PARLIAMENTARY DEBATE
School Funding Formula (London) - 28 June 2017 (Commons/Commons Chamber)

If, inexplicably, there are right hon. and hon. Members who do not wish to hear the debate on the school funding formula in London, I hope that they will courteously leave the Chamber quickly and quietly, so that we can all listen to the right hon. Member for Twickenham (Sir Vince Cable).

Mr Speaker, may I express my appreciation for being able to speak from these Benches again, after a two-year lapse, and to take advantage of the real privilege we have of being able to raise in an Adjournment debate matters of acute concern to our constituents? I wish to raise the issue of school funding, which proved to be one of massive importance during the election campaign, not just to me and my constituents, but to many others.

Let me give some examples of the kind of problems that have surfaced. I have visited three primary schools in the past week, one of which has already had to seek a parental contribution of £120 a head from each parent in order to balance its budget. Another had to put a proposition to the parents to go on to part-time schooling for one day a week, but that has subsequently been withdrawn in favour of a parental contribution and redundancies. This pattern is now being repeated throughout my borough and many others.

I can confirm that we face exactly the same issues in the London Borough of Sutton, and I believe that every secondary head has written to me expressing concerns, for instance, about requiring schools to cut back on the A-level options that are available. Does my right hon. Friend hope, as I do, that the Minister for School Standards will respond positively and set out how London can benefit from the bonanza that was available to the Democratic Unionist party in the past couple of weeks, so that we can see the right level of funding in our schools as well?

My right hon. Friend anticipates a point I was going to make, but he is absolutely right to say that this problem is widely shared. Several elements have contributed to this anxiety in the schools sector, one of which is that we have had flat or falling funding in nominal terms per pupil, certainly over the past couple of years—it is a small fall but it is significant. Much more seriously, there has been a very big increase in costs. Costs that were previously borne by central Government are now being offloaded on to individual schools. Some of them are obvious ones, such as national insurance contributions, which have added a couple of percentage points to the payroll—that is 80% of the cost of a typical school. The increase in pension contributions is another.

One particularly bizarre item causing considerable puzzlement in schools is the apprenticeship levy. I can perhaps claim some authorship of the original ideas behind the levy, from the coalition years, but none of us ever intended that it would apply to schools. The training of teachers, and indeed other professionals, does not go through an apprenticeship route. It appears that this is being introduced because people in maintained schools are regarded as council employees, and of course the whole direction of Government funding is to move in the opposite direction. In addition, there is a completely bizarre distinction between academies and non-academies. I wonder whether the Minister, in discussions with his colleagues, can lift what is not a massive but an extremely irritating and, at the margin, onerous burden on schools. It is something that would help significantly, and the burden is clearly inappropriate.

The consequence of these changes, together with the new funding formula that the Government have mooted, is very significant indeed. The National Audit Office has estimated that, between 2014-15 and 2019-20, which is when the funding formula comes in, there will have been an 8% real cut overall in English schools. The Education Policy Institute, which has done a parallel study and is broadly in favour of the principle of the funding formula, notes that the cut is something in the order of 6% to 11% in the narrower period of 2016-17 to 2019-20, with more than half of primary and secondary schools facing cuts of that magnitude.

Let me take the discussion very specifically to the funding formula, which is how I couched this debate. I have no objection—I do not think that any of us possibly could have—to the principle of trying to achieve fairness in the allocation of funds. It is a perfectly desirable objective. Although there is never likely to be much of a consensus on this, striving to achieve better fairness in distribution is a perfectly acceptable philosophical principle. I am not coming here to make a particular whinge about my own Twickenham constituency and borough, because, as the figures net out, we are not significant losers. Indeed, on some calculations, there may be a small gain, but that is not the case in many parts of inner London, which will be hit very severely. None the less, there are some very serious problems with the funding formula as it is due to be applied, and I just wanted to raise them with the Minister in the hope that he can give us some confidence that they will be addressed.

My first concern is that, clearly, it is much easier to introduce a new funding formula when budgets overall are flat or rising than when they are falling. It is a simple matter of common sense. Some secondary schools in my constituency face 3% real cuts to meet the funding formula. If that were done at a time when their budget was flat and others were rising, one can see how they could accommodate it, but imposing on already very stressed financial budgets real cuts as a consequence of the formula is just making this deeply, deeply unattractive.

The informed estimate is that if the Government were to bring in the funding formula while ensuring that no school actually loses in absolute terms, it would probably cost them £335 million. That sounds a lot of money, but, as my right hon. Friend has pointed out, in relation to some of the other transactions of the past 48 hours it probably is not all that significant. Can the Minister clarify a commitment, which I think was made in his party’s manifesto, that the Government will ensure that no school is absolutely worse off as a result of the formula? That would certainly help to lubricate the whole process.

