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As a parent engaged in the education of your child, you will have heard about the Westminster government’s new national funding formula. But what exactly is it? How will it affect your child’s education? Will your child’s school be better off, worse off, or no different?

This quick and easy guide is designed to give parents – the most important stakeholders in their child’s education – all of the major headlines, plus places to go to find more information if you need it.

UPDATE October 2017: Since we published our parents' guide to the new National Funding Formula, Education Secretary Justine Greening and the Department for Education have announced a further £1.3 billion of funding for schools. This money will be distributed to schools via the education budget, but the extra funding will not impact on or change the new formula itself, though there are now plans for a 'soft' launch.

What is the national funding formula?

The national funding formula (NFF) is the proposed method the Department for Education will use to allocate budgets for state-funded schools in England (this does not include fee-paying private or public schools that set their own budgets and are autonomous from government).

What about schools in Wales, Northern Ireland and Scotland?

Education is devolved to the regions, so each assembly will continue to be responsible for school funding. At present, the proposed national funding formula will only be introduced across state-funded schools in England.

Is the national funding formula currently in place in England?

No. It won’t come into effect until 2018-19 (it was originally proposed to introduce it in 2017, but this has been moved back a year to allow Local Authorities (LAs) the opportunity to plan their budgets for 2017-18 in advance). 2018-19 will be a transitional year, giving time to allow local authorities to adjust to budgetary change and continue to set local formulae. 2019-20 will see the new national funding formula implemented in full.

Have all of the details of the new national funding formula been decided?

No, although the proposals went through two rounds of consultations. The first stage of the consultation ran from 7th March to 17th April 2016. Over 6,000 people responded. The second stage opened in December 2016 and closed on 22nd March 2017. The proposals for the first round were refined for the second round. You can see more about how funding will change from 2018 on the government website. Since then, there have been changes to government plans on how the formula will be implemented, as well as timescale for full implementation.

Why has a national funding formula been proposed?

In March 2016, the Education Secretary (then Nicky Morgan MP, who has been succeeded by Justine Greening MP) announced two consultations open to the public on school funding reforms. The measure was proposed in order to tackle inequality in the current funding method. The aim was to make a new national funding formula where it was more transparent to the public where the money was spent on schools and how it was apportioned between areas and schools. 

The intention behind the new national funding formula is to reduce historical unfairness in the amount each school receives, ending the so-called “postcode lottery”, where some similar schools in the same area received different levels of funding where it was hard to justify the imbalance. The knock-on effect was that the better-funded school could attract and keep a higher calibre of teaching staff, leading to greater demand for places in that school among parents. In the introduction to the proposal, Justine Greening MP says: “Patchy and inconsistent decisions have built up over many years, and mean resources are not getting to the schools and pupils that need them most. Underfunded schools do not have access to the same opportunities to do the best for their children, and it is harder for them to attract the best teachers and to afford the right support. That is why introducing fair funding was a key manifesto commitment… It is the only way we can be sure that the same child, with the same needs, will attract the same funding regardless of where they happen to live; and the only way that parents can be sure there is a level playing field.”

Does this mean that all schools will receive the same budget?

No. There will be certain baseline figures for some budgetary aspects, and at least to begin with, schools can, under certain limitations, move money around depending upon their individual needs, and Local Authorities (LAs) will retain spending discretion between schools, at least to begin with (see below). However, aspects such as the size of the school, measured in numbers of pupils, and the location of the school (urban versus rural) will be determining factors in categorising schools; so that eventually, it is planned that all schools meeting similar criteria will be given the same funding once the NFF is fully-implemented. This has not historically been the case. The government has said that, “Schools in the historically lowest-funded local authority areas will gain 3.6%... schools in areas of sustained educational under-performance will also gain.”

The revised 'soft' formula

In September 2017, Education Secretary Justine Greening confirmed that when the NFF is introduced in 2018/19, the government will not set the funding amounts for individual schools, but instead set the overall budgets for each of the 152 Local Authorities (LAs), who then have a degree of autonomy in distributing their overall budget among schools within its catchment area. Each LA can still use its own funding formula (in line with government guidance). Such local discretion means that similar schools with similar demands within different Local Authorities may still receive a variation in funding. 

It's possible that, after 2020, the government will implement a 'hard' NFF, in which it allocates funding to each school on behalf of LAs and removes variations at local level altogether, though this is by no means certain. Previously, it had been thought that a 'hard' formula would be introduced in time for 2019/20.

The impact of additional funding

In July 2017 it was announced that an additional £1.3 billion had been allocated to schools from the education budget across 2018/19 - 2019/20. The increase in funding will not affect the NFF, but simply provide a larger overall cash pot for which the formula can be applied.

At this time the government also announced that all primary schools would attract a minimum funding level of £3,300 per pupil in 2018-19, increasing to £3,500 per pupil by 2019-20; where secondary schools would be allocated funding of £4,600 by 2018-19 and £4,800 by 2019-20. Under the 'soft' NFF of 2018/19, LAs will have the discretion to decide whether or not all schools within its catchment area receive the minimum amount of spending via its funding formula. They will also be able to set a reduction of no more than 1.5% per pupil within its funding formula.

How has the new national funding formula been worked out?

The overall budget for schools in 2017/18 is just over £42 billion. This is known as the Dedicated Schools Grant (DSG).

Out of that budget, around £33 billion will go on schools, with the rest being spent on other educational areas such as early years provision and additional support for high-needs young people.

The total amount each school receives will be divided between four building blocks that are the key to the formula. The blocks are not equally weighted in terms of financial worth. 

  • A – Basic per-pupil funding. At 72.5%, this makes up the majority of the funding.
  • B – Additional needs funding. This comprises just over 18%.
  • C – School-led funding. This comprises just under 9.5%.
  • D – Geographic funding. The above three blocks will be adjusted for individual schools depending upon area. 

