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Root of all complexity

Those disappointed at the Government's decision not to directly fund schools should acknowledge the great difficulties in financing schools fairly, says Alan Parker.

DAVID Blunkett, the Education Secretary, lost a battle with John Prescott, the deputy Prime Minister, to tie the hands of local authorities over the amount of money they pass to schools, or so some newpapers, including The TES, said recently. This is curious, given that Mr Blunkett has yet to make a public speech in favour of Whitehall setting funding levels directly. At no time, according to my sources, were the civil servants responsible for the new Green Paper, Modernising Local Government Finance, asked to consider such an option.

In the event, the report published last month by the Department of Transport, Environment and the Regions proved to be a low-key affair as far as education is concerned. School funding occupies just four of its 44 pages. The rest covers proposals for changing the current local government finance system and focuses on helping councils to support national policies on modernising local democracy, securing best value and tackling social exclusion.

Despite all that, the big issue in education is the decision that, at least in the medium term, there will be no simple transparent national funding formula for schools which bypasses education authorities. The Green Paper says: "It is not possible to devise a national formula that reflects every variation in local need." As an alternative to securing fair allocations between authorities and between schools, it promises to simplify the national formula which determines how much each authority receives and the "fair funding" formula which distributes funds to schools. It also promises a levelling-up so that there are no losers in real terms.

On the question of how to match funding to the separate responsibilities of authorities and schools, it promises a more transparent split between what should be spent directly on schools and what is required to meet the authorities' responsibilities.

The Green Paper does raise the question of compulsion - which would mean Whitehall setting or "ring-fencing" budgets for school spending and obliging authorities to pass on the money. But it discounts this option in favour of a voluntary approach. This would allow ministers to use moral pressure to try to force compliance.

Compulsion is seen as eroding local democracy and accontability, undermining co-ordination between services and, most importantly, creating an unhelpful precedent for ring-fencing other budgets. Yet the paper includes a threat that legislation could follow if the voluntary approach fails. In addition, ministers intend to retain specific grants to support particular initiatives, such as the literacy strategy and Excellence in Cities.

Supporters of a national funding formula - led by the heads' unions - will be disappointed but they never really stood a chance. The idea is more difficult than it looks, and, anyway, would be unlikely to deliver the anticipated benefits.

A "fair" system is not one that simply delivers the same amount of cash per pupil to every school. There is general agreement about the reasons why some schools need more, but the list of possible factors is long. If "simplicity" is important, choosing a few formula elements is problematic and allocating weightings to them would prompt fierce debate. Finally, collecting reliable data to feed into formulae can generate both excessive bureaucracy, and "perverse incentives" (such as the threat of reduced cash if a school proves successful at raising standards).

The complexity of the system hinders its rapid reform. Different levels of cash per pupil are easy to identify, but differences in schemes of delegation, compounded by the genuine case for differential funding, makes valid comparison between schools problematic. However, when transparency is achieved it might well reveal that present inequalities are not as unfair as some now believe.

Thus, a new national system will be difficult to design and expensive to implement, particularly if the promise to protect potential losers is to be kept. This all points to long time-scales. The Green Paper gives 2003-04 as the likely year for changes to the local government finance system overall. The need to phase in changes at school level will push convergence to a new system further back than that.

Resolving the technical issues will also require the combination of technical expertise and the ability to reconcile competing interests. This means that even if there is a longer-term agenda to produce a uniform national system, LEAs will be expected to undertake the process of convergence. This is the fundamental reason why direct funding could not be offered in this Green Paper.

Alan Parker is director of education for Ealing, London

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