The silent school reforms: the impact of centralising school funding

29 April 2016

Of the school reforms announced in the Government’s education white paper published last month, the plans to convert all schools to academies have attracted the biggest headlines and caused heated debates across the political spectrum. This policy will affect the remaining 30 per cent of secondary and 80 per cent of primary schools that are not yet academies, though many will have planned their conversion already. However, a policy that will almost certainly affect all schools is the introduction of a national funding formula (NFF), which will replace the 152 local funding formulae currently used by local authorities to fund schools. The Government has undertaken a consultation on the formula and it is scheduled to be implemented from 2017-18.

The introduction of the NFF will be consequential to school budgets in two significant ways. Firstly, school funding will no longer depend on the historic level of funding of their local authority. Currently, local authorities receive a proportion of the Dedicated Schools Grant, broadly determined by the amount they received per pupil the previous year. Secondly, the implementation of the NFF means that schools will no longer be affected by funding decisions made by their local politicians. Although there are some limitations, local authorities can currently add and determine the weighting of ‘defining factors’, such as whether a pupil entitled to free school meals should attract more or less funding than a pupil whose first language is not English. Both these aspects of the current funding allocation have been characterised as a ‘postcode lottery’.

However, a report recently published by the Institute for Fiscal Studies points out that the most likely difference between current and future schools funding will be caused by the standardisation of the formulae and not by a significant change in geographical distribution of funding. What this means is that differences in individual schools’ funding are largely a result of decisions made by local authorities and not central government. As such, the unfairness of the ‘postcode lottery’ is really a matter of local decision-making. With the Government aiming to further devolve certain funding decisions over the current Parliament, as seen with health and social care in Manchester, it is curious that local discretion over school funding is deemed unfair.


Past governments have been aware of this funding inequity for decades, and the Government is now determined to create a system where funding is more coherent across the country. A consultation is currently ongoing on which role should be played by different factors, although it has been narrowed down to four categories: a basic amount per pupil, factors reflecting pupil characteristics, school costs and area costs. How funding will be allocated across these categories will have a huge impact on the funding of schools across the country. While schools in London are particularly worried about what the new formula will do to their funding levels, others are happily preparing for what they say could result in the ability to double their staffing levels.

Although some of these predictions are exaggerated, as per-pupil funding is still going to depend on school level deprivation and area costs, it is true that schools will experience significant changes to their levels of funding. This is not only due to the NFF, but more broadly because of the lower per-pupil funding that will be seen over this Parliament. Research currently undertaken by Reform shows that per-pupil funding channelled through the DSG and the pupil premium will fall by around seven per cent on a national scale over this Parliament, as shown in Figure 1.

Figure 1

It is crucial that schools receiving a smaller share of a smaller government funding pot as a result of the NFF find more efficient ways to spend their funds if they want to avoid falling standards. Reform is currently working on a report outlining some of the characteristics shared by the schools achieving most value for money, aiming to provide recommendations on how to best enable schools to cope with the funding pressures they are faced with.



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