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Towards a saner funding system

Schools are being torn by the conflicting demands of what they can spend and what they must deliver. John Atkins proposes a way of linking the two. There are two fundamental weaknesses in the current system for funding schools. The first is a weakness of accountability.

On the one hand, central Government has over the past few years sought to define what pupils should accomplish in our schools. Local authorities, governors and headteachers no longer determine the curriculum, nor are they sole judges of pupils' progress in it.

On the other hand, through its standard spending assessment mechanism, and the "capping" arrangements by which it limits local authority spending, the Government effectively tells local authorities how much they should spend on national curriculum delivery. The problem is that there is no link between these two.

The mechanisms of government which produce the national curriculum and the SSA settlement are entirely unconnected. There is no demonstration that the SSA settlement provides "enough" to deliver the national curriculum to the standard that the Government expects. As a result, when funds get tight everyone blames everyone else. Schools and local authorities criticise Government for putting too little in the SSA settlement. Government criticises local authorities and schools for not spending the money wisely - and attempts to weaken the connection between investment in schools and pupils' subsequent performance. The question of who is in the end accountable for pupils' performance is thus dodged.

The second weakness in the present system is a weakness of allocation. SSA does not simply allocate education resources to local authorities on a per capita basis: some authorities get more per head than others. The ratio between the most highly funded authority and the least highly funded is currently 1. 65 to 1. By far the greatest contribution to this difference comes from the assessment that the SSA methodology makes of "additional educational needs": that is, the extra amounts which need to be spent on some pupils, compared to others, to ensure that all get an equal opportunity to realise their potential.

But the "additional educational needs" assessment is not based on any analysis of which pupils need more, or of why. Instead it is based on statistics. Government statisticians look at which authorities have traditionally spent more on education in the past, and try to relate this extra spending to "indicators" which appear to describe the nature of the authorities concerned. Thus, for example, they note that authorities with high proportions of children from ethnic minorities, from single-parent families and from families on income support have traditionally spent more on education in the past. Government then builds its findings into a formula which governs how much these and other authorities should spend in the future.

There is a problem with this approach. There are many reasons why authorities with many children in these groups traditionally spent more - and why authorities without so many spent less. And traditionally low-spending authorities in particular may well now regret their past underspending, especially since the arrival of the national curriculum. But under the present arrangements they are trapped within it. Meanwhile the high disparities between local authorities' funding for education continue, with no firm idea in anyone's mind of what these disparities are intended to accomplish - or whether they are accomplishing it.

Our proposals for a new way of funding local authority education set out to address both these issues directly. We start by posing the basic question of what we want pupils in our schools to be able to achieve, either in national curriculum terms or more widely. Once this question has been answered, it is possible to work out what inputs from teaching staff, non-teaching staff and other resources (including local authority resources) are needed to support pupils' achievement, and what - on a per pupil basis - these inputs are likely to cost.

This of course involves decisions about the size of classes in which pupils are taught - and indeed the extent to which pupils are taught in class groups. It will require decisions on how much should be spent on non-teaching staff, and on learning materials and resources. It will not be possible to claim - even as a debating point - that the scale of these inputs do not matter.

But it is surely not unreasonable to try to work out what it "should" cost to deliver something so tightly defined as the national curriculum, even if one's first estimates need to be revised in the light of likely available resources. Indeed, a number of local education authorities have already done just this at local level by adopting "needs-led" or "activity-led" budgeting. Why can it not be done at national level too? If it were, then the accountability muddle would be immediately resolved: it will be clear what the global sum for education has been based on.

This leaves us with the second issue: the distribution of these resources between authorities. If the overall sum for local authority education has been worked out on the basis of what we want pupils to be able to achieve, then clearly the relative allocation to individual authorities cannot simply be based on history. Instead, there are five, pupil-related questions to be answered: * why we should spend more on some pupils than on others * which pupils these should be * what we are intending to achieve by this (and how we will know when we achieve it) * how the numbers of these pupils in any one authority should be assessed * how much extra they should receive.

Answering these questions fully requires significant debate. Specifically, we need to find ways of identifying groups of pupils on whom there are logical, causal reasons to spend more - and how much more. But our suggested starting point in this debate is to look at the following four groups: * pupils for whom English is an additional language * pupils whose parents are on income support * pupils who show low potential at entry to the system * pupils whose performance in end of key stage tests gives cause for concern.

For each of these groups, we would suggest, it is possible to argue causally - and not just by correlation - that more resources should be provided, and estimate how much.

For the first two groups, the argument is not difficult. Pupils for whom English is an additional language are likely to benefit from specific extra language support, particularly in key stage 1. One could hazard the cost of such support. And schools with a large proportion of pupils whose parents are on income support may want to provide a richer school environment to make up for the relative lack of resources in many of their pupils' homes.

Our last two groups, however, raise far more difficult questions. We are suggesting that resources be particularly targeted at authorities who have greater than normal proportions of pupils whose attainment (or apparent potential to attain on entry) is low. Authorities' funding would therefore be directly linked to low scores in tests of potential at entry to the school system, and subsequently to low attainment in end of key stage tests.

Both of these will cause controversy. Although instruments for assessing pupils' potential at entry to the school system are increasingly reliable, the idea of "testing five-year-olds" may not have wide appeal. And the idea of allocating more resources to authorities who show low results at end of key stage tests may be seen as too close to "rewarding failure" for comfort.

We would suggest, however, that these concerns are overstated. First, the proposed assessing of five-year-olds is only for authority funding purposes. The assessments can be anonymous, and only a relatively small sample of pupils need be assessed (perhaps 100 or 200 in any one authority, if the sample is carefully randomised) to obtain the necessary profile.

Second, it is hard to imagine that a school would wilfully disadvantage its pupils simply to give its authority more funds in a future funding settlement. Nor can one envisage authorities encouraging their schools to get pupils into difficulties. In any case, there already exist both national and local procedures for identifying schools in difficulties, and (by and large) helping them get out of them. And the advantages of targeting resources at exactly where they are required, rather than relying on the present statistical approach, are almost certainly sufficient to outweigh any remote danger of "rewarding failure".

It is possible to design - and implement - a new approach to funding local authority education which provides clear accountability for the overall sum concerned and a rational basis for distributing this sum to local authorities.

We think that our report, The Funding of Education, suggests the basis of such an approach.

John Atkins is a principal associate in the management consultancy practice of Coopers and Lybrand. The Funding of Education was commissioned from Coopers Lybrand by the National Union of Teachers and is available from The NUT, Hamilton House, Mabledon Place, London WC1H 9BD

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