General background on school funding reform in England can be found in a Library briefing paper:

This looks at the current school funding system, the Government’s proposals for reforms, and commentary.  

What is the Government proposing?

There is currently no national, ‘from scratch’ formula to determine how much local authority areas receive per-pupil, each year, for their schools budget. Allocations are driven largely by historical funding levels. 

The Government is proposing the phased introduction of new national school funding formulas from 2018-19. One, the main national funding formula (or NFF), will be used for calculating the bulk of school funding for pupils aged approximately 5 to 16. A second formula will be used for calculating high needs funding – this is largely for special educational provision. There are ongoing parallel reforms to early years funding.

In the first year, 2018-19, the NFF would only be used to calculate local authorities’ allocations and as now they would apply a local funding formula (a so-called ‘soft’ formula).

In 2019-20, the NFF would be used to distribute the vast majority of school funding directly to schools (a so-called ‘hard’ formula).

There would be transitional arrangements while the new funding system is phased in, including caps on gains and losses.

The Government is currently consulting on its proposals. Its second-stage consultations opened on 14 December 2016 and are due to close on 22 March 2017.

These changes build on reforms started by the Coalition Government, which held a number of consultations and allocated £390 million of additional funding to the ‘least fairly funded’ areas for 2015-16. Devon local authority was one of the recipients. This funding was then rolled forward to subsequent years.

Potential impact for individual schools, constituencies (including East Devon) and local authority areas

Alongside the second stage consultation documents, the DfE has published tables of figures illustrating potential impacts for schools and local authorities.

The DfE is clear that these are not actual allocations for schools or local authorities in any particular year, and are for illustrative purposes only, to inform the consultation.

They illustrate funding under the NFF in two hypothetical scenarios:

  • If the NFF was introduced in full and without transitional protections in 2016-17. This figure is then compared to a baseline.
  • If the NFF was introduced in 2018-19, with transitional protections (i.e., caps on gains and losses). Again, this figure is compared to a baseline.

Actual funding under the NFF would depend on pupil numbers/ characteristics at the time, any changes to the formula made post-consultation, and overall school funding. There are also other separate sources of school revenue funding, including the Pupil Premium Grant and 16-19 (sixth form) funding.

National funding formula consultation:

Illustrative NFF funding for schools in East Devon

Baseline funding
[a] Funding school received in 2016-17 or 2016/17 (£ million)  50.4
           
Illustrative NFF funding if formula implemented in full in 2016-17, without transitional protections
[b] Illustrative total NFF funding (£ million) 49.9
     
[c]= [b]/[a] -1 Percentage change compared to baseline  
   All schools      -1.1%
   max gain      +12.0%
   max loss      -2.9%
          
  Schools with more funding than baseline      16
  Schools with less or the same funding as baseline      20
Illustrative NFF funding in the first year of transition
[d] Illustrative NFF year 1 funding (£ million)      50.0
          
[e]=[d]/[a] -1 Percentage change compared to baseline       
  All schools      -0.9%
  max gain      +2.4%
  max loss     

-1.5%
        
  Schools with more funding than baseline      16
  Schools with less or the same funding as baseline      20
          
Number of schools excluded because they are new schools still filling up 2

Sources: https://consult.education.gov.uk/funding-policy-unit/schools-national-funding-formula2/

EduBase, DfE

The wider school funding context

Schools in England report that they are facing rising cost pressures, especially from increased staffing costs.

In the November 2015 Spending Review, the Government said that the core schools budget would be protected in real terms over the Spending Review period, and that per pupil funding levels will be maintained in cash terms. Funding for the pupil premium would also be protected in cash terms.

Savings of around £600 million would be made from the Education Services Grant (ESG). This is additional funding given to academies and local authorities for services such as human resources, school improvement and education welfare services.

The Institute for Fiscal Studies (IFS) estimated in April 2016 that there would be at least a 7% real terms reduction in per-pupil spending between 2015-16 and 2019-20, or about 8% if changes in the costs likely to be faced by schools were also accounted for.

On 14 December 2016, the National Audit Office (NAO) published a report on schools’ financial health:

This reported that the department’s overall schools budget was protected in real terms, but did not provide for funding per pupil to increase in line with inflation. Mainstream schools in England would be required to make £3 billion of savings by 2019-20, to counteract cost pressures. This equated to an 8% real-terms reduction in per-pupil funding for mainstream schools between 2014-15 and 2019-20.

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