funding formula (or indeed in Pupil Premium allocations) and the Government should consider incorporating this kind of data into their national funding formula calculations.

Q4. Within the total pupil-led funding, do you support our proposal to increase the proportion allocated to the additional needs factors (deprivation, low prior attainment and English as an additional language)?

Yes. As outlined above, we agree that students with additional needs receive additional support which costs more and this should be recognised in the formula. As we articulate in our next answer, deprivation and low prior attainment are particularly strong barriers to social mobility and so it is important that the government ensures that the government provides schools with the right resources to support their pupils in overcoming these barriers.

Q5. Do you agree with the proposed weightings for each of the additional needs factors?

Yes. We agree that deprivation should be the most heavily weighted of the additional needs factors. Deprivation brings with it a wide array of challenges, some of which are hard to measure or define precisely – partly because they can differ so greatly from one school to another. As such, it is important that a large proportion of funding is allocated on this basis. We also welcome the move towards a broader definition of deprivation that aims to capture those pupils who are not in receipt of pupil premium.

However, the government should be careful with its use of IDACI as it is far from a perfect measure for these purposes. Indeed, the government’s own advice on using deprivation indices – including IDACI – states that they should not be used to “[identify] deprived people” (DCLG, 2015). It is not updated regularly enough to take into account changing demographics and can paint an inaccurate picture of neighbourhoods where affluent and deprived communities live very close together – a particular problem in bigger cities. For example, a pupil living on the Strand in London would, according to IDACI, be living in a neighbourhood that is amongst the 20% (Westminster 018A) or 30% (Westminster 018B) most deprived neighbourhoods in the country, despite the fact that the average property price is £1.6 million.

Whilst in the short term IDACI may be a satisfactory proxy measurement, the DfE should work with DCLG to improve it or to develop a more appropriate and accurate measure.

We also agree that low prior attainment should have a strong weighting, as schools invest heavily in extra support and interventions targeted at those students who have previously had issues with attainment. However, we would like to repeat our warning from the first stage that the government should be careful that this does not become an undue influence on schools’ assessment of pupils at primary level. Linking LPA to funding could act as a disincentive in terms of EYFS outcomes.

If the Government is serious about the issue of social mobility, it is essential that deprivation and low prior attainment are weighted strongly in the formula. Longstanding deprivation and the issues that it brings – including multigenerational unemployment and low basic skills among adults – are a real barrier to social mobility and schools need additional resources to deal with these challenges. However, research from the Education Policy Institute has found that “pupils who live in the least deprived areas… experience the highest relative gains”. The Government should therefore resist calls to lessen deprivation weightings and consider whether it should be increased to ensure that schools serving the most deprived communities do not miss out on the funding that they need.

Q6. Do you have any suggestions about potential indicators and data sources we could use to allocate mobility funding in 2019-20 and beyond?

We welcome the government’s decision to include a mobility factor in the formula. For those schools with a high pupil turnover, pupil mobility has significant financial implications and it is right that this is addressed in the formula. For instance, one small inner-city primary in our region has at least one pupil starting or leaving every single week and has found that there is a big administrative burden connected to this. This includes conducting handovers, inductions, tours and exchanging information with other schools. There is also an increased difficulty in target setting, tracking data or measuring progress, as well as planning lessons for classes that change weekly. Equipment also needs to be renamed which may not seem like a major task, but can be very time-consuming. Mobile students in these areas also often have significant needs, including lack of English language skills, huge gaps in learning and emotional and behavioural difficulties. As a result of the lag in funding, there are often no funds to support pupils with their additional needs.

It is clear from this example that schools with high student mobility need additional budgetary support, but it is also clear that more should be done to ensure that the lag in funding is minimised, ensuring that schools get the funding that they need when they need it. The government should identify these schools through existing data and work with these schools to understand their specific needs and establish whether there is a consistent way of allocating mobility funding appropriately.

Q7. Do you agree with the proposed lump sum amount of £110,000 for all schools?