My second concern is different and has nothing to do with money. It is about the centralisation of decision-making that is a consequence of this new formula. At present, there is a significant degree of flexibility for local authorities in moving money within the funding blocks, particularly within the school block. That enables local authorities to take account of local circumstances. In my particular case, we have a significant number of problems in the secondary sector. This involves a significant number of outer borough pupils, the fact that we have a large number of pupils who go into the private sector at 11 or thereabouts, and more challenging demands on the secondary sector. There is an understanding locally that, effectively, there should be a cross subsidy from primary to secondary. That is the result of local circumstances, and people understand that and accept it. Under the funding formula, such local, particular concerns can no longer be taken into account. One of the practical consequences in my area is that the secondary schools, which have particular needs, will be very savagely hit, because the cuts will fall on them disproportionately. As I understand it, there will be very little capacity in the Department for Education or with regional commissioners to handle the kind of local negotiation that would be required to take account of such particularities. I ask the Minister to try to ensure that as we move to a new funding system, it does not become hopelessly over-centralised. There is a real danger that we have a Soviet style of financial allocation that takes no account of local circumstances.

My third concern is about special needs and disadvantaged pupils who fall within the special educational needs block. As the Minister knows, funding for that at a local level is a complete mess. Local authorities are not funded up to anywhere remotely near the level that is required to meet the special needs of statemented pupils. The new plan system, which was passed in the last Parliament, requires substantial funding, which is simply not available. Local schools are having to use out-of-borough private providers of special needs education, which is often very high cost. Indeed, one of the things the Government should think about is a Competition and Markets Authority referral for some of these institutions.

Whatever the reasons, local councils have run up very large deficits on their special needs budgets. They are having to use school block money in order to support it. Many schools are in great difficulty as a result of the financing of special needs, so much so that schools that were regarded as centres of excellence are now trying to deter people from coming because of the extra cost involved, and a pass-the-parcel system is developing with special needs, which is deeply unhealthy, and completely inimical to good schooling.

A fourth concern I have about the proposals as they currently stand is that all kinds of perverse incentives are built into the rather complex formula that the Department has evolved, one of which is that it penalises high achievement. I happen to represent a borough where 50% of schools are regarded as “outstanding” and the other 50% “good”. It is a very high achievement area. Parents have very high expectations: schools deliver. Under the formula, high achievement will be penalised, and the funding is being redirected to schools in which there is low achievement. One of the utterly perverse consequences is that schools in London, particularly in inner London—areas such as Hackney, Lewisham and Lambeth, which 20 or 30 years ago were regarded as dreadful sink schools—are now very high-achieving schools in terms of value added, and those schools will need significant amounts of funding.

The right hon. Gentleman is making a very good point. Certainly in Wokingham, which has very low per-pupil amounts and good-performing schools, we feel there is a problem. Was not the idea of the reform to have a higher absolute amount for every pupil in the country, because there is a basic cost wherever you are being educated?

Yes, indeed. The right hon. Gentleman makes the important point that it is not just a question to read having a basic amount of funding, but an evidence base for what the cost of running a school actually is. I worry that as the formula is currently devised, there is no evidence base. Wild guesses have been made about the differential costs of secondary and primary schooling, and we need objective studies of what it costs to run a school, so that the formula can work well.

I just want to round up and come to a conclusion, to give the Minister a plentiful opportunity to reply.

My final point is that in addition to all the difficulties I have mentioned, there is a high level of uncertainty about how the new formula will be applied. Some of our secondary schools, which will face deep cuts, are protected up to a point by the maximum 3% cut—the floor that has been introduced—but we do not know for how many years that will continue. If they take painful corrective measures now, will they have to continue to do so? There is uncertainty about how the growth of pupil numbers will be accommodated. I believe that a system of retrospective prompt rebating could easily be set up and would make the planning of school finances much easier.

To round off my comments, I think there is an acceptance on both sides of the House that funding distribution needs to be looked at in a fair framework. That cannot happen in the current environment of large-scale cuts across the board, and I sincerely hope that the Minister will look at some of the other points that I have made about the need for much more decentralisation and flexibility in decision making, which will make it much easier to carry the reform through.

May I begin by congratulating the right hon. Member for Twickenham (Sir Vince Cable) on his first speech in this Parliament and welcome him back to the House of Commons?

The Government want to ensure that all children, regardless of where they live, receive a first-class education. Over the past seven years, we have made significant progress. There are now almost 1.8 million more children in schools that are rated good or outstanding compared with 2010. Thanks to a curriculum that ensures that all children are taught the core knowledge that they need to be successful, to the promotion of evidence-based teaching practices such as Asian-style maths mastery and systematic synthetic phonics, and the hard work of hundreds of thousands of teachers, standards across England are on the rise. According to the latest international figures, secondary school pupils in England outperform pupils in the other nations of the United Kingdom.

