The ultimate impact on the education system of the Coalition’s reforms won’t be clear for some years, but there are some immediate financial implications which schools and colleges need to grasp, says Sam Ellis.

A return to austerity?

When reading section eight of the schools white paper on school funding, The Importance of Teaching, I was reminded of the quote at the start of Simon Schama’s book about the French Revolution, Citizens. Allegedly, when asked by an American diplomat in 1972 what he thought the historical importance of the 1789 French Revolution was, Chinese Premier Zhou Enlai replied: “It is too soon to tell.”

If the plans for radical reform outlined in the white paper come to pass, it is likely that education will feel the impact for a very long time.

It will indeed be too soon to tell whether the actual consequences are for better or worse. Having said that, some things are matters of fact.

Firstly let us unpick the meaning of “the recent spending review which sees real terms growth in school funding” (p79 paragraph 8.3). This means that school funding will increase to compensate for an increase in pupil numbers, mainly in the primary sector. In cash per pupil terms, there will be no significant real terms increase (0.4 per cent over four years).

The main themes in the funding section are the targeting of funding on deprived pupils, changing the funding system, increasing its transparency, ending the funding disparity between post-16 providers and reducing bureaucracy in allocating capital funding.

Pupil premium

The white paper says that: “Addressing the disparity between rich and poor pupils is a top priority of the coalition government” (p81).

The mechanism by which disadvantaged pupils will be indentified for the first year was defined on 13 December as “those pupils currently eligible for free school meals”. In 2011-12 these pupils will attract £430 each in addition to the baseline school budget.

The stated aim is to extend the range of pupils attracting the premium to “known to be eligible for free school meals before” from 2012-13. The exact meaning of “before” is yet to be determined. The January 2011 census will be used to determine the pupils receiving the premium for the year from April 2011.

The value of the pupil premium is set to rise, reaching its full value of £2.5 billion in 2014-15. Assuming that there will be a stepped increase and that more pupils will be eligible, the year on year increase will be less than £430 and the total in 2014-15 less than £1720 per pupil.

Given that there is no significant real terms increase in funding, one has to ask if this is actually new money or redistribution. It seems too soon to get a straight answer.

The white paper says heads and teachers (p81) will decide how the funding should be used and the ministerial statement from Education Secretary Michael Gove on 13 December stated: “We trust schools to use the premium for the purposes intended.”

With that however comes accountability and the same statement says that the department “will ask that (schools) inform parents how you have spent the premium.” The white paper states that performance tables will be reformed to show “how well children eligible for the premium achieve”.

Tackling transparency

Work to increase the transparency of the funding system is already in progress, starting in April 2011 when the current system of a dedicated schools’ grant (DSG) plus other grants ends. Funding for schools will be passed to local authorities (LAs) and will contain the DSG plus other grants, including specialist school funding.

The total level of grant received by the LAs should match the sum of the grants currently allocated to schools at authority level. How funding is then redistributed to schools is a local decision which rests with the local schools forum. Members should make sure they know who represents them on the forum and that the representation is working.

A minimum funding guarantee means that no school should see a reduction of more than 1.5 per cent per pupil before the pupil premium is applied as a result of local redistribution of grants. However, post-16 funding is excluded from this.

It seems clear that the government is heading in a ‘funding per pupil’ direction and a consultation on a national funding formula will be published in spring 2011.

The Young People’s Learning Agency (YPLA) will be replaced with a new Education Funding Agency (EFA), subject to legislation. The EFA will be responsible for the funding of academies, free schools and all 16-19 provision. The EFA will also distribute resources to LAs for schools that have not become academies.

The government intends to make academy status the norm (paragraph 8.11 p82). The current situation for funding an academy means it receives the same basic funding as any school in the LA plus an additional grant. The additional grant represents the academy’s share of the funding that the LA would have retained for central expenditure.

Without going into pages of mind-numbing detail, it is a fact that the current distribution of the additional grant and the associated recoupment of funds from LAs is not simple, transparent or equitable. The white paper states that the calculation of this grant will be reviewed so it is fair to all. That must be seen in the context of earlier ministerial statements that there will be no financial incentive or disincentive to a school becoming an academy.

Any move to a national funding formula would certainly ease the problem but there is a significant risk of unintended consequences, particularly if it is introduced quickly and with insufficient modeling and testing.

Post-16 budget reduced

It is important to realise that, following the CSR, the size of the overall budget for post-16 education will be reduced. Although the funding methodology will not change for this year, funding will be based on lagged numbers – that is, the number of students in the October count.

Once the global funding pot, called the quantum, is known, the calculations will be done in reverse to work out the funding rate per learner. The 2011 funding for post-16 learners will probably be less than it was in the past but the actual values are unlikely to be published until well into 2011.

The funding rate for schools is currently higher than that for colleges, by an estimated £280 per student. The government has decided to bring these into line by moving school sixth form rates down to the college level by 2015. The process is phased and will start in 2011-12.

There is a statement that: “We will provide the necessary transitional protection for schools facing significant changes.” However there is no explanation of “significant change” nor “necessary protection”. I seem to remember that it is not the fall that kills you; it is the sudden stop at the end.

Capital funding

The sudden stop applied to the Building Schools for the Future (BSF) programme may not have actually killed anyone but it has certainly caused some significant pain around the country.

Capital spending will be reduced by 60 per cent to £15.8 billion for the whole of the spending review period which, although a major blow, is comparable with what it was in the 2003-07 CSR under the previous administration.

The white paper states that this money will be used to target “the poor condition of the existing school estate” which presumably means schools close to falling down. It is also there “to ensure there are enough places for the predicted increase… at the primary level”. Presumably this is new builds where numbers require it.

The ministerial statement of 13 December sets the level of devolved formula capital for maintained schools in 2011-12 at £185m. That is will be allocated to all schools at the same rate – a small amount and cold comfort in hard times.

Difficult decisions

Clearly school leaders will need to take difficult decisions. These include making teaching group sizes as large as practical, maximizing the contact ratio for teaching staff, ensuring that maximum value is obtained from all staff time, developing the culture through the whole school of ‘waste not want not’, and looking for effective procurement and cooperative ventures with other institutions.

Perhaps the largest shift will be for the curriculum team who will need to design a curriculum and write a timetable to match a financially defined level of staffing rather than planning a curriculum and timetable and then working out how to afford it. There is a resource on the ASCL website to support members in this task.

Everything in the white paper may not come to pass and you may be sure that the ASCL view from December Council will be communicated loud and clear to the highest levels of government.

However the government is intent on being radical. If the evidence of the first six months is anything to go by, they will also take action at breakneck speed. It may well be a white-knuckle ride.

Will the funding decisions provide schools with sufficient production capacity to meet the production demand? Zhou Enlai could not have put it better: “It is too soon to tell.”

• Sam Ellis is ASCL’s funding specialist.

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