Welcome though it is, the National Funding Formula requires a more sophisticated level of calculation if it is to reflect the real cost to schools of providing a worthwhile education, say Sam Ellis, Susan Fielden and Julia Harnden.

Redo the maths

The statement on school funding, delivered by Secretary of State for Education Justine Greening to Parliament in July, draws a line in the sand. It confirms the introduction of a National Funding Formula (NFF) in 2018/19 supported with £1.3 billion extra funding found from efficiency savings in the DfE itself. More detail is promised this month (September) on exactly how the money will be distributed.

The £1.3 billion represents an increase in the core funding for schools and high needs of about 3% above what is needed to match pupil number growth alone for 2018–2020. Set against the overall cost pressures that have built up in the system since 2010, it is welcome relief but it still means that schools must continue to manage finances as efficiently as possible in order to cope with existing as well as any new cost pressures. And, for many, ‘efficiency’ will not be enough.

The statement also says that leaders will “strive to maximise the efficient use of resources” – but surely many schools have already passed that point?

Another critical message is that local authorities (LAs) will continue to set a local formula to distribute the funding allocated from the national formula in 2018 and 2019 in consultation with schools – so the local authority will continue to take the key decisions.

Operational needs?

The 2016 consultation on an NFF proposed a common lump sum for all schools, a range of per pupil amounts for different factors and a funding floor of –3%. Justine Greening’s statement promises up to 3% gains a year per pupil for under-funded schools, and a 0.5% a year per pupil cash increase from 2018–2020. This seems to imply that the –3% funding floor will change to +0.5%.

Despite this apparent good news, it is a mathematical fact that the type of formula proposed can never produce an output that is equitable because the formula makes no reference to operational needs. It does not recognise that schools teach pupils in groups rather than individually. We don’t know the 2018/19 formula values yet but, without significant change, the proposals from December 2016 mean that most schools will need to use significant elements of funding for deprivation, English as an additional language (EAL), low prior attainment and Pupil Premium, just to prop up a very basic curriculum.

Many schools with low levels of deprivation will have insufficient funding to do it and some schools may have little or no prospect of remaining solvent. And this is before cost pressures and pay awards are factored in. (A report on this issue can be downloaded from the Effervesce website at https://tinyurl.com/ybhwx7vt)

The funding debate will continue but some facts do not change and the mathematics is true, whether you like it or not.

A basic school funding model

When you look at what actually* goes on in a sample of financially efficient, good and outstanding secondary schools with low levels of deprivation in low-funded areas, you can see that there is a clear consensus about the relationship between the numbers of teachers and the number of pupils – strong enough to build into a reliable model for school funding. Other facts about expenditure and cost also emerge:

• Average teacher cost (including on-costs) varies but the majority of the schools in the sample are clustered around £47,000 (2015)* – schools need to be able to pay at the right rate to recruit and retain good staff.
• An already financially efficient school with low levels of deprivation has little room for manoeuvre – core funding levels (the lump sum and the per pupil funding in the formula) will make the difference between survival and insolvency.

Armed with these facts it is possible to construct simple funding models that demonstrate what a school needs in order to operate at a minimum level and how that may compare with any lump sum and per pupil amount formula. The fundamental problem with the lump sum and per pupil allocation mechanism soon becomes apparent.

Schools teach children and young people in classes. The marginal cost of an extra pupil may be very small but the cost of a class is considerable. Despite being simple, a lump sum and per pupil funding formula is not the most efficient way to share out a limited pot of money. It assumes that every extra child costs the same to educate. Moreover, when the school reaches a tipping point, an extra class is needed, and the cost per pupil rockets.

The blue dots on the graph* show the cost per pupil in random schools and the red line shows the limitations of a simple funding model. Some schools are relatively over-funded and some under-funded. The NFF consultation figures put the majority of schools in the under-funded category.

So, unless the national spend on the core schools budget increases in line with the number of pupils, every school will experience a cut in funding. The values in the funding formula (local or national) need to increase in line with unavoidable cost pressures or every school will feel the pinch. And unless the core funding a school receives through a formula is adequate to support an educationally and financially viable school, money allocated for the support for the disadvantaged, vulnerable and those with special educational needs and disabilities (SEND) will be required to plug the gap. In low-disadvantage areas plugging the gap may not be possible.

A benchmarking tool

Despite the welcome aspects of Justine Greening’s statement, the funding proposals need to be challenged on the national scene and improved upon at local LA/school forum level.

We are developing a tool to help test the reasonableness of a school funding formula. The aim is to help those senior school leaders representing colleagues on their schools forum, to provide a benchmarking tool for all schools and to support colleagues in working with the LA and local MPs to secure a reasonable deal for local children.

The potential of such a tool, if it were to be used in 150 local authorities and the conclusions shared across ASCL members, would be to provide a powerful body of evidence for national negotiations and local benchmarking.

If you are interested in being involved in the tool’s development, email julia.harnden@ascl.org.uk

* Effervesce – A Core Funding Level for Schools: Protecting educational and financial viability through a national funding formula (May 2017) https://tinyurl.com/yayl77e3

Julia Harnden
ASCL Funding Specialist
@julia_harnden

Sam Ellis
Funding and Timetable Consultant

Susan Fielden
School Finance Specialist

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