The anachronistic way in which funding is distributed across the country is not fair and is in need of reform, so over the past six months I have spent a lot of time meeting teachers, headteachers, parents, governors and hon. and right hon. Members to discuss fairness in the school funding system. As a result of those conversations, I have never been more convinced of the need to grasp the nettle and address the unfairness of the current funding system. The data that are used to allocate funding to local authorities are over a decade out of date. Over that period, for example, the free school meals rate has almost halved in Southwark and has more than doubled in Dorset, but the funding that each local authority receives has not responded. It is not right that local authorities with similar needs and characteristics receive very different levels of funding from central Government. That results in a situation where, for example, a school in Barnsley would receive 50% more funding, with no other change to its circumstances, if it were situated in Hackney. That is not a rational, fair or efficient system for distributing money to our schools.

That is why the Government have gone further than any previous Government in reforming school funding, and why the Queen’s Speech made it clear that we are determined to introduce a fairer distribution of funding for schools. In doing so, we will ensure that all schools in England are funded on a consistent and transparent basis that reflects local needs. We will set out our plans shortly, and, as outlined in our manifesto, we will make sure that no school budget is cut as a result of the new formula. That will be particularly important for six schools in the right hon. Gentleman’s constituency. The other 23 schools would all see a rise in funding as a result of the national funding formula. I hope that that addresses one of the concerns that he expressed.

In March 2016, we launched the first stage of our consultation on the national funding formula. We asked for views on the principles that should underpin it and its overall design. Those principles included using robust data to ensure that funding is matched to pupil characteristics and the importance of transparency in the way in which funding is allocated. Over 6,000 people responded and there was widespread support for reforming the current system and for the principles that we set out, including the issue that the right hon. Gentleman raised of low prior attainment, which he queried. Allocating extra funding for pupils who begin school behind their peers is, I believe, absolutely right. There is no perverse incentive, because it is the child’s attainment in the predecessor school that is relevant: nursery school if they are going to primary school, or primary school if they are going to secondary school.

It is absolutely right, of course, that we should invest in pupils with low prior attainment, but does the Minister agree that that should not be at the expense of schools that, for whatever reason, do not hit the criteria on low prior attainment, English as an additional language or free school meals? They should have the funding they need to provide a full, rounded, liberal education.

I accept my hon. Friend’s point. We have had many discussions on these and other issues—regarding not only schools in his constituency, but f40 schools across the country. I feel strongly that schools with children who come from deprived backgrounds, with all the challenges they bring, should receive extra funding through the formula in addition to the money that comes through the pupil premium. I also strongly believe that we need to ensure that children who start school behind their peers catch up. Funding, I hope, will help ensure that they do. My hon. Friend is right, however, that we want to ensure that schools without any of those characteristics are properly funded. We can do that when a strong economy is generating the revenue to pay for those funds.

One of the issues that the right hon. Member for Twickenham (Sir Vince Cable) did not raise was rising rolls, particularly in London. The birth rate and the influx of people coming to London with young children require schools to accommodate more children, but the money lags. Will the Minister consider that aspect? If schools are not going to lose out over all, the per-pupil funding will be crucial in London to make sure that money goes to the schools as rolls rise.

My hon. Friend is absolutely right: as pupil numbers rise, so funding for schools will rise as well, because it is based on a per-pupil approach. We are spending record amounts on school funding—£41 billion this year—and that is set to rise further as pupil numbers rise.

In December last year, we launched the second stage of the consultation on the detailed design of the formula. As part of the consultation and to ensure maximum transparency, we published detailed illustrative impact data for all schools and local authorities, and that enabled us to hold a truly national debate during the three months of the consultation. During that period, as I said, I met parents, teachers and governors. Both the Secretary of State and I met hon. Members from across the House. We received more than 5,000 letters on the national funding formula and held more than 10 debates in the House. We received more than 25,000 responses to the consultation itself.

I thank the Minister for meeting me and the heads of Wilson’s School and Carshalton High School for Girls a few months ago. As my right hon. Friend the Member for Twickenham (Sir Vince Cable) said, irrespective of what the Government do about the funding formula, significant funding pressures come from the apprenticeship levy, pensions, national insurance and the additional recruitment costs that schools face because of the shortage of teachers. How will the Minister address those cost pressures?

The right hon. Gentleman has anticipated my comments, as he did his right hon. Friend’s. I will come to those issues. On the apprenticeship levy, schools can use apprenticeship levy funds not only for training support staff, but for training teachers. We are developing a teacher apprenticeship and the Government have asked Sir Andrew Carter to help develop a high-quality teaching apprenticeship to enable schools to draw down funding available through the apprenticeship levy.

We will publish our response to that consultation in due course. We will build on the strong support for the basic objective of reforming the current system as well as addressing the detailed issues and concerns raised throughout the consultation. We remain committed to working with Parliament and bringing forward proposals that will command consensus.

