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Beyond the unfairness of funding

Paul Fisher explores the bureaucratic tundra that lies behind the calculation of schools' spending.

Paying for schools should be simple. Take a large computer, tell it how many pupils there are in different age ranges and then factor in additional educational needs, plus the circumstances of individual schools. Or, instead of counting pupils, you could go for an activity-led staffing model and make grants accordingly.

They are suggestions for a single national funding formula, the first proposed by the House of Commons education select committee, and the second by the Secondary Heads Association. Both detailed funding models are, naturally, weighted to counter social deprivation. And, to ensure democratic linkage between education expenditure and tax, both centrally determined formulae would allow local authorities greater freedom in how much they added to their central government allocations.

The Education Secretary Gillian Shephard reckons national funding to be "an attractive - not to say seductive - idea". It's certainly one she takes seriously enough to have asked her civil servants to prepare some costings. They made the same discovery as the Audit Commission survey, namely that school funding is unfair. It is so unfair that the Department for Education reckons ironing out funding discrepancies would either increase costs by Pounds 500 million a year or mean that some schools would lose 20 per cent of their budgets.

At the core of the unfairness is the area cost adjustment. This alteration to central government's allocation of education funding is awarded on the basis of higher labour and building costs in London and the South-east. The special treatment has evolved into the 20 per cent budget shortfalls identified by the Department for Education and the inequities are resented throughout the rest of the country. They are viewed as pure discrimination by people in counties such as Cambridgeshire, Gloucestershire and Warwickshire whose LEAs are tantalisingly adjacent to the favoured circle of adjustment. That said, Mrs Shephard's recent statements show her supporting the status quo and her caution reveals that she can't afford the political sacrifices of robbing Hertfordshire Peters to pay Cambridgeshire Pauls. And neither is she likely to persuade the Treasury to yield her department an extra half billion in the cause of fairness.

The difficulty is not in creating a sensible formula but in moving towards it and the next large obstacle will be to define what we are moving away from. Explorers into school funding must enter a bureaucratic tundra and be lashed by blizzards of statistics. Underfoot is a permafrost of legislative muddle and the only beast to thrive in such terrain is the fabled buck.

The opaque system begins with a formula that shuttles back and forth between the Departments of Environment and Education. In 1993-94, for example, this formula set a base figure of Pounds 2,096 per 11 to 15-year-old. Then, on the basis of elderly census and social security statistics, come a series of precise add-ons. For example, Pounds 960 goes for children on income support, Pounds 958 for single-parent families, Pounds 465 for those born in the New Commonwealth, Pounds 50 for those getting free school meals, an average of Pounds 43 per pupil for those who need transport in rural areas, and Pounds 109 for their counter-parts in London and the South-east. Such calculations go towards the overall Standard Spending Assessment which comprises four-fifths of local authority funding.

Although education absorbs nearly half the SSA, this vast shifting of public funds is never the subject of a discrete parliamentary debate. Instead, since the Seventies when the Department of the Environment subsumed the Department of Housing and Local Government, it is a matter of interdepartmental wrangling. Nonetheless, the first of the funding formulae is, much like the select committee's Alternative Funding Formula, based on a simple count of pupils.

Ergo, particularly now that capping puts further central control on local expenditure, there is a national formula. Well, not quite. The SSA might be calculated on a per pupil basis but it is not distributed that way to schools. Local authorities operate formula number two to infinity. Some have up to 40 criteria for distributing money with important educational calculations such as the number of trees round the school and how the grass is mown.

There are two further problem areas. One is local government reorganisation which, by dividing county LEAs, will lead inevitably to turbulence. The other is the opted-out or grant-maintained schools and here, financially and acronymically, things get very strange. The Government never intended opt-outs to be inordinately richer than their neighbours, and thus pegged their budgets to LEA estimates of school costs. GM budgets are deducted straight from SSAs and so retain intimate financial links with what, supposedly, has been opted out of. In order to protect GM budgets from authorities that spend below the SSA, the DFE devised a Common Funding Formula as a fall-back. It is hardly common because (pegged as each CFF is to LEA estimates), it is unique to every authority, but the CFF does have the virtue of being straightforward. It has four core factors of age-weighted pupil units, special educational needs, free school meals (as a socio-economic indicator) and premises. Officials at the GM Funding Agency reckon the CFF is a model for a wider funding formula, but they cannot say if their 1,000 schools are actually funded via SSA or CFF based calculations. Ask the DFE, is their advice. That's one for the Department of the Environment, says the DFE, and the buck cavorts away into a flurry of initials. The muddle has been created in the name of diversity. No wonder one poor opted-out head came over as confused when the education select committee asked how his budget had been calculated. "I have to confess," he replied, "that I don't understand how the figure was arrived at. But I understand why I do not understand."

Meanwhile, the Association for Metropolitan Authorities says the opt-out funding arrangements "violate the constitutional relationship between local and central government". Alan Parker, the AMA's education officer, extends the objections to the CFF, saying: "Any nationally-imposed mechanism for resourcing schools must tend to undermine local decision making. The solution therefore is to reinstate local democracy rather than pursuing the holy grail of a perfect national formula."

Despite the confusions in the old, unresolved struggle between the centre and the regions, many heads and governors are beginning to navigate a way through the wilderness. This feat is down to the knowledge gathered under local financial management regimes. Having spent five or so years paying close attention to their budgets, heads and governors have learned to appreciate a mad muddle when they see one. They understand that more than two-thirds of the budgets they administer go on teachers' salaries. Further, they understand the difficulties when a centrally imposed 2.7 per cent pay rise is unmatched by a corresponding rise in the SSA. They are absolutely certain that they should not be held accountable for this centrally-inspired mess. The pay and job loss issue is the main reason why the funding formula debate has intensified and is why every teachers' conference included calls for more rational (as well as more) funding.

David Jamieson, a Labour member of the education select committee, talks of a "triangle of blame" between Government, LEAs and schools. "It's crazy and destroys the consensus," he says. The committee is good at consensus. Jamieson, for instance, challenges Labour orthodoxy by suggesting that "maybe local authorities don't like full accountability". The committee chairman, the Conservative Sir Malcolm Thornton, is being equally iconoclastic when he accuses the Tories of "accepting the teachers' pay settlement but not paying it". These snippets are worth repeating in that they reveal the independent minds behind the consensual alternative funding blueprint. The committee's view is that the villain is the SSA. It recommends abolishing Department of Environment involvement and putting direct accountability with the DFE. Jamieson, Thornton et al say the education secretary should make an annual announcement of how much the Government has available for education, how much is allocated to each pupil, and which factors attract extra funding. "These could be debated in Parliament," Sir Malcolm says. "Such a debate ought to be easier to follow than the present argument which is always frustrated by the difficulty of fixing where the precise responsibility lies for expenditure in our schools." At the recent Secondary Heads Association conference, Mrs Shephard promised that she would look at the area cost adjustment, part of the SSA. "That will please them," she muttered to president Peter Downes. "Not in the South-east," he whispered. Mrs Shephard cannot please everybody on this one.

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