A completely fair funding system is a weighty issue
For many years, there has been a campaign for fairer funding of English schools. The coalition government planned to introduce a national fair funding formula (NFFF), but got cold feet in 2014 and announced new minimum funding levels instead, which were designed to help the most “underfunded” areas. The current government has now pledged to introduce fair funding.
In principle, the idea sounds obvious, rational, simple. We could have one flat rate per pupil across England, possibly varied by key stage. No longer would similar schools on different sides of local authority boundaries receive different levels of funding. Schools could now be fairly compared on performance, because they were at last being fairly funded.
Of course, everyone accepts that a fair funding system would need to be more complicated than this. Schools in areas such as London have higher salary costs, and need a London weighting to reflect this. And there are good reasons why we might want to fund different phases of education at different rates. The variation between primary and secondary rates across the country, combined with the arbitrary cut-off for the real-terms budget protection at age 16 have made some of these issues topical. It would be sensible for the government to review its funding rates per phase and consider if these are rational.
The three biggest barriers to a NFFF are local flexibility, treatment of disadvantage and transitional costs.
When Michael Gove was education secretary and I was schools minister, Gove’s first instinct was to create a model where every school would receive its funding directly from either the Department for Education or one of its agencies. Gove liked the fact that this would cut local authorities out of the funding loop. There was no constructive question in the debate to which he thought the answer was “local authorities”, and he thought that a NFFF would make life simpler for academy chains and new free schools. He was also right that the unequal funding of local authority and academy schools makes little sense.
Applying a NFFF would cut out all aspects of local decision-making about priorities and cost pressures. The DfE has already been moving to reduce the number of variables that local authorities can use in determining funding priorities, but it makes sense to allow some flexibility in a small number of sensitive areas. Some schools operate across multiple sites, incurring unavoidable transport and higher utility costs. Growing schools often need extra funding until they reach optimum economies of scale. Local authorities make decisions knowing these schools’ circumstances. Local authorities are also better equipped to judge whether or not to subsidise smaller schools, for example in rural areas.
When we looked carefully at the NFFF, it was clear that a lot of unfair variation in per-pupil funding was a result of the way we have chosen to fund disadvantage. We try – sensibly in my view – to give more money to schools with more disadvantaged pupils, including those from low-income households and children in care. In the last Parliament, we layered on an extra level of targeted disadvantaged funding in the form of a pupil premium.
When we looked at fair funding reform in 2013 and 2014, neither of us wanted to reduce disadvantage funding. Once we made this decision, the impact of introducing a NFFF was less than many people might expect.
Indeed, the plan that we sent to the prime minister and deputy prime minister would only have led to increases in per-pupil funding of a few per cent or less in many low-funded areas. Some lower-funded areas received a lot of the boost they would have received through a NFFF when we introduced minimum funding.
Gains to underfunded areas from a new NFFF are likely to be relatively modest unless a government cuts or reorganises funding for disadvantaged pupils. Given the huge gaps that persist between educational outcomes for disadvantaged pupils and their peers, it would be controversial to cut overall disadvantaged funding. What the government could do is look at the amount of disadvantage funding per disadvantaged child, and seek to make this fairer across the country. The government could also review how to allocate this very big funding stream. At present, we use a mixture of free school meal eligibility, prior attainment and area-based funding. I looked carefully at this issue while I was schools minister and saw no easy answers.
That brings me to the third and final issue – transitional costs. Both Gove and I wanted to bring in a new funding formula, starting in 2015. This would be phased in, and it would avoid any school losing upfront in cash terms per pupil. We drew up a detailed plan and sent this to David Cameron (who used to refer to it privately as “Gove’s plan to lose me the next general election”). The problem was that some areas would gain, while many would lose (relatively speaking) and we couldn’t give details of the long-term consequences for each area or school, because the DfE had no spending commitments from the Treasury beyond 2015-16. It was at that point Cameron, along with Nick Clegg, rejected an early introduction of a NFFF, and we went with the short-term fix of minimum funding levels.
The ideal time to fix the problem of underfunded areas is when you have a growing education budget – then you can allocate more into low-funded areas without squeezing those who are “overfunded”. Underfunded areas will also rightly say that fair funding becomes even more important when there is a budget squeeze – a view that the current education secretary Nicky Morgan seems to share.
It will still be a challenge to deliver this message to highly funded schools, which will often be in areas of high disadvantage. A small redistribution may upset underfunded areas, while a big redistribution could cause teacher redundancies in challenging schools. Unless Morgan is able to get more money from the chancellor, there is no simple answer here. Ministers will need a strong policy rationale and a politically sensitive plan to successfully deliver this long-overdue reform.