Agenda item

To receive a presentation on the changes to the School Funding Formula, and how these will impact on Hampshire schools.

The Committee received a presentation from the Director of Children’s Services and his representatives providing an overview of the changes to school funding formula (Item 8 in the Minute Book).

Members heard that the presentation was a shortened version of that being provided to all school heads and governors across a number of events in the coming weeks. It was important that school representatives had a good grasp of what the changes to the national funding formula meant for the education sector in Hampshire, how the local formula would be applied, and where the gaps in funding and challenges remained.

There continued to be a projected overspend across all blocks of school funding in Hampshire. In previous years the dedicated schools grant reserves had been meet any shortfalls, but this had now been depleted, so the variance in spend must be met by the allocations of funding from 2018/19. These variances did not relate to specific schools with overspends, but a number of different pressures within the system, combined with a formula which didn’t meet the true cost of providing education in the County.

The total pressure on all school budgets was £8m, and this would likely to continue into 2019/20. For the early years block, the pressure on the budget was in part due to accounting, based on the early years census, which was a technical issue but somewhat solvable. There was less pressure on the central block of funding for schools. For high needs, there were multiple causes of pressure on this budget, and this would sit in the system for the next few years, although some actions relating to procurement and efficiency reviews may help ease this amount. As Hampshire County Council manage the high needs budget, Children’s Services have a significant role to play in finding ways to reduce this pressure. The ray of hope was that through the national formula funding, there was increased funding in the high needs block, without which the pressure would be significantly worse. Hampshire was not alone in facing this issue, as every local authority was similarly affected.

An overview of the new national funding formula was provided to Members, who heard that the allocation for schools, central funding, high needs and early years was received by Hampshire County Council in one designation from the Department for Education, who distributed funding in accordance with the national formula. Once divided into the four blocks, money (with small exceptions) could not transfer across these areas. The central budget for administering services on behalf of schools was retained by the Council. The high needs funding was distributed for placements and pupil top up. Both the early years and schools funding was determined by a locally applied formula, and this was agreed and applied by the Schools Forum. From this, funding was passed on to maintained schools and early years providers, and for academies, forwarded to the Education Funding Agency for directing on to academy schools. For those schools in a multi-academy trust, the pot of funding for all schools was received centrally by the administrators of the trust, who determined how much each school received in funding.

The long term ambition of the Department for Education was to move to a hard version of the national funding formula, which would see the national allocations transferred directly to schools without a local formula being applied. For the moment, the soft launch of the formula came with a promise that no school would lose funding (unless they had a reduced number of children on roll), and £1.2bn of recycled funding had been allocated nationally to increase the revenue funding available to schools over the next two years. Prior to the change in formula, Hampshire had received the third lowest combined budget per school aged pupil. Post-changes, it now received the second lowest allocation nationally, although it would positively receive an additional £37m by 2019/20, compared to the baseline for 2017/18.

For 2018/19, the Schools Forum were being asked to transfer £3.6m, the most possible given the ring-fencing of the schools budget, into the high needs block to alleviate some of the pressure in this area. Although this funding would transfer across prior to designation, it would be spent in mainstream schools through inclusion, EHCP and SEND support. The Schools Forum had previously agreed a set of principles for the schools block formula, and in this spirit were being asked at the next meeting to choose between three options for how the new funding would be applied for the next financial year. The three options would vary the distribution of gains across schools in each District and Borough area, but as the choice of how to apply the formula was purely a Schools Forum decision, it would be for the representatives to determine which was preferable; Hampshire officers would play no part in voting on which option to adopt.

Looking to the future, a number of issues had been identified for which there would be significant pressures should the national funding formula be applied and allocated directly to schools, as the Hampshire Schools Forum have traditionally moved allocations around to meet the gap in the high needs block, and other pressures in the budget. Once agreed, the final proposals would be considered by the Executive Lead Member for Children’s Services in January.

In response to questions, Members heard:

• That currently Hampshire County Council were running a pilot where schools can apply for funding to support any child who shows early indications of a SEND need. This had been incredibly popular, to the point where the funding had been overspent by 40% (from a total pot of £1.5m). The Department had not yet seen a parallel offset in the number of referrals for EHCPs, although it may be that the number of these would have grown more quickly without the pilot. The Department were committed to running the pilot for a further year, and would decide following the full analysis from this if it was something the Schools Forum supported.
• The Schools Forum is a statutory forum which is constituted with representatives from primary and secondary schools, including academies, early years, and special schools, and includes a mix of head teachers, governors and other representatives. The designation within the Forum is dependent on the split of schools in the County, and all decisions are made on the vote.
• There was a spectrum of opinion on whether the Schools Forum should continue to mitigate gaps in the budget, or should start allocating budget shares to the letter of the national funding formula. This would be determined in part by the December meeting of the Forum.
• The effect of pay rises hadn’t yet been modelled within the future allocations for school funding.
• The slides did not pick up on individual deficits of schools, with the Department seeing more schools who are in, or are forecasting, deficit budgets. As the Local Authority pays this deficit on behalf of maintained schools, the school goes into debt with Hampshire County Council, and the number of these currently has led to the Department issuing notices to those in more severe situations. Work was on-going with these schools to undertake a root analysis review of overspend, and to agree actions plans for resolving these.

The Chairman noted his and the Committee’s gratitude for the informative presentation, and agreed that any further questions from Members could be sent to the officers via the scrutiny officer.

RESOLVED:

That Members note the overview provided.