The basic blocks shown above can be broken down into further constituent parts, which are in turn weighted in different ways.

A - Basic per-pupil funding

The figures given in the government’s proposed formula give an indication of per-pupil amounts. They show that as the child moves up stages at school, more is allocated per pupil, so that each KS1 and KS2 pupil will receive the same amount, KS3 pupils will receive proportionally more, and KS4 pupils will receive the most. The reason for this is that costs increase as children move up, requiring a greater complexity of teaching, so secondary schools will receive greater per-pupil funding levels than primary schools. Secondary schools are also more fully equipped with computer and science labs and equipment, and there is also the additional cost of examination fees at KS4.

B - Additional needs funding

This block includes:

  • Deprivation
  • Low prior attainment
  • English as an additional language
  • Mobility

These subsections are not equally weighted, with Deprivation taking up 51% and Low prior attainment 41% of the block B funding. One area of concern is that the criteria of what falls into Deprivation has broadened, with various new IDACI (Income Deprivation Affecting Children Index) categories now competing for the same overall budget. There is no clear indication about how children from ‘just about managing’ (JAM) families will be measured. 

C - School-led funding

This block includes:

  • Lump sum
  • Sparsity
  • Premises (including Rates, PFI, Split sites, Exceptional circumstances) 
  • Growth

Again, the subsections are not evenly distributed, with Lump sum taking up just under 75% of the budget for block C. The government is setting the lump sum at £110,000 per school, stating that the amount, “reflects our objective to encourage schools to share services and functions where possible so that resources are freed up for teaching and leadership, and to make more funding available to invest in pupil-led factors.” The Sparsity subcategory is designed to give extra support to small schools in remote areas, which owing to their location may not be in a position to share services. 

D - Geographic funding

An area cost adjustment will be made, to balance geographic variation in teacher and labour markets. It will be calculated depending on the location of the school.

Will pupil premium be protected?

Yes. The government has pledged to ring-fence the additional funding (on top of the budget for the new national funding formula) for state schools in England, which is allocated annually to help the most disadvantaged pupils. For the academic year 2016-17, £2.4 billion extra to the education budget will go on pupil premium. The amount is shared with regional LAs to divide among schools in their catchment areas, or dispersed directly to academies and free schools. The purpose of pupil premium is "to raise the attainment of disadvantaged pupils of all abilities and to close the gaps between them and their peers". Click here to see the criteria for qualifying for pupil premium. 

Why is the proposed new national funding formula controversial?

Due to the nature of redistributing limited financial resources, inevitably some schools will see their overall funding reduced (estimated to be 42% of all schools), whilst other schools will see their funding increase. To ward against schools having significant gains or losses, it’s proposed that no school can lose more than 3% of its funding and no school can gain more than 5.5% overall. 

  • Real-term reduction in school funding: To complicate matters, the new national funding formula is being proposed at a time when all state schools are feeling the effects of increased costs. Over the past five years, the education budget has been protected from cuts, rising in line with prices. This is no longer the case. While the government hasn’t cut the education budget, inflation and therefore the costs of running schools has increased, and the same amount of funding is no longer stretching as far. A report by the National Audit Office has estimated that schools will face cuts of 8% in real terms by 2019-20. Some educators speculate that even schools that are likely to gain under the new national funding formula will see any extra cash going straight to paying for increased costs. The Public Accounts Committee has warned that school standards in England are at risk as schools are required to make savings during a time of significant financial pressure. See their report and recommendations
  • Why have costs increased? Pupil numbers rose 7% between 2015 and 2020, which increases costs on the school to provide education and resources for greater numbers of pupils (schools may be unable to employ more teachers to accommodate the increase in pupil numbers). This also puts more pressure on existing teachers. Funding per pupil is not rising in line with inflation. Other increased costs on school budgets include higher contributions to national insurance and teachers’ pensions (schools will have to pay 5% more), the introduction of the “national living wage”, pay rises and the apprenticeship levy. Schools that stand to lose out under the new national funding formula face a smaller overall budget and increased costs. 
  • Difficulty in defining what is “fair”: There is also the difficulty of determining what objective measures can be used to decide on the appropriate budget for each school. There is no such thing as an “average” school – all are unique with individual strengths and challenges, different pupils, parents and teaching staff. Determining factors may be decided by the % of pupils with Special Educational Needs (SEN) which require a greater allocation of the overall budget, through to how good a state of repair the school buildings and equipment are in. Such factors will inevitably have an aspect of subjectivity. 

Funding caps

While some schools will receive more funding and others less (measured against the cuts to the overall budget), the government is increasing measures – funding caps – to ensure that losses and gains are kept within certain parameters. 

  • Schools with increase to funding:
    3% per-pupil cap from 2018-19, reducing to 2.5 per cent in 2019-20.
  • Schools with decreased funding:
    3% per pupil cap (known as the “funding floor”) for the first year.

Local authorities will be allowed to increase central service costs by up to 2.4% from 2018. Councils cannot lose more than 2.5% of their per-pupil funding until 2020.

Will my school lose or gain funding?

At the moment it is only possible to speculate. However, there is some concern that, whilst rural schools may benefit, inner city schools in areas where affluence has grown more exponentially will be harder hit. 

The National Union of Teachers and the Association of Teachers and Lecturers have set up a website called School Cuts that features a map where you can search for your school and see how much less funding the school might receive under the current proposals. They claim that, “Unless the Government allocates more money, schools will lose £3 billion a year in real terms by 2020” and that “60% of secondary schools are running deficit budgets”. The figures on School Cuts is based on projections and are not at present finalised figures. 

Reviewed: February 2018

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