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Double funding loss could last eight years

A single grant-maintained school will cost an inner-London borough more than Pounds 700,000 in lost income over the next eight years unless the Government changes the way it funds opted-out schools.

The Raines Foundation School in Tower Hamlets is an extreme example of the "double funding" that was built into the grants for opted-out schools from the start. Double funding means that schools are compensated twice over for services they no longer receive from the local education authority, such as libraries and advisory services. And this year, the compensation may cost LEAs more than Pounds 20m which would otherwise have gone to their own schools.

Education ministers, aware of the anomaly and under pressure from the Public Accounts Committee to remove it, have changed the way they calculate grants to opted-out schools with the aim of phasing out the bulk of double funding within four years. (The Public Accounts Committee had said it should be phased out within two years.) But, as last week's report from the House of Commons Select Committee on Education pointed out, the way in which it is being phased out is so gradual that the worst-affected local authorities will continue to suffer for up to eight years.

The committee recommended "that the DFE reconsider the arrangements for ending this anomaly, with a view to ensuring that no authority will be disadvantaged for more than four years".

When a school opts out, its annual maintenance grant (AMG) has two main elements: "direct AMG", which is worked out in the same way as it is for other schools in the authority under the local management of schools formula, and "central AMG", a percentage added on to reflect the value of centrally provided authority services that the schools no longer receive.

As local authorities delegate more and more service budgets, the direct element should increase and the central element decrease.

But for the first few years the Government froze the central grant at its original cash value when the school opted out. Thus as LEAs delegated more and more service budgets to schools, existing grant-maintained schools had their direct grant increased but suffered no reduction in their central grant. In this way, they were being funded twice over for activities such as library and advisory services that were delegated after they opted out.

To remedy this, education ministers made new regulations for funding grant-maintained schools in 1993. Under these rules, the central grant to GM schools will be gradually reduced, each year's total being set at not less than 90 per cent of the previous year's grant in cash terms.

Although this change has already removed the double funding in some cases, it could take eight to 10 years to resolve in the case of the worst-affected authorities.

Local Schools Information, the local authority-backed organisation that monitors arrangements for grant-maintained schools, has pointed out this continuing injustice in its response to the Department for Education's consultation document on the calculation of grants to opted-out schools for 1995-96. It estimates the level of double funding in the current year at more than Pounds 20m.

According to LSI, the Raines Foundation School is one of two grant-maintained schools gaining more than Pounds 200,000 a year at a local education authority's expense: the other is Dunraven School in Lambeth.

Both these are extreme cases, partly because they are in inner-London boroughs that were late in delegating service budgets to schools because of the upheaval caused by the abolition of the Inner London Education Authority.

* The Select Committee report has also highlighted big increases in the running costs of educational quangos.

In the three years from 1988-89 to 1992-93, when inflation rose by 28 per cent, running costs in the Centre for Information on Language Teaching and Research rose by 60 per cent, while the costs rose by 100 per cent in the Central Bureau for Education Visits and Exchanges, the Teaching as a Career Unit and National Council for Educational Technology. Costs in the University Funding CouncilUniversity Grants Committee were up by 118 per cent; in the Further Education Unit by 136 per cent.

The Department for Education's Expenditure Plans 1994-95 to 1996-97, HMSO, Pounds 5.95.

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