Stick or U-turn: six plays to fix the funding formula

24th March 2017 at 00:00
The government is feeling the heat over the proposed schools funding formula. Will it take a gamble by pushing through its plan unchanged?
The DfE is getting in a twist over how to finance schools fairly – but the options are limited

David Cameron is said to have once privately referred to proposals for a national funding formula for schools as “Michael [Gove]’s plan to lose me the next general election”. More than three years later, those words must seem painfully close to the mark for today’s cabinet.

Mr Cameron heeded his political instincts and put off dealing with long-standing calls to resolve decades of inequality in England’s school funding until after the 2015 election. Now, following further delay, the ball is in Theresa May’s court. But what might be a politically straightforward exercise in times of plenty is turning out to be infinitely more difficult in today’s tough fiscal climate.

Ministers are grappling with the dilemma of redistributing school funding in a way that aligns with the prime minister’s pledge to increase social mobility and avoids alienating either the Tory heartlands or the grammar schools that it has thrown its weight behind.

They are doing so at a time when school budgets are severely squeezed, meaning nearly all schools stand to lose money in real terms regardless of whether they are seen as relative “winners” or “losers” under the new formula.

If they were worried about the manifesto promise being broken over NI, well there was a manifesto promise for a fair schools funding formula, too

As Malcolm Trobe, interim general secretary of the Association of School and College Leaders, put it: “They are in a hole, come what may. It’s just a question of what the size of the hole is.”

Education secretary Justine Greening is all too aware of this, having faced a succession of attacks by Conservative MPs – including her own – as well as unions, thinktanks, schools, headteachers and parents, since the detailed proposals were announced in December.

The Department for Education’s consultation on the formula closed on Wednesday. At the time of writing, ministers were planning to consider the responses before returning with a final plan, which could be reflected in the Budget this autumn.

Legislation would then be needed to allow the shift in power over school funding away from local authorities, ahead of the national formula’s introduction in 2018-19. But with threats of backbench rebellion already rising in volume, pressure is growing for the government to follow up its recent U-turn on national insurance and make concessions now.

Ministers insist they are in “listening mode”. So what could they do to extricate themselves from what is rapidly becoming one of the most intractable political problems of the day?

Option 1: Scrap the national funding formula

This could seem like the simplest option. But, having promised a funding formula, it would be difficult to put the genie back in the bottle.

The one thing many that people agree on is how unsatisfactory the current system is, with its huge inconsistencies. In Tower Hamlets, schools attracted £6,906 per pupil in 2016-17 – excluding the pupil premium – while the figure in Wokingham, Berkshire, was only £3,991. The status quo allows huge differences in the way pupils with the same characteristics are funded in different areas of the country.

Simply scrapping the formula would certainly fail to appease the f40 group of the lowest-funded local education authorities in England, which are overwhelmingly in leafy, Tory-dominated areas. It would continue to allow local authorities to distribute funding as they saw fit, rather than handing the money directly to schools, which would seem to swim against the tide of government policy.

Those who would rather retain the status quo might have felt hopeful after chancellor Philip Hammond U-turned over national insurance contributions rises set out in his Budget, but f40 chairman Ivan Ould sees it differently: “If they were worried about their manifesto promise being broken for NI contributions, well, there was a manifesto promise for a fair schools funding formula, too.”

Option 2: Postpone the formula

This would retain the current postcode lottery for longer, which could be unpopular for the reasons stated above. It would risk frustrating campaigners, given that the formula has been repeatedly delayed.

Unless the Treasury provides more money, postponing the plans could be seen as merely delaying a painful decision. There is no guarantee that tweaking the plans without providing extra money would suppress the criticism being levelled at the government.

“It could end up with just as many losers – possibly different ones,” said Graham Brady, chairman of the 1922 committee of Conservative backbench MPs.

However, it would also provide more time for the government to fully consider the slew of consultation responses and potentially come up with something with wider appeal.

Option 3: Introduce the proposals as they are

According to the Sutton Trust, the planned formula would give too little money to disadvantaged pupils. But the f40 group argues the exact opposite – that because the formula takes into account the number of deprived pupils attending a school, it amounts to “double funding” for poorer children because they also attract the pupil premium.

Meanwhile, the NAHT school leaders’ union has warned that the “lump sum” part of the formula – constant for all schools – was being reduced to a level that would make small schools “unsustainable”, while others believe it is just propping up unviable schools.

Whether critics such as the f40 group are able to swallow the current proposals partly depends on how long the government maintains the funding “floor”, which stops any school from seeing its funding fall by more than 1.5 per cent a year. Continuing the “floor” beyond 2019-20 would mean that the uneven pattern of spending would never fully disappear, limiting any gains for “winners” under the formula. But getting rid of it would hit the “losers” even harder.

Most significantly, ploughing ahead would fail to address the overarching concern that all schools need more money.

Option 4: Appease the shires

Ms Greening faces a growing backlash from Tory backbenchers, particularly those in rural constituencies, who feel that their areas have been underfunded for years and are aghast that the changes would still result in massive school cuts. Some have threatened to vote against the changes, while one MP leading the charge, Geoffrey Clifton-Brown, has warned that the plans need a “radical overhaul”.

The DfE could deal with one of its biggest gripes by reducing the amount of money allocated to deprived pupils – which would also appeal to grammar school heads who have warned that their relatively affluent intake would lose out on funding. But doing so would make it much more difficult for the government to argue that it was taking social mobility seriously.

Option 5: Give more to disadvantaged areas

This would be an absolute no-go in the eyes of many Conservative MPs; Mr Ould said it would be “impossible in the current climate”. But it would address concerns that some deprived areas would see big losses in future. London, for example, is one of the biggest losers, due to changes to the deprivation measures being used under the formula.

However, trying to soften that blow without any new money would leave no one happy with the new formula.

Option 6: Provide more money

This would leave the government with wider political problems. But for schools, it seems the only conceivable solution. Mr Trobe speaks for many when he says: “There’s no reasonable way out of this without additional money.”

More cash would undoubtedly be welcomed, though it would leave a dilemma over how the money should be distributed. Perhaps criticism would be more muted if the formula created genuine “winners” – with real-terms gains after taking into account schools’ increased costs.


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