Yes. We agree that there should be a lump sum amount available to all schools, to take into account factors that do not differ from school to school. This is particularly important to very small schools, which will receive far less funding through pupil-led factors. In the North East, many of these schools are in isolated and rural areas and, as such, we would hope that this £110,000 would be boosted by extra sparsity funding.

Q8. Do you agree with the proposed amounts for sparsity funding of up to £25,000 for primary schools and up to £65,000 for secondary, middle and all-through schools?

No. For those schools where isolation is an issue, it is a very big issue. Smaller schools in rural areas are being increasingly isolated; local authority support has eroded and many potential MAT sponsors steer clear to avoid dealing with the challenges that running these schools represent. There are unique costs associated with running isolated schools and this is illustrated by the differential in non-staff spending compared to other schools. These schools are at the hub of their communities and ensure that pupils are not forced to travel significant distances for their education. The sparsity funding needs to be sufficient to meet the additional needs of these schools, and the Government should carry out further work with these schools to understand whether the amounts proposed are sufficient to ensure their ongoing sustainability. A number of smaller rural schools in our region have either closed, are scheduled to close or are at risk of closure, due to insufficient funding and this has a far greater impact on the communities that they serve than the closure of schools in less-isolated areas.

Q9. Do you agree that lagged pupil growth data would provide an effective basis for the growth factor in the longer term?

Yes. Given the difficulties in arriving at an appropriate measure on which to base the growth factor, we would suggest that lagged pupil growth data would be worth trialling. It seems to be a reasonable approach, but would need to be reviewed to assess whether it produced the desired result, although we acknowledge that there is no perfect solution.

Q10. Do you agree with the principle of a funding floor that would protect schools from large overall reductions as a result of this formula? This would be in addition to the minimum funding guarantee.

No. There should not be a funding floor. The government should bring all schools into line with the best-funded schools by increasing the size of the overall schools budget. However, if the government is unwilling to provide adequate resources to fund the system properly, then some schools will have to lose money in order for the system to be rebalanced. In this situation, the government should consider a taper rather than a floor to ensure that schools arrive at the right amount of money through a more gradual process that would provide them with the stability to readjust in a more effective manner.

Q11. Do you support our proposal to set the floor at minus 3%, which will mean that no school will lose more than 3% of their current per-pupil funding level as a result of this formula?

No. A greater level of funding has been key to the success of London schools over the past decade and North East schools have been encouraged to emulate those in the capital, but without the funds. Schools in our region – and other parts of England – need to see their budgets brought into line with those in London, rather than the other way around. A cut of 3% would be significant for any school and will have a major impact on the kind of education that can be provided. Even schools that are not at the floor will lose significant sums of money. For instance one of our region’s highest-performing secondary schools is due to see its budget cut by £226,000 as a result of the national funding formula without even hitting the floor.

We recognise that for some schools to gain, others have to lose if the size of the overall budget is to remain roughly the same. However, to rebalance the schools budget in a fair way, more money needs to be injected into the system. This is the only way for the national funding formula to redistribute funding in a fairer manner and we would encourage the government to increase the size of the schools budget as a matter of urgency.

Q12. Do you agree that for new or growing schools the funding floor should be applied to the per-pupil funding they would have received if they were at full capacity?

Yes. This approach makes sense on the basis of the impact that not being at full capacity has on per-pupil funding and thus on the rest of the formula. However, the Government should also consider those schools that are under capacity and be cognisant of the impact that the formula will have on this group. These schools are often underfunded as a result of being under-capacity which then makes it difficult to get back up to capacity. If special funding arrangements are in place for new and growing schools, the Government should also consider whether special arrangements should be made for under capacity schools.

Q13. Do you support our proposal to continue the minimum funding guarantee at minus 1.5% per pupil? This will mean that schools are protected against reductions of more than 1.5% per pupil per year.

No. We support the continuation of the minimum funding guarantee to limit the annual reduction in per pupil funding. In the interests of providing greater stability to those schools that are due to lose the most, we would suggest that the government considers setting the minimum funding guarantee at minus 1.0% rather than 1.5%. This would effectively give this group of schools an extra year to adjust their budgets and would be appreciated by the school leaders who are having to make very difficult decisions about what savings can be made.

