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Two weeks after the consultation on the government’s National Funding Formula closed, Executive Chairman of the Education Policy Institute and former Schools Minister, David Laws, blogs for CM on the issues Justine Greening and co face if they are to satisfy all parties when a final decision on school funding is announced.


Over the last few months, we have seen the first major media and public spotlight on the issue of schools funding since the 1990s.

This coincides with two recent developments – firstly, the proposals by the government to introduce a new “National Funding Formula” for schools; and, secondly, the emergence of real cuts in per pupil funding, as cost pressures exceed the extra money being granted to schools in England.

A report last week by the Education Policy Institute shed light on what the proposed changes are, and what impacts there are likely to be.

Our Institute found, strikingly, that after these two sets of changes, every school in England will experience cuts in real per pupil funding over the next three years. In other words, even schools which are supposed to gain from the new funding formula will see their real budgets contract because of the other cuts and cost pressures. Around half of primary and secondary schools will be faced with real cuts in per pupil funding of between 6 and 11 per cent by 2019/20.

For the average primary school in England, these pressures are equivalent to losing around £74,000 in real terms (the budget for two teachers), and for the average secondary school the loss would be around £291,000 (the budget for six teachers). It is not the case that exactly this number of staff per school will be lost—some schools will cushion their funding pressures by using existing cash reserves.

For some schools, a major part of the budget pressure comes from the new funding formula. This formula is designed to ensure that a pupil with the same characteristics receives the same amount of funding wherever he or she is being educated (leaving aside that schools in areas such as London receive higher funding to cover higher staff costs). You might think that we would already be funding pupils consistently in this way—but this is not the case.

Creating a fair funding formula, in a time of public sector austerity, means that some schools will “win” while others “lose.” Unsurprisingly, the losing schools are not very enthusiastic— no school considers itself to be overfunded. So “levelling up” is much easier politically—but this would require extra money, which the Department for Education currently does not possess.

A second problem for Education Secretary, Justine Greening, is that “fair funding” does not mean the same funding for all pupils. The government still plans to spend a lot more money on disadvantaged pupils, for example, in order to help schools to close the “attainment gap.” Justine Greening has actually, and commendably, proposed a new formula which continues to allocate a large share of funding to these less advantaged pupils.

This decision means that higher funded areas such as London do not lose as much money as had been expected by some commentators and politicians—potentially a good outcome for social mobility, but one which raises risks of a conservative backbench rebellion.

It would be challenging enough to implement a new funding formula with winners and absolute losers. But the task for Greening is even harder because these changes are taking place at a time when the amount of money allocated for each pupil is being frozen in cash terms, while costs are rising significantly. This means that schools are not being compensated for higher pay, higher pension costs, higher national insurance costs, cuts to the Education Services Grant, and other economy-wide pressures on costs. It is these additional cost pressures that wipe out the gains for the winning schools, and push the losing schools into even greater losses per pupil.

What could the Department for Education now do? It could scrap the new funding formula, but this would cause even more anger amongst the schools which are due to gain. It could choose to move more money away from disadvantaged schools—but this would be widely criticised as being socially regressive. The third option would be to put the extra money already made available as part of the reform into raising funding for the most underfunded areas, while completely protecting all areas from outright cuts. This might work, but would involve rather small gains for the winning areas. Finally, Philip Hammond and Theresa May could decide to bail-out the education department with a large dollop of extra cash.

But will May and Hammond want to spend more money on schools? Both were Ministers in a Coalition government in which schools spending was largely protected from cuts, but where the departments they headed (Home Office/Defence) were often less privileged. It will be interesting to see how the government squares this circle.

David Laws is Executive Chairman of the Education Policy Institute. He was Schools Minister from 2012 to 2015.