Second financial crisis on the cards

12th December 2003 at 00:00
Funding consultants warn heads that many will face the same problems next year. William Stewart reports

Many schools and local education authorities could be heading for a repeat of this year's funding problems, experts warned this week.

Consultants at a Secondary Heads Association conference on school funding said there were fears that the Department for Education and Skills had again under-estimated rising costs in some schools. Around a third of England's 150 LEAs would struggle to meet competing demands on their budgets from central Government, they said.

But Stephen Crowne, finance director of the DfES, reassured the conference that school funding was a "grade A" issue for the Government and there will not be a repeat of this year's problems.

Lindsey Wharmby, SHA funding consultant, said heads were already worried about the accuracy of the DfES's estimate of a 3.4 per cent rise in their costs for 20045. "There will be variation with some above that figure and some below," she said.

Rita Hale, an independent consultant on public sector funding, said her analysis showed that 49 councils were facing "acute problems" because they were being told by Education Secretary Charles Clarke to spend the majority of their central Government grant increase on schools.

This meant increasing council tax to pay for rising costs in other services. But that in turn was likely to lead to council-tax capping.

"Quite a lot of authorities will have difficulties because on the one hand the big man at the DfES has said 'If you don't do what I want then I will set your school budgets for you'," she said.

"But if they try and increase their council tax the big man at the Office of the Deputy Prime Minister is saying he will cap them."

Local authorities would be further constrained because the political climate following the Victoria Climbie inquiry and the children's Green Paper make it difficult to make cuts in social services.

Ms Hale said 13 councils were expected to pass on their entire grant increase to schools, 15 had to pass on more than 90 per cent of it and 21 more than 80 per cent.

These hardest hit authorities were likely to be county councils and outer London boroughs. She added 19 would be in even greater difficulty because they were expected to pass on to schools more than their total grant increase.

Further evidence that the days of rising education spending may be over came in this week's pre-budget report. Chancellor Gordon Brown admitted to a pound;10 billion hole in public finances, which will limit the additional resources available in next summer's three- year spending review.

Mr Brown also announced an extra pound;340m for local authorities to help them increase spending while holding down council taxes.

Ms Wharmby outlined SHA's proposals for a national schools funding formula that would provide a more equitable system. She compared the current situation to "playing snakes and ladders in the fog", with too many people making too many decisions.

Instead SHA was proposing that schools' funding entitlement should be worked out nationally according to an "activity-led formula" based on the costs of the services they provided. This money would be delivered straight to schools, bypassing LEAs.

LEAs would be expected to pay for all central services through council tax.

Ms Wharmby conceded that work had to be done on the proposals to enable councils to deal with the cost of educating children with extreme special needs.

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