Q14. Are there further considerations we should be taking into account about the proposed schools national funding formula?

Yes. This consultation ignores the elephant in the room, which is that the schools budget is too small. The National Audit Office released a report into the financial sustainability of schools in December 2016 which found that mainstream schools would have to make £3.0 billion worth of savings (8.0%) by 2019-20 “against a backdrop of growing pupil numbers and a real-terms reduction in funding per pupil”. The Institute for Fiscal Studies has calculated that spending per pupil will fall by 6.5% by 2019-20, the first real-terms cut since the mid-1990s. This is a very unwelcome development and we would urge the DfE to fight for an increased schools budget. Education is an investment in the future and underinvestment now will have severe consequences years from now.

We would also like to draw your attention once more to the issue of the ACA and the unfair effect that this has on the distribution of school funding. It has the effect of moving significant amounts of money towards London and the South East effectively on the basis of higher house prices. This is intended to reflect the cost pressures faced by schools recruiting in high cost areas, but there are significant pressures in other areas that mitigate the need for an ACA. For instance, the employment landscape for schools is such that schools in geographically remote or deprived areas face significant challenges recruiting staff. There has been considerable wage inflation in some areas as a result of a competitive market for the most experienced and specialist practitioners.

All North East local authorities have an ACA of 1.0000, meaning that £792 million is not available to schools in the region purely on the basis that it is a relatively poor – and thus relatively cheap – area. It is not fair that a pupil in Sunderland or Stockton-on-Tees would attract less funding than an otherwise identical pupil in Notting Hill or Knightsbridge.

We are opposed to the inclusion of the ACA and, in particular, its inclusion as a multiplier and would urge the government to reconsider this element of the formula.

Q15. Are there further considerations we should be taking into account about the impact of the proposed schools national funding formula?

Yes. We would encourage the government to consider the impact of the proposed national funding formula on those schools that will lose funding in less abstract terms and think instead about what this will look like practically. In particular, the government should make an honest assessment of how funding changes will impact on the educational outcomes – and by extension the future life chances – of children and young people across the country. The consultation document acknowledges that, “adjusting to a new, lower, funding level will require schools to find economies and efficiencies in non-pay spend and find efficiencies in deploying and using staff”, but there is no acknowledgement of the devastating impact that this could have on schools and their pupils.

Some of the options that schools are considering as a result of squeezed budgets include:

• Narrowing the curriculum offer.
• Cutting extra-curricular activities, school trips and work experience.
• Getting rid of support staff.
• Increasing class sizes.
• Shortening the school day.
• Employing less experienced teaching staff because they are cheaper.
• Closing school libraries.
• Mixing year groups in primary schools.
• Using out-of-date textbooks and other resources.
• More difficulty recruiting head teachers and other school leaders.

As a result of the underfunding of education, all schools are making difficult decisions about what to cut, but is a particular issue for the thousands of schools that will see their budgets cut as a result of the proposed national funding formula. Rather than talking in general terms about “economies” and “efficiencies”, we would encourage the government to consult with schools to define exactly what these “economies” and “efficiencies” are. The dialogue between schools and government on this issue will be much constructive when both sides are clear and specific about what is being cut and the impact that this is having on the educational outcomes of children and young people.

Q16. Do you agree that we should allocate 10% of funding through a deprivation factor in the central school services block?

Yes. We support the inclusion of a deprivation factor in the central school services block, in recognition of the importance of central school services to schools in more deprived communities.

Q17. Do you support our proposal to limit reductions on local authorities’ central school services block funding to 2.5% per pupil in 2018-19 and in 2019-20?


Q18. Are there further considerations we should be taking into account about the proposed central school services block formula?

The role of local authorities has changed significantly over the past decade and could change significantly again. The current formula has been designed with certain assumptions about the role of local authorities and will therefore need to be revised should this change occur.