The right hon. Member for Twickenham raised the issue of introducing a national funding formula at this moment. We felt that at a time of constraints on budgets it was even more important to introduce such a formula to ensure that the unfairnesses are ironed out—more important than when budgets are rising.

Not only do we want the system for distribution to be fair; we also want to ensure that every school has the resources it needs to deliver a world-class education for every child. We have protected the core schools budget in real terms since 2010. We have given record levels of funding for our schools, and we set out plans to increase funding further in our manifesto, as well as continuing to protect the pupil premium to support the most disadvantaged pupils in our schools.

I will not.

We recognise that schools are facing cost pressures and we will reflect on the message that people sent at the election about the funding of our schools. We also know that how schools use their money is important in delivering the best outcomes for pupils. We will continue to provide support to help schools to use their funding in cost-effective ways. The Government have produced tools, information and guidance to support improved financial health and efficiency in schools. Those tools are available in one area of the gov.uk website.

I am a school governor at a local primary school in my constituency. You say that we need help to find efficient ways of spending the money in the school. I have to tell you, from personal experience, that, as a group of experienced governors, we have done absolutely everything we can to be as efficient as we possibly can. The next thing to go will be teaching assistants and teachers. I have respect for what you say but—I am sorry—I just do not think that any more tools will help. What would help is more money. That is what we need.

Order. May I just say very gently to the hon. Lady, who is already well and truly making her mark, that the word “you” implies the Chair, and I have not made any statements about any of these matters? The hon. Lady is new, but extremely articulate, and I know that she will get to grips with these things very quickly.

I understand the hon. Lady’s point, but there are ways in which we can help schools to become more efficient with the available tools such as reviewing the level of efficiency, investigating levels of expenditure against other similar schools and other benchmarking tools that are on the website. The best way for schools to know what is effective is to share best practice. There are case studies on the gov.uk website, showing, for example, how a school in Leicestershire supports other local schools to develop a strategic three-year budget plan and thinks through its staffing model to best meet the curriculum. It also shows a school in Barnsley that has made significant savings by introducing a more efficient working pattern for support staff, and a school in my county of West Sussex that used a data-led approach to designing its curriculum and strategic staffing plans.

Earlier this year, we introduced a schools buying strategy to support schools to save more than £l billion a year by 2019-20 on their non-staff expenditure. The strategy includes the introduction of school buying hubs, which are regional units designed to communicate with and provide procurement support to all schools in the area. The hubs will provide expertise and specialist advice on procuring and managing catering and cleaning contracts, for example, to help to deliver better value in school buying. Alongside procurement advice, they will provide market intelligence, help with complex contracts, and promote local collaboration and aggregation.

The Government are building a digital buying platform to enable schools to compare prices more easily and to access a wide range of suppliers. School business management is an important and increasingly skilled profession. To support school business managers and help them to share their market knowledge, we will provide support to create new school business manager networks in areas of the country where they do not already exist. We will also create a network leaders forum to bring together leading members of the many networks, creating face-to-face opportunities to share knowledge and best practice on a national basis.

We will also provide schools with more access to better national deals. We have introduced a new deal on multifunctional devices—printers and photocopiers—this year. On average, schools could save more than 40% by using this arrangement, and up to 10% by making use of our national energy deal. The Department will work closely with schools—including the school the hon. Lady is a governor of—and suppliers to ensure that deals are easily accessible to schools and tailored to their needs.

Improved procurement will help free up resources available for teaching pupils, but to maximise these resources, it is also essential for schools to deploy their staff effectively and efficiently. This can be achieved through reducing unnecessary workload—that is where the Government have a key role to play—and making use of the full set of resources on the gov.uk website that support schools’ efficiency and financial health.

We are continuing our extensive work with the profession, teaching unions and Ofsted to challenge unhelpful practices and reduce workload, so that teachers can concentrate on teaching, not bureaucracy and paperwork. In February, we published the findings of the 2016 teacher workload survey, an update on how we are meeting our commitments to tackle workload, and details of further steps we will take, including an offer of targeted support. Earlier this year, we also published the school workforce planning guidance to help schools to make well-informed decisions about their staffing structures, and schools should always carefully consider their individual context and the mix of staffing roles they require.

In summary, this Government will continue to support England’s schools by providing more funding than ever before, by making sure that the funding is distributed fairly and to where it is needed most, and by helping schools to achieve more with that funding, with a focus on sustaining and improving the rapid progress our children and young people are making under this Government.

Introducing fair funding will be an historic and necessary reform—the biggest change to school funding for well over a decade. Thanks to the determination of this Government to address issues of unfairness in our society, we will have a clear, simple and transparent system that matches funding to children’s needs and the schools they attend. It will enable all schools, regardless of where they are situated in the country, to provide the very best education for pupils and an excellent education system.

Question put and